TEXAS NEW MEXICO POWER CO - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 2-97230

TEXAS-NEW MEXICO POWER COMPANY

(Exact name of registrant as specified in its charter)


Texas		75-0204070
(State of incorporation)		(I.R.S. employer identification number)

4100 International Plaza, P. O. Box 2943, Fort Worth, Texas 76113

(Address and zip code of principal executive offices)

Registrant’s telephone number, including area code 817-731-0099

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ¨ No x

TNP Enterprises, Inc. holds all 10,705 outstanding common shares of Texas-New Mexico Power Company.

Texas New-Mexico Power Company and Subsidiaries

Quarterly Report on Form 10-Q for the period ended September 30, 2004

TABLE OF CONTENTS


PART 1. FINANCIAL STATEMENTS

Item 1.	Financial Statements.

	Texas-New Mexico Power Company (TNMP) and Subsidiaries:

		Consolidated Statements of Income (Loss) Three and Nine Month Periods Ended September 30, 2004 and 2003	3
		Consolidated Statements of Comprehensive Income (Loss) Three and Nine Month Periods Ended September 30, 2004 and 2003	4
		Consolidated Statements of Cash Flows Nine Month Periods Ended September 30, 2004 and 2003	5
		Consolidated Balance Sheets September 30, 2004, and December 31, 2003	6

	Notes to Consolidated Interim Financial Statements		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 4.	Controls and Procedures		17

PART 2. OTHER INFORMATION

Item 1.	Legal Proceedings		18

Item 6.	Exhibits and Reports on Form 8-K		18

	(a)	Exhibit Index	18

	(b)	Reports on Form 8-K	18

Statement Regarding Forward Looking Information			18

Signature page			19

Certifications			20

-2-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2004			2003			2004			2003
	*(In thousands)*
OPERATING REVENUES	$	74,732		$	69,953		$	201,454		$	199,079

OPERATING EXPENSES:
Purchased power		19,628			17,542			54,600			50,843
Other operating and maintenance		18,322			13,554			55,487			47,544
Depreciation of utility plant		7,433			7,197			22,186			21,374
Taxes other than income taxes		6,509			5,976			17,700			16,088

Total operating expenses		51,892			44,269			149,973			135,849

OPERATING INCOME		22,840			25,684			51,481			63,230

INTEREST CHARGES AND OTHER INCOME AND DEDUCTIONS:
Interest on long-term debt		6,432			6,592			19,423			18,670
Other interest and amortization of debt-related costs		539			277			1,682			1,977
Carrying charges on deferred stranded costs		(928	)		—			(928	)		—
Other income and deductions, net		(208	)		(783	)		(1,094	)		(1,631	)

Total		5,835			6,086			19,083			19,016

INCOME BEFORE INCOME TAXES		17,005			19,598			32,398			44,214
Income tax expenses		6,196			7,295			11,245			16,031

INCOME BEFORE EXTRAORDINARY ITEM		10,809			12,303			21,153			28,183
Extraordinary item - disallowance of stranded costs, net of taxes (Note 3)		—			—			(97,836	)		—

NET INCOME (LOSS)	$	10,809		$	12,303		$	(76,683	)	$	28,183

The accompanying notes are an integral part of these consolidated financial statements.

-3-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2004		2003		2004			2003
	*(In thousands)*
NET INCOME (LOSS)	$	10,809	$	12,303	$	(76,683	)	$	28,183

Other comprehensive income, net of tax:
Interest rate hedge, net of reclassification adjustment (Note 5)		129		129		387			(1,240	)

Total other comprehensive income		129		129		387			(1,240	)

COMPREHENSIVE INCOME (LOSS)	$	10,938	$	12,432	$	(76,296	)	$	26,943

The accompanying notes are an integral part of these consolidated financial statements.

-4-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2004			2003
	*(In thousands)*
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from sales to customers	$	177,757		$	188,758
Purchased power costs paid		(53,909	)		(49,409	)
Cash paid for payroll and to other suppliers		(34,951	)		(42,342	)
Interest paid, net of amounts capitalized		(18,462	)		(21,365	)
Income taxes paid		(3,526	)		(10,691	)
Other taxes paid		(17,105	)		(16,034	)
Other operating cash receipts and payments, net		581			721

NET CASH PROVIDED BY OPERATING ACTIVITIES		50,385			49,638

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant and other investing activities		(33,163	)		(28,087	)

NET CASH USED IN INVESTING ACTIVITIES		(33,163	)		(28,087	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid on common stock		(6,000	)		(18,400	)
Issuance of Senior Notes, net of discount		—			248,923
Repayments to credit facility - net		—			(171,000	)
Redemptions:
Senior Notes		(8,375	)		—
Notes payable to affiliate		—			(14,557	)
Financing and redemption costs		(921	)		(1,583	)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(15,296	)		43,383

NET CHANGE IN CASH AND CASH EQUIVALENTS		1,926			64,934
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		56,907			284

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	58,833		$	65,218

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net income (loss)	$	(76,683	)	$	28,183
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Extraordinary item - disallowance of stranded costs, net of taxes		97,836			—
Depreciation of utility plant		22,186			21,374
Credit for Texas system benefit fund regulatory asset		(244	)		(3,960	)
Amortization of debt-related costs and other deferred charges		1,945			2,207
Carrying charges on deferred stranded costs		(928	)		—
Allowance for funds used during construction		(661	)		(693	)
Deferred income taxes		27,511			5,427
Investment tax credits		(794	)		(635	)
Deferred purchased power and fuel costs		540			2,513
Cash flows impacted by changes in current assets and liabilities:
Accounts receivable		(1,831	)		2,990
Accounts payable		(1,015	)		(879	)
Accrued interest		1,010			1,655
Accrued taxes		(18,306	)		530
Changes in other current assets and liabilities		(1,182	)		(4,316	)
Interest rate lock on issuance of senior notes		—			(4,162	)
Other, net		1,001			(596	)

NET CASH PROVIDED BY OPERATING ACTIVITIES	$	50,385		$	49,638

The accompanying notes are an integral part of these consolidated financial statements.

-5-

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

(a wholly owned subsidiary of TNP Enterprises, Inc.)

CONSOLIDATED BALANCE SHEETS


	September 30, 2004 (Unaudited)		December 31, 2003
	*(In thousands)*
*ASSETS*

CURRENT ASSETS:
Cash and cash equivalents	$	58,833	$	56,907
Special deposits		3,081		2,520
Accounts receivable, net		34,274		32,443
Federal income tax receivable		24,659		—
Materials and supplies, at lower of cost or market		1,235		1,082
Other current assets		1,413		662

Total current assets		123,495		93,614

UTILITY PLANT:
Electric plant		838,470		804,622
Construction work in progress

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