UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
— OR —
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 333-108876
TXU Energy Company LLC
| A Delaware Limited Liability Company | 75-2967817 | |
| (State of Organization) | (I.R.S. Employer Identification No.) | |
| 1601 Bryan Street, Dallas TX, 75201-3411 | (214) 812-4600 | |
| (Address of Principal Executive Offices)(Zip Code) | (Registrant’s Telephone Number) | |
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 Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 12, 2005, all outstanding common membership interests in TXU Energy Company LLC were held by TXU US Holdings Company.
TXU Energy Company LLC meets the conditions set forth in General Instructions (H)(1)(a) and (b) of Form 10-Q and is therefore filing this report with the reduced disclosure format.
Periodic reports on Form 10-K and Form 10-Q and current reports on Form 8-K that contain financial information of TXU Energy Company LLC and its subsidiaries are made available to the public, free of charge, on the TXU Corp. website at http://www.txucorp.com, shortly after they have been filed with the Securities and Exchange Commission. TXU Energy Company LLC will provide copies of current reports not posted on the website upon request. The information on TXU Corp.’s website shall not be deemed a part of, or incorporated by reference into, this report on Form 10-Q.
i
When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.
| 1999 Restructuring Legislation | legislation that restructured the electric utility industry in Texas to provide for retail competition | |
| 2004 Form 10-K | TXU Energy Company LLC’s Annual Report on Form 10-K for the year ended December 31, 2004 | |
| Bcf | billion cubic feet | |
| Capgemini | Capgemini Energy LP, a subsidiary of Cap Gemini North America Inc. that provides business support services to TXU Energy Holdings | |
| Commission | Public Utility Commission of Texas | |
| EITF | Emerging Issues Task Force | |
| EITF 04-6 | EITF Issue No. 04-6, “Accounting for Stripping Costs Incurred during Production in the Mining Industry” | |
| ERCOT | Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas | |
| FASB | Financial Accounting Standards Board, the designated organization in the private sector for establishing standards for financial accounting and reporting | |
| FERC | Federal Energy Regulatory Commission | |
| FIN | Financial Accounting Standards Board Interpretation | |
| FIN 47 | FIN No. 47, “Accounting for Conditional Asset Retirement Obligations – An Interpretation of FASB Statement No. 143” | |
| Fitch | Fitch Ratings, Ltd. | |
| GW | gigawatts | |
| GWh | gigawatt-hours | |
| historical service territory | the territory, largely in north Texas, being served by TXU Corp. as a regulated utility at the time of entering retail competition on January 1, 2002 | |
| kWh | kilowatt-hours | |
| Moody’s | Moody’s Investors Services, Inc. | |
| MW | megawatts | |
| MWh | megawatt-hours | |
| NRC | United States Nuclear Regulatory Commission | |
ii
| price-to-beat rate | residential and small business customer electricity rates established by the Commission that (i) were required to be charged in a REP’s historical service territories until the earlier of January 1, 2005 or the date when 40% of the electricity consumed by such customer classes is supplied by competing REPs, adjusted periodically for changes in fuel costs, and (ii) are required to be made available to those customers until January 1, 2007 | |
| REP | retail electric provider | |
| S&P | Standard & Poor’s, a division of the McGraw Hill Companies | |
| Sarbanes-Oxley | Sarbanes – Oxley Act of 2002 | |
| SEC | United States Securities and Exchange Commission | |
| SFAS | Statement of Financial Accounting Standards issued by the FASB | |
| SFAS 34 | SFAS No. 34, “Capitalization of Interest Cost” | |
| SFAS 133 | SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” | |
| SFAS 140 | SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of FASB Statement 125” | |
| SFAS 143 | SFAS No. 143, “Accounting for Asset Retirement Obligations” | |
| SG&A | selling, general and administrative | |
| TXU Corp. | refers to TXU Corp., a holding company, and/or its consolidated subsidiaries, depending on context | |
| TXU Electric Delivery | refers to TXU Electric Delivery Company, a subsidiary of US Holdings, and/or its consolidated bankruptcy remote financing subsidiary, TXU Electric Delivery Transition Bond Company LLC, depending on context | |
| TXU Energy Holdings | refers to TXU Energy Company LLC, a subsidiary of US Holdings, and/or its consolidated subsidiaries, depending on context | |
| TXU Fuel | TXU Fuel Company, a former subsidiary of TXU Energy Holdings | |
| TXU Gas | TXU Gas Company, a former subsidiary of TXU Corp. | |
| TXU Mining | TXU Mining Company LP, a subsidiary of TXU Energy Holdings | |
| TXU Portfolio Management | TXU Portfolio Management Company LP, a subsidiary of TXU Energy Holdings | |
| US | United States of America | |
| US GAAP | accounting principles generally accepted in the US | |
| US Holdings | TXU US Holdings Company, a subsidiary of TXU Corp. and parent of TXU Energy Holdings and TXU Electric Delivery | |
iii
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| (millions of dollars) | ||||||||
| Operating revenues |
$ | 1,803 | $ | 1,957 | ||||
| Costs and expenses: |
||||||||
| Cost of energy sold and delivery fees |
1,056 | 1,254 | ||||||
| Operating costs |
152 | 167 | ||||||
| Depreciation and amortization |
79 | 97 | ||||||
| Selling, general and administrative expenses |
113 | 148 | ||||||
| Franchise and revenue-based taxes |
26 | 26 | ||||||
| Other income |
(2 | ) | (1 | ) | ||||
| Other deductions |
1 | 20 | ||||||
| Interest income |
(9 | ) | (2 | ) | ||||
| Interest expense and related charges |
91 | 79 | ||||||
| Total costs and expenses |
1,507 | 1,788 | ||||||
| Income from continuing operations before income taxes |
296 | 169 | ||||||
| Income tax expense |
93 | 53 | ||||||
| Income from continuing operations |
203 | 116 | ||||||
| Loss from discontinued operations, net of tax benefit (Note 2) |
(3 | ) | (3 | ) | ||||
| Net income |
$ | 200 | $ | 113 | ||||
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| (millions of dollars) | ||||||||
| Components related to continuing operations: |
||||||||
| Income from continuing operations |
$ | 203 | $ | 116 | ||||
| Other comprehensive income (loss), net of tax effects: |
||||||||
| Cash flow hedges: |
||||||||
| Net change in fair value of derivatives (net of tax (expense) benefit of $(8) and $31) |
15 | (58 | ) | |||||
| Amounts realized in earnings during the period (net of tax expense of $10 and $3) |
17 | 5 | ||||||
| Total |
32 | (53 | ) | |||||
| Comprehensive income from continuing operations |
235 | 63 | ||||||
| Comprehensive loss from discontinued operations |
(3 | ) | (3 | ) | ||||
| Comprehensive income |
$ | 232 | $ | 60 | ||||
See Notes to Financial Statements.
1
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| (millions of dollars) | ||||||||
| Cash flows – operating activities: |
||||||||
| Income from continuing operations |
$ | 203 | $ | 116 | ||||
| Adjustments to reconcile income from continuing operations to cash provided by operating activities: |
||||||||
| Depreciation and amortization |
94 | 115 | ||||||
| Deferred income taxes and investment tax credits – net |
39 | 25 | ||||||
| Net effect of unrealized mark-to-market valuations of commodity contracts |
24 | 18 | ||||||
| Decrease in accrued lease liability for out-of-service assets |
(15 | ) | — | |||||
| Change in regulatory-related liabilities |
(16 | ) | (17 | ) | ||||
| Charge for contract counterparty nonperformance |
12 | — | ||||||
| Net equity loss from unconsolidated affiliates |
2 | — | ||||||
| Stock-based compensation expense |
4 | — | ||||||
| Bad debt expense |
11 | 26 | ||||||
| Changes in operating assets and liabilities |
(115 | ) | 138 | |||||
| Cash provided by operating activities |
243 | 421 | ||||||
| Cash flows – financing activities: |
||||||||
| Issuances of long-term debt |
71 | — | ||||||
| Retirements/repurchases of debt |
(1 | ) | — | |||||
| Increase in notes payable to banks |
135 | 75 | ||||||
| Net change in advances from affiliates |
(175 | ) | (243 | ) | ||||
| Distribution paid to parent |
(175 | ) | (175 | ) | ||||
| Debt premium, discount, financing and reacquisition expenses |
(8 | ) | — | |||||
| Cash used in financing activities |
(153 | ) | (343 | ) | ||||
| Cash flows – investing activities: |
||||||||
| Capital expenditures |
(58 | ) | (35 | ) | ||||
| Nuclear fuel |
(26 | ) | (47 | ) | ||||
| Proceeds from sale of assets |
2 | — | ||||||
| Other |
(7 | ) | 10 | |||||
| Cash used in investing activities |
(89 | ) | (72 | ) | ||||
| Discontinued Operations |
||||||||
| Cash provided by (used in) operating activities |
(3 | ) | 4 | |||||
| Cash used in financing activities |
— | (5 | ) | |||||
| Cash used in investing activities |
— | (1 | ) | |||||
| Cash used in discontinued operations |
(3 | ) | (2 | ) | ||||
| Net change in cash and cash equivalents |
(2 | ) | 4 | |||||
| Cash and cash equivalents – beginning balance |
70 | 18 | ||||||
| Cash and cash equivalents – ending balance |
$ | 68 | $ | 22 | ||||
See Notes to Financial Statements.
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (millions of dollars) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 68 | $ | 70 | ||||
| Restricted cash |
6 | 6 | ||||||
| Advances to affiliates |
844 | 686 | ||||||
| Accounts receivable — trade |
766 | 1,139 | ||||||
| Inventories |
296 | 284 | ||||||
| Commodity contract assets |
1,047 | 546 | ||||||
| Other current assets |
322 | 233 | ||||||
| Total current assets |
3,349 | 2,964 | ||||||
| Investments: |
||||||||
| Restricted cash |
15 | 15 | ||||||
| Other investments |
540 | 538 | ||||||
| Property, plant and equipment — net |
9,909 | 9,920 | ||||||
| Goodwill |
517 | 517 | ||||||
| Commodity contract assets |
319 | 315 | ||||||
| Cash flow hedge and other derivative assets |
35 | 8 | ||||||
| Assets held for sale (Note 2) |
14 | 17 | ||||||
| Other noncurrent assets |
218 | 221 | ||||||
| Total assets |
$ | 14,916 | $ | 14,515 | ||||
| LIABILITIES AND MEMBERSHIP INTERESTS | ||||||||
| Current liabilities: |
||||||||
| Notes payable – banks |
$ | 345 | $ | 210 | ||||
| Long-term debt due currently |
431 | 31 | ||||||
| Accounts payable – trade: |
||||||||
| Affiliates (principally TXU Electric Delivery) |
196 | 191 | ||||||
| All other |
724 | 861 | ||||||
| Notes or other liabilities due TXU Electric Delivery |
32 | 49 | ||||||
| Commodity contract liabilities |
810 | 491 | ||||||
| Accrued taxes |
155 | 190 | ||||||
| Other current liabilities |
628 | |||||||