UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 7, 2005
TECO ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Florida | 1-8180 | 59-2052286 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer identification No.) |
702 N. Franklin Street, Tampa, Florida 33602
(Address of principal executive offices) (Zip code)
Registrant’s telephone number, including area code: (813) 228-1111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Section 1 – Registrant’s Business and Operations
Item 1.01: Entry into a Material Definitive Agreement
On January 13, 2005, an indirect subsidiary of TECO Energy, Inc. (“TECO Energy” or “Company”) entered into a Purchase Agreement to sell its membership interests in Commonwealth Chesapeake Company, LLC (“CCC”), the owner of the Commonwealth Chesapeake Power Station in Virginia, to an affiliate of Tenaska Power Fund, L.P. The Commonwealth Chesapeake Power Station is a 315 megawatt oil-fired simple-cycle combustion turbine electric generating facility located in New Church, VA, operating in the Pennsylvania-Jersey-Maryland (PJM) market. Proceeds from the sale are expected to be approximately $86 million after adjustments at closing for the value of fuel, inventory and working capital items, and the payment of transaction-related expenses associated with the sale. The sale is expected to close by the end of the first quarter of 2005, subject to a financing contingency and certain regulatory approvals. See the press release dated January 13, 2005, which is attached as Exhibit 99.1, for additional information.
The Purchase Agreement provides for TPF Chesapeake, LLC (“TPF”) to acquire all of the membership interests in CCC indirectly owned by TECO Energy, Inc. through its affiliate, TM Delmarva Power, L.L.C. (“TMDP”). It contains customary representations, warranties, covenants and closing conditions found in similar transactions. The closing conditions include expiration of the Hart-Scott-Rodino Act waiting period, Federal Energy Regulatory Commission approval under §203 and §205 of the Federal Power Act, and TPF’s successful closing of financing for a substantial portion of the acquisition price. The Purchase Agreement also contains indemnification provisions subject to specified limitations as to time and amount, and the obligations of TMDP are guaranteed by TECO Energy, Inc. The Purchase Agreement terminates if the transaction is not completed by May 31, 2005. The Purchase Agreement is filed as Exhibit 10.1 hereto and reference is made thereto.
Section 2 – Financial Information
Item 2.01: Completion of Acquisition or Disposition of Assets
On January 7, 2005, an indirect subsidiary of TECO Energy disposed of its 100% interest in BCH Mechanical, Inc. (“BCH”) pursuant to a Stock Purchase Agreement dated as of December 31, 2004. BCH operates a combination of mechanical contracting businesses that include air conditioning, plumbing and piping, sheet metal, and owner-direct air conditioning services. The Stock Purchase Agreement is filed as Exhibit 2.1 hereto and reference is made thereto.
The purchaser of BCH was BCH Holdings, Inc., the majority owner of which is Daryl W. Blume, who was a Vice President of BCH and one of the owners of BCH when it was purchased by a subsidiary of TECO Energy, Inc. in September 2000.
Under the transaction, TECO Energy is retaining BCH’s net working capital determined as of December 31, 2004, estimated to be about $2 million, and certain other existing obligations.
TECO Energy’s fourth quarter 2004 pre-tax impairments previously announced in the Current Report on Form 8-K dated January 6, 2005, will include charges of $20.1 million ($14.3 million after-tax) to write-down the carrying value of BCH to the estimated fair value of the business as part of the normal year-end closing process and impairment testing in accordance with Financial Accounting Standards Board Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (FAS 144). No additional gain or loss was recorded as a result of the sale. BCH’s results of operations and charges will be reported as discontinued operations on TECO Energy’s consolidated statements of income. Pro forma financial information to reflect the disposition of BCH is included under Item 9.01(b).
2
Section 2 – Financial Information - continued
Item 2.05: Costs Associated with Exit or Disposal Activities
On January 13, 2004, TECO Energy’s Board of Directors authorized the transaction described in Item 1.01, and thereby committed the Company to a plan to dispose of Commonwealth Chesapeake Company, LLC, the owner of the Commonwealth Chesapeake Power Station in Virginia. TECO Energy’s fourth quarter 2004 pre-tax impairment charges previously announced in the Current Report on Form 8-K dated January 6, 2005, will include a pre-tax charge of $81.3 million ($52.1 million after-tax) to write-down the carrying value of CCC to the estimated fair value of the CCC business as part of the normal year-end closing process and impairment testing in accordance with FAS 144. No additional material gain or loss is expected as a result of the proposed sale of CCC described in Item 1.01 above.
Item 2.06: Material Impairments
See Item 2.05 regarding the pre-tax impairment charge of $81.3 million ($52.1 million after-tax) related to TECO Energy’s investment in CCC.
Section 9 – Financial Statements and Exhibits
Item 9.01: Financial Statements and Exhibits
| (b) | Pro forma financial information |
The following unaudited pro forma consolidated balance sheet reflects the dispositions of Frontera Renovation Limited Partnership (Frontera) (incorporated by reference from TECO Energy’s Current Report on Form 8-K dated December 22, 2004) of BCH as if they had occurred on Sept. 30, 2004. The accompanying unaudited pro forma condensed statements of income for the nine-month periods ended September 30, 2004 and 2003, and for the years ended December 31, 2003, 2002 and 2001, no longer reflect the Frontera and BCH results of operations and charges as continuing operations since those results will be included in discontinued operations as if the dispositions had occurred on Dec. 31, 2001. The pro forma financial information does not purport to represent what TECO Energy, Inc.’s consolidated results would have been if the dispositions had in fact occurred on these dates, nor does it purport to indicate the future consolidated financial position or future consolidated results of operations of TECO Energy. The pro forma adjustments are based on the operating results and related charges for Frontera and BCH recorded for the periods.
3
TECO Energy, Inc.
Pro Forma Condensed Consolidated Balance Sheet
September 30, 2004
(Unaudited)
| $ millions
|
As reported |
Frontera Adjustments(1) |
BCH (1) Adjustments |
Pro Forma | ||||||||||
| Current assets |
||||||||||||||
| Cash and cash equivalents |
$ | 102.5 | $ | 132.0 | $ | (1.0 | ) | $ | 233.5 | |||||
| Restricted cash |
57.2 | — | — | 57.2 | ||||||||||
| Receivables, less allowance for uncollectibles |
324.0 | — | (10.9 | ) | 313.1 | |||||||||
| Current derivative assets |
19.5 | — | — | 19.5 | ||||||||||
| Inventories, at average cost |
— | |||||||||||||
| Fuel |
59.6 | — | — | 59.6 | ||||||||||
| Materials and supplies |
86.6 | (6.2 | ) | (0.2 | ) | 80.2 | ||||||||
| Prepayments and other current assets |
167.8 | (0.5 | ) | (0.2 | ) | 167.1 | ||||||||
| Assets held for sale |
144.7 | — | — | 144.7 | ||||||||||
| Total current assets |
961.9 | 125.3 | (12.3 | ) | 1,074.9 | |||||||||
| Total property, plant and equipment (net) |
5,501.3 | (166.2 | ) | (0.8 | ) | 5,334.3 | ||||||||
| Other assets |
||||||||||||||
| Deferred income taxes |
967.7 | 15.4 | 5.8 | 988.9 | ||||||||||
| Other investments |
11.5 | — | — | 11.5 | ||||||||||
| Regulatory assets |
165.4 | — | — | 165.4 | ||||||||||
| Investment in unconsolidated affiliates |
254.8 | — | — | 254.8 | ||||||||||
| Goodwill |
71.2 | — | (11.8 | ) | 59.4 | |||||||||
| Deferred charges and other assets |
146.8 | (5.1 | ) | — | 141.7 | |||||||||
| Assets held for sale |
2,052.3 | — | — | 2,052.3 | ||||||||||
| Total other assets |
3,669.7 | 10.3 | (6.0 | ) | 3,674.0 | |||||||||
| Total assets |
$ | 10,132.9 | $ | (30.6 | ) | $ | (19.1 | ) | $ | 10,083.2 | ||||
4
TECO Energy, Inc.
Pro Forma Condensed Consolidated Balance Sheet – continued
September 30, 2004
(Unaudited)
| $ millions
|
As reported |
Frontera Adjustments(1) |
BCH (1) Adjustments |
Pro Forma |
||||||||||||
| Current liabilities |
||||||||||||||||
| Total Long-term debt due within one year |
$ | 13.2 | — | — | 13.2 | |||||||||||
| Notes Payable |
25.0 | — | — | 25.0 | ||||||||||||
| Accounts Payable |
256.4 | (0.6 | ) | (4.5 | ) | 251.3 | ||||||||||
| Customer deposits |
104.0 | — | — | 104.0 | ||||||||||||
| Current derivative liabilities |
3.8 | — | — | 3.8 | ||||||||||||
| Interest accrued |
96.1 | — | — | 96.1 | ||||||||||||
| Taxes accrued |
112.8 | (1.4 | ) | 0.3 | 111.7 | |||||||||||
| Liabilities associated with assets held for sale |
1,593.8 | — | — | 1,593.8 | ||||||||||||
| Total current liabilities |
2,205.1 | (2.0 | ) | (4.2 | ) | 2,198.9 | ||||||||||
| Other liabilities |
||||||||||||||||
| Deferred income tax |
517.4 | — | — | 517.4 | ||||||||||||
| Investment tax credits |
20.6 | — | — | 20.6 | ||||||||||||
| Regulatory liabilities |
547.6 | — | — | 547.6 | ||||||||||||
| Deferred credits and other liabilities |
361.5 | — | (3.5 | ) | 358.0 | |||||||||||
| Liabilities associated with assets held for sale |
675.3 | — | — | 675.3 | ||||||||||||
| Total Long-term debt, less amount due within one year |
4,001.9 | — | — | 4,001.9 | ||||||||||||
| Minority interest |
2.7 | — | — | 2.7 | ||||||||||||
| Total other liabilities |
6,127.0 | — | (3.5 | ) | 6,123.5 | |||||||||||
| Capital |
||||||||||||||||
| Common equity |
199.6 | — | — | 199.6 | ||||||||||||
| Additional paid in capital |
1,488.5 | — | — | 1,488.5 | ||||||||||||
| Retained earnings |
167.9 | (28.6 | ) | (11.4 | ) | 127.9 | ||||||||||
| Accumulated other comprehensive income |
(47.8 | ) | — | — | (47.8 | ) | ||||||||||
| Common equity |
1,808.2 | (28.6 | ) | (11.4 | ) | 1,768.2 | ||||||||||
| Unearned compensation |
(7.4 | ) | — | — | (7.4 | ) | ||||||||||
| Total capital |
1,800.8 | (28.6 | ) | (11.4 | ) | 1,760.8 | ||||||||||
| Total liabilities and capital |
$ | 10,132.9 | $ | (30.6 | ) | $ | (19.1 | ) | $ | 10,083.2 | ||||||
| (1) | Reflects the assets and liabilities of Frontera and BCH and the related loss net of the tax benefit on the sale. |
5
TECO Energy, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the nine months ended September 30, 2004
(Unaudited)
| $ millions, except per share amounts
|
As reported |
Frontera Adjustments(1) |
BCH (1) Adjustments |
Pro Forma |
||||||||||||
| Revenues |
$ | 2,097.6 | $ | 49.8 | $ | 36.8 | $ | 2,011.0 | ||||||||
| Operating expenses |
1,886.7 | 50.8 | 38.6 | 1,797.3 | ||||||||||||
| Income from operations |
210.9 | (1.0 | ) | (1.8 | ) | 213.7 | ||||||||||
| Other (Expense) Income |
||||||||||||||||
| AFUDC - other funds |
0.7 | — | — | 0.7 | ||||||||||||
| Other Income |
112.5 | (2.6 | ) | 0.5 | 114.6 | |||||||||||
| Loss on debt extinguishment |
(4.3 | ) | — | — | (4.3 | ) | ||||||||||
| Impairment on TIE Investment |
(152.3 | ) | — | — | (152.3 | ) | ||||||||||
| TMDP arbitration reserve |
5.7 | — | — | 5.7 | ||||||||||||
| Earnings from equity Investments |
26.6 | — | — | 26.6 | ||||||||||||
| Total Other (expense) income |
(11.1 | ) | (2.6 | ) | 0.5 | (9.0 | ) | |||||||||
| Interest charges |
244.9 | — | 0.7 | 244.2 | ||||||||||||
| Loss before income taxes |
(45.1 | ) | (3.6 | ) | (2.0 | ) | (39.5 | ) | ||||||||
| Provision (benefit) for income tax |
16.6 | (1.3 | ) | (0.8 | ) | 18.7 | ||||||||||
| Minority interest |
61.0 | — | — | 61.0 | ||||||||||||
| Net (loss) income from continuing operations |
$ | (0.7 | ) | $ | (2.3 | ) | $ | (1.2 | ) | $ | 2.8 | |||||
| Average common shares outstanding |
||||||||||||||||
| Basic |
190.5 | 190.5 | ||||||||||||||
| Diluted |
190.5 | 190.9 | ||||||||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | (0.00 | ) | $ | 0.01 | |||||||||||
| Diluted |
$ | (0.00 | ) | $ | 0.01 | |||||||||||
| (1) | Reflects the reversal of the results of operations for Frontera and BCH and the related tax impacts. |
6
TECO Energy, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the nine months ended September 30, 2003
(Unaudited)
| $ millions, except per share amounts
|
As reported |
Frontera Adjustments (1) |
BCH (1) Adjustments |
Pro Forma |
||||||||||||
| Revenues |
$ | 2,106.2 | $ | 53.5 | $ | 39.6 | $ | 2,013.1 | ||||||||
| Operating expenses |
2,022.3 | 121.2 | 39.0 | 1,862.1 | ||||||||||||
| Income from operations |
83.9 | (67.7 | ) | 0.6 | 151.0 | |||||||||||
| Other Income (Expense) |
||||||||||||||||
| AFUDC - other funds |
15.6 | — | — | 15.6 | ||||||||||||
| Other Income |
41.6 | — | (0.6 | ) | 42.2 | |||||||||||
| TMDP arbitration reserve |
(32.0 | ) | — | — | (32.0 | ) | ||||||||||
| Earnings from equity Investments |
6.7 | — | — | 6.7 | ||||||||||||
| Total Other Income (Expense) |
31.9 | — | (0.6 | ) | 32.5 | |||||||||||
| Interest charges |
230.7 | — | 0.4 | 230.3 | ||||||||||||
| Loss before income taxes |
(114.9 | ) | (67.7 | ) | (0.4 | ) | (46.8 | ) | ||||||||
| Benefit for income tax |
(69.5 | ) | (23.8 | ) | (0.1 | ) | (45.6 | ) | ||||||||
| Minority interest |
34.7 | — | — | 34.7 | ||||||||||||
| Net income (loss) from continuing operations |
$ | (10.7 | ) | $ | (43.9 | ) | $ | (0.3 | ) | $ | 33.5 | |||||
| Average common shares outstanding |
||||||||||||||||
| Basic |
177.5 | 177.5 | ||||||||||||||
| Diluted |
177.5 | 177.8 | ||||||||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | (0.06 | ) | $ | 0.19 | |||||||||||
| Diluted |
$ | (0.06 | ) | $ | 0.19 | |||||||||||
| (1) | Reflects the reversal of the results of operations for Frontera and BCH and the related tax impacts. |
7
TECO Energy, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the year ended Dec. 31, 2003
(Unaudited)
| $ millions, except per share amounts
|
As reported |
Frontera Adjustments(1) |
BCH (1) Adjustments |
Pro Forma |
||||||||||||
| Revenues |
$ | 2,740.0 | $ | 63.1 | $ | 60.6 | $ | 2,616.3 | ||||||||
| Operating Expenses |
2,719.9 | 138.7 | 79.7 | 2,501.5 | ||||||||||||
| Income from Operations |
20.1 | (75.6 | ) | (19.1 | ) | 114.8 | ||||||||||
| Other Income (Expense) |
||||||||||||||||
| AFUDC - Other Funds |
19.8 | — | — | 19.8 | ||||||||||||
| Other Income |
114.5 | 2.0 | (0.6 | ) | 113.1 | |||||||||||
| TMDP Arbitration Reserve |
(32.0 | ) | — | — | (32.0 | ) | ||||||||||
| Earnings from Equity Investments |
(0.4 | ) | — | — | (0.4 | ) | ||||||||||
| Total Other Income |
101.9 | 2.0 | (0.6 | ) | 100.5 | |||||||||||
| Interest Charges |
320.7 | — | 0.8 | 319.9 | ||||||||||||
| Loss Before Income Taxes |
(198.7 | ) | (73.6 | ) | (20.5 | ) | (104.6 | ) | ||||||||
| Benefit for Income Tax |
(135.2 | ) | (25.8 | ) | (7.9 | ) | (101.5 | ) | ||||||||
| Minority Interest |
48.8 | — | — | 48.8 | ||||||||||||
| Net income (loss) from Continuing Operations |
$ | (14.7 | ) | $ | (47.8 | ) | $ | (12.6 | ) | $ | 45.7 | |||||
| Average common shares outstanding |
||||||||||||||||
| Basic |
179.9 | 179.9 | ||||||||||||||
| Diluted |
179.9 | 180.2 | ||||||||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | (0.08 | ) | $ | 0.25 | |||||||||||
| Diluted |
$ | (0.08 | ) | $ | 0.25 | |||||||||||
| (1) | Reflects the reversal of the results of operations for Frontera and BCH and the related tax impacts. |
8
TECO Energy, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the year ended Dec. 31, 2002
(Unaudited)
| $ millions, except per share amounts
|
As reported |
Frontera Adjustments(1) |
BCH (1) Adjustments |
Pro Forma |
|||||||||||
| Revenues |
$ | 2,664.9 | $ | 83.1 | $ | 46.9 | $ | 2,534.9 | |||||||
| Operating Expenses |
2,283.1 | 71.1 | 39.4 | 2,172.6 | |||||||||||
| Income from Operations |
381.8 | 12.0 | 7.5 | 362.3 | |||||||||||
| Other Income (Expense) |
|||||||||||||||
| AFUDC - Other Funds |
24.9 | — | — | 24.9 | |||||||||||
| Other Income |
19.0 | — | (0.9 | ) | 19.9 | ||||||||||
| Loss on debt extinguishment |
(34.1 | ) | — | — | (34.1 | ) | |||||||||
| Earnings from Equity Investments |
5.5 | — | — | 5.5 | |||||||||||
| Total Other Income (Expense) |
15.3 | — | (0.9 | ) | 16.2 | ||||||||||
| Interest Charges |
171.6 | — | 1.2 | 170.4 | |||||||||||
| Income Before Income Taxes |
225.5 | 12.0 | 5.4 | 208.1 | |||||||||||
| (Benefit) Provision for Income Tax |
(51.7 | ) | 4.2 | 2.1 | (58.0 | ) | |||||||||
| Minority Interest |
— | — | — | — | |||||||||||
| Net Income from Continuing Operations |
277.2 | $ | 7.8 | 3.3 | 266.1 | ||||||||||
| Average common shares outstanding |
|||||||||||||||
| Basic |
153.2 | 153.2 | |||||||||||||
| Diluted |
153.3 | 153.3 | |||||||||||||
| Earnings per share from continuing operations |
|||||||||||||||
| Basic |
$ | 1.81 | $ | 1.74 | |||||||||||
| Diluted |
$ | 1.81 | $ | 1.74 | |||||||||||
| (1) | Reflects the reversal of the results of operations for Frontera and BCH and the related tax impacts. |
9
TECO Energy, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the year ended Dec. 31, 2001
(Unaudited)
| $ millions, except per share amounts
|
As reported |
Frontera Adjustments (1) |
BCH (1) Adjustments |
Pro Forma |
||||||||||||
| Revenues |
$ | 2,483.3 | $ | 47.4 | $ | 41.2 | $ | 2,394.7 | ||||||||
| Operating Expenses |
2,085.4 | 48.9 | 34.9 | 2,001.6 | ||||||||||||
| Income from Operations |
397.9 | (1.5 | ) | 6.3 | 393.1 | |||||||||||
| Other Income (Expense) |
||||||||||||||||
| AFUDC - Other Funds |
6.6 | — | — | 6.6 | ||||||||||||
| Other Income |
23.1 | — | (0.6 | ) | 23.7 | |||||||||||
| Earnings from Equity Investments |
9.1 | — | — | 9.1 | ||||||||||||
| Total Other Income |
38.8 | — | (0.6 | ) | 39.4 | |||||||||||
| Interest Charges |
178.5 | — | 1.4 | 177.1 | ||||||||||||
| Income Before Income Taxes |
258.2 | (1.5 | ) | 4.3 | 255.4 | |||||||||||
| (Benefit) Provision for Income Tax |
(7.3 | ) | (0.5 | ) | 1.7 | (8.5 | ) | |||||||||
| Minority Interest |
— | — | — | |||||||||||||
| Net Income from Continuing Operations |
265.5 | $ | (1.0 | ) | 2.6 | 263.9 | ||||||||||
| Average common shares outstanding |
||||||||||||||||
| Basic |
134.5 | 134.5 | ||||||||||||||
| Diluted |
135.4 | 135.4 | ||||||||||||||
| Earnings per share from continuing operations |
||||||||||||||||
| Basic |
$ | 1.98 | $ | 1.97 | ||||||||||||
| Diluted |
$ | 1.96 | $ | 1.95 | ||||||||||||
| (1) | Reflects the reversal of the results of operations for Frontera and BCH and the related tax impacts. |
10
| (c) | Exhibits |
| 2.1 | Stock Purchase Agreement dated as of December 31, 2004, by and between TECO Solutions, Inc. as Seller, and BCH Holdings, Inc. as Purchaser. |
| 10.1 | Purchase and Sale Agreement dated as of January 13, 2005, by and between TM Delmarva Power, L.L.C. as Seller, and TPF Chesapeake, LLC as Purchaser. |
| 99.1 | Press release dated January 13, 2005, announcing that an indirect subsidiary of TECO Energy, Inc. has signed an agreement to sell Commonwealth Chesapeake Company, LLC. |
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: January 13, 2005 |
TECO ENERGY, INC. | |
| (Registrant) | ||
| /s/ G. L. GILLETTE | ||
| G. L. GILLETTE | ||
| Executive Vice President | ||
| and Chief Financial Officer (Principal Financial Officer) | ||
12
Exhibit Index
| Exhibit No. |
Description of Exhibits | |
| 2.1 | Stock Purchase Agreement dated as of December 31, 2004, by and between TECO Solutions, Inc. as Seller, and BCH Holdings, Inc. as Purchaser. | |
| 10.1 | Purchase and Sale Agreement dated as of January 13, 2005, by and between TM Delmarva Power, L.L.C. as Seller, and TPF Chesapeake, LLC as Purchaser. | |
| 99.1 | Press release dated January 13, 2005, announcing that an indirect subsidiary of TECO Energy, Inc. has signed an agreement to sell Commonwealth Chesapeake Company, LLC. | |
13