Table of Contents
SECURITIES AND EXCHANGE COMMISSION
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission | Registrant; State of Incorporation; | IRS Employer | ||
File Number | Address; and Telephone Number | Identification Number | ||
1-13739 | UNISOURCE ENERGY CORPORATION | 86-0786732 | ||
(An Arizona Corporation) | ||||
One South Church Avenue, Suite 100 | ||||
Tucson, AZ 85701 | ||||
(520) 571-4000 | ||||
1-5924 | TUCSON ELECTRIC POWER COMPANY | 86-0062700 | ||
(An Arizona Corporation) | ||||
One South Church Avenue, Suite 100 | ||||
Tucson, AZ 85701 | ||||
(520) 571-4000 |
Name of Each Exchange | ||||
Registrant | Title of Each Class | on Which Registered | ||
UniSource Energy | Common Stock, no par value | New York Stock Exchange | ||
Corporation |
UniSource Energy Corporation | Yesþ | Noo | ||
Tucson Electric Power Company | Yeso | Noþ |
UniSource Energy Corporation | Yeso | Noþ | ||
Tucson Electric Power Company | Yesþ | Noo |
UniSource Energy Corporation | Yesþ | Noo | ||
Tucson Electric Power Company (1) | Yeso | Noþ |
UniSource Energy Corporation | Yeso | Noo | ||
Tucson Electric Power Company | Yeso | Noo |
UniSource Energy Corporation | Large Accelerated Filerþ | Accelerated Filero | Non-accelerated filero | Smaller Reporting Companyo |
Tucson Electric Power Company | Large Accelerated Filero | Accelerated Filero | Non-accelerated filerþ | Smaller Reporting Companyo |
UniSource Energy Corporation | Yeso | Noþ | ||
Tucson Electric Power Company | Yeso | Noþ |
Table of Contents
EXPLANATORY NOTE
This Amendment No.1 on Form 10-K/A to the Annual Report on Form 10-K for UniSource Energy Corporation (UniSource Energy) and Tucson Electric Power Company (TEP) for the year ended December 31, 2009, originally filed with the Securities and Exchange Commission on February 26, 2010, is being filed to remove the inadvertently included phrase “DRAFT Audit Committee 2/19/10”from the header of the Notes to Consolidated Financial Statements. Even though the Notes to Consolidated Financial Statements were inadvertently labeled draft, Management, the Audit Committee, and the Independently Registered Public Accountants had completed their procedures prior to filing the Form 10-K with the Securities and Exchange Commission.
In addition, the typographical changes described below were made toItem 8. — Consolidated Financial Statements and Supplementary Data:
• | In the 2007 portion of the UniSource Energy Consolidated Statement of Changes in Stockholders’ Equity and TEP Consolidated Statement of Changes in Stockholder’s Equity, the line item entitled “Implementation of FIN 48” was changed to “Implementation of Accounting for Uncertain Tax Positions”. |
• | In the 2007 portion of the TEP Consolidated Statement of Changes in Stockholder’s Equity, the line item entitled “Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income to Regulatory Asset” was changed to remove the words “to Regulatory Asset”. |
• | The “TEP’s Utility Operating Statistics” table was removed fromNote 5. — Utility Plant and Jointly-Owned Facilitiesas it was a repeat of information included in Item 1. — Business. |
• | In the last sentence of the fifth paragraph of the section entitled “TEP Credit Agreement” inNote 6. - Debt, Credit Facilities, and Capital Lease Obligations, the reference to February 25, 2009 was changed to February 25, 2010. |
Except as described above, and for the updated Item 9A, Item 15 and the consent and certifications filed as Exhibits 23, 31 and 32, no other changes have been made to the Annual Report on Form 10-K and this Form 10-K/A does not amend, update or change the financial statements or any other items or disclosures in the Annual Report on
Form 10-K.
K/A-i
— PART II — | ||||
1 | ||||
1 | ||||
2 | ||||
4 | ||||
5 | ||||
6 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
12 | ||||
14 | ||||
15 | ||||
16 | ||||
26 | ||||
37 | ||||
40 | ||||
47 | ||||
49 | ||||
56 | ||||
57 | ||||
59 | ||||
62 | ||||
71 | ||||
75 | ||||
79 | ||||
80 | ||||
81 | ||||
81 | ||||
82 | ||||
84 | ||||
87 | ||||
91 | ||||
— PART IV — | ||||
92 | ||||
93 | ||||
95 | ||||
K/A-ii
Table of Contents
K/A-1
Table of Contents
UniSource Energy Corporation:
/s/ PricewaterhouseCoopers LLP | ||
Phoenix, Arizona | ||
February 25, 2010 |
K/A-2
Table of Contents
Tucson Electric Power Company:
/s/ PricewaterhouseCoopers LLP | ||
PricewaterhouseCoopers LLP | ||
Phoenix, Arizona | ||
February 25, 2010 |
K/A-3
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
- Thousands of Dollars - | ||||||||||||
(Except Per Share Amounts) | ||||||||||||
Operating Revenues | ||||||||||||
Electric Retail Sales | $ | 1,047,619 | $ | 988,612 | $ | 983,993 | ||||||
Provision for Rate Refunds — CTC Revenue | — | (58,092 | ) | — | ||||||||
Net Electric Retail Sales | 1,047,619 | 930,520 | 983,993 | |||||||||
Electric Wholesale Sales | 128,627 | 236,300 | 196,233 | |||||||||
California Power Exchange (CPX) Provision for Wholesale Refunds | (4,172 | ) | — | — | ||||||||
Gas Revenue | 144,609 | 163,977 | 148,598 | |||||||||
Other Revenues | 77,741 | 66,714 | 52,549 | |||||||||
Total Operating Revenues | 1,394,424 | 1,397,511 | 1,381,373 | |||||||||
Operating Expenses | ||||||||||||
Fuel | 298,655 | 299,987 | 297,037 | |||||||||
Purchased Energy | 294,584 | 442,210 | 347,377 | |||||||||
Transmission | 10,181 | 19,214 | 15,648 | |||||||||
Increase (Decrease) to Reflect PPFAC/PGA Recovery Treatment | (17,091 | ) | (10,975 | ) | 5,259 | |||||||
Total Fuel and Purchased Energy | 586,329 | 750,436 | 665,321 | |||||||||
Other Operations and Maintenance | 333,887 | 295,658 | 242,264 | |||||||||
Depreciation and Amortization | 176,018 | 147,690 | 140,638 | |||||||||
Amortization of Transition Recovery Asset | — | 23,945 | 77,681 | |||||||||
Taxes Other Than Income Taxes | 45,857 | 39,339 | 47,836 | |||||||||
Total Operating Expenses | 1,142,091 | 1,257,068 | 1,173,740 | |||||||||
Operating Income | 252,333 | 140,443 | 207,633 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest Income | 12,072 | 11,011 | 18,828 | |||||||||
Other Income | 18,063 | 7,838 | 7,622 | |||||||||
Other Expense | (5,292 | ) | (9,286 | ) | (4,380 | ) | ||||||
Total Other Income (Deductions) | 24,843 | 9,563 | 22,070 | |||||||||
Interest Expense | ||||||||||||
Long-Term Debt | 58,134 | 70,227 | 73,095 | |||||||||
Capital Leases | 49,270 | 52,511 | 59,227 | |||||||||
Other Interest Expense | 3,468 | 1,837 | 5,480 | |||||||||
Interest Capitalized | (2,302 | ) | (5,565 | ) | (5,551 | ) | ||||||
Total Interest Expense | 108,570 | 119,010 | 132,251 | |||||||||
Income Before Income Taxes | 168,606 | 30,996 | 97,452 | |||||||||
Income Tax Expense | 64,348 | 16,975 | 39,079 | |||||||||
Net Income | $ | 104,258 | $ | 14,021 | $ | 58,373 | ||||||
Weighted-Average Shares of Common Stock Outstanding (000) | 35,858 | 35,632 | 35,486 | |||||||||
Basic Earnings per Share | $ | 2.91 | $ | 0.39 | $ | 1.64 | ||||||
Diluted Earnings per Share | $ | 2.69 | $ | 0.39 | $ | 1.57 | ||||||
Dividends Declared per Share | $ | 1.16 | $ | 0.96 | $ | 0.90 | ||||||
K/A-4
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
- Thousands of Dollars - | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Cash Receipts from Electric Retail Sales | $ | 1,145,051 | $ | 1,079,964 | $ | 1,061,994 | ||||||
Cash Receipts from Electric Wholesale Sales | 175,679 | 353,618 | 301,616 | |||||||||
Cash Receipts from Gas Sales | 163,441 | 182,271 | 165,678 | |||||||||
Cash Receipts from Operating Springerville Unit 3 | 49,386 | 53,495 | 38,887 | |||||||||
Cash Receipts from Operating Springerville Unit 4 | 19,565 | 4,162 | — | |||||||||
Interest Received | 13,470 | 17,246 | 19,197 | |||||||||
Performance Deposits Received | 34,630 | 34,404 | 12,549 | |||||||||
Income Tax Refunds Received | 20,242 | 22,355 | 1,016 | |||||||||
Other Cash Receipts | 15,441 | 15,137 | 14,603 | |||||||||
Sale of Excess Emission Allowances | 24 | 1,494 | 14,861 | |||||||||
Refund of Disputed Transmission Costs | — | 10,665 | — | |||||||||
Purchased Energy Costs Paid | (334,481 | ) | (577,588 | ) | (450,197 | ) | ||||||
Fuel Costs Paid | (300,810 | ) | (292,646 | ) | (283,439 | ) | ||||||
Payment of Other Operations and Maintenance Costs | (236,184 | ) | (196,860 | ) | (158,057 | ) | ||||||
Taxes Other Than Income Taxes Paid, Net of Amounts Capitalized | (161,574 | ) | (154,548 | ) | (151,074 | ) | ||||||
Wages Paid, Net of Amounts Capitalized | (122,245 | ) | (108,504 | ) | (106,097 | ) | ||||||
Interest Paid, Net of Amounts Capitalized | (54,641 | ) | (58,774 | ) | (68,446 | ) | ||||||
Performance Deposits Paid | (22,260 | ) | (48,520 | ) | (7,900 | ) | ||||||
Capital Lease Interest Paid | (38,598 | ) | (43,828 | ) | (54,315 | ) | ||||||
Income Taxes Paid | (9,050 | ) | (9,900 | ) | (20,923 | ) | ||||||
Excess Tax Benefit from Stock Options Exercised | (3,256 | ) | (633 | ) | (541 | ) | ||||||
Other Cash Payments | (6,520 | ) | (5,999 | ) | (6,646 | ) | ||||||
Net Cash Flows — Operating Activities | 347,310 | 277,011 | 322,766 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital Expenditures | (287,104 | ) | (357,324 | ) | (245,366 | ) | ||||||
Payments for Investment in Springerville Lease Debt | (31,375 | ) | — | — | ||||||||
Prepayment Deposit on UED Short-Term Debt | (3,625 | ) | — | — | ||||||||
Deposit — Collateral Trust Bond Trustee | — | (133,111 | ) | — | ||||||||
Proceeds from Investment in Springerville Lease Debt | 12,736 | 24,918 | 27,732 | |||||||||
Other Proceeds from Investing Activities | 331 | 5,137 | 4,475 | |||||||||
Return of Investment from Millennium Energy Businesses | 8,333 | 839 | 12 | |||||||||
Insurance Proceeds for Replacement Assets | 4,928 | 8,035 | — | |||||||||
Investment in and Loans to Equity Investees | (207 | ) | (600 | ) | (845 | ) | ||||||
Other Payments for Investing Activities | (661 | ) | (711 | ) | (3,413 | ) | ||||||
Net Cash Flows — Investing Activities | (296,644 | ) | (452,817 | ) | (217,405 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from Borrowings Under Revolving Credit Facilities | 203,000 | 242,000 | 205,000 | |||||||||
Proceeds from Issuance of Short-Term Debt | 30,000 | — | — | |||||||||
Proceeds from Stock Options Exercised | 3,441 | 1,969 | 1,980 | |||||||||
Excess Tax Benefit from Stock Options Exercised | 3,256 | 633 | 541 | |||||||||
Other Cash Receipts | 5,681 | 6,028 | 8,210 | |||||||||
Proceeds from Issuance of Long-Term Debt | — | 320,745 | — | |||||||||
Repayments of Borrowings Under Revolving Credit Facilities | (198,000 | ) | (237,000 | ) | (218,000 | ) | ||||||
Payments of Capital Lease Obligations | (24,192 | ) | (74,316 | ) | (71,549 | ) | ||||||
Common Stock Dividends Paid | (41,429 | ) | (34,043 | ) | (31,784 | ) | ||||||
Repayment of Long-Term Debt | (6,000 | ) | (76,000 | ) | (6,000 | ) | ||||||
Payment of Debt Issue/Retirement Costs | (2,268 | ) | (3,739 | ) | (465 | ) | ||||||
Other Cash Payments | (2,405 | ) | (5,672 | ) | (7,162 | ) | ||||||
Net Cash Flows — Financing Activities | (28,916 | ) | 140,605 | (119,229 | ) | |||||||
Net Increase(Decrease) in Cash and Cash Equivalents | 21,750 | (35,201 | ) | (13,868 | ) | |||||||
Cash and Cash Equivalents, Beginning of Year | 55,172 | 90,373 | 104,241 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 76,922 | $ | 55,172 | $ | 90,373 | ||||||
Non-Cash Financing Activity | ||||||||||||
Repayment of UED Short-Term Debt | $ | (3,625 | ) | $ | — | $ | — | |||||
Repayment of Collateral Trust Bonds | $ | — | $ | (128,300 | ) | $ | — | |||||
K/A-5
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
- Thousands of Dollars - | ||||||||
ASSETS | ||||||||
Utility Plant | ||||||||
Plant in Service | $ | 4,147,268 | $ | 3,870,493 | ||||
Utility Plant Under Capital Leases | 720,628 | 702,337 | ||||||
Construction Work in Progress | 144,551 | 171,996 | ||||||
Total Utility Plant | 5,012,447 | 4,744,826 | ||||||
Less Accumulated Depreciation and Amortization | (1,652,296 | ) | (1,580,308 | ) | ||||
Less Accumulated Amortization of Capital Lease Assets | (574,437 | ) | (546,825 | ) | ||||
Total Utility Plant — Net | 2,785,714 | 2,617,693 | ||||||
Investments and Other Property | ||||||||
Investments in Lease Debt and Equity | 132,168 | 126,672 | ||||||
Other | 60,239 | 64,096 | ||||||
Total Investments and Other Property | 192,407 | 190,768 | ||||||
Current Assets | ||||||||
Cash and Cash Equivalents | 76,922 | 55,172 | ||||||
Accounts Receivable — Retail and Other | 64,230 | 74,288 | ||||||
Accounts Receivable — Wholesale Sales | 18,288 | 44,725 | ||||||
Unbilled Accounts Receivable | 53,361 | 60,146 | ||||||
Allowance for Doubtful Accounts | (5,977 | ) | (19,684 | ) | ||||
Materials and Fuel Inventory | 116,791 | 92,170 | ||||||
Prepayments | 6,759 | 7,893 | ||||||
Derivative Instruments | 2,653 | 3,437 | ||||||
Regulatory Assets — Derivative Instruments | 17,841 | 38,276 | ||||||
Regulatory Assets — Other | 23,931 | 23,299 | ||||||
Deferred Income Taxes — Current | 52,355 | 61,398 | ||||||
Income Tax Receivable | 620 | 12,720 | ||||||
Interest Receivable on Capital Lease Debt Investment | 5,081 | 4,491 | ||||||
Collateral Posted | 1,750 | 14,120 | ||||||
Other | 11,700 | 9,635 | ||||||
Total Current Assets | 446,305 | 482,086 | ||||||
Regulatory and Other Assets | ||||||||
Income Taxes Recoverable Through Future Revenues | 18,144 | 19,814 | ||||||
Regulatory Assets — Pension and Other Postretirement Benefits | 84,149 | 112,035 | ||||||
Regulatory Assets — Derivative Instruments | 9,503 | 18,324 | ||||||
Regulatory Assets — Other | 35,529 | 39,395 | ||||||
Derivative Instruments | 4,498 | 3,113 | ||||||
Other Assets | 24,993 | 26,339 | ||||||
Total Regulatory and Other Assets | 176,816 | 219,020 | ||||||
Total Assets | $ | 3,601,242 | $ | 3,509,567 | ||||
K/A-6
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
- Thousands of Dollars - | ||||||||
CAPITALIZATION AND OTHER LIABILITIES | ||||||||
Capitalization | ||||||||
Common Stock Equity | $ | 750,865 | $ | 679,274 | ||||
Capital Lease Obligations | 488,349 | 513,517 | ||||||
Long-Term Debt | 1,307,795 | 1,313,615 | ||||||
Total Capitalization | 2,547,009 | 2,506,406 | ||||||
Current Liabilities | ||||||||
Current Obligations Under Capital Leases | 40,441 | 18,334 | ||||||
Short-Term Borrowings | 35,000 | 10,000 | ||||||
Current Maturities of Long-Term Debt | 12,195 | 6,000 | ||||||
Accounts Payable | 54,152 | 62,514 | ||||||
Accounts Payable — Purchased Power | 44,838 | 49,146 | ||||||
Interest Accrued | 41,396 | 43,440 | ||||||
Accrued Taxes Other than Income Taxes | 36,698 | 36,746 | ||||||
Accrued Employee Expenses | 27,545 | 26,859 | ||||||
Customer Deposits | 25,978 | 22,656 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 24,258 | 25,665 | ||||||
Regulatory Liabilities — Other | 17,971 | 8,161 | ||||||
Derivative Instruments | 21,186 | 41,076 | ||||||
Other | 3,960 | 1,460 | ||||||
Total Current Liabilities | 385,618 | 352,057 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred Income Taxes — Noncurrent | 227,199 | 178,089 | ||||||
Regulatory Liabilities — Net Cost of Removal for Interim Retirements | 195,177 | 151,796 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 16,714 | 44,469 | ||||||
Derivative Instruments | 19,489 | 29,849 | ||||||
Pension and Other Postretirement Benefits | 123,476 | 157,769 | ||||||
Customer Advances for Construction | 31,803 | 31,062 | ||||||
Other | 54,757 | 58,070 | ||||||
Total Deferred Credits and Other Liabilities | 668,615 | 651,104 | ||||||
Commitments and Contingencies (Note 4) | ||||||||
Total Capitalization and Other Liabilities | $ | 3,601,242 | $ | 3,509,567 | ||||
K/A-7
Table of Contents
December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
- Thousands of Dollars - | ||||||||||||||||
COMMON STOCK EQUITY | ||||||||||||||||
Common Stock-No Par Value | $ | 696,206 | $ | 687,360 | ||||||||||||
2009 | 2008 | |||||||||||||||
Shares Authorized | 75,000,000 | 75,000,000 | ||||||||||||||
Shares Outstanding | 35,851,185 | 35,457,780 | ||||||||||||||
Accumulated Earnings (Deficit) | 60,461 | (1,231 | ) | |||||||||||||
Accumulated Other Comprehensive Loss | (5,802 | ) | (6,855 | ) | ||||||||||||
Total Common Stock Equity | 750,865 | 679,274 | ||||||||||||||
PREFERRED STOCK | ||||||||||||||||
No Par Value, 1,000,000 Shares Authorized, None Outstanding | — | — | ||||||||||||||
CAPITAL LEASE OBLIGATIONS | ||||||||||||||||
Springerville Unit 1 | 320,843 | 306,553 | ||||||||||||||
Springerville Coal Handling Facilities | 85,224 | 90,812 | ||||||||||||||
Springerville Common Facilities | 109,499 | 108,516 | ||||||||||||||
Sundt Unit 4 | 13,077 | 25,400 | ||||||||||||||
Other | 147 | 570 | ||||||||||||||
Total Capital Lease Obligations | 528,790 | 531,851 | ||||||||||||||
Less Current Maturities | (40,441 | ) | (18,334 | ) | ||||||||||||
Total Long-Term Capital Lease Obligations | 488,349 | 513,517 | ||||||||||||||
LONG-TERM DEBT | ||||||||||||||||
Issue | Maturity | Interest Rate | ||||||||||||||
UniSource Energy: | ||||||||||||||||
Convertible Senior Notes | 2035 | 4.50% | 150,000 | 150,000 | ||||||||||||
Credit Agreement | 2011 | Variable | 40,000 | 58,000 | ||||||||||||
Tucson Electric Power Company: | ||||||||||||||||
Variable Rate IDBs | 2011 | Variable | 458,600 | 458,600 | ||||||||||||
Unsecured IDBs | 2020 – 2033 | 4.95% to 7.13% | 445,015 | 445,015 | ||||||||||||
UNS Gas and UNS Electric: | ||||||||||||||||
Senior Unsecured Notes | 2011 – 2023 | 6.23% to 7.1% | 200,000 | 200,000 | ||||||||||||
Credit Agreement | 2011 | Variable | — | 8,000 | ||||||||||||
UED: | ||||||||||||||||
Secured Term Loan | 2010 | Variable | 26,375 | — | ||||||||||||
Total Stated Principal Amount | 1,319,990 | 1,319,615 | ||||||||||||||
Less Current Maturities | (12,195 | ) | (6,000 | ) | ||||||||||||
Total Long-Term Debt | 1,307,795 | 1,313,615 | ||||||||||||||
Total Capitalization | $ | 2,547,009 | $ | 2,506,406 | ||||||||||||
K/A-8
Table of Contents
Accumulated | ||||||||||||||||||||
Common | Other | Total | ||||||||||||||||||
Shares | Common | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||
Outstanding* | Stock | Earnings (Deficit) | Loss | Equity | ||||||||||||||||
Balances at December 31, 2006 | 35,190 | $ | 697,426 | $ | (27,913 | ) | $ | (15,364 | ) | $ | 654,149 | |||||||||
Implementation of Accounting for Uncertain Tax Positions | 696 | 696 | ||||||||||||||||||
Comprehensive Income: | ||||||||||||||||||||
2007 Net Income | 58,373 | 58,373 | ||||||||||||||||||
Decrease in Pension and Other Post-Retirement Benefit Liabilities (net of $3,929 income taxes) | 5,993 | 5,993 | ||||||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $2,500 income taxes) | (3,813 | ) | (3,813 | ) | ||||||||||||||||
Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income (net of $996 income taxes) | 1,519 | 1,519 | ||||||||||||||||||
Total Comprehensive Income | 62,072 | |||||||||||||||||||
Dividends | — | — | (31,784 | ) | (31,784 | ) | ||||||||||||||
Shares Issued under Stock Compensation Plans | 125 | 1,980 | 1980 | |||||||||||||||||
Tax Benefit Realized from Stock-Based Compensation Plans | — | 540 | 540 | |||||||||||||||||
Other | — | 2,422 | 2,422 | |||||||||||||||||
Balances at December 31, 2007 | 35,315 | 702,368 | (628 | ) | (11,665 | ) | 690,075 | |||||||||||||
Impact of Change in Pension Plan Measurement Date | (603 | ) | (603 | ) | ||||||||||||||||
Comprehensive Income (Loss): | ||||||||||||||||||||
2008 Net Income | 14,021 | 14,021 | ||||||||||||||||||
Unrealized Loss on Interest Rate Swap | ||||||||||||||||||||
(net of $2,181 income taxes) | (3,326 | ) | (3,326 | ) | ||||||||||||||||
Reclassification of Unrealized Gain on Cash Flow Hedges to Regulatory Asset (net of $1,370 income taxes) | (2,089 | ) | (2,089 | ) | ||||||||||||||||
Reclassification of Unrealized Loss on Cash Flow Hedges to Net Income (net of $1,569 income taxes) | 2,393 | 2,393 | ||||||||||||||||||
Employee Benefit Obligations | ||||||||||||||||||||
Amortization of net actuarial loss and prior service credit included in net periodic benefit cost (net of $158 income taxes) | (242 | ) | (242 | ) | ||||||||||||||||
Increase in SERP Liability (net of $108 income taxes) | (165 | ) | (165 | ) | ||||||||||||||||
Reclassification of Pension and Other Postretirement Benefit to Regulatory Asset (net of $5,401 income taxes) | 8,239 | 8,239 | ||||||||||||||||||
Total Comprehensive Income | 18,831 | |||||||||||||||||||
Dividends | — | (20,017 | ) | (14,021 | ) | — | (34,038 | ) | ||||||||||||
Shares Issued under Stock Compensation Plans | 143 | 1,969 | — | — | 1,969 | |||||||||||||||
Tax Benefit Realized from Stock-Based Compensation Plans | — | 633 | — | — | 633 | |||||||||||||||
Other | — | 2,407 | — | — | 2,407 | |||||||||||||||
Balances at December 31, 2008 | 35,458 | 687,360 | (1,231 | ) | (6,855 | ) | 679,274 | |||||||||||||
Comprehensive Income: | ||||||||||||||||||||
2009 Net Income | 104,258 | 104,258 | ||||||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $33 income taxes) | 51 | 51 | ||||||||||||||||||
Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income (net of $690 income taxes) | 1,053 | 1,053 | ||||||||||||||||||
Employee Benefit Obligations | ||||||||||||||||||||
Amortization of SERP Net Prior Service Cost Included in Net Periodic Benefit Cost (net of $33 income taxes) | (51 | ) | (51 | ) | ||||||||||||||||
Total Comprehensive Income | 105,311 | |||||||||||||||||||
Dividends | (42,566 | ) | (42,566 | ) | ||||||||||||||||
Shares Issued under Deferred Compensation Plans | 10 | 279 | 279 | |||||||||||||||||
Shares Issued under Stock Compensation Plans — (net of shares redeemed for taxes) | 383 | 2,541 | 2,541 | |||||||||||||||||
Tax Benefit Realized from Stock-Based Compensation Plans | 3,256 | 3,256 | ||||||||||||||||||
Other Stock-Based Compensation | 2,770 | 2,770 | ||||||||||||||||||
Balances at December 31, 2009 | 35,851 | $ | 696,206 | $ | 60,461 | $ | (5,802 | ) | $ | 750,865 | ||||||||||
* | UniSource Energy has 75 million authorized shares of Common Stock. | |
We describe limitations on our ability to pay dividends in Note 8. | ||
See Notes to Consolidated Financial Statements. |
K/A-9
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
- Thousands of Dollars - | ||||||||||||
Operating Revenues | ||||||||||||
Electric Retail Sales | $ | 867,516 | $ | 805,528 | $ | 816,471 | ||||||
Provision for Rate Refunds — CTC Revenue | — | (58,092 | ) | — | ||||||||
Net Electric Retail Sales | 867,516 | 747,436 | 816,471 | |||||||||
Electric Wholesale Sales | 150,679 | 259,855 | 195,999 | |||||||||
California Power Exchange (CPX) Provision for Wholesale Refunds | (4,172 | ) | — | — | ||||||||
Other Revenues | 82,688 | 71,962 | 58,033 | |||||||||
Total Operating Revenues | 1,096,711 | 1,079,253 | 1,070,503 | |||||||||
Operating Expenses | ||||||||||||
Fuel | 281,710 | 289,985 | 296,511 | |||||||||
Purchased Power | 142,252 | 238,024 | 140,498 | |||||||||
Transmission | 3,066 | 10,515 | 9,014 | |||||||||
Increase (Decrease) to Reflect PPFAC Recovery Treatment | (20,724 | ) | — | — | ||||||||
Total Fuel and Purchased Energy | 406,304 | 538,524 | 446,023 | |||||||||
Other Operations and Maintenance | 289,765 | 256,584 | 202,837 | |||||||||
Depreciation and Amortization | 152,901 | 126,040 | 119,811 | |||||||||
Amortization of Transition Recovery Asset | — | 23,945 | 77,681 | |||||||||
Taxes Other Than Income Taxes | 37,618 | 31,650 | 40,366 | |||||||||
Total Operating Expenses | 886,588 | 976,743 | 886,718 | |||||||||
Operating Income | 210,123 | 102,510 | 183,785 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest Income | 11,471 | 9,900 | 16,073 | |||||||||
Other Income | 10,991 | 5,708 | 3,665 | |||||||||
Other Expense | (2,904 | ) | (6,249 | ) | (3,296 | ) | ||||||
Total Other Income (Deductions) | 19,558 | 9,359 | 16,442 | |||||||||
Interest Expense | ||||||||||||
Long-Term Debt | 36,226 | 47,456 | 50,230 | |||||||||
Interest on Capital Leases | 49,258 | 52,491 | 59,205 | |||||||||
Other Interest Expense | 1,571 | 1,367 | 4,538 | |||||||||
Interest Capitalized | (1,752 | ) | (4,675 | ) | (2,744 | ) | ||||||
Total Interest Expense | 85,303 | 96,639 | 111,229 | |||||||||
Income Before Income Taxes | 144,378 | 15,230 | 88,998 | |||||||||
Income Tax Expense | 55,130 | 10,867 | 35,542 | |||||||||
Net Income | $ | 89,248 | $ | 4,363 | $ | 53,456 | ||||||
K/A-10
Table of Contents
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
- Thousands of Dollars - | ||||||||||||
Cash Flows from Operating Activities | ||||||||||||
Cash Receipts from Electric Retail Sales | $ | 944,873 | $ | 883,423 | $ | 883,885 | ||||||
Cash Receipts from Electric Wholesale Sales | 199,918 | 377,579 | 301,616 | |||||||||
Cash Receipts from Operating Springerville Unit 3 | 49,386 | 53,495 | 38,887 | |||||||||
Cash Receipts from Operating Springerville Unit 4 | 19,565 | 4,162 | — | |||||||||
Interest Received | 12,768 | 15,849 | 16,284 | |||||||||
Income Tax Refunds Received | 14,462 | 20,902 | — | |||||||||
Reimbursement of Affiliate Charges | 19,998 | 16,534 | — | |||||||||
Refund of Disputed Transmission Costs | — | 10,665 | — | |||||||||
Performance Deposits Received | 14,000 | 10,150 | — | |||||||||
Sale of Excess Emission Allowances | 24 | 1,494 | 16,975 | |||||||||
Other Cash Receipts | 10,101 | 7,774 | 7,931 | |||||||||
Fuel Costs Paid | (282,653 | ) | (284,830 | ) | (283,440 | ) | ||||||
Purchased Power Costs Paid | (185,129 | ) | (364,356 | ) | (245,439 | ) | ||||||
Payment of Other Operations and Maintenance Costs | (223,760 | ) | (185,206 | ) | (144,753 | ) | ||||||
Taxes Other Than Income Taxes Paid, Net of Amounts Capitalized | (124,053 | ) | (117,611 | ) | (116,641 | ) | ||||||
Wages Paid, Net of Amounts Capitalized | (97,289 | ) | (84,857 | ) | (82,661 | ) | ||||||
Capital Lease Interest Paid | (38,586 | ) | (43,807 | ) | (54,293 | ) | ||||||
Interest Paid, Net of Amounts Capitalized | (33,128 | ) | (38,467 | ) | (47,050 | ) | ||||||
Income Taxes Paid | (14,606 | ) | — | (23,609 | ) | |||||||
Performance Deposits Paid | (14,000 | ) | (10,150 | ) | — | |||||||
Other Cash Payments | (3,827 | ) | (4,037 | ) | (3,580 | ) | ||||||
Net Cash Flows — Operating Activities | 268,064 | 268,706 | 264,112 | |||||||||
Cash Flows from Investing Activities | ||||||||||||
Capital Expenditures | (235,485 | ) | (294,940 | ) | (162,539 | ) | ||||||
Payments for Investments in Lease Debt and Equity | (31,375 | ) | — | — | ||||||||
Deposit — Collateral Trust Bond Trustee | — | (133,111 | ) | — | ||||||||
Proceeds from Investments in Springerville Lease Debt | 12,736 | 24,918 | 27,732 | |||||||||
Insurance Proceeds for Replacement Assets | 4,928 | 8,035 | — | |||||||||
Other Cash Receipts | 6 | 5,055 | 650 | |||||||||
Other Cash Payments | (411 | ) | (711 | ) | (2,968 | ) | ||||||
Net Cash Flows — Investing Activities | (249,601 | ) | (390,754 | ) | (137,125 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||||
Proceeds from Issuance of Long-Term Debt | — | 220,745 | — | |||||||||
Proceeds from Borrowings Under Revolving Credit Facility | 171,000 | 170,000 | 160,000 | |||||||||
Repayments of Borrowings Under Revolving Credit Facility | (146,000 | ) | (170,000 | ) | (180,000 | ) | ||||||
Payments of Capital Lease Obligations | (24,091 | ) | (74,228 | ) | (71,464 | ) | ||||||
Repayments of Long-Term Debt | — | (10,000 | ) | — | ||||||||
Dividends Paid to UniSource Energy | (60,000 | ) | (2,500 | ) | (53,000 | ) | ||||||
Equity Investment from UniSource Energy | 30,000 | — | 18,000 | |||||||||
Other Cash Receipts | 2,447 | 1,237 | 7,795 | |||||||||
Payment of Debt Issue/Retirement Costs | (1,329 | ) | (3,120 | ) | (451 | ) | ||||||
Other Cash Payments | (1,347 | ) | (3,421 | ) | (968 | ) | ||||||
Net Cash Flows — Financing Activities | (29,320 | ) | 128,713 | (120,088 | ) | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (10,857 | ) | 6,665 | 6,899 | ||||||||
Cash and Cash Equivalents, Beginning of Year | 33,275 | 26,610 | 19,711 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 22,418 | $ | 33,275 | $ | 26,610 | ||||||
Non-Cash Financing Activity — Repayment of Collateral Trust Bonds | $ | — | $ | (128,300 | ) | $ | — | |||||
K/A-11
Table of Contents
December 31, | ||||||||
2009 | 2008 | |||||||
- Thousands of Dollars - | ||||||||
ASSETS | ||||||||
Utility Plant | ||||||||
Plant in Service | $ | 3,584,308 | $ | 3,351,474 | ||||
Utility Plant Under Capital Leases | 719,922 | 701,631 | ||||||
Construction Work in Progress | 113,390 | 145,457 | ||||||
Total Utility Plant | 4,417,620 | 4,198,562 | ||||||
Less Accumulated Depreciation and Amortization | (1,582,442 | ) | (1,531,611 | ) | ||||
Less Accumulated Amortization of Capital Lease Assets | (573,853 | ) | (546,332 | ) | ||||
Total Utility Plant — Net | 2,261,325 | 2,120,619 | ||||||
Investments and Other Property | ||||||||
Investments in Lease Debt and Equity | 132,168 | 126,672 | ||||||
Other | 31,813 | 31,291 | ||||||
Total Investments and Other Property | 163,981 | 157,963 | ||||||
Current Assets | ||||||||
Cash and Cash Equivalents | 22,418 | 33,275 | ||||||
Accounts Receivable — Retail and Other | 46,894 | 53,091 | ||||||
Accounts Receivable — Wholesale | 17,904 | 44,610 | ||||||
Unbilled Accounts Receivable | 32,368 | 33,554 | ||||||
Allowance for Doubtful Accounts | (3,806 | ) | (17,135 | ) | ||||
Accounts Receivable — Due from Affiliates | 5,218 | 16,614 | ||||||
Materials and Fuel Inventory | 104,861 | 81,067 | ||||||
Prepayments | 5,678 | 5,535 | ||||||
Derivative Instruments | 5,043 | 5,129 | ||||||
Regulatory Assets — Derivative Instruments | 3,696 | 14,242 | ||||||
Regulatory Assets — Other | 23,330 | 22,834 | ||||||
Deferred Income Taxes — Current | 50,789 | 59,615 | ||||||
Interest Receivable on Capital Lease Debt Investment | 5,081 | 4,491 | ||||||
Other | 11,313 | 10,554 | ||||||
Total Current Assets | 330,787 | 367,476 | ||||||
Regulatory and Other Assets | ||||||||
Regulatory Assets — Pension and Other Postretirement Benefits | 80,169 | 106,596 | ||||||
Regulatory Assets — Derivatives | 4,631 | 5,400 | ||||||
Regulatory Assets — Other | 34,203 | 38,180 | ||||||
Income Taxes Recoverable Through Future Revenues | 18,144 | 19,814 | ||||||
Derivative Instruments | 1,075 | 4,982 | ||||||
Other Assets | 19,984 | 20,741 | ||||||
Total Regulatory and Other Assets | 158,206 | 195,713 | ||||||
Total Assets | $ | 2,914,299 | $ | 2,841,771 | ||||
K/A-12
Table of Contents
CONSOLIDATED BALANCE SHEETS
December 31, | ||||||||
2009 | 2008 | |||||||
- Thousands of Dollars - | ||||||||
CAPITALIZATION AND OTHER LIABILITIES | ||||||||
Capitalization | ||||||||
Common Stock Equity | $ | 643,144 | $ | 583,606 | ||||
Capital Lease Obligations | 488,311 | 513,370 | ||||||
Long-Term Debt | 903,615 | 903,615 | ||||||
Total Capitalization | 2,035,070 | 2,000,591 | ||||||
Current Liabilities | ||||||||
Current Obligations Under Capital Leases | 40,332 | 18,231 | ||||||
Borrowings Under Revolving Credit Facility | 35,000 | 10,000 | ||||||
Accounts Payable | 48,631 | 56,001 | ||||||
Accounts Payable — Purchased Power | 22,697 | 28,510 | ||||||
Accounts Payable — Due from Affiliates | 3,694 | 3,610 | ||||||
Income Taxes Payable | — | 2,057 | ||||||
Interest Accrued | 33,970 | 35,828 | ||||||
Accrued Taxes Other than Income Taxes | 28,404 | 27,679 | ||||||
Accrued Employee Expenses | 24,409 | 23,990 | ||||||
Customer Deposits | 18,125 | 15,902 | ||||||
Derivative Instruments | 9,434 | 18,737 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 9,200 | 14,310 | ||||||
Regulatory Liability — Other | 17,439 | 7,083 | ||||||
Other | 1,363 | 1,204 | ||||||
Total Current Liabilities | 292,698 | 263,142 | ||||||
Deferred Credits and Other Liabilities | ||||||||
Deferred Income Taxes — Noncurrent | 217,316 | 180,098 | ||||||
Regulatory Liabilities — Net Cost of Removal for Interim Retirements | 162,764 | 122,037 | ||||||
Regulatory Liabilities — Over-Recovered Purchased Energy Costs | 16,714 | 44,469 | ||||||
Derivative Instruments | 11,195 | 18,794 | ||||||
Pension and Other Postretirement Benefits | 116,991 | 149,955 | ||||||
Other | 61,551 | 62,685 | ||||||
Total Deferred Credits and Other Liabilities | 586,531 | 578,038 | ||||||
Commitments and Contingencies (Note 4) | ||||||||
Total Capitalization and Other Liabilities | $ | 2,914,299 | $ | 2,841,771 | ||||
K/A-13
Table of Contents
December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
- Thousands of Dollars - | ||||||||||||||||
COMMON STOCK EQUITY | ||||||||||||||||
Common Stock—No Par Value | $ | 843,971 | $ | 813,971 | ||||||||||||
2009 | 2008 | |||||||||||||||
Shares Authorized | 75,000,000 | 75,000,000 | ||||||||||||||
Shares Outstanding | 32,139,434 | 32,139,434 | ||||||||||||||
Capital Stock Expense | (6,357 | ) | (6,357 | ) | ||||||||||||
Accumulated Deficit | (188,668 | ) | (217,153 | ) | ||||||||||||
Accumulated Other Comprehensive Loss | (5,802 | ) | (6,855 | ) | ||||||||||||
Total Common Stock Equity | 643,144 | 583,606 | ||||||||||||||
PREFERRED STOCK | ||||||||||||||||
No Par Value, 1,000,000 Shares Authorized, None Outstanding | — | — | ||||||||||||||
CAPITAL LEASE OBLIGATIONS | ||||||||||||||||
Springerville Unit 1 | 320,843 | 306,553 | ||||||||||||||
Springerville Coal Handling Facilities | 85,224 | 90,812 | ||||||||||||||
Springerville Common Facilities | 109,499 | 108,516 | ||||||||||||||
Sundt Unit 4 | 13,077 | 25,400 | ||||||||||||||
Other Leases | — | 320 | ||||||||||||||
Total Capital Lease Obligations | 528,643 | 531,601 | ||||||||||||||
Less Current Maturities | (40,332 | ) | (18,231 | ) | ||||||||||||
Total Long-Term Capital Lease Obligations | 488,311 | 513,370 | ||||||||||||||
LONG-TERM DEBT | ||||||||||||||||
Issue | Maturity | Interest Rate | ||||||||||||||
Variable Rate IDBs | 2011 | Variable | 458,600 | 458,600 | ||||||||||||
Unsecured IDBs | 2020 – 2033 | 4.95% to 7.125% | 445,015 | 445,015 | ||||||||||||
Total Long-Term Debt | 903,615 | 903,615 | ||||||||||||||
Total Capitalization | $ | 2,035,070 | $ | 2,000,591 | ||||||||||||
K/A-14
Table of Contents
Accumulated | ||||||||||||||||||||
Capital | Other | Total | ||||||||||||||||||
Common | Stock | Accumulated | Comprehensive | Stockholder’s | ||||||||||||||||
Stock | Expense | Deficit | Loss | Equity | ||||||||||||||||
- Thousands of Dollars - | ||||||||||||||||||||
Balances at December 31, 2006 | $ | 795,971 | $ | (6,357 | ) | $ | (219,640 | ) | $ | (15,260 | ) | $ | 554,714 | |||||||
Implementation of Accounting for Uncertain Tax Positions | 696 | 696 | ||||||||||||||||||
Comprehensive Income: | ||||||||||||||||||||
2007 Net Income | 53,456 | 53,456 | ||||||||||||||||||
Decrease in Pension and Other Post-Retirement Benefit Liabilities (net of $3,820 income taxes) | 5,826 | 5,826 | ||||||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $2,532 income taxes) | (3,862 | ) | (3,862 | ) | ||||||||||||||||
Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income (net of $996 income taxes) | 1,519 | 1,519 | ||||||||||||||||||
Total Comprehensive Income | 56,939 | |||||||||||||||||||
Capital Contribution from UniSource Energy | 18,000 | 18,000 | ||||||||||||||||||
Dividends Paid | (53,000 | ) | (53,000 | ) | ||||||||||||||||
Balances at December 31, 2007 | 813,971 | (6,357 | ) | (218,488 | ) | (11,777 | ) | 577,349 | ||||||||||||
Impact of Change in Pension Plan Measurement Date | (528 | ) | (528 | ) | ||||||||||||||||
Comprehensive Income (Loss): | ||||||||||||||||||||
2008 Net Income | 4,363 | 4,363 | ||||||||||||||||||
Unrealized Loss on Interest Rate Swap (net of $2,181 income taxes) | (3,326 | ) | (3,326 | ) | ||||||||||||||||
Reclassification of Unrealized Gain on Cash Flow Hedges to Regulatory Asset (net of $1,337 income taxes) | (2,039 | ) | (2,039 | ) | ||||||||||||||||
Reclassification of Unrealized Loss on Cash Flow Hedges to Net Income (net of $1,569 income taxes) | 2,393 | 2,393 | ||||||||||||||||||
Employee Benefit Obligations | ||||||||||||||||||||
Amortization of net actuarial loss and prior service credit included in net periodic benefit cost (net of $157 income taxes) | (240 | ) | (240 | ) | ||||||||||||||||
Increase in SERP Liability (net of $108 income taxes) | (165 | ) | (165 | ) | ||||||||||||||||
Reclassification of Pension and Other Postretirement Benefit to Regulatory Asset (net of $5,441 income taxes) | 8,299 | 8,299 | ||||||||||||||||||
Total Comprehensive Income | 9,285 | |||||||||||||||||||
Dividends Paid | (2,500 | ) | (2,500 | ) | ||||||||||||||||
Balances at December 31, 2008 | 813,971 | (6,357 | ) | (217,153 | ) | (6,855 | ) | 583,606 | ||||||||||||
Comprehensive Income: | ||||||||||||||||||||
2009 Net Income | 89,248 | 89,248 | ||||||||||||||||||
Unrealized Loss on Cash Flow Hedges (net of $33 income taxes) | 51 | 51 | ||||||||||||||||||
Reclassification of Unrealized Losses on Cash Flow Hedges to Net Income (net of $690 income taxes) | 1,053 | 1,053 | ||||||||||||||||||
Employee Benefit Obligations | ||||||||||||||||||||
Amortization of SERP Net Prior Service Cost Included in Net Periodic Benefit Cost (net of $33 income taxes) | (51 | ) | (51 | ) | ||||||||||||||||
Total Comprehensive Income | 90,301 | |||||||||||||||||||
Capital Contribution from UniSource Energy | 30,000 | 30,000 | ||||||||||||||||||
Dividends | (60,763 | ) | (60,763 | ) | ||||||||||||||||
Balances at December 31, 2009 | $ | 843,971 | $ | (6,357 | ) | $ | (188,668 | ) | $ | (5,802 | ) | $ | 643,144 | |||||||
K/A-15
Table of Contents
K/A-16
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | A portion of the reported amounts of assets and liabilities at the dates of the financial statements; | ||
• | Our disclosures about contingent assets and liabilities at the dates of the financial statements; and | ||
• | A portion of revenues and expenses reported during the periods presented. |
• | An independent regulator sets rates; | ||
• | The regulator sets the rates to recover the specific enterprise’s costs of providing service; and | ||
• | The service territory lacks competitive pressures to reduce rates below the rates set by the regulator. |
K/A-17
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TEP | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Average AFUDC rate on regulated construction expenditures | 6.4 | % | 7.5 | % | 10.05 | % | ||||||
AFUDC — Debt (in millions) | $ | 2 | $ | 2 | $ | 2 | ||||||
AFUDC — Equity (in millions) | $ | 4 | $ | 3 | $ | 1 | ||||||
Average capitalized interest rate on generation-related construction expenditures (before December 2008) | N/A | 5.02 | % | 5.73 | % | |||||||
Capitalized interest (in millions) | N/A | $ | 2 | $ | 1 |
UNS Gas | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Average AFUDC rate on regulated construction expenditures | 7.05 | % | 8.37 | % | 8.12 | % | ||||||
AFUDC — Debt (in millions) | $ | 0.1 | $ | 0.1 | $ | 0.3 | ||||||
AFUDC — Equity (in millions) | $ | 0.1 | $ | 0.1 | $ | 0.3 |
UNS Electric | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Average AFUDC rate on regulated construction expenditures | 7.62 | % | 8.84 | % | 13.51 | % | ||||||
AFUDC — Debt (in millions) | $ | 0.4 | $ | 0.2 | $ | 0.7 | ||||||
AFUDC — Equity (in millions) | $ | 0.5 | $ | 0.3 | $ | 0.4 |
K/A-18
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Year | TEP | UNS Gas | UNS Electric | UED | ||||||||||||
2009 | 3.64 | % | 2.76 | % | 4.33 | % | 2.57 | % | ||||||||
2008 | 3.33 | % | 2.77 | % | 4.47 | % | 2.57 | % | ||||||||
2007 | 3.35 | % | 3.28 | % | 4.60 | % | N/A |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-Millions of Dollars- | ||||||||||||
Lease Expense: | ||||||||||||
Interest Expense – Included in: | ||||||||||||
Interest on Capital Leases | $ | 49 | $ | 52 | $ | 59 | ||||||
Operating Expenses – Fuel | 5 | 5 | 5 | |||||||||
Amortization of Capital Lease Assets – Included in: | ||||||||||||
Operating Expenses – Fuel | 2 | 4 | 4 | |||||||||
Operating Expenses – Depreciation and Amortization | 26 | 21 | 21 | |||||||||
Total Lease Expense | $ | 82 | $ | 82 | $ | 89 | ||||||
K/A-19
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | When it is able to reasonably estimate the fair value of any future obligation to retire as a result of an existing or enacted law, statute, ordinance or contract; or | ||
• | If it can reasonably estimate the fair value. |
K/A-20
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-21
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-22
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-23
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | The effective portion of the changes in the fair value of TEP’s interest rate swaps and TEP’s six-year power purchase swap agreement are recorded in AOCI and the ineffective portion, if any, is recognized in earnings. | ||
• | When TEP determines a contract is no longer effective in offsetting the changes in cash flow of a hedged item, TEP recognizes the changes in fair value in earnings. The unrealized gains and losses at that time remain in AOCI and are reclassified into earnings as the underlying hedged transaction occurs. |
• | TEP | |
TEP’s non-trading hedges, such as forward power purchase contracts indexed to gas, short-term forward power sales contracts, or call and put options (gas collars), that did not qualify for cash flow hedge accounting treatment or did not qualify for the normal scope exception, are considered mark-to-market transactions. TEP hedges a portion of its monthly natural gas exposure for plant fuel, gas-indexed purchased power and spot market purchases with fixed price contracts for a maximum of three years. Beginning in December 2008, as a result of the 2008 TEP Rate Order, which permits recovery in the PPFAC of hedging transactions, unrealized gains and losses are recorded as either a regulatory asset or regulatory liability only to the extent they qualify for recovery under the PPFAC mechanism. | ||
TEP enters into certain energy-related derivatives for trading purposes which are forward power purchase and sale contracts entered into purely to profit from market price changes. The net trading activities represent a very small portion (less than 1%) of TEP’s revenue from wholesale sales in 2007 and 2008. In 2009, TEP had no trading activity. As unrealized gains and losses resulting from changes in the market prices of trading derivatives are not recoverable in the PPFAC, unrealized gains and losses are recorded in the income statement in Electric Wholesale Sales. | ||
• | UNS Electric | |
UNS Electric hedges a portion of its purchased power exposure to fixed price and natural gas-indexed contracts with forward power purchases or financial gas swaps. In April 2009, UNS Electric also began using call and put options, creating price stability and reducing exposure to price volatility that may result in delayed recovery under the PPFAC. | ||
• | UNS Gas | |
UNS Gas enters into derivatives such as forward gas purchases and gas swaps, creating price stability and reducing exposure to natural gas price volatility that may result in delayed recovery under the PGA. Beginning in December 2008, unrealized gains and losses are recorded as either a regulatory asset or regulatory liability, as the UNS Gas PGA mechanism permits the recovery of the prudent cost of hedging contracts. |
K/A-24
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | TEP’s interest rate swaps, TEP’s forward contracts to sell excess capacity, and TEP and UNS Gas’ forward gas swaps were recorded in AOCI; | ||
• | TEP’s non-trading hedges such as forward power purchase contracts indexed to gas, and TEP’s forward purchase and sale trading contracts were recorded in the income statement; and | ||
• | All other commodity contracts were reflected on the balance sheet as either regulatory assets or regulatory liabilities. |
K/A-25
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | UniSource Energy and TEP reclassified Transmission expenses of $19 million and $11 million in 2008, and $16 million and $9 million in 2007, respectively, from Other Operations and Maintenance to Transmission, a component of Total Fuel and Purchased Energy; | ||
• | UniSource Energy and TEP reclassified capital lease expenses of $5 million in 2007 and 2008 from Interest on Capital Leases to Fuel; and | ||
• | UniSource Energy reclassified $11 million in 2008 and $5 million in 2007 of over-recovered PPFAC and PGA expenses from Purchased Energy, Transmission, and Fuel to Increase (Decrease) to reflect PPFAC/PGA Recovery Treatment, a component of Total Fuel and Purchased Energy. |
K/A-26
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | The forward component of 0.18 cents per kWh became effective on April 1, 2009, and will be updated each year. The forward component is based on the forecasted fuel and purchased power costs for the twelve-month period from April 1 to March 31 the following year, less the average base cost of fuel and purchased power of approximately 2.9 cents per kWh, which is embedded in base rates. | ||
• | The true-up component will reconcile any over/under collected amounts from the preceding 12 month period and will be credited to or recovered from customers in the subsequent year. |
K/A-27
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
-Millions of Dollars- | ||||||||
Fixed CTC Revenue to be Refunded within the next 12 months; Included in Current Liabilities | $ | (9 | ) | $ | (14 | ) | ||
Under-Recovered Purchased Energy Costs – Regulatory Basis as Billed to Customers | $ | 29 | $ | — | ||||
Estimated Purchased Energy Costs Recovered through Accrued Unbilled Revenues | (9 | ) | — | |||||
Fixed CTC Revenue to be Refunded | (37 | ) | (44 | ) | ||||
Total Included in Deferred Credits and Other Liabilities | $ | (17 | ) | $ | (44 | ) | ||
K/A-28
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Income | ||||||||||||||||
Statement | Balance Sheet | |||||||||||||||
Regulatory Asset | ||||||||||||||||
Non | ||||||||||||||||
(Gain)/Loss | Current | Current | AOCI | |||||||||||||
Recorded in Fuel: | ||||||||||||||||
San Juan Coal Contract Amendment | $ | (9 | ) | $ | 1 | $ | 8 | $ | — | |||||||
Retiree Health Care and Final Mine Reclamation Costs | (15 | ) | — | 15 | — | |||||||||||
Unrealized Gains (Losses) on Derivative Contracts (PPFAC) | (8 | ) | 14 | 5 | (11 | ) | ||||||||||
Deregulation Costs Recorded in O&M | (1 | ) | 1 | — | — | |||||||||||
Property Taxes | (7 | ) | 7 | — | — | |||||||||||
Pension and Other Postretirement Benefits | — | — | 14 | (14 | ) | |||||||||||
Pre-Tax Impact of Reapplying Regulatory Accounting | $ | (40 | ) | $ | 23 | $ | 42 | $ | (25 | ) | ||||||
• | San Juan Coal Contract Amendment costs of $9 million, incurred by TEP in 2000, will be amortized over 9 years beginning in December 2008. | ||
• | Final Mine Reclamation and Retiree Health Care Costs represent costs associated with TEP’s jointly-owned facilities at San Juan, Four Corners and Navajo. TEP is required to recognize the present value of its liability associated with final reclamation and retiree health care obligations. As TEP is permitted to fully recover these costs through the PPFAC when the costs are invoiced by the miners, TEP recorded a regulatory asset. | ||
• | Unrealized gains (losses) on derivative instruments (PPFAC) are contracts for which the settled amounts will be recovered through the PPFAC. As TEP expects to recover the final settled amounts through the PPFAC, TEP reclassified amounts previously recorded in the income statement and in AOCI to a regulatory asset. | ||
• | Deregulation Costs represent deferred expenses that TEP incurred to comply with various ACC deregulation orders. | ||
• | Property taxes related to generation assets which will be recovered in rates as cash is paid rather than as costs are accrued. | ||
• | Pension and Other Postretirement Benefits represent the underfunded status of TEP’s defined benefit and other postretirement benefit plans prior to December 2008. As TEP expects to recover these costs in rates, TEP reclassified amounts previously recorded in AOCI to a regulatory asset. |
K/A-29
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-Millions of Dollars- | ||||||||||||
Operating Revenues | ||||||||||||
Amortization of the Fixed CTC Revenue to be Refunded | $ | (12 | ) | $ | — | $ | — | |||||
Operating Expenses | ||||||||||||
Depreciation (related to Net Cost of Removal for Interim Retirements) | 41 | 10 | 7 | |||||||||
Deferral of Under-Recovered Purchased Energy Costs | (21 | ) | — | — | ||||||||
Deferral of Unrealized losses on Derivative Instruments | 10 | — | — | |||||||||
Amortization of 1999 Transition Recovery Asset | — | 24 | 78 | |||||||||
Other | 3 | — | — | |||||||||
Interest Expense | ||||||||||||
Long-Term Debt (Amortization of Loss on Reacquired Debt Costs) | — | 1 | 1 | |||||||||
Income Taxes | — | 4 | 5 | |||||||||
Net Increase to Income Statement | $ | 21 | $ | 39 | $ | 91 | ||||||
K/A-30
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2009 | 2008 | |||||||
-Millions of Dollars- | ||||||||
Current Regulatory Assets | ||||||||
Property Tax Deferrals(1) | $ | 16 | $ | 16 | ||||
Derivative Instruments(2) | 4 | 14 | ||||||
Deregulation Costs(3) | 4 | 4 | ||||||
Other Current Regulatory Assets(4) | 3 | 3 | ||||||
Total Current Regulatory Assets | 27 | 37 | ||||||
Pension and Other Postretirement Benefits(7) | 80 | 107 | ||||||
Regulatory Assets – Other | ||||||||
Derivative Instruments(2) | 5 | 5 | ||||||
Deregulation Costs(3) | 7 | 10 | ||||||
San Juan Coal Contract Amendment(5) | 7 | 8 | ||||||
Final Mine Reclamation Costs(8) | 9 | 8 | ||||||
Retiree Health Care Costs(8) | 6 | 6 | ||||||
Unamortized Loss on Reacquired Debt(9) | 4 | 5 | ||||||
Other Regulatory Assets(4) | 1 | 1 | ||||||
Total Regulatory Assets — Other | 39 | 43 | ||||||
Income Taxes Recoverable through Future Revenues(6) | 18 | 20 | ||||||
Current Regulatory Liabilities | ||||||||
Over-Recovered Purchased Energy Costs | (9 | ) | (14 | ) | ||||
Renewable Energy Standards Tariff (REST)(10) | (17 | ) | (6 | ) | ||||
Other Current Regulatory Liabilities(4) | — | (1 | ) | |||||
Total Current Regulatory Liabilities | (26 | ) | (21 | ) | ||||
Other Regulatory Liabilities | ||||||||
Net Cost of Removal for Interim Retirements(11) | (163 | ) | (123 | ) | ||||
Over-Recovered Purchased Energy Costs | (17 | ) | (44 | ) | ||||
Total Other Regulatory Liabilities | (180 | ) | (167 | ) | ||||
Total Net Regulatory Assets (Liabilities) | $ | (42 | ) | $ | 19 | |||
1. | Property Tax is recorded based on historical ratemaking treatment allowing recovery as costs are paid out, rather than as costs are accrued. TEP records a regulatory property tax asset related to its generation assets. While these assets do not earn a return, the costs are fully recovered in rates over an approximate six month period. | ||
2. | Derivative Instruments represent the unrealized gains or losses on contracts entered into to hedge the variability of purchased energy costs and short-term wholesale sales that are expected to be recovered through the PPFAC. As a result of the 2008 TEP Rate Order and the approval of the PPFAC, TEP deferred the gains and losses on certain contracts that meet the recovery criteria under the PPFAC requirements. | ||
3. | Deregulation costs represent deferred expenses that TEP incurred to comply with various ACC deregulation orders, the recovery of which has been authorized by the ACC in the 2008 TEP Rate Order. These assets are included in rate base and consequently earn a return. TEP will recover these costs through rates over a four-year period, beginning in December 2008. |
K/A-31
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. | TEP does not earn a return on these assets. | ||
5. | San Juan Coal Contract Amendment costs of $15 million were incurred by TEP in 2000. In the 2008 TEP Rate Order, the ACC approved the recovery of $9 million of these costs over a nine-year period beginning in December 2008. The current portion is recorded in Other Assets. These assets do not earn a return. | ||
6. | Income Taxes Recoverable Through Future Revenues, while not included in rate base, are amortized over the life of the assets. TEP does not earn a return on these assets. | ||
7. | Pension Assets. TEP records a regulatory pension and postretirement benefit asset related to its employees. Based on past regulatory actions, TEP expects to recover these costs in rates. TEP does not earn a return on these assets. | ||
8. | Final Reclamation and Retiree Health Care Costs represent costs associated with TEP’s jointly-owned facilities at San Juan, Four Corners and Navajo. TEP is required to recognize the present value of its liability associated with final reclamation and retiree health care obligations. As TEP is permitted to fully recover these costs through the PPFAC when the costs are invoiced by the miners, TEP recorded a regulatory asset. TEP expects to recover these costs over the life of the mines, which is estimated to be between 17 and 34 years. TEP does not earn a return on these assets. | ||
9. | Unamortized Loss on Reacquired Debt Costs is amortized for rate recovery over the remaining life of the related debt instruments over a period of 21 years. TEP does not earn a return on these costs. |
10. | Renewable Energy Standards Tariff (REST) represents the REST surcharge collected in excess of qualified renewable expenditures. | ||
11. | Net Cost of Removal for Interim Retirements represents an estimate of the cost of future asset retirement obligations net of salvage value. These are amounts collected through revenue for the net cost of removal of interim retirements for transmission, distribution, general and intangible plant which are not yet expended. TEP collects through revenue the net cost of removal of interim retirements for generation plant, which it has not yet expended. |
K/A-32
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) | ThePGA factor, computed monthly, is a calculation of the twelve-month rolling weighted average gas cost, and automatically adjusts monthly, subject to limitations on how much the price per therm may change in a twelve-month period. Effective December 2007, the ACC increased the annual cap on the maximum increase in the PGA factor from $0.10 per therm to $0.15 per therm in a twelve-month period. | ||
(2) | At any time UNS Gas’ PGA bank balance is under-recovered, UNS Gas may request aPGA surchargewith the goal of collecting the amount deferred from customers over a period deemed appropriate by the ACC. When the PGA bank balance reaches an over-collected balance of $10 million on a billed basis, UNS Gas is required to request aPGA surcreditwith the goal of returning the over-collected balance to customers over a period deemed appropriate by the ACC. |
December 31, | ||||||||
2009 | 2008 | |||||||
-Millions of Dollars- | ||||||||
Under (Over) Recovered Purchased Gas Costs – Regulatory Basis as Billed to Customers | $ | (2 | ) | $ | 5 | |||
Estimated Purchased Gas Costs Recovered through Accrued Unbilled Revenues | (8 | ) | (10 | ) | ||||
Over-Recovered Purchased Gas Costs (PGA) Included as a Current Regulatory Liability | $ | (10 | ) | $ | (5 | ) | ||
K/A-33
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2009 | 2008 | |||||||
-Millions of Dollars- | ||||||||
Current Assets | ||||||||
Derivative Instruments | $ | 5 | $ | 7 | ||||
Pension Obligations | 2 | 3 | ||||||
Other Regulatory Assets | ||||||||
Derivative Instruments | 3 | 6 | ||||||
Other Regulatory Assets | 1 | 1 | ||||||
Other Regulatory Liabilities | ||||||||
Net Cost of Removal for Interim Retirements | (20 | ) | (19 | ) |
• | Derivative instruments represent the unrealized gains or losses on contracts entered into to hedge the variability of purchased energy costs that are expected to be recovered through the PGA. UNS Gas does not earn a return on these costs. | ||
• | Pension assets represent the unfunded status of UNS Gas’ share of the UES pension and other postretirement benefit plans that it expects, based on past regulatory actions, to recover through rates. UNS Gas does not earn a return on these costs. | ||
• | Other Regulatory Assets consist of its 2007 rate case costs which are recoverable over 3 years. In addition, UNS Gas deferred its 2008 rate case costs and its low income assistance program costs. UNS Gas requested recovery of these costs in its 2008 rate case filing. UNS Gas does not earn a return on these costs. |
• | Net Cost of Removal for Interim Retirements represents an estimate of the cost of future asset retirement obligations. These are amounts collected through revenue for the net cost of removal of interim retirements for which removal costs have not yet been expended. In December 2007, to comply with ACC requirements, UNS Gas reclassified $12 million of Net Cost of Removal for Interim Retirements from Accumulated Depreciation to a regulatory liability. |
K/A-34
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
-Millions of Dollars- | ||||||||
(Over-)Recovered Purchased Power Costs – Regulatory Basis as Billed to Customers | $ | (1 | ) | $ | — | |||
Estimated Purchased Power Costs Recovered through Accrued Unbilled Revenues | (4 | ) | (7 | ) | ||||
(Over-)Recovered Purchased Power Costs (PPFAC) Included as a Current Regulatory Liability | $ | (5 | ) | $ | (7 | ) | ||
K/A-35
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2009 | 2008 | |||||||
-Millions of Dollars- | ||||||||
Current Regulatory Assets | ||||||||
Derivatives | $ | 9 | $ | 17 | ||||
Other Regulatory Assets | ||||||||
Derivative Instruments | 2 | 7 | ||||||
Pension Assets | 2 | 3 | ||||||
Other | 1 | — | ||||||
Current Regulatory Liabilities | ||||||||
REST | (1 | ) | (1 | ) | ||||
Over-Recovered Purchased Power Costs | (5 | ) | (6 | ) | ||||
Other Regulatory Liabilities | ||||||||
Net Cost of Removal for Interim Retirements | (12 | ) | (11 | ) |
• | Derivative instruments represent the unrealized gains or losses on contracts entered into to hedge the variability of purchased energy costs that are expected to be recovered through the PPFAC. UNS Electric does not earn a return on these costs. | ||
• | Pension assets represent the unfunded status of UNS Electric’s share of the UES pension and other postretirement benefit plans that it expects, based on past regulatory actions, to recover through rates. UNS Electric does not earn a return on these costs. | ||
• | Rate case costs included in Other Regulatory Assets are included in rate base and consequently earn a return. The recovery period is 3 years. |
• | Renewable Energy Standards Tariff (REST) represents the REST surcharge collected in excess of qualified renewable expenditures. The ACC approved a REST surcharge for UNS Electric, effective June 1, 2008, to allow UNS Electric to recover the cost of qualified renewable expenditures, such as payments to customers who have renewable energy resources or the incremental cost of renewable power generated or purchased by UNS Electric. Any surcharge collected in excess of qualified renewable expenditures will be reflected in the financial statements as a current regulatory liability. Conversely, qualified renewable expenditures in excess of the REST surcharge will be reflected as a current regulatory asset. The REST plan includes an adjustor mechanism which allows UNS Electric to file an application with the ACC to apply any shortage or surplus in the prior year’s program expenses to the subsequent year’s REST surcharge. |
K/A-36
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | UNS Electric defers differences between purchased energy costs and the recovery of such costs in revenues. Future billings are adjusted for such deferrals through use of a PPFAC approved by the ACC. The PPFAC allows for a revenue surcharge or surcredit (that adjusts the customer’s rate for delivered purchased power) to collect or return under- or over-recovery of costs. |
• | Net Cost of Removal for Interim Retirements represents an estimate of the cost of future asset retirement obligations. These are amounts collected through revenue for the net cost of removal of interim retirements for which removal costs have not yet been expended. In June 2008, to comply with ACC expectations, UNS Electric reclassified $7 million of Net Cost of Removal for Interim Retirements from Accumulated Depreciation to a regulatory liability. |
(1) | TEP, a vertically integrated electric utility business, is our largest subsidiary. | ||
(2) | UNS Gas is a regulated gas distribution utility business. | ||
(3) | UNS Electric is a regulated electric distribution utility business. |
K/A-37
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reportable Segments | ||||||||||||||||
UNS | UNS | |||||||||||||||
TEP | Gas | Electric | Other | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Intersegment Revenue | ||||||||||||||||
2009: | ||||||||||||||||
Wholesale Sales – TEP to UNSE | $ | 23 | $ | — | $ | — | $ | — | ||||||||
Wholesale Sales – UNSE to TEP | — | — | 4 | — | ||||||||||||
Wholesale Sales – UED to UNSE | — | — | — | 12 | ||||||||||||
Gas Revenue – UNSG to UNSE & UED | — | 5 | — | — | ||||||||||||
Other Revenue – TEP to Affiliates(1) | 8 | — | — | — | ||||||||||||
Other Revenue – Millennium to TEP & UNSE(2) | — | — | — | 16 | ||||||||||||
Other Revenue – TEP to UNSE(3) | 3 | — | — | — | ||||||||||||
Total Intersegment Revenue | $ | 34 | $ | 5 | $ | 4 | $ | 28 | ||||||||
2008: | ||||||||||||||||
Wholesale Sales – TEP to UNSE | $ | 24 | $ | — | $ | — | $ | — | ||||||||
Wholesale Sales – UNSE to TEP | — | — | 9 | — | ||||||||||||
Wholesale Sales – UED to UNSE | — | — | — | 7 | ||||||||||||
Gas Revenue – UNSG to UNSE & UED | — | 8 | — | — | ||||||||||||
Other Revenue – TEP to Affiliates(1) | 8 | — | — | — | ||||||||||||
Other Revenue – Millennium to TEP & UNSE(2) | — | — | — | 16 | ||||||||||||
Other Revenue – TEP to UNSE(3) | 2 | — | — | — | ||||||||||||
Total Intersegment Revenue | $ | 34 | $ | 8 | $ | 9 | $ | 23 | ||||||||
2007: | ||||||||||||||||
Other Revenue – TEP to Affiliates(1) | $ | 7 | $ | — | $ | — | $ | — | ||||||||
Other Revenue – Millennium to TEP &UNSE(2) | — | — | — | 15 | ||||||||||||
Total Intersegment Revenue | $ | 7 | $ | — | $ | — | $ | 15 | ||||||||
(1) | TEP provides corporate services (finance, accounting, tax, information technology services, etc.) to UniSource Energy and its subsidiaries. See Note 14. | |
(2) | A Millennium subsidiary provides a supplemental workforce and meter reading services to TEP and UNS Electric. | |
(3) | TEP provides control area services to UNS Electric. See Note 14. |
K/A-38
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reportable Segments | ||||||||||||||||||||||||
UNS | UNS | All | Reconciling | UniSource | ||||||||||||||||||||
2009 | TEP | Gas | Electric | Other | Adjustments | Energy | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Income Statement | ||||||||||||||||||||||||
Operating Revenues – External | $ | 1,063 | $ | 148 | $ | 183 | $ | — | $ | — | $ | 1,394 | ||||||||||||
Operating Revenues – Intersegment | 34 | 5 | 4 | 28 | (71 | ) | — | |||||||||||||||||
Depreciation and Amortization | 153 | 7 | 14 | 2 | — | 176 | ||||||||||||||||||
Interest Income | 11 | — | — | 1 | — | 12 | ||||||||||||||||||
Interest Expense | 85 | 6 | 7 | 11 | — | 109 | ||||||||||||||||||
Income Tax Expense (Benefit) | 55 | 5 | 4 | 1 | (1 | ) | 64 | |||||||||||||||||
Net Income (Loss) | 89 | 7 | 6 | 2 | — | 104 | ||||||||||||||||||
Cash Flow Statement | ||||||||||||||||||||||||
Capital Expenditures | (235 | ) | (14 | ) | (28 | ) | (10 | ) | — | (287 | ) | |||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets | 2,914 | 307 | 273 | 1,107 | (1,000 | ) | 3,601 | |||||||||||||||||
Investments in Equity Method Entities | — | — | — | 10 | — | 10 | ||||||||||||||||||
Reportable Segments | ||||||||||||||||||||||||
UNS | UNS | All | Reconciling | UniSource | ||||||||||||||||||||
2008 | TEP | Gas | Electric | Other | Adjustments | Energy | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Income Statement | ||||||||||||||||||||||||
Operating Revenues – External | $ | 1,045 | $ | 166 | $ | 186 | $ | — | $ | — | $ | 1,397 | ||||||||||||
Operating Revenues – Intersegment | 34 | 8 | 9 | 23 | (74 | ) | — | |||||||||||||||||
Depreciation and Amortization | 126 | 7 | 14 | 1 | — | 148 | ||||||||||||||||||
Amortization of Transition Recovery Asset | 24 | — | — | — | — | 24 | ||||||||||||||||||
Interest Income | 10 | — | — | 1 | — | 11 | ||||||||||||||||||
Net Loss from Equity Method Entities | — | — | — | (2 | ) | — | (2 | ) | ||||||||||||||||
Interest Expense | 96 | 7 | 7 | 11 | (2 | ) | 119 | |||||||||||||||||
Income Tax Expense (Benefit) | 11 | 6 | 2 | (2 | ) | — | 17 | |||||||||||||||||
Net Income (Loss) | 4 | 9 | 4 | 16 | (19 | ) | 14 | |||||||||||||||||
Cash Flow Statement | �� | |||||||||||||||||||||||
Capital Expenditures | (295 | ) | (16 | ) | (30 | ) | (16 | ) | — | (357 | ) | |||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets | 2,842 | 294 | 285 | 1,061 | (972 | ) | 3,510 | |||||||||||||||||
Investments in Equity Method Entities | — | — | — | 25 | — | 25 | ||||||||||||||||||
K/A-39
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Reportable Segments | ||||||||||||||||||||||||
UNS | UNS | All | Reconciling | UniSource | ||||||||||||||||||||
2007 | TEP | Gas | Electric | Other | Adjustments | Energy | ||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Income Statement | ||||||||||||||||||||||||
Operating Revenues – External | $ | 1,064 | $ | 151 | $ | 169 | $ | (3 | ) | $ | — | $ | 1,381 | |||||||||||
Operating Revenues – Intersegment | 7 | — | — | 15 | (22 | ) | — | |||||||||||||||||
Depreciation and Amortization | 120 | 8 | 13 | — | — | 141 | ||||||||||||||||||
Amortization of Transition Recovery Asset | 78 | — | — | — | — | 78 | ||||||||||||||||||
Interest Income | 16 | 1 | — | 2 | — | 19 | ||||||||||||||||||
Interest Expense | 111 | 7 | 6 | 8 | — | 132 | ||||||||||||||||||
Income Tax Expense (Benefit) | 36 | 3 | 3 | (3 | ) | — | 39 | |||||||||||||||||
Net Income (Loss) | 53 | 4 | 5 | (4 | ) | — | 58 | |||||||||||||||||
Cash Flow Statement | ||||||||||||||||||||||||
Capital Expenditures | (162 | ) | (23 | ) | (38 | ) | (22 | ) | — | (245 | ) | |||||||||||||
Balance Sheet | ||||||||||||||||||||||||
Total Assets | 2,573 | 276 | 231 | 1,077 | (971 | ) | 3,186 | |||||||||||||||||
Investments in Equity Method Entities | 3 | — | — | 28 | — | 31 |
Purchase Commitments | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Fuel (including Transportation) | $ | 89 | $ | 51 | $ | 42 | $ | 39 | $ | 37 | $ | 142 | $ | 400 | ||||||||||||||
Purchased Power | 44 | 12 | 4 | 2 | 2 | 2 | 66 | |||||||||||||||||||||
Transmission | 2 | 2 | 2 | 2 | 2 | 2 | 12 | |||||||||||||||||||||
Total Firm Purchase Commitments | 135 | 65 | 48 | 43 | 41 | 146 | 478 | |||||||||||||||||||||
Operating Lease Payments | 1 | — | — | — | — | — | 1 | |||||||||||||||||||||
Total Unrecognized Firm Commitments | $ | 136 | $ | 65 | $ | 48 | $ | 43 | $ | 41 | $ | 146 | $ | 479 | ||||||||||||||
K/A-40
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-41
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Purchase Commitments | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Total Unrecognized Firm Commitments – Fuel | $ | 19 | $ | 14 | $ | 5 | $ | 3 | $ | 3 | $ | 23 | $ | 67 | ||||||||||||||
Purchase Commitments | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Purchased Power | $ | 67 | $ | 23 | $ | 14 | $ | 47 | $ | — | $ | — | $ | 151 | ||||||||||||||
Transmission | 2 | 2 | 1 | — | — | — | 5 | |||||||||||||||||||||
Total Unrecognized Firm Commitments | $ | 69 | $ | 25 | $ | 15 | $ | 47 | $ | — | $ | — | $ | 156 | ||||||||||||||
K/A-42
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-43
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-44
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | UES’ guarantee of senior unsecured notes issued by UNS Gas ($100 million) and by UNS Electric ($100 million), | ||
• | UES’ guarantee of the $60 million UNS Gas/UNS Electric Revolver, and | ||
• | UniSource Energy’s guarantee of approximately $2 million in building lease payments for UNS Gas, and | ||
• | UniSource Energy’s guarantee of the $26 million of outstanding loans under the UED Credit Agreement. In February 2010, UED increased its borrowings under this agreement to $35 million. As a result, UniSource Energy increased its guarantee to $35 million. |
K/A-45
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-46
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2009 | ||||||||||||||||||||
- Millions of Dollars - | ||||||||||||||||||||
UNS | UniSource | |||||||||||||||||||
TEP | UNS Gas | Electric | UED | Energy | ||||||||||||||||
Plant in Service: | ||||||||||||||||||||
Electric Generation Plant | $ | 1,527 | $ | — | $ | 17 | $ | 61 | $ | 1,605 | ||||||||||
Electric Transmission Plant | 682 | — | 30 | 4 | 716 | |||||||||||||||
Electric Distribution Plant | 1,110 | — | 185 | — | 1,295 | |||||||||||||||
Gas Distribution Plant | — | 216 | — | — | 216 | |||||||||||||||
Gas Transmission Plant | — | 18 | — | — | 18 | |||||||||||||||
General Plant | 178 | 15 | 11 | — | 204 | |||||||||||||||
Computer Software | 82 | 1 | 4 | — | 87 | |||||||||||||||
Electric Plant Held for Future Use | 5 | — | 1 | — | 6 | |||||||||||||||
Total Plant in Service | $ | 3,584 | $ | 250 | $ | 248 | $ | 65 | $ | 4,147 | ||||||||||
Utility Plant under Capital Leases | $ | 720 | $ | — | $ | 1 | $ | — | $ | 721 | ||||||||||
December 31, 2008 | ||||||||||||||||||||
- Millions of Dollars - | ||||||||||||||||||||
UNS | UniSource | |||||||||||||||||||
TEP | UNS Gas | Electric | UED | Energy | ||||||||||||||||
Plant in Service: | ||||||||||||||||||||
Electric Generation Plant | $ | 1,398 | $ | — | $ | 17 | $ | 58 | $ | 1,473 | ||||||||||
Electric Transmission Plant | 660 | — | 29 | 4 | 693 | |||||||||||||||
Electric Distribution Plant | 1,044 | — | 163 | — | 1,207 | |||||||||||||||
Gas Distribution Plant | — | 201 | — | — | 201 | |||||||||||||||
Gas Transmission Plant | — | 18 | — | — | 18 | |||||||||||||||
General Plant | 173 | 14 | 9 | — | 196 | |||||||||||||||
Computer Software | 71 | 1 | 4 | — | 76 | |||||||||||||||
Electric Plant Held for Future Use | 5 | — | 1 | — | 6 | |||||||||||||||
Total Plant in Service | $ | 3,351 | $ | 234 | $ | 223 | $ | 62 | $ | 3,870 | ||||||||||
Utility Plant under Capital Leases | $ | 701 | $ | — | $ | 1 | $ | — | $ | 702 |
K/A-47
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2009 | ||||||||||||||||||||||||||||
Regulated | Non- Regulated | |||||||||||||||||||||||||||
UNS | UNS | |||||||||||||||||||||||||||
Gas | Electric | UniSource | ||||||||||||||||||||||||||
TEP | Total | Total | Total | UED | Energy | |||||||||||||||||||||||
T&D | Gen | Plant | Plant | Plant | Plant | Total Plant | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Gross Plant in Service | $ | 2,057 | $ | 1,527 | $ | 3,584 | $ | 250 | $ | 248 | $ | 65 | $ | 4,147 | ||||||||||||||
Less Accumulated | ||||||||||||||||||||||||||||
Depreciation and Amortization | 913 | 669 | 1,582 | 15 | 52 | 3 | 1,652 | |||||||||||||||||||||
Net Plant in Service | $ | 1,144 | $ | 858 | $ | 2,002 | $ | 235 | $ | 196 | $ | 62 | $ | 2,495 | ||||||||||||||
December 31, 2008 | ||||||||||||||||||||||||||||
Regulated | Non- Regulated | |||||||||||||||||||||||||||
UNS | UNS | |||||||||||||||||||||||||||
Gas | Electric | UniSource | ||||||||||||||||||||||||||
TEP | Total | Total | Total | UED | Energy | |||||||||||||||||||||||
T&D | Gen | Plant | Plant | Plant | Plant | Total Plant | ||||||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||||||
Gross Plant in Service | $ | 1,953 | $ | 1,398 | $ | 3,351 | $ | 234 | $ | 223 | $ | 62 | $ | 3,870 | ||||||||||||||
Less Accumulated | ||||||||||||||||||||||||||||
Depreciation and Amortization | 865 | 667 | 1,532 | 9 | 39 | 1 | 1,581 | |||||||||||||||||||||
Net Plant in Service | $ | 1,088 | $ | 731 | $ | 1,819 | $ | 225 | $ | 184 | $ | 61 | $ | 2,289 | ||||||||||||||
UNS Gas, | ||||||||
UNS Electric | ||||||||
Major Class of Utility Plant in Service | TEP | & UED | ||||||
Electric Generation Plant | 7-59 years | 38-49 years | ||||||
Electric Transmission Plant | 10-50 years | 20-50 years | ||||||
Electric Distribution Plant | 28-60 years | 23-50 years | ||||||
Gas Distribution Plant | n/a | 30-65 years | ||||||
Gas Transmission Plant | n/a | 30-55 years | ||||||
General Plant | 5-31 years | 5-40 years | ||||||
Intangible Plant | 3-15 years | 5-32 years |
K/A-48
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Plant | Construction | |||||||||||||||
Ownership | in | Work in | Accumulated | |||||||||||||
Percentage | Service | Progress | Depreciation | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
San Juan Units 1 and 2 | 50.0 | % | $ | 416 | $ | 5 | $ | 209 | ||||||||
Navajo Station Units 1, 2 and 3 | 7.5 | 138 | 3 | 86 | ||||||||||||
Four Corners Units 4 and 5 | 7.0 | 89 | 5 | 67 | ||||||||||||
Transmission Facilities | 7.5 to 95.0 | 243 | — | 177 | ||||||||||||
Luna Energy Facility | 33.3 | 50 | — | — | ||||||||||||
Total | $ | 936 | $ | 13 | $ | 539 | ||||||||||
K/A-49
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-50
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-51
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | The Springerville Common Facilities Leases have an initial term to December 2017 for one lease and January 2021 for the other two leases, subject to optional renewal periods of two or more years through 2025. | ||
• | The Springerville Unit 1 Leases have an initial term to January 2015 and provide for renewal periods of three or more years through 2030. | ||
• | The Springerville Coal Handling Facilities Leases have an initial term to April 2015 and provide for one renewal period of six years, then additional renewal periods of five or more years through 2035. |
LIBOR | ||||||||
Outstanding at December 31, 2009 | Fixed Ratio | Spread | ||||||
$35 million | 5.77 | % | 1.625 | % | ||||
$23 million | 3.18 | % | 1.625 | % | ||||
$7 million | 3.32 | % | 1.625 | % |
K/A-52
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Current | Long- | Current | Long- | |||||||||||||||||||||
Liabilities | TermDebt | Total | Liabilities | Term Debt | Total | |||||||||||||||||||
- Millions of Dollars- | ||||||||||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||
Revolver | $ | — | $ | 31 | $ | 31 | $ | — | $ | 43 | $ | 43 | ||||||||||||
Term Loan | $ | 6 | $ | 3 | $ | 9 | $ | 6 | $ | 9 | $ | 15 | ||||||||||||
Weighted Average Interest Rate on the Revolver and Term Loan | — | — | 1.48 | % | — | — | 2.48 | % |
K/A-53
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-54
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UNS | UNS | UNS | UNS | |||||||||||||
Gas | Electric | Gas | Electric | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||
Balance on the Revolver | $ | — | $ | — | $ | — | $ | 8 | ||||||||
Weighted Average Interest Rate | — | — | — | 1.5 | % | |||||||||||
Outstanding Letters of Credit | $ | — | $ | 11 | $ | 10 | $ | 7 | ||||||||
K/A-55
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TEP | ||||||||||||||||||||||||||||||||
Variable | ||||||||||||||||||||||||||||||||
Rate IDBs | TEP | TEP | UniSource | |||||||||||||||||||||||||||||
Supported | Scheduled | Capital | Energy | |||||||||||||||||||||||||||||
by Letters | Debt | Lease | TEP | UNS | UNS | (includes | ||||||||||||||||||||||||||
of Credit | Retirements | Obligations | Total | Gas | Electric | UED) | Total | |||||||||||||||||||||||||
- Millions of Dollars - | ||||||||||||||||||||||||||||||||
2010 | $ | — | $ | — | $ | 93 | $ | 93 | $ | — | $ | — | $ | 32 | $ | 125 | ||||||||||||||||
2011 | 459 | — | 107 | 566 | 50 | — | 34 | 650 | ||||||||||||||||||||||||
2012 | — | — | 118 | 118 | — | — | — | 118 | ||||||||||||||||||||||||
2013 | — | — | 122 | 122 | — | — | — | 122 | ||||||||||||||||||||||||
2014 | — | — | 195 | 195 | — | — | — | 195 | ||||||||||||||||||||||||
Total 2010 — 2014 | 459 | — | 635 | 1,094 | 50 | — | 66 | 1,210 | ||||||||||||||||||||||||
Thereafter | — | 445 | 103 | 548 | 50 | 100 | 150 | 848 | ||||||||||||||||||||||||
Less: Imputed Interest | — | — | (209 | ) | (209 | ) | — | — | — | (209 | ) | |||||||||||||||||||||
Total | $ | 459 | $ | 445 | $ | 529 | $ | 1,433 | $ | 100 | $ | 100 | $ | 216 | $ | 1,849 | ||||||||||||||||
• | The carrying amounts of our current assets and liabilities, including Current Maturities of Long-Term Debt, UED’s term loan, and amounts outstanding under our credit agreements, approximate their fair value due to the short-term nature of these instruments. Accordingly, these items have been excluded from the table below. |
K/A-56
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | Investments in Lease Debt and Equity: TEP calculated the present value of remaining cash flows at the balance sheet date using current market rates with similar characteristics with respect to credit rating and time-to-maturity. We also incorporated the impact of counterparty credit risk using market credit default swap data. | |
• | Fixed Rate Long-Term Debt: UniSource Energy and TEP used quoted market prices, where available, or calculated the present value of remaining cash flows at the balance sheet date using current market rates for bonds with similar characteristics with respect to credit rating and time-to-maturity. We also incorporate the impact of our own credit risk using a credit default swap rate when determining the fair value of fixed rate long-term debt. | |
• | Variable Rate Long-Term Debt: TEP considers the principal amounts of variable rate debt outstanding to be reasonable estimates of their fair value. The fair value of variable rate long-term debt has also been adjusted for credit risk using a credit default swap rate. |
December 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Assets: | ||||||||||||||||
TEP Investment in Lease Debt and Equity | $ | 132 | $ | 140 | $ | 127 | $ | 144 | ||||||||
Millennium Note Receivable | 15 | 15 | — | — | ||||||||||||
Liabilities: | ||||||||||||||||
Fixed Rate Long-Term Debt | ||||||||||||||||
TEP | 445 | 336 | 445 | 322 | ||||||||||||
UniSource Energy | 795 | 693 | 795 | 661 | ||||||||||||
Variable Rate Long-Term Debt | ||||||||||||||||
TEP | 459 | 452 | 459 | 441 | ||||||||||||
UniSource Energy | 459 | 452 | 459 | 441 |
K/A-57
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-58
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | TEP | |||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Federal Income Tax Expense at Statutory Rate | $ | 59 | $ | 11 | $ | 34 | $ | 51 | $ | 5 | $ | 31 | ||||||||||||
State Income Tax Expense, Net of Federal Benefit | 7 | 1 | 5 | 6 | 1 | 4 | ||||||||||||||||||
Depreciation Differences (Flow Through Basis) | 1 | 2 | 3 | 1 | 2 | 3 | ||||||||||||||||||
San Juan Generating Station Environmental Penalties | — | 3 | — | — | 3 | — | ||||||||||||||||||
Federal/State Tax Credits | (1 | ) | (3 | ) | (2 | ) | (1 | ) | (3 | ) | (2 | ) | ||||||||||||
Other | (2 | ) | 3 | (1 | ) | (2 | ) | 3 | — | |||||||||||||||
Total Federal and State Income Tax Expense | $ | 64 | $ | 17 | $ | 39 | $ | 55 | $ | 11 | $ | 36 | ||||||||||||
Effective Tax Rate | 38 | % | 55 | % | 40 | % | 38 | % | 71 | % | 40 | % | ||||||||||||
UniSource Energy | TEP | |||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Current Tax Expense (Benefit) | ||||||||||||||||||||||||
Federal | $ | 5 | $ | (17 | ) | $ | 14 | $ | 7 | $ | (12 | ) | $ | 22 | ||||||||||
State | — | (2 | ) | 3 | 1 | (1 | ) | 6 | ||||||||||||||||
Total | 5 | (19 | ) | 17 | 8 | (13 | ) | 28 | ||||||||||||||||
Deferred Tax Expense (Benefit) | ||||||||||||||||||||||||
Federal | 48 | 34 | 20 | 38 | 23 | 9 | ||||||||||||||||||
State | 11 | 2 | 2 | 9 | 1 | (1 | ) | |||||||||||||||||
Total | 59 | 36 | 22 | 47 | 24 | 8 | ||||||||||||||||||
Total Federal and State Income Tax Expense | $ | 64 | $ | 17 | $ | 39 | $ | 55 | $ | 11 | $ | 36 | ||||||||||||
K/A-59
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | TEP | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Gross Deferred Income Tax Assets | ||||||||||||||||
Capital Lease Obligations | $ | 208 | $ | 209 | $ | 208 | $ | 209 | ||||||||
Customer Advances and Contributions in Aid of Construction | 43 | 40 | 26 | 26 | ||||||||||||
Alternative Minimum Tax Credit | 43 | 49 | 28 | 35 | ||||||||||||
Accrued Postretirement Benefits | 24 | 24 | 24 | 24 | ||||||||||||
Emission Allowance Inventory | 13 | 13 | 12 | 12 | ||||||||||||
Other | 35 | 39 | 25 | 27 | ||||||||||||
Gross Deferred Income Tax Assets | 366 | 374 | 323 | 333 | ||||||||||||
Gross Deferred Income Tax Liabilities | ||||||||||||||||
Plant — Net | (442 | ) | (390 | ) | (397 | ) | (357 | ) | ||||||||
Capital Lease Assets — Net | (58 | ) | (61 | ) | (58 | ) | (61 | ) | ||||||||
Regulatory Asset — Income Taxes Recoverable Through Future Revenues | (7 | ) | (8 | ) | (7 | ) | (8 | ) | ||||||||
Pensions | (10 | ) | (7 | ) | (11 | ) | (8 | ) | ||||||||
Deferred Lease Payment | (5 | ) | (6 | ) | (5 | ) | (6 | ) | ||||||||
Other | (19 | ) | (19 | ) | (11 | ) | (13 | ) | ||||||||
Gross Deferred Income Tax Liabilities | (541 | ) | (491 | ) | (489 | ) | (453 | ) | ||||||||
Net Deferred Income Tax Liabilities | $ | (175 | ) | $ | (117 | ) | $ | (166 | ) | $ | (120 | ) | ||||
UniSource Energy | TEP | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Deferred Income Taxes — Current Assets | $ | 52 | $ | 61 | $ | 51 | $ | 60 | ||||||||
Deferred Income Taxes — Noncurrent Liabilities | (227 | ) | (178 | ) | (217 | ) | (180 | ) | ||||||||
Net Deferred Income Tax Liability | $ | (175 | ) | $ | (117 | ) | $ | (166 | ) | $ | (120 | ) | ||||
K/A-60
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2009 | 2008 | |||||||
Unrecognized Tax Benefits, beginning of year | $ | 20 | $ | 12 | ||||
Additions based on tax positions taken in the current year | 1 | 6 | ||||||
Reductions based on settlements with tax authorities | (1 | ) | — | |||||
Additions based on tax positions taken in the prior year | — | 3 | ||||||
Reductions based on tax positions taken in the prior year | (1 | ) | (1 | ) | ||||
Unrecognized Tax Benefits, end of year | $ | 19 | $ | 20 | ||||
K/A-61
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-62
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
Years Ended December 31, | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Regulatory Pension Asset included in Other Regulatory Assets | $ | 75 | $ | 105 | $ | 9 | $ | 7 | ||||||||
Accrued Benefit Liability included in Accrued Employee Expenses | — | — | (4 | ) | (4 | ) | ||||||||||
Accrued Benefit Liability included in Pension and Other Postretirement Benefits | (58 | ) | (95 | ) | (65 | ) | (63 | ) | ||||||||
Accumulated Other Comprehensive Loss | 3 | 3 | — | — | ||||||||||||
Net Amount Recognized | $ | 20 | $ | 13 | $ | (60 | ) | $ | (60 | ) | ||||||
K/A-63
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
Years Ended December 31, | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Change in Projected Benefit Obligation | ||||||||||||||||
Benefit Obligation at Beginning of Year | $ | 230 | $ | 209 | $ | 67 | $ | 65 | ||||||||
Actuarial (Gain) Loss | — | 13 | 1 | — | ||||||||||||
Interest Cost | 14 | 14 | 4 | 4 | ||||||||||||
Service Cost | 7 | 7 | 2 | 2 | ||||||||||||
Measurement Date Change | — | 1 | — | — | ||||||||||||
Amendments | (1 | ) | (2 | ) | — | — | ||||||||||
Benefits Paid | (8 | ) | (12 | ) | (3 | ) | (4 | ) | ||||||||
Projected Benefit Obligation at End of Year | 242 | 230 | 71 | 67 | ||||||||||||
Change in Plan Assets | ||||||||||||||||
Fair Value of Plan Assets at Beginning of Year | 135 | 193 | — | — | ||||||||||||
Actual (Loss) Return on Plan Assets | 32 | (57 | ) | — | — | |||||||||||
Benefits Paid | (8 | ) | (12 | ) | (3 | ) | (4 | ) | ||||||||
Employer Contributions | 25 | 10 | 5 | 4 | ||||||||||||
Measurement Date Change | — | 1 | — | — | ||||||||||||
Fair Value of Plan Assets at End of Year | 184 | 135 | 2 | — | ||||||||||||
Funded Status at End of Year | $ | (58 | ) | $ | (95 | ) | $ | (69 | ) | $ | (67 | ) | ||||
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
Years Ended December 31, | ||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Net Loss | $ | 77 | $ | 105 | $ | 13 | $ | 13 | ||||||||
Prior Service Cost (Benefit) | 1 | 3 | (4 | ) | (6 | ) |
K/A-64
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, | ||||||||
2009 | 2008 | |||||||
Projected Benefit Obligation at End of Year | $ | 242 | $ | 230 | ||||
Accumulated Benefit Obligation at End of Year | 210 | 198 | ||||||
Fair Value of Plan Assets at End of Year | 184 | 135 |
Other Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Service Cost | $ | 7 | $ | 7 | $ | 8 | $ | 2 | $ | 2 | $ | 2 | ||||||||||||
Interest Cost | 14 | 14 | 13 | 4 | 4 | 4 | ||||||||||||||||||
Expected Return on Plan Assets | (11 | ) | (16 | ) | (14 | ) | — | — | — | |||||||||||||||
Prior Service Cost Amortization | 1 | 2 | 1 | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||
Recognized Actuarial Loss | 7 | — | 2 | 1 | 1 | 1 | ||||||||||||||||||
Net Periodic Benefit Cost | $ | 18 | $ | 7 | $ | 10 | $ | 5 | $ | 5 | $ | 5 | ||||||||||||
K/A-65
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pension Benefits | ||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||
Regulatory | Regulatory | Regulatory | ||||||||||||||||||||||
Asset | AOCI | Asset | AOCI | Asset | AOCI | |||||||||||||||||||
-Millions of Dollars- | ||||||||||||||||||||||||
Current Year Actuarial (Gain) Loss | $ | (21 | ) | $ | — | $ | 85 | $ | 1 | $ | (16 | ) | $ | (6 | ) | |||||||||
Amortization of Actuarial Gain (Loss) | (7 | ) | — | — | — | (1 | ) | (1 | ) | |||||||||||||||
Prior Service (Cost) Amortization | — | — | (2 | ) | — | (1 | ) | (1 | ) | |||||||||||||||
Plan Amendments | (1 | ) | — | (2 | ) | — | — | — | ||||||||||||||||
Reclassification from AOCI to Regulatory Asset | — | — | 8 | (8 | ) | — | — | |||||||||||||||||
Change in Additional Minimum Liability | — | — | — | — | — | — | ||||||||||||||||||
Total Recognized | $ | (29 | ) | $ | — | $ | 89 | $ | (7 | ) | $ | (18 | ) | $ | (8 | ) | ||||||||
Other Postretirement Benefits | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Regulatory | Regulatory | 2007 | ||||||||||||||
Asset | Asset | AOCI | AOCI | |||||||||||||
-Millions of Dollars- | ||||||||||||||||
Current Year Actuarial (Gain) Loss | $ | 1 | $ | — | $ | — | $ | (1 | ) | |||||||
Amortization of Actuarial Gain (Loss) | (1 | ) | (1 | ) | — | (1 | ) | |||||||||
Prior Service (Cost) Amortization | 2 | 2 | — | 2 | ||||||||||||
Change in Additional Minimum Liability | — | — | — | (2 | ) | |||||||||||
Reclassification from AOCI to Regulatory Asset | — | 6 | (6 | ) | — | |||||||||||
Total Recognized | $ | 2 | $ | 7 | $ | (6 | ) | $ | (2 | ) | ||||||
K/A-66
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Weighted-Average Assumptions Used to Determine Benefit Obligations as of the Measurement Date | ||||||||||||||||
Discount Rate | 6.3 | % | 6.3 | % | 6.0 | % | 6.5 | % | ||||||||
Rate of Compensation Increase | 3.0 – 5.0 | % | 3.0 – 5.0 | % | N/A | N/A |
Other Postretirement | ||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | ||||||||||||||||
Weighted-Average Assumptions Used to Determine Net Periodic Benefit Cost for Years Ended December 31 | ||||||||||||||||||||
Discount Rate | 6.3 | % | 6.6 – 6.8 | % | 5.9 | % | 6.5 | % | 6.5 | % | ||||||||||
Rate of Compensation Increase | 3.0 – 5.0 | % | 3.0 – 5.0 | % | 3.0 – 5.0 | % | N/A | N/A | ||||||||||||
Expected Return on Plan Assets | 8.0 | % | 7.75 – 8.3 | % | 8.3 | % | N/A | N/A |
December 31, | ||||||||
2009 | 2008 | |||||||
Assumed Health Care Cost Trend Rates | ||||||||
Health Care Cost Trend Rate Assumed for Next Year | 7.9 | % | 7.5 | % | ||||
Ultimate Health Care Cost Trend Rate Assumed | 4.5 | % | 5 | % | ||||
Year that the Rate Reaches the Ultimate Trend Rate | 2027 | 2017 |
K/A-67
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
One-Percentage- | One-Percentage- | |||||||
Point Increase | Point Decrease | |||||||
-Millions of Dollars- | ||||||||
Effect on Total of Service and Interest Cost Components | $ | 1 | $ | (1 | ) | |||
Effect on Postretirement Benefit Obligation | 5 | (4 | ) |
UNS Gas and UNS Electric | ||||||||||||||||
TEP Plan Assets | Plan Assets | |||||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Asset Category | ||||||||||||||||
Equity Securities | 57 | % | 51 | % | 56 | % | 67 | % | ||||||||
Fixed Income Securities | 34 | % | 33 | % | 33 | % | 31 | % | ||||||||
Real Estate | 7 | % | 13 | % | 11 | % | — | |||||||||
Other | 2 | % | 3 | % | — | 2 | % | |||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
K/A-68
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fair Value Measurements of Pension Assets | ||||||||||||||||
December 31, 2009 | ||||||||||||||||
($ in millions) | ||||||||||||||||
Significant | ||||||||||||||||
Quoted Prices | Other | Significant | ||||||||||||||
in Active | Observable | Unobservable | ||||||||||||||
Markets | Inputs | Inputs | ||||||||||||||
Asset Category | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Cash | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Equity Securities: | ||||||||||||||||
U.S. Large Cap | — | 53 | — | 53 | ||||||||||||
U.S. Small Cap | — | 10 | — | 10 | ||||||||||||
Non-U.S. | — | 42 | — | 42 | ||||||||||||
Fixed Income | — | 63 | — | 63 | ||||||||||||
Real Estate | — | 5 | 8 | 13 | ||||||||||||
Hedge Fund | — | — | 1 | 1 | ||||||||||||
Private Equity | — | — | 1 | 1 | ||||||||||||
Total | $ | 1 | $ | 173 | $ | 10 | $ | 184 | ||||||||
Level 1 cash equivalents are based on observable market prices and are comprised of the fair value of commercial paper, money market funds, and certificates of deposit. | |||
Level 2 investments comprise amounts held in co-mingled equity funds, US bond and real estate funds. Valuations are based on active market quoted prices for assets held by each respective fund. | |||
Level 3 real estate investments were valued by appraisal at September 30, 2009, and subsequently revalued at December 31, 2009. Revaluation comprised of using a preliminary real estate index value to estimate the percentage change in asset value from September 30, 2009, to December 31, 2009. The preliminary real estate index value was developed based on appraisals comprising 82% of real estate assets tracked by the index. | |||
Level 3 hedge and private equity funds are classified as funds-of-funds. They are valued based on individual fund manager valuation models. |
Private Equity | Real Estate | Hedge Fund | Total | |||||||||||||
Beginning Balances at December 31, 2008 | $ | 1 | $ | 12 | $ | 3 | $ | 16 | ||||||||
Actual Return on Plan Assets: | ||||||||||||||||
Relating to Assets still held at Reporting Date | — | (4 | ) | — | (4 | ) | ||||||||||
Relating to Assets sold during the Period | — | — | (1 | ) | (1 | ) | ||||||||||
Purchases, Sales, and Settlements | — | — | (1 | ) | (1 | ) | ||||||||||
Transfers in and/or out of Level 3 | — | — | — | — | ||||||||||||
Ending Balance at December 31, 2009 | $ | 1 | $ | 8 | $ | 1 | $ | 10 | ||||||||
K/A-69
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TEP Plan % | UES Plan % | VEBA Trust % | ||||||||||
Fixed Income | 31.7 | % | 33.4 | % | 62.5 | % | ||||||
U.S. Large Cap | 26.4 | % | 27.8 | % | 27.6 | % | ||||||
Non-US Developed | 15.9 | % | 16.7 | % | 3.3 | % | ||||||
Real Estate | 10.6 | % | 11.1 | % | — | |||||||
U.S. Small Cap | 5.2 | % | 5.5 | % | 1.6 | % | ||||||
Non-US Emerging | 5.2 | % | 5.5 | % | — | |||||||
Private Equity | 5.0 | % | — | — | ||||||||
Cash / Treasury Bills | — | — | 5.0 | % | ||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | ||||||
K/A-70
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other | ||||||||
Pension | Postretirement | |||||||
Benefits | Benefits | |||||||
-Millions of Dollars- | ||||||||
2010 | $ | 10 | $ | 5 | ||||
2011 | 11 | 5 | ||||||
2012 | 12 | 5 | ||||||
2013 | 13 | 6 | ||||||
2014 | 14 | 6 | ||||||
Years 2015-2019 | 88 | 30 |
K/A-71
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2009 | 2008 | 2007 | ||||||||||
Expected Term (years) | 7 | 6 | 6 | |||||||||
Risk-free Rate | 3.4 | % | 3.1 | % | 4.4 | % | ||||||
Expected Volatility | 25.0 | % | 18.8 | % | 20.2 | % | ||||||
Expected Dividend Yield | 3.2 | % | 2.8 | % | 2.4 | % | ||||||
Weighted-Average Grant-Date Fair Value of Options Granted During the Period | $ | 5.53 | $ | 4.23 | $ | 8.13 |
K/A-72
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2009 | 2008 | 2007 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
(Shares in Thousands) | Exercise | Exercise | Exercise | |||||||||||||||||||||
Stock Options | Shares | Price | Shares | Price | Shares | Price | ||||||||||||||||||
Outstanding, Beginning of Year | 1,635 | $ | 22.50 | 1,451 | $ | 21.21 | 1,388 | $ | 18.59 | |||||||||||||||
Granted | 249 | $ | 26.11 | 304 | $ | 26.18 | 184 | $ | 37.88 | |||||||||||||||
Exercised or Vested | (282 | ) | $ | 14.46 | (120 | ) | $ | 16.34 | (120 | ) | $ | 16.56 | ||||||||||||
Forfeited/Expired | (4 | ) | $ | 12.28 | — | — | (1 | ) | $ | 12.28 | ||||||||||||||
Outstanding, End of Year | 1,598 | $ | 24.50 | 1,635 | $ | 22.50 | 1,451 | $ | 21.21 | |||||||||||||||
Exercisable, End of Year | 1,085 | $ | 23.06 | 1,153 | $ | 19.50 | 1,139 | $ | 17.43 | |||||||||||||||
Aggregate Intrinsic Value of Options Exercised ($000s) | $ | 4,177 | $ | 1,680 | $ | 2,226 |
At December 31, 2009($000s) | ||||
Aggregate Intrinsic Value for Options Outstanding | $ | 13,408 | ||
Aggregate Intrinsic Value for Options Exercisable | $ | 10,679 | ||
Weighted Average Remaining Contractual Life of Outstanding Options | 4.4 years | |||
Weighted Average Remaining Contractual Life of Exercisable Options | 3.0 years |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||
Number of | Remaining | Average | Number | Average | ||||||||||||||||
Range of | Shares | Contractual | Exercise | of Shares | Exercise | |||||||||||||||
Exercise Prices | (000s) | Life | Price | (000s) | Price | |||||||||||||||
$15.28 – $18.84 | 664 | 1.6 years | $ | 17.39 | 664 | $ | 17.39 | |||||||||||||
$26.11 – $37.88 | 934 | 6.4 years | $ | 29.55 | 421 | $ | 31.99 |
Number of Shares | Weighted-Average | |||||||
Non-vested Shares | (000s) | Grant-Date Fair Value | ||||||
Non-vested at January 1, 2009 | 482 | $ | 5.59 | |||||
Granted | 249 | 5.53 | ||||||
Vested | (218 | ) | 6.13 | |||||
Forfeited | — | — | ||||||
Non-vested at December 31, 2009 | 513 | $ | 5.33 | |||||
K/A-73
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | May 2009 — 21,886 stock units at a weighted average fair value of $26.73 per share, | ||
• | February 2008 — 3,130 stock units at a weighted average fair value of $28.75 per share, | ||
• | May 2008 — 18,448 stock units at a weighted average fair value of $31.71 per share, | ||
• | August 2008 — 1,400 stock units at a weighted average fair value of $32.15 per share, and | ||
• | 2007 — 17,857 stock units at a weighted average fair value of $37.30 per share. |
K/A-74
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Performance Shares | Restricted Stock Units | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Shares | Grant-Date | Shares | Grant-Date | |||||||||||||
(000s) | Fair Value | (000s) | Fair Value | |||||||||||||
Non-vested at January 1, 2009 | 67 | $ | 25.23 | 23 | $ | 31.33 | ||||||||||
Granted | 62 | 21.62 | 22 | 26.73 | ||||||||||||
Vested | (22 | ) | 35.56 | (23 | ) | 31.33 | ||||||||||
Forfeited | (7 | ) | 35.56 | — | — | |||||||||||
Non-vested at December 31, 2009 | 100 | $ | 19.92 | 22 | $ | 26.73 | ||||||||||
K/A-75
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
UniSource Energy | ||||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2009 | ||||||||||||||||
- Millions of Dollars - | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 51 | $ | — | $ | — | $ | 51 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 14 | — | 14 | ||||||||||||
Equity Investments(3) | — | — | 6 | 6 | ||||||||||||
Collateral Posted(4) | — | 2 | — | 2 | ||||||||||||
Energy Contracts(5) | — | 1 | 6 | 7 | ||||||||||||
Total Assets | 51 | 17 | 12 | 80 | ||||||||||||
Liabilities | ||||||||||||||||
Energy Contracts(5) | — | (16 | ) | (19 | ) | (35 | ) | |||||||||
Interest Rate Swaps(6) | — | (6 | ) | — | (6 | ) | ||||||||||
Total Liabilities | — | (22 | ) | (19 | ) | (41 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 51 | $ | (5 | ) | $ | (7 | ) | $ | 39 | ||||||
UniSource Energy | ||||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2008 | ||||||||||||||||
- Millions of Dollars - | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 14 | $ | — | $ | — | $ | 14 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 9 | — | 9 | ||||||||||||
Equity Investments(3) | — | — | 11 | 11 | ||||||||||||
Collateral Posted(4) | — | 14 | — | 14 | ||||||||||||
Energy Contracts(5) | — | 1 | 6 | 7 | ||||||||||||
Total Assets | 14 | 24 | 17 | 55 | ||||||||||||
Liabilities | ||||||||||||||||
Energy Contracts(5) | — | (40 | ) | (23 | ) | (63 | ) | |||||||||
Interest Rate Swaps(6) | — | (8 | ) | — | (8 | ) | ||||||||||
Total Liabilities | — | (48 | ) | (23 | ) | (71 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 14 | $ | (24 | ) | $ | (6 | ) | $ | (16 | ) | |||||
K/A-76
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
TEP | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2009 | ||||||||||||||||
- Millions of Dollars - | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 8 | $ | — | $ | — | $ | 8 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 14 | — | 14 | ||||||||||||
Energy Contracts(5) | — | 1 | 5 | 6 | ||||||||||||
Total Assets | 8 | 15 | 5 | 28 | ||||||||||||
Liabilities | ||||||||||||||||
Energy Contracts(5) | — | (5 | ) | (9 | ) | (14 | ) | |||||||||
Interest Rate Swaps(6) | — | (6 | ) | — | (6 | ) | ||||||||||
Total Liabilities | — | (11 | ) | (9 | ) | (20 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 8 | $ | 4 | $ | (4 | ) | $ | 8 | |||||||
TEP | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant Other | Significant | ||||||||||||||
Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
December 31, 2008 | ||||||||||||||||
- Millions of Dollars - | ||||||||||||||||
Assets | ||||||||||||||||
Cash Equivalents(1) | $ | 8 | $ | — | $ | — | $ | 8 | ||||||||
Rabbi Trust Investments to support the Deferred Compensation and SERP Plans(2) | — | 9 | — | 9 | ||||||||||||
Energy Contracts(5) | — | — | 10 | 10 | ||||||||||||
Total Assets | 8 | 9 | 10 | 27 | ||||||||||||
Liabilities | ||||||||||||||||
Energy Contracts(5) | — | (18 | ) | (11 | ) | (29 | ) | |||||||||
Interest Rate Swaps(6) | — | (8 | ) | — | (8 | ) | ||||||||||
Total Liabilities | — | (26 | ) | (11 | ) | (37 | ) | |||||||||
Net Total Assets and (Liabilities) | $ | 8 | $ | (17 | ) | $ | (1 | ) | $ | (10 | ) | |||||
(1) | Cash Equivalents are based on observable market prices and are comprised of the fair value of commercial paper, money market funds, and certificates of deposit. | |
(2) | Level 2 Investments comprise amounts held in mutual and money market funds related to deferred compensation and Supplemental Executive Retirement Plan (SERP) benefits. The valuation is based on quoted prices, traded in active markets. These investments are included in Investments and Other Property — Other in the UniSource Energy and TEP balance sheets. | |
(3) | Equity Investments are, in the absence of readily ascertainable market values, based on the lower of the investment partners’ valuations or management’s valuation and comprise Millennium’s equity investment in unregulated businesses. These investments are included in Investments and Other Property — Other in the UniSource Energy balance sheet. | |
(4) | Collateral provided for energy contracts with counterparties to reduce credit risk exposure. | |
(5) | Energy Contracts include gas swap agreements (Level 2), forward power purchase and sales contracts (Level 3), and forward power purchase contracts indexed to gas (Level 3), entered into to take advantage of favorable market conditions and reduce exposure to energy price risk. The valuation techniques are described below. | |
(6) | Interest Rate Swaps are valued based on either the six-month LIBOR index or the Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap index (Level 2). |
K/A-77
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-78
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Year Ended | ||||||||||||||||
December 31, 2009 | ||||||||||||||||
- Millions of Dollars - | ||||||||||||||||
UniSource Energy | TEP | |||||||||||||||
Mark-to- | Mark-to- | |||||||||||||||
Market | Market | |||||||||||||||
Contracts | Investments | Total | Contracts | |||||||||||||
Balance, as of January 1, 2009 | $ | (17 | ) | $ | 11 | $ | (6 | ) | $ | (1 | ) | |||||
Gains and (Losses) (Realized/Unrealized) | ||||||||||||||||
Recorded to: | ||||||||||||||||
Net Regulatory Assets — Derivative Instruments | 5 | — | 5 | (2 | ) | |||||||||||
OCI | (1 | ) | — | (1 | ) | (1 | ) | |||||||||
Other Expense | — | (2 | ) | (2 | ) | — | ||||||||||
Cash — Proceeds from Sale of Investment | — | (3 | ) | (3 | ) | — | ||||||||||
Balance, as of December 31, 2009 | $ | (13 | ) | $ | 6 | $ | (7 | ) | $ | (4 | ) | |||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-In Thousands- | ||||||||||||
Numerator: | ||||||||||||
Net Income | $ | 104,258 | $ | 14,021 | $ | 58,373 | ||||||
Income from Assumed Conversion of Convertible Senior Notes | 4,390 | — | 4,390 | |||||||||
Adjusted Numerator | $ | 108,648 | $ | 14,021 | $ | 62,763 | ||||||
Denominator: | ||||||||||||
Weighted-average Shares of Common Stock Outstanding | ||||||||||||
Common Shares Issued | 35,653 | 35,415 | 35,264 | |||||||||
Fully Vested Deferred Stock Units | 105 | 217 | 222 | |||||||||
Participating Securities | 100 | — | — | |||||||||
Total Weighted-average Shares of Common Stock Outstanding and Participating Securities — Basic | 35,858 | 35,632 | 35,486 | |||||||||
Effect of Diluted Securities | ||||||||||||
Convertible Senior Notes | 4,093 | — | 4,000 | |||||||||
Options and Stock Issuable under Employee Benefit Plans and the Directors’ Plan | 499 | 537 | 583 | |||||||||
Total Shares | 40,450 | 36,169 | 40,069 | |||||||||
K/A-79
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K/A-80
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
• | The FASB issued authoritative guidance for transfers of financial assets that clarify and change the criteria for a transfer to be accounted for as a sale, change the amount of a recognized gain/loss on a sale when beneficial interests are received by the transferor, and requires extensive disclosures. This standard is effective for interim and annual periods beginning January 1, 2010. To date, we have not participated in any transfers to which this guidance is applicable. | ||
• | The FASB issued authoritative guidance for variable interest entities requiring an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This standard did not have a material impact on our financial statements on adoption on January 1, 2010. | ||
• | The FASB issued authoritative guidance for multiple deliverable revenue arrangements that provides another alternative for determining the selling price of deliverables and eliminates the residual method of allocating consideration. In addition, this pronouncement requires expanded qualitative and quantitative disclosures and is effective for revenue arrangements entered into after January 1, 2011. We are evaluating the impact of this pronouncement. | ||
• | The FASB issued amendments that require some new disclosures and clarify some existing disclosure requirements about fair value measurements. The amendments are effective for interim and annual reporting periods beginning January 1, 2010, except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in level 3 fair value measurements, which are effective for interim and annual reporting periods beginning January 1, 2011. We are evaluating the impact of these new and revised disclosures on our financial statements. |
K/A-81
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UniSource Energy | ||||||||||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-Thousands of Dollars- | ||||||||||||
Net Income | $ | 104,258 | $ | 14,021 | $ | 58,373 | ||||||
Adjustments to Reconcile Net Income | ||||||||||||
To Net Cash Flows from Operating Activities | ||||||||||||
Depreciation and Amortization Expense | 176,018 | 147,690 | 140,638 | |||||||||
Depreciation and Amortization Recorded to Fuel and Other O&M Expense | 4,929 | 6,467 | 6,897 | |||||||||
Amortization of Deferred Debt-Related Costs included in Interest Expense | 4,171 | 3,891 | 3,831 | |||||||||
Provision for Bad Debts | 3,583 | 5,007 | 3,592 | |||||||||
Deferred Income Taxes | 58,692 | 35,739 | 22,021 | |||||||||
California Power Exchange Provision for Wholesale Revenue Refunds | 4,172 | — | — | |||||||||
Pension and Postretirement Expense | 23,594 | 11,991 | 14,442 | |||||||||
Pension and Postretirement Funding | (30,078 | ) | (13,928 | ) | (13,809 | ) | ||||||
Gain on Sale of Millennium’s Investment in Sabinas | (5,979 | ) | — | — | ||||||||
Stock Based Compensation Expense | 2,779 | 2,901 | 2,693 | |||||||||
Excess Tax Benefit from Stock Options Exercised | (3,256 | ) | (633 | ) | (541 | ) | ||||||
Mark-to-Market Transactions | 43 | 9,281 | 2,459 | |||||||||
Impact of Reapplication of Regulatory Accounting | — | (40,144 | ) | — | ||||||||
Provision for Navajo Retiree Health Care and Mine Reclamation | — | 10,198 | — | |||||||||
Amortization of Transition Recovery Asset | — | 23,945 | 77,681 | |||||||||
CTC Revenue Refunded | (12,141 | ) | 58,092 | — | ||||||||
Over/Under Recovered Purchased Energy Cost | (17,091 | ) | (10,337 | ) | 2,377 | |||||||
Decrease in Value of Millennium Investments | 1,249 | 2,469 | — | |||||||||
Net Unrealized Loss (Gain) on MEH Trading Activities | — | — | 2,562 | |||||||||
Changes in Assets and Liabilities which Provided (Used) | ||||||||||||
Cash Exclusive of Changes Shown Separately | ||||||||||||
Accounts Receivable | 17,696 | 432 | 4,981 | |||||||||
Collateral Posted | 12,370 | (14,120 | ) | — | ||||||||
Materials and Fuel Inventory | (24,621 | ) | (10,176 | ) | (8,805 | ) | ||||||
Accounts Payable | (8,196 | ) | 8,164 | (5,057 | ) | |||||||
Income Taxes | 14,924 | (12,720 | ) | (2,895 | ) | |||||||
Interest Accrued | 15,956 | 16,772 | 10,031 | |||||||||
Other Regulatory Liabilities | 10,009 | 7,501 | 2,903 | |||||||||
Taxes Other Than Income Taxes | (48 | ) | (29 | ) | 1,344 | |||||||
Other | (5,723 | ) | 14,537 | (2,952 | ) | |||||||
Net Cash Flows — Operating Activities | $ | 347,310 | $ | 277,011 | $ | 322,766 | ||||||
K/A-82
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
TEP | ||||||||||||
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-Thousands of Dollars- | ||||||||||||
Net Income | $ | 89,248 | $ | 4,363 | $ | 53,456 | ||||||
Adjustments to Reconcile Net Income | ||||||||||||
To Net Cash Flows from Operating Activities | ||||||||||||
Depreciation and Amortization Expense | 152,901 | 126,040 | 119,811 | |||||||||
Depreciation and Amortization Recorded to Fuel and Other O&M Expense | 3,439 | 5,039 | 5,339 | |||||||||
Amortization of Deferred Debt-Related Costs included in Interest Expense | 2,364 | 2,826 | 2,677 | |||||||||
Provision for Bad Debts | 2,342 | 2,957 | 2,161 | |||||||||
California Power Exchange Provision for Wholesale Revenue Refunds | 4,172 | — | — | |||||||||
Deferred Income Taxes | 46,721 | 24,410 | 8,310 | |||||||||
Pension and Postretirement Expense | 21,294 | 10,402 | 12,683 | |||||||||
Pension and Postretirement Funding | (28,330 | ) | (12,439 | ) | (12,479 | ) | ||||||
Stock Based Compensation Expense | 2,121 | 2,239 | 2,097 | |||||||||
CTC Revenue Refunded | (12,141 | ) | 58,092 | — | ||||||||
Over/Under Recovered Purchased Energy Cost | (20,724 | ) | — | — | ||||||||
Mark-to-Market Transactions | 44 | 9,283 | 2,459 | |||||||||
Impact of Reapplication of regulatory accounting | — | (40,144 | ) | — | ||||||||
Provision for Navajo Retiree Health Care and Mine Reclamation | — | 10,198 | — | |||||||||
Amortization of Transition Recovery Asset | — | 23,945 | 77,681 | |||||||||
Changes in Assets and Liabilities which Provided (Used) | ||||||||||||
Cash Exclusive of Changes Shown Separately | ||||||||||||
Accounts Receivable | 9,488 | 131 | 4,013 | |||||||||
Materials and Fuel Inventory | (23,794 | ) | (8,774 | ) | (9,103 | ) | ||||||
Accounts Payable | (10,410 | ) | 14,812 | (6,230 | ) | |||||||
Income Taxes | (2,057 | ) | 10,127 | (3,378 | ) | |||||||
Interest Accrued | 16,142 | 15,857 | 10,113 | |||||||||
Taxes Other Than Income Taxes | 725 | (1,011 | ) | 1,463 | ||||||||
Other Regulatory Liabilities | 10,555 | 6,449 | — | |||||||||
Other | 3,964 | 3,904 | (6,961 | ) | ||||||||
Net Cash Flows — Operating Activities | $ | 268,064 | $ | 268,706 | $ | 264,112 | ||||||
K/A-83
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
Years Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-Thousands of Dollars- | ||||||||||||
(Decrease)/Increase to Utility Plant Accruals | $ | 1,082 | $ | (25,450 | ) | $ | 24,915 | |||||
Net Cost of Removal of Interim Retirements | 43,381 | 45,100 | 21,301 | |||||||||
Capital Lease Obligations | 17,984 | 16,612 | 13,259 |
UniSource Energy and TEP | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
-Millions of Dollars- | ||||||||||||
Cash Flow Hedges — Unrealized Gains (Losses) | ||||||||||||
Forward Power Contracts | $ | (1 | ) | $ | (7 | ) | $ | — | ||||
Gas Price Swaps | — | 3 | (5 | ) | ||||||||
Interest Rate Swaps | 1 | (5 | ) | (1 | ) | |||||||
Total Pre-Tax Unrealized Gains (Losses) | $ | — | $ | (9 | ) | $ | (6 | ) | ||||
After-Tax Unrealized Gains (Losses) Recorded in AOCI | $ | — | $ | (5 | ) | $ | (4 | ) | ||||
After-Tax Unrealized (Gains) Losses Reclassified to Net Income | $ | 1 | $ | 2 | $ | 2 | ||||||
K/A-84
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
2009 | 2008 | 2007 | ||||||||||
-Millions of Dollars- | ||||||||||||
Recorded in Wholesale Sales: | ||||||||||||
Forward Power Sales | $ | 23 | $ | 30 | $ | 28 | ||||||
Forward Purchased Power | (21 | ) | (30 | ) | (28 | ) | ||||||
Net Impact in Wholesale Sales | $ | 2 | $ | — | $ | — | ||||||
K/A-85
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UniSource | ||||||||||||||||
TEP | UNS Gas | UNS Electric | Energy | |||||||||||||
December 31, 2009 | ||||||||||||||||
-Millions of Dollars- | ||||||||||||||||
Net Liability Position | $ | 26 | $ | 25 | $ | 20 | $ | 71 | ||||||||
Cash Collateral Posted | — | 2 | — | 2 | ||||||||||||
Letters of Credit | 1 | — | 11 | 12 | ||||||||||||
Additional Collateral to Post if Contingent Features Triggered | 26 | 23 | 14 | 63 |
K/A-86
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) |
UniSource Energy | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
-Thousands of Dollars- | ||||||||||||||||
(except per share data) | ||||||||||||||||
2009 | ||||||||||||||||
Operating Revenue | $ | 311,857 | $ | 337,784 | $ | 414,239 | $ | 330,544 | ||||||||
Operating Income | 33,300 | 59,090 | 116,858 | 43,085 | ||||||||||||
Net Income | 4,919 | 31,275 | 57,646 | 10,418 | ||||||||||||
Basic EPS | 0.14 | 0.88 | 1.60 | 0.29 | ||||||||||||
Diluted EPS | 0.14 | 0.80 | 1.45 | 0.28 | ||||||||||||
2008 | ||||||||||||||||
Operating Revenue | $ | 330,134 | $ | 360,322 | $ | 387,852 | $ | 319,203 | ||||||||
Operating Income | 22,017 | 34,627 | 13,900 | 69,899 | ||||||||||||
Net Income (Loss) | (2,614 | ) | 4,747 | (11,039 | ) | 22,927 | ||||||||||
Basic EPS | (0.07 | ) | 0.13 | (0.31 | ) | 0.64 | ||||||||||
Diluted EPS | (0.07 | ) | 0.13 | (0.31 | ) | 0.60 |
TEP | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
-Thousands of Dollars- | ||||||||||||||||
2009 | ||||||||||||||||
Operating Revenue | $ | 213,274 | $ | 271,544 | $ | 357,189 | $ | 254,704 | ||||||||
Operating Income | 18,572 | 51,594 | 108,055 | 31,902 | ||||||||||||
Net Income (Loss) | (553 | ) | 26,507 | 55,277 | 8,017 | |||||||||||
2008 | ||||||||||||||||
Operating Revenue | $ | 228,602 | $ | 294,141 | $ | 323,312 | $ | 233,198 | ||||||||
Operating Income | 7,460 | 29,752 | 6,329 | 58,969 | ||||||||||||
Net Income (Loss) | (8,862 | ) | 5,765 | (12,237 | ) | 19,697 |
K/A-87
Table of Contents
UNISOURCE ENERGY, TEP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (concluded) |
• | Fourth Quarter 2009.In December 2009, based on settlement discussions related to its sales to the CPX and CISO, TEP wrote off the remaining receivable balance of $2 million and accrued an additional liability of $2 million resulting in a $4 million ($2.4 million after-tax) reduction in net income. |
• | Fourth Quarter 2008.In the fourth quarter of 2008, as a result of the 2008 TEP Rate Order, TEP reapplied regulatory accounting to its generation operations, and consequently, recorded a reduction to fuel expense, O&M and Taxes Other Than Income Taxes of $32 million, $1 million and $7 million, respectively. The total after-tax impact on net income was an increase of $24 million. | ||
• | Third Quarter 2008.In the third quarter of 2008, as a result of a settlement between Peabody and the Navajo Generating Station participants, TEP recorded, as fuel expense, the present value of its share of the Navajo Generating Station mine reclamation and postretirement benefit costs, totaling $9 million ($5 million after-tax). |
• | Second Quarter 2009.Millennium recorded a $6 million ($3.6 million after-tax) gain on the sale of its Sabinas investment. |
K/A-88
Table of Contents
Additions- | ||||||||||||||||
Beginning | Charged to | Ending | ||||||||||||||
Description | Balance | Income | Deductions | Balance | ||||||||||||
-Millions of Dollars- | ||||||||||||||||
Year Ended December 31, | ||||||||||||||||
Allowance for Doubtful Accounts(1) | ||||||||||||||||
2009 | $ | 20 | $ | 4 | $ | 18 | $ | 6 | ||||||||
2008(2) | 18 | 5 | 3 | 20 | ||||||||||||
2007(2) | 17 | 4 | 3 | 18 |
(1) | TEP, UNS Gas and UNS Electric record additions to the Allowance for Doubtful Accounts based on historical experience and any specific customer collection issues identified. Deductions principally reflect amounts charged off as uncollectible, less amounts recovered. | |
(2) | Balances are related primarily to TEP reserves for sales to the CPX and CISO in 2000 and 2001. The accounts were written off in 2009 as a result of negotiations in the fourth quarter of 2009. See Note 4. |
K/A-89
Table of Contents
Additions- | ||||||||||||||||
Beginning | Charged to | Ending | ||||||||||||||
Description | Balance | Income | Deductions | Balance | ||||||||||||
-Millions of Dollars- | ||||||||||||||||
Year Ended December 31, | ||||||||||||||||
Allowance for Doubtful Accounts(1) | ||||||||||||||||
2009 | $ | 17 | $ | 2 | $ | 15 | $ | 4 | ||||||||
2008(2) | 17 | 3 | 3 | 17 | ||||||||||||
2007(2) | 16 | 2 | 1 | 17 |
(1) | TEP record additions to the Allowance for Doubtful Accounts based on historical experience and any specific customer collection issues identified. Deductions principally reflect amounts charged off as uncollectible, less amounts recovered. | |
(2) | Balances are related primarily to TEP reserves for sales to the CPX and CISO in 2000 and 2001. The accounts were written off in 2009 as a result of negotiations in the fourth quarter of 2009. See Note 4. |
K/A-90
Table of Contents
K/A-91
Table of Contents
Page | ||||
(a) 1. Consolidated Financial Statements as of December 31, 2009 and 2008 and for Each of the Three Years in the Period Ended December 31, 2009 | ||||
2 | ||||
4 | ||||
5 | ||||
6 | ||||
8 | ||||
9 | ||||
16 | ||||
3 | ||||
10 | ||||
11 | ||||
12 | ||||
14 | ||||
15 | ||||
Notes to Consolidated Financial Statements | 16 | |||
2. Financial Statement Schedules | ||||
89 | ||||
3. Exhibits | ||||
K/A-92
Table of Contents
UNISOURCE ENERGY CORPORATION | ||||
Date: March 17, 2010 | By: | /s/ Kevin P. Larson | ||
Kevin P. Larson | ||||
Senior Vice President and Principal Financial Officer |
K/A-93
Table of Contents
TUCSON ELECTRIC POWER COMPANY | ||||
Date: March 17, 2010 | By: | /s/ Kevin P. Larson | ||
Kevin P. Larson | ||||
Senior Vice President and Principal Financial Officer |
K/A-94
Table of Contents
23 | — | Consent of Independent Registered Public Accounting Firm. | ||
31(a) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — UniSource Energy, by Paul J. Bonavia. | ||
31(b) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — UniSource Energy by Kevin P. Larson. | ||
31(c) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — TEP, by Paul J. Bonavia. | ||
31(d) | — | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act — TEP, by Kevin P. Larson. | ||
*32 | — | Statements of Corporate Officers (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002). |
* | Pursuant to Item 601(b)(32)(ii) of Regulation S-K, this certificate is not being “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
K/A-95