UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest events reported) October 30, 2002
--------------------------
(October 29, 2002)
--------------------------
PNM RESOURCES, INC.
(Exact name of registrant as specified in its charter)
New Mexico Commission 85-0468296
---------------------------- File Number 333-32170 -----------------------
(State or Other Jurisdiction --------- (I.R.S. Employer
of Incorporation) Identification) Number)
Alvarado Square, Albuquerque, New Mexico 87158
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(505) 241-2700 (Registrant's
telephone number, including area code)
------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Item 9. FD Disclosure
The Company is filing to this Form 8-K its Quarter Ended September 30, 2002
Earnings Announcement; Unaudited Consolidated Statement of Earnings; Unaudited
Consolidated Balance Sheets; Unaudited Consolidated Statement of Cash Flows;
Comparative Operating Statistics and Other Select Financial Information.
PNM Resources Reports Third Quarter Earnings
Highlights:
o GAAP quarterly earnings of $0.45 per diluted share
including a one-time charge of $0.14 per diluted share for
a workforce reduction; ongoing earnings for the quarter
were $0.59 per diluted share.
o Reaffirm previous earnings guidance for 2002, estimating
ongoing earnings will be within previously announced
target of $1.90 to $2.10 per diluted share for the year.
o Contract to buy 200 megawatts (net generating capacity) of
wind power will add a significant renewable component to
generation portfolio.
o Negotiated settlement will set a five-year rate path for PNM electric
customers, if approved by state regulators.
o Company will support dropping plans to introduce retail electric
competition in New Mexico in 2007.
ALBUQUERQUE, N.M., October 29, 2002 - PNM Resources (NYSE: PNM) today reported
consolidated net earnings available for common stock for the three months ended
September 30, 2002, of $17.7 million, or $0.45 per diluted share. In the
comparable period in 2001, the company reported consolidated net earnings
available for common stock of $32.6 million, or $0.82 per diluted share.
Ongoing earnings for the quarter ended September 30, 2002, were $0.59 per
diluted share, down from $0.96 per diluted share in the same period last year.
In the latest quarter, the company recorded a one-time charge against earnings
of $8.8 million (pre-tax), or $0.14 per diluted share, to reflect the cost of a
3.1 percent reduction in force announced in August 2002. In the comparable
quarter in 2001, expenses related to PNM's transaction with Westar Energy
(formerly Western Resources) and the write-off of an investment in a technology
company reduced earnings by $0.14 per diluted share.
2
PNM Resources reported earnings for the first nine months of 2002 were $1.35 per
diluted share, compared to $3.66 per diluted share for the first nine months of
2001. Year-to-date ongoing earnings were $1.49 per diluted share compared with
$4.31 per diluted share for the first three quarters of 2001.
PNM Resources, Inc.
Reconciliation of Ongoing Earnings Per Share To GAAP Reported EPS
September 30, 2002
Three Months Nine Months Twelve Months
2002 2001 2002 2001 2002 2001
------- ------ ------ ------ ------ ------
GAAP Reported EPS $0.45 $0.82 $1.35 $3.66 $1.46 $4.01
One-time charge 0.14 0.06 0.14 0.47 0.14 0.64
Westar transaction costs (1) -- 0.08 -- 0.18 0.09 0.25
-------- ----- ------- ---- ---- ----
Ongoing earnings $0.59 $0.96 $1.49 $4.31 $1.69 $4.90
Average shares (000s) 39,325 39,748 39,484 39,771 39,502 39,728
Note 1. This transaction has been terminated.
PERFORMANCE SUMMARY
PNM electric gross margin (Electric Operating Revenues less Fuel and Purchased
Power Expense) for the third quarter 2002 was $133.2 million, down from $166.4
million in the comparable period last year. The decline in electric gross margin
was due to lower prices and less activity in the wholesale power market in 2002
compared to the same period in 2001.
PNM gas gross margin (Gas Operating Revenues less Gas Purchased for Resale) was
$23.3 million for the latest quarter, compared to $25.3 million in the third
quarter of 2001.
Non-fuel operations and maintenance (O&M) expense fell 4.9 percent for the
latest quarter compared to the same period last year. Total non-fuel O&M for the
first three quarters of 2002 was down $16.5 million, or 6.0 percent compared to
the same period in 2001, as PNM continues to improve operational efficiency.
Beginning with the September 30, 2002 quarterly reporting period, PNM Resources
will reclassify its energy trading activities to a net margin presentation in
accordance with Financial Accounting Standards Board (FASB) Emerging Issues Task
Force (EITF) Issue 02-3, "Issues Related to Accounting for Contracts Involved in
Energy Trading and Risk Management Activities." The EITF also requires the
restatement of prior periods to conform to the current period classification.
The reclassification to net margin on trading activities has no impact on
previously reported operating margins or net income. The reclassification
adjustments are currently under review and will be included in the financial
statements on Form 10-Q to be filed with the Securities and Exchange Commission
on or before November 14, 2002.
3
Other Significant Developments
PNM Resources has recently announced several significant developments designed
to lay the foundation for future growth in revenues and earnings:
o On October 21, PNM announced it has entered into an agreement with FPL
Energy LLC, a subsidiary of FPL Group, Inc. (NYSE: FPL) to develop a
200 megawatt (net generating capacity) wind power project in New
Mexico. PNM will buy the power generated under a long-term contract.
o On October 10, PNM announced an agreement with representatives of
various customer groups and the staff of the New Mexico Public
Regulation Commission (NMPRC) to set PNM electric rates in New Mexico
over a five-year period. If approved by the NMPRC, PNM's current rate
structure will largely remain intact. The agreement will lower rates
6.5 percent, or about $35 million, in a two-step reduction beginning in
September 2003.
o The company expects that lower fuel costs at its major coal-fired
generation facility will largely offset the reduction in retail
electric revenues. Because the agreement does not provide for a fuel
adjustment clause in rates, savings from lower fuel costs and improved
business productivity will accrue to shareholders. Under the terms of
the agreement, benefits from the company's wholesale power sales will
also flow to shareholders.
o Parties to the agreement also committed to support repeal of the 1999
law that put New Mexico on the path to retail electric competition in
2007, if the agreement is approved by the NMPRC.
o On September 25, PNM Resources and Westar Energy agreed to dismiss
litigation over their unsuccessful attempt to combine the two
companies' electric utilities businesses. Each side agreed to release
all of its claims and potential claims in connection with the
transaction in exchange for a release from the other party of all of
its claims and potential claims.
o On August 22, the company announced a corporate realignment that will
consolidate several business areas and reduce operation and maintenance
costs while maintaining PNM's high standards for reliability and
customer service.
Details of these announcements and other PNM Resources news are available at the
company's website, pnm.com.
Earnings Guidance for 2002
Based on results so far this year and its financial and operating forecasts for
the fourth quarter, the company expects 2002 earnings will be in the range of
$1.90 to $2.10 per diluted share. This earnings forecast is unchanged from the
last guidance offered to analysts and investors in July.
The company has scheduled a teleconference for 9:00 a.m. Eastern Time on
Wednesday, October 30, to discuss third quarter earnings and other issues of
interest to shareholders and investors.
The public is invited to listen to the teleconference by calling 1-973-694-2225.
A webcast of the PNM Resources quarterly earnings presentation can be accessed
through the company's website at pnm.com. A replay of the conference call will
be available beginning at 11:00 a.m. (ET) Oct. 30 through 11:00 p.m. (ET)
November 6, 2002, at 1-973-709-2089 (passcode 265548).
PNM Resources is an energy holding company based in Albuquerque, New Mexico.
PNM, the principal subsidiary of PNM Resources, provides natural gas service to
439,637 gas customers and electric utility service to 385,468 customers in New
Mexico. The company also sells power on the wholesale market in the Western U.S.
PNM Resources stock is traded primarily on the NYSE under the symbol PNM.
4
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
--------------------------------------------------------------------------------
Statements made in this news release that relate to future events are made
pursuant to the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based upon current expectations and the company
assumes no obligation to update this information. Because actual results may
differ materially from expectations, the company cautions readers not to place
undue reliance on these statements. Future financial results will be affected by
a number of factors, including interest rates, weather, fuel costs, changes in
supply and demand in the market for electric power, wholesale power prices,
market liquidity, the performance of generating units and transmission system,
and state and federal regulatory and legislative decisions and actions,
including NMPRC action on the agreement to set electric rates for five years and
the result of attempts to repeal the law authorizing retail electric
competition. For a detailed discussion of the important factors affecting PNM
Resources, please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Form 10-K for the year
ended December 31, 2001, Form 10-Q for the quarter ended June 30, 2002 and Form
8-K filings with the Securities and Exchange Commission.
5
This financial statement has been condensed to a net operating margin
presentation. Full financial statements will be provided in the Form 10-Q to be
filed with the Securities and Exchange Commission (SEC) on or before November
14, 2002. The financial statements filed with the SEC will include the impact of
adopting Emerging Issues Task Force (EITF) Issue 02-3, "Issues Related to
Accounting for Contracts Involved in Energy Trading and Risk Management
Activities" which concluded that trading activities should be presented on a net
rather than gross basis in the statement of earnings. The reclassification to
net margin on trading activities has no impact on previously reported operating
margins or net income.
PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
2002 2001 2002 2001
-------------- -------------- --------------- --------------
(In thousands, except per share amounts)
Operating Margin................................ 156,030 191,930 456,795 663,612
-------------- -------------- --------------- --------------
Operating Expenses
Administrative and general................... 38,041 39,241 106,494 117,494
Energy production costs...................... 35,238 36,224 104,411 109,128
Depreciation and amortization................ 25,780 24,194 75,776 72,343
Transmission and distribution costs.......... 15,949 18,402 47,937 48,760
Taxes, other than income taxes............... 7,077 6,380 24,589 21,436
Income taxes................................. 4,810 20,067 16,317 89,182
-------------- -------------- --------------- --------------
Total operating expenses................... 126,895 144,508 375,524 458,343
-------------- -------------- --------------- --------------
Operating income........................... 29,135 47,422 81,271 205,269
Other Income and Deductions, Net of Tax......... 4,418 1,033 18,203 (10,921)
-------------- -------------- --------------- --------------
Income before interest charges............. 33,553 48,455 99,474 194,348
Interest Charges................................ 15,756 15,680 45,571 48,424
-------------- -------------- --------------- --------------
Net Earnings.................................... 17,797 32,775 53,903 145,924
Preferred Stock Dividend Requirements........... 147 147 440 440
-------------- -------------- --------------- --------------
Net Earnings Applicable to Common Stock......... $ 17,650 $ 32,628 $ 53,463 $ 145,484
============== ============== =============== ==============
Earnings Per Share of Common Stock (Basic)...... $ 0.45 $ 0.83 $ 1.37 $ 3.72
============== ============== =============== ==============
Average Shares Outstanding (Basic).............. 39,118 39,118 39,118 39,118
============== ============== =============== ==============
Earnings Per Share of Common Stock (Diluted).... $ 0.45 $ 0.82 $ 1.35 $ 3.66
============== ============== =============== ==============
Average Shares Outstanding (Diluted)............ 39,325 39,748 39,484 39,771
============== ============== =============== ==============
Dividends Paid Per Share of Common Stock........ $ 0.22 $ 0.20 $ 0.64 $ 0.60
============== ============== =============== ==============
6
PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
------------------ ------------------
2002 2001
------------------ ------------------
(Unaudited)
(In thousands)
ASSETS
Total utility plant................................................... $2,865,287 $2,738,990
Accumulated depreciation and amortization............................. (1,310,747) (1,234,629)
Construction work in progress......................................... 228,390 249,656
Nuclear fuel, net of accumulated amortization......................... 29,942 26,940
------------------ ------------------
Net utility plant................................................... 1,812,872 1,780,957
------------------ ------------------
Other Property and Investments........................................... 406,569 554,237
------------------ ------------------
Current Assets
Cash and cash equivalents............................................. 29,991 26,057
Accounts receivables, net of allowance for uncollectible accounts..... 118,264 147,787
Other receivables..................................................... 38,644 52,158
Inventories........................................................... 36,613 36,483
Regulatory assets..................................................... 120 10,473
Short-term investments................................................ 109,469 45,111
Other current assets.................................................. 25,906 31,428
------------------ ------------------
Total current assets................................................ 359,007 349,497
------------------ ------------------
Deferred Charges......................................................... 328,850 249,947
------------------ ------------------
Total assets........................................................ $2,907,298 $2,934,638
================== ==================
7
PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
------------------ ------------------
2002 2001
------------------ ------------------
(Unaudited)
(In thousands)
CAPITALIZATION AND LIABILIITES
Capitalization
Common stock.............................................. $ 622,723 $ 625,632
Accumulated other comprehensive income, net of tax........ (40,810) (28,996)
Retained earnings......................................... 451,640 415,388
Minority interest......................................... 11,538 11,652
Preferred stock........................................... 12,800 12,800
Long-term debt, less current maturities................... 953,926 953,884
------------------ ------------------
Total capitalization.................................... 2,011,817 1,990,360
------------------ ------------------
Current Liabilities
Short-term debt........................................... 100,000 35,000
Accounts payable.......................................... 99,528 120,918
Accrued interest and taxes................................ 59,833 72,022
Other current liabilities................................. 55,702 101,697
------------------ ------------------
Total current liabilities............................... 315,063 329,637
------------------ ------------------
Deferred Credits
Accumulated deferred income taxes......................... 111,670 120,153
Accumulated deferred investment tax credits............... 42,366 44,714
Regulatory liabilities.................................... 67,977 67,053
Other deferred credits.................................... 358,405 382,721
------------------ ------------------
------------------ ------------------
Total deferred credits.................................. 580,418 614,641
------------------ ------------------
Total capitalization and liabilities.................... $ 2,907,298 $ 2,934,638
================== ==================
8
PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
---------------------------------
2002 2001
--------------- ---------------
(In thousands)
Cash Flows From Operating Activities:
Net earnings......................................................... $ 53,903 $ 145,924
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization.................................... 85,625 80,086
Other, net....................................................... (25,276) 15,413
Changes in certain assets and liabilities:
Accounts receivables........................................... 29,523 (19,497)
Other assets................................................... 907 36,490
Accounts payable............................................... (21,390) (51,714)
Other liabilities.............................................. (19,258) 90,158
--------------- ---------------
Net cash flows provided by operating activities.......... 104,034 296,860
--------------- ---------------
Cash Flows From Investing Activities:
Utility plant additions.............................................. (166,640) (165,127)
Redemption of short term investments................................. 45,000 -
Return of principle of PVNGS lease lessor notes...................... 17,531 16,674
Other investing...................................................... (32,493) (5,440)
--------------- ---------------
Net cash flows used for investing activities............. (136,602) (153,893)
--------------- ---------------
Cash Flows From Financing Activities:
Borrowings........................................................... 65,000 -
Exercise of employee stock options................................... (2,909) (3,589)
Dividends paid....................................................... (25,475) (23,905)
Other financing...................................................... (114) (559)
--------------- ---------------
Net cash flows provided by (used for) financing activities....... 36,502 (28,053)
--------------- ---------------
Increase in Cash and Cash Equivalents................................ 3,934 114,914
Beginning of Period.................................................. 26,057 107,691
--------------- ---------------
End of Period........................................................ $ 29,991 $222,605
=============== ===============
Supplemental Cash Flow Disclosures:
Interest paid........................................................ $ 45,610 $ 48,298
=============== ===============
Income taxes paid, net............................................... $ 43,534 $ 56,150
=============== ===============
9
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following table shows retail electric revenues by customer class and
average customers:
Retail Electric Revenues
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- ------------- -------------- -------------
Residential................ $ 53,213 $ 49,942 $ 149,631 $ 142,785
Commercial................. 69,800 68,422 187,382 183,372
Industrial................. 21,819 21,836 62,239 62,161
Other...................... 11,708 13,512 33,207 36,461
------------- ------------- -------------- -------------
$ 156,540 $ 153,712 432,459 $ 424,779
============= ============= ============== =============
Average customers.......... 385,468 378,336 383,572 376,520
============= ============= ============== =============
The following table shows electric sales by customer class:
Retail Electric Sales
(Megawatt hours)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- ------------- -------------- -------------
Residential................. 620,299 593,186 1,743,712 1,676,271
Commercial.................. 928,251 932,204 2,462,728 2,447,231
Industrial.................. 427,481 425,299 1,225,398 1,210,266
Other....................... 74,225 75,750 183,590 182,450
------------- ------------- -------------- -------------
2,050,256 2,026,439 5,615,428 5,516,218
============= ============= ============== =============
10
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following table shows gas revenues by customer and average customers:
Gas Revenues
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- ------------- -------------- -------------
Residential.................... $20,550 $21,717 $118,274 $ 188,113
Commercial.................... 6,248 6,700 36,838 56,375
Industrial.................... 348 623 1,412 26,541
Transportation*............... 4,941 6,024 13,686 16,437
Other......................... 4,823 4,585 20,339 31,204
------------- ------------- -------------- -------------
$36,910 $39,649 $190,549 $ 318,670
============= ============= ============== =============
Average customers............. 439,637 431,703 442,364 433,549
============= ============= ============== =============
*Customer-owned gas.
The following table shows gas throughput by customer class:
Gas Throughput
(Thousands of decatherms)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
------------- ------------- -------------- -------------
Residential................. 2,291 2,337 18,791 18,357
Commercial.................. 1,262 1,176 7,826 6,867
Industrial.................. 94 145 390 3,665
Transportation*............. 13,753 16,842 35,226 41,243
Other....................... 801 764 3,905 3,541
------------- ------------- -------------- -------------
18,201 21,264 66,138 73,673
============= ============= ============== =============
*Customer-owned gas.
11
The revenues included in this table are presented on a gross basis. PNM
Resources will adopt Emerging Issues Task Force (EITF) Issue 02-3, "Issues
Related to Accounting for Contracts Involved in Energy Trading and Risk
Management Activities" which concluded that trading activities should be
presented on a net rather than gross basis in the statement of earnings. The
September 30, 2002 financial statements included in the Form 10-Q to be filed
with the Securities and Exchange Commission on or before November 14, 2002 will
include reclassification adjustments to net the costs related to these trading
activities against the revenues shown below for all periods presented. The
reclassification to net margin on trading activities has no impact on previously
reported operating margins or net income.
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following table shows revenues by customer class:
Generation and Trading Revenues By Market
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Intersegment sales............ $ 96,592 $ 95,413 $264,554 $ 259,726
Long-term contracts........... 7,261 15,967 32,160 61,762
Trading *..................... 83,828 412,564 199,702 1,217,447
Other......................... 5,408 - 13,549 932
-------------- -------------- -------------- --------------
$ 193,089 $ 523,944 $509,965 $1,539,867
============== ============== ============== ==============
*Includes mark-to-market gains/(losses).
The following table shows sales by customer class:
Generation and Trading Sales By Market
(Megawatt hours)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Intersegment sales............... 2,050,256 2,026,439 5,615,428 5,516,218
Long-term contracts.............. 160,946 322,930 669,099 1,169,877
Trading.......................... 2,306,314 3,194,083 6,569,009 8,656,623
-------------- -------------- -------------- --------------
4,517,516 5,543,452 12,853,536 15,342,718
============== ============== ============== ==============
12
1. Reconcile GAAP to Ongoing 2002 vs. 2001 Third Quarter Earnings
Third Quarter Third Quarter
2002 2001
------------- -------------
Reported Earnings (Diluted) $0.45 $0.82
One-Time Items
Realignment Expenses $0.14 Administrative
& General
Merger Related Expenses $0.08 Other Income
Avistar write-off $0.06 Other Income
----- -----
Ongoing Earnings $0.59 $0.96
===== =====
2. Current Liquidity Arrangements as of 10/25/2002
PNM PNM Resources
--- -------------
$150 million unsecured Revolver $25 million in unsecured Local Lines of Credit
- $100 million Drawn -$0 Drawn
$30 million in unsecured Local $137 million in Cash and Liquid Investments
Lines of Credit - $0 Drawn
$38 million in invested Cash
3. Historical Earnings Excluding Special Gains and Charges
First Quarter Second Quarter Third Quarter Fourth Quarter Year-end
------------- -------------- ------------- -------------- --------
2002 $0.63 $0.28 $0.59 N/A N/A
2001 $1.78 $1.58 $0.96 $0.20 $4.52
2000 $0.55 $0.45 $1.01 $0.57 $2.58
1999 $0.55 $0.41 $0.52 $0.43 $1.91
4. Historical Market Data
Spark Spread* Velocity of Trading
--------------------------- ----------------------------
Third Quarter Only Annual Third Quarter Only Annual
2002 8.32 N/A 1.65 N/A
2001 28.83 74.52 2.15 1.93
2000 146.67 75.49 1.85 1.88
1999 21.07 13.07 2.03 1.80
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PNM RESOURCES, INC.
---------------------------------------------
(Registrant)
Date: October 30, 2002 /s/ John R. Loyack
---------------------------------------------
John R. Loyack
Vice President and Chief Accounting Officer
(Officer duly authorized to sign this report)
14