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) July 30, 2003
--------------------
(July 29, 2003)
--------------------
Commission Name of Registrants, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
----------- -------------------------------------------- ------------------
333-32170 PNM Resources, Inc. 85-0468296
(A New Mexico Corporation)
Alvarado Square
Albuquerque, New Mexico 87158
(505) 241-2700
1-6986 Public Service Company of New Mexico 85-0019030
(A New Mexico Corporation)
Alvarado Square
Albuquerque, New Mexico 87158
(505) 241-2700
------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Item 12. Results of Operations and Financial Condition
On July 29, 2003, PNM Resources, Inc. (the "Company") issued a press
release announcing its unaudited results of operations for the six months ended
June 30, 2003. The press release is furnished herewith as Exhibit 99.1 and
incorporated by reference herein.
The Company's press release and other communications from time to time
may include certain non-GAAP financial measures. A "non-GAAP financial measure"
is defined as a numerical measure of a company's financial performance,
financial position or cash flows that excludes (or includes) amounts that are
included in (or excluded from) the most directly comparable measure calculated
and presented in accordance with GAAP in the Company's financial statements.
Non-GAAP financial measures utilized by the Company include presentations
of revenues, operating expenses, operating income, other income and deductions,
net income, earnings per share and other GAAP measures of operating performance
that exclude or include the effect of litigation settlements, accounting or
regulatory changes, the restructuring of selected operations, certain merger
activities and other similar events. The Company's management believes these
non-GAAP financial measures provide useful information to investors by removing
the effect of variances in GAAP reported results of operations that are not
indicative of fundamental changes in the earnings capacity of the Company's
operations. Management also believes that the presentation of the non-GAAP
financial measure is consistent with its past practice, as well as industry
practice in general, and will enable investors and analysts to compare current
non-GAAP measures with non-GAAP measures presented in prior periods. The
non-GAAP financial measures used by the Company should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with GAAP.
Limitation on Incorporation by Reference
In accordance with general instructions B.2 and B.6 of Form 8-K, the
information in this report, including exhibits, is furnished pursuant to Item
12 and shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liability of that
section and not deemed incorporated by reference in any filing under the
Securities Act of 1933.
EXHIBIT INDEX
Exhibit Number Description
99.1 Press Release dated July 29, 2003, PNM Resources, Inc. and
Subsidiaries Consolidated Statements of Earnings for the three
and six months ended June 30, 2003 and 2002 and other select
financial information.
2
EXHIBIT 99.1
PNM Resources Second Quarter Earnings Up 60 Percent
Highlights:
o Second Quarter 2003 net earnings of $0.44 per diluted share,
compared to $0.28 per diluted share in the second quarter of
2002.
o Total operating revenues rose $90.0 million, or 36 percent, to
$340.2 million in the latest quarter, compared to $250.2
million in the second quarter of 2002.
o Gross operating margin improved $23.1 million, to $164.9
million for second quarter 2003, compared to $141.8 million in
the second quarter 2002.
o Gross margin on wholesale power sales increased $22.3 million
or 215.5 percent, to $32.7 million in the latest quarter.
o Gross margin on PNM utility operations rose $775,000 or 0.6
percent over the comparable period last year, to $132.2
million in the latest quarter.
ALBUQUERQUE, N.M., July 29, 2003 - PNM Resources (NYSE: PNM) today reported
consolidated net earnings available for common stock of $17.6 million, or $0.44
per share (diluted), for the three months ended June 30, 2003. In the comparable
period in 2002, the company reported consolidated net earnings available for
common stock of $11.0 million, or $0.28 per diluted share. There were no
one-time items reported in the latest quarter of 2003 or in the comparable three
months of 2002.
GAAP net earnings of $1.22 per diluted common share in the first quarter 2003
included a one-time gain of $0.95 per share and a one-time charge of $0.26 a
share, increasing first quarter earnings by a net of $0.69 per share. Ongoing
earnings for the six months ended June 30, 2003, were $0.97 per diluted share,
compared to $0.90 per share for the first half of 2002.
PNM Resources, Inc.
Reconciliation of GAAP Reported to Ongoing Earnings Per Share
June 30, 2003
Three Months Six Months Twelve Months
Q2 2003 Q2 2002 6/30/03 6/30/02 6/30/03 6/30/02
------------ ------------ ---------- ---------- ----------- ----------
GAAP Reported EPS $0.44 $0.28 $1.66 $0.90 $2.37 $1.84
One-time charges -- -- 0.26 -- 0.46 0.27
Change in Accounting (1) -- -- (0.95) -- (0.95) --
------------ ------------ ---------- ---------- ----------- ----------
Ongoing earnings $0.44 $0.28 $0.97 $0.90 $1.88 $2.11
Average diluted shares (000s) 39,755 39,586 39,569 39,612 39,464 39,613
Note 1. To conform to FASB Statement 143, `Accounting for Asset Retirement
Obligations.'
3
EXHIBIT 99.1 (Continued)
"New long-term wholesale contracts, the continuing recovery of the wholesale
power market following last year's lows, and growing demand in PNM's New Mexico
service territory all contributed to our improved second quarter results," said
PNM Resources Chairman, President and Chief Executive Officer Jeff Sterba.
PERFORMANCE SUMMARY
Consolidated gross margin (operating revenues less cost of energy) for the
quarter increased $23.1 million, or 16.3 percent, over the comparable period
last year.
Retail electric gross margin (operating revenues less cost of energy) decreased
by $466,000, to $92.7 million compared to $93.2 million in the same quarter last
year. The decrease in revenues was the result of the transfer of a major
customer from retail to wholesale status, partially offset by continued growth
in residential and commercial sales. The company estimates underlying retail
electric growth in the PNM service territory (normalized for weather) at about
2.0 percent for the quarter on an annual basis.
Gas gross margin (operating revenues less cost of gas) increased $2.2 million,
or 8.8 percent, in the most recent quarter compared to the second quarter 2002.
The increase in gas gross margin was primarily due to cooler weather in April
2003 compared to the same month last year.
Gross margin on wholesale electric sales improved by $22.3 million, from $10.4
million in the second quarter 2002 to $32.7 million in the second quarter of
2003. The improvement in margin was primarily due to the expansion of existing
long-term wholesale contracts and the addition of new long-term contracts.
ONE-TIME AND NON-RECURRING GAINS AND CHARGES
There were no one-time gains or charges recorded in the second quarter 2003. PNM
first quarter 2003 income included a non-cash gain (after tax) of $37.4 million
or $0.95 per share, stemming from the initial adoption of Financial Accounting
Standards Board (FASB) Statement No. 143, Accounting for Asset Retirement
Obligations. In the same quarter, the company also recorded a one-time charge
against earnings (after tax) of $10.1 million, or $0.26 per share, to reflect
the write-off of regulatory assets.
OTHER RECENT SIGNIFICANT DEVELOPMENTS AFFECTING PNM RESOURCES:
o In June, PNM agreed to a negotiated settlement of the
company's pending gas rate case. If approved by regulators,
the agreement will increase PNM revenues by $22.0 million,
with an assumed 10.25 percent return on equity in the PNM gas
utility.
o In May, PNM completed the sale of $182 million in tax-exempt
bonds. The new bonds pay an initial annual interest rate of
2.75 percent, adjustable next year.
Details of these announcements and other PNM Resources news are available at the
company's website, pnm.com.
4
EXHIBIT 99.1 (Continued)
EARNINGS GUIDANCE UNCHANGED FOR 2003
Based on results for the first six months and its financial and operating
forecasts for the remainder of the year, PNM reaffirmed existing earnings
guidance for 2003. The company expects 2003 ongoing earnings (not including
one-time gains and charges) will be in the range of between $1.80 and $2.05 per
diluted share.
EARNINGS TELECONFERENCE SCHEDULED
PNM Resources has scheduled a teleconference for 9:00 a.m. Eastern Time on
Wednesday, July 30, to discuss Second Quarter 2003 earnings and other issues of
interest to shareholders and investors. The public is invited to listen to the
teleconference by calling 1- 973-694-6836 after 8:45 a.m. ET. A webcast of the
presentation can be accessed through a link on the company's website at pnm.com.
A Power Point presentation of charts that will accompany the teleconference is
also available at the Web site.
PNM Resources is an energy holding company based in Albuquerque, New Mexico.
PNM, the principal subsidiary of PNM Resources, serves about 450,000 natural gas
customers and 390,000 electric 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. For more information about our
company, see our web site at www.pnm.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements made in this news release and documents we file with the SEC that
relate to future events or our expectations, projections, estimates, intentions,
goals, targets and strategies are made pursuant to the Private Securities
Litigation Reform Act of 1995. You are cautioned that all forward-looking
statements are based upon current expectations and estimates and we assume no
obligation to update this information. Because actual results may differ
materially from those expressed or implied by the forward-looking statements,
PNM Resources cautions you not to place undue reliance on these statements. Many
factors could cause actual results to differ, and will affect our future
financial condition, cash flow and operating results. These factors include
interest rates, weather, fuel costs, changes in supply and demand in the market
for electric power, wholesale power prices, market liquidity, the competitive
environment in the electric and natural gas industries, the performance of
generating units and transmission system, state and federal regulatory and
legislative decisions and actions, the outcome of legal proceedings and the
performance of state, regional and national economies. For a detailed discussion
of the important factors that affect PNM Resources and that could cause actual
results to differ from those expressed or implied by our forward-looking
statements, please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our current and future Annual Reports on
Form 10-K and Quarterly Reports on Form 10-Q and our current and future Current
Reports on Form 8-K, filed with the SEC.
5
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
(In thousands, except per share amounts)
Operating Revenues:
Electric................................... $266,150 $206,136 $507,528 $397,920
Gas........................................ 74,009 43,968 220,262 153,169
Unregulated businesses..................... 52 85 112 917
-------------- -------------- -------------- --------------
Total operating revenues................. 340,211 250,189 727,902 552,006
-------------- -------------- -------------- --------------
Operating Expenses:
Cost of energy sold........................ 175,335 108,382 401,269 251,987
Administrative and general................. 42,600 36,319 74,642 67,707
Energy production costs.................... 34,515 34,202 69,609 69,173
Depreciation and amortization.............. 28,850 25,217 57,224 49,996
Transmission and distribution costs........ 15,194 15,451 31,353 31,988
Taxes, other than income taxes............. 6,720 9,028 14,506 17,512
Income taxes............................... 7,083 2,141 15,959 11,507
-------------- -------------- -------------- --------------
Total operating expenses................. 310,297 230,740 664,562 499,870
-------------- -------------- -------------- --------------
Operating income......................... 29,914 19,449 63,340 52,136
-------------- -------------- -------------- --------------
Other Income and Deductions:
Other income............................... 12,745 11,724 23,951 25,451
Other deductions........................... (4,020) (1,895) (21,932) (3,392)
Income tax (expense) benefit............... (3,132) (3,432) (725) (8,274)
-------------- -------------- -------------- --------------
Net other income and deductions.......... 5,593 6,397 1,294 13,785
-------------- -------------- -------------- --------------
Income before interest charges........... 35,507 25,846 64,634 65,921
Interest Charges............................. 17,764 14,689 35,997 29,815
-------------- -------------- -------------- --------------
Net Earnings from Operations................. 17,743 11,157 28,637 36,106
-------------- -------------- -------------- --------------
Cumulative Effect of a Change in Accounting
Principle, Net of Tax..................... - - 37,422 -
-------------- -------------- -------------- --------------
Net Earnings................................. 17,743 11,157 66,059 36,106
Preferred Stock Dividend Requirements........ 147 147 293 293
-------------- -------------- -------------- --------------
Net Earnings Applicable to Common Stock...... $ 17,596 $ 11,010 $ 65,766 $ 35,813
============== ============== ============== ==============
Net Earnings per Common Share:
Basic...................................... $ 0.45 $ 0.28 $ 1.68 $ 0.92
============== ============== ============== ==============
Diluted.................................... $ 0.44 $ 0.28 $ 1.66 $ 0.90
============== ============== ============== ==============
Dividends Paid per Share of Common Stock..... $ 0.23 $ 0.22 $ 0.45 $ 0.42
============== ============== ============== ==============
6
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following tables show electric revenues by customer class and average
customers:
Electric Retail Revenues
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
Residential................ $46,871 $45,696 $1,175
Commercial................. 62,984 62,577 407
Industrial................. 16,351 20,792 (4,441)
Other...................... 4,885 5,347 (462)
------------- ------------- --------------
$131,091 $134,412 $ (3,321)
============= ============= ==============
Average customers.......... 394,679 383,589 11,090
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
Residential................ $97,834 $96,418 $1,416
Commercial................. 118,090 117,582 508
Industrial................. 35,102 40,420 (5,318)
Other...................... 9,109 9,336 (227)
------------- ------------- --------------
$260,135 $263,756 $ (3,621)
============= ============= ==============
Average customers.......... 393,635 382,625 11,010
============= ============= ==============
7
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following tables show electric sales by customer class:
Electric Sales
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(Megawatt hours)
Residential............... 547,145 534,417 12,728
Commercial................ 830,153 823,218 6,935
Industrial................ 325,243 405,571 (80,328)
Other..................... 56,783 62,491 (5,708)
------------- ------------- --------------
1,759,324 1,825,697 (66,373)
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(Megawatt hours)
Residential............... 1,139,280 1,123,413 15,867
Commercial................ 1,551,015 1,534,477 16,538
Industrial................ 696,878 797,917 (101,039)
Other..................... 99,669 109,365 (9,696)
------------- ------------- --------------
3,486,842 3,565,172 (78,330)
============= ============= ==============
8
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following tables show gas revenues by customer and average customers:
Gas Revenues
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
Residential............... $44,699 $25,612 $19,087
Commercial................ 15,142 8,191 6,951
Industrial................ 434 415 19
Transportation*........... 6,010 5,134 876
Other..................... 7,724 4,616 3,108
------------- ------------- --------------
$74,009 $43,968 $30,041
============= ============= ==============
Average customers......... 451,079 443,514 7,565
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
Residential............... $142,673 $97,724 $44,949
Commercial................ 45,563 30,590 14,973
Industrial................ 1,465 1,064 401
Transportation*........... 9,755 8,745 1,010
Other..................... 20,806 15,046 5,760
------------- ------------- --------------
$220,262 $153,169 $67,093
============= ============= ==============
Average customers......... 451,688 443,720 7,968
============= ============= ==============
*Customer-owned gas.
9
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following tables show gas throughput by customer class:
Gas Throughput
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(Thousands of decatherms)
Residential............... 3,651 2,984 667
Commercial................ 1,641 1,594 47
Industrial................ 70 124 (54)
Transportation*........... 16,455 14,076 2,379
Other..................... 1,026 1,114 (88)
------------- ------------- --------------
22,843 19,892 2,951
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(Thousands of decatherms)
Residential............... 15,857 16,500 (643)
Commercial................ 5,975 6,564 (589)
Industrial................ 256 296 (40)
Transportation*........... 25,090 21,473 3,617
Other..................... 2,969 3,104 (135)
------------- ------------- --------------
50,147 47,937 2,210
============= ============= ==============
*Customer-owned gas.
Electric Transmission Revenues
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
External customers........ $ 2,317 $ 5,912 $(3,595)
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
External customers........ $ 6,874 $ 11,810 $(4,936)
============= ============= ==============
10
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following tables show revenues by customer class:
Wholesale Revenues
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
Long-term contracts....... $33,607 $16,045 $17,562
Forward sales*............ 44,010 20,407 23,603
Short-term sales.......... 55,125 48,304 6,821
------------- ------------- --------------
$132,742 $84,756 $47,986
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(In thousands)
Long-term contracts....... $59,786 $33,060 $26,726
Forward sales*............ 66,948 38,150 28,798
Short-term sales.......... 113,785 86,576 27,209
------------- ------------- --------------
$240,519 $157,786 $82,733
============= ============= ==============
*Includes mark-to-market gains/(losses).
Note: For comparative purposes, wholesale revenues for the three months
and six months ended June 30, 2002 have not been reclassified to a net
margin basis in accordance with GAAP. The impact would be to reduce 2002
forward sales revenue by $18.9 million and $35.4 million, respectively.
11
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following tables show sales by customer class:
Wholesale Sales
Three Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(Megawatt hours)
Long-term contracts....... 560,672 227,000 333,672
Forward sales............. 955,180 396,884 558,296
Short-term sales.......... 1,352,006 1,771,569 (419,563)
------------- ------------- --------------
2,867,858 2,395,453 472,405
============= ============= ==============
Six Months Ended
June 30,
2003 2002 Variance
------------- ------------- --------------
(Megawatt hours)
Long-term contracts....... 1,062,117 508,153 553,964
Forward sales............. 1,517,380 652,980 864,400
Short-term sales.......... 2,808,744 3,609,715 (800,971)
------------- ------------- --------------
5,388,241 4,770,848 617,393
============= ============= ==============
12
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: July 30, 2003 /s/ Robin A. Lumney
---------------------------------------------
Robin A. Lumney
Vice President, Controller
and Chief Accounting Officer
(Officer duly authorized to sign this report)
13