UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from ________ to _______
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
PNM RESOURCES, INC.
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
(Full title of the plan)
PNM Resources, Inc.
(Name of issuer)
Alvarado Square
Albuquerque, New Mexico 87158
(Address of issuer's principal executive office)
CONTENTS
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................ 3
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits
as of December 31, 2002 and 2001................................ 5
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2002............................ 6
Notes to Financial Statements........................................ 7
Supplemental Schedule:
Schedule I: Line 4(i) - Schedule of Assets
(Held at End of Year) - December 31, 2002....................... 12
Signature............................................................ 14
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
PNM Resources, Inc.
Master Employee Savings Plan and Trust:
We have audited the accompanying statement of net assets available for benefits
of the PNM Resources, Inc. Master Employee Savings Plan and Trust (the "Plan")
as of December 31, 2002, and the related statement of changes in net assets
available for benefits for the year then ended. These financial statements and
the schedule referred to below are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audit. The financial statements of the PNM Resources, Inc.
Master Employee Savings Plan and Trust as of December 31, 2001, and for the year
then ended, were audited by other auditors who have ceased operations. Those
auditors expressed an unqualified opinion on those financial statements in their
report dated April 26, 2002.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2002, and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets (held at end of
year) for investment purposes is presented for purposes of additional analysis
and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements, taken as a whole.
/s/GRANT THORNTON LLP
Albuquerque, New Mexico
May 30, 2003
3
This is a copy of a report previously issued by Arthur Andersen LLP. The report
has not been reissued by Arthur Andersen LLP nor has Arthur Andersen LLP
provided a consent letter for the inclusion of its report in this Annual
Report on Form 11-K.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Public Service Company of New Mexico
Master Employee Savings Plan and Trust:
We have audited the accompanying statements of net assets available for benefits
of the PUBLIC SERVICE COMPANY OF NEW MEXICO MASTER EMPLOYEE SAVINGS PLAN AND
TRUST (the "Plan") as of December 31, 2001 and 2000, and the related statement
of changes in net assets available for benefits for the year ended December 31,
2001. These financial statements and the schedule referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedule of assets (held at end of
year) for investment purposes is presented for purposes of additional analysis
and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements, taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Albuquerque, New Mexico
April 26, 2002
4
PNM Resources, Inc.
Master Employee Savings Plan and Trust
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31,
2002 2001
------------------ -----------------
Investments, at fair value:
Shares of registered investment companies $ 148,334,425 $ 161,700,054
PIMCO StocksPLUS Fund- Admin Class 2,248,670 1,390,386
Public Service Company of New Mexico Common Stock Fund 5,101,593 6,049,127
Participant loans 5,477,202 5,782,441
------------------ -----------------
Total investments 161,161,890 174,922,008
------------------ -----------------
Receivables:
Employer contributions 623,386 485,020
Employee contributions 314,901 335,180
------------------ -----------------
Total receivables 938,287 820,200
------------------ -----------------
Net assets available for benefits $ 162,100,177 $ 175,742,208
================== =================
The accompanying notes are an integral part of
these financial statements.
5
PNM Resources, Inc.
Master Employee Savings Plan and Trust
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2002
Additions to net assets:
Investment income-
Interest and dividend income $ 3,694,092
Contributions-
Participants' contributions 12,068,391
Employer's contributions 9,404,142
-------------
Total contributions 21,472,533
Other additions 64
-------------
Total additions 25,166,689
-------------
Deductions from net assets:
Net depreciation in fair value of investments 28,597,292
Benefits paid to participants 10,156,941
Administrative expenses 54,487
-------------
Total deductions 38,808,720
-------------
Net decrease in net assets available for benefits
Net assets available for benefits, beginning of year 175,742,208
-------------
Net assets available for benefits, end of year $ 162,100,177
=============
The accompanying notes are an integral part of
these financial statements.
6
PNM Resources, Inc.
Master Employee Savings Plan and Trust
Notes to Financial Statements
December 31, 2002 and 2001
NOTE 1 - Plan Description
The following description of the PNM Resources, Inc. (the "Company") Master
Employee Savings Plan and Trust (the "Plan") is provided for general
information purposes only. More complete information regarding the Plan's
provisions may be found in the Plan document.
General
-------
The Plan is a defined contribution plan covering all employees of the
Company who meet the eligibility requirements as defined by the Plan. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
The Plan was amended and restated on May 28, 2001 to allow participants to
direct their respective contributions into Company stock. Previous
amendments effective January 1, 1998, provided for the following: immediate
participation in the Plan by all employees upon employment; employees must
complete one year of employment in order to receive a Company contribution;
Company matching contributions of 75% of participant's contributions up to
6% of their eligible compensation (maximum contribution of 4.5%); an
additional Company contribution of 3% of participant's eligible
compensation, regardless of other Company matching contributions; immediate
vesting in employee and employer contributions; addition of loan and
hardship withdrawal features; portable benefits; expanded fund investment
options; the sharing of Plan funding by the Company and employee and
investment risk and/or benefit are with the employee.
The retirement benefit provided by this Plan is dependent upon the
contributions made by the employee, including any Company match, and the
rate of return on the investments (risk and benefit). Should an employee
not participate in the matching contributions, a retirement benefit will be
provided by the 3% non-matching contribution made by the Company. Should an
employee take full advantage of the matching portions by contributing the
6%, a retirement benefit of 13.5% can be accrued each year along with any
investment gain or loss.
Contributions and Vesting
-------------------------
Eligible employees can contribute an amount up to 100%, but not less than
1%, of compensation as defined by the Plan, limited by requirements of the
Internal Revenue Code ("IRC") and the nature of the participant
contribution. Participants are fully vested in their contributions and
earnings thereon. There were no forfeitures during the Plan year.
Benefits
--------
Upon termination of service for any reason, a participant may elect to
receive an amount equal to the value of the participant's vested interest
in his or her account. The form of payment is a lump-sum distribution or a
combination of a lump-sum payment and a direct rollover contribution to
another qualified plan.
7
PNM Resources, Inc.
Master Employee Savings Plan and Trust
Notes to Financial Statements
December 31, 2002 and 2001
NOTE 1 - Plan Description (continued)
Participant Accounts
--------------------
Individual accounts are maintained for each of the Plan's participants to
reflect the participant's share of the Plan's income and expenses and the
participant's contribution. Allocations are based on participant account
balances, as defined in the Plan document.
Investment Options
------------------
During the plan year ending December 31, 2002, participants were able to
allocate their contributions among various investment options.
Participant Loans
-----------------
Participants may borrow from their fund accounts a minimum of $1,000 up to
a maximum aggregate equal to the lesser of $50,000 or 50% of their account
balance. Loan terms range from 1-5 years. Loans for the purchase of a
primary residence may be repaid over a longer period of time, as determined
by a committee established to administer the Plan (the "Committee"). All
loans shall be repaid with a substantially level amortization of both
principal and interest on a schedule prescribed by the Committee with
payments made at least quarterly. The loans are secured by 50% of the
balance in the participant's account and bear interest at a rate
commensurate with the interest rates charged by persons in the business of
lending money for loans which would be made under similar circumstances, as
determined by the Committee. Interest rates on outstanding loans at
December 31, 2002 range from 5.62% to 10.00%.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
---------------------
The accompanying financial statements have been prepared using the accrual
basis of accounting.
Income Recognition
------------------
Interest income is recorded as earned on the accrual basis. Dividend income
is recorded on the ex-dividend date.
Investment Valuation
--------------------
Investments of the Plan are stated at fair value. Securities traded in
public markets are valued at their quoted market prices. Participant loans
are valued at cost, which approximates fair value. Purchases and sales of
securities are reflected on a trade-date basis.
8
PNM Resources, Inc.
Master Employee Savings Plan and Trust
Notes to Financial Statements
December 31, 2002 and 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Risks and Uncertainties
-----------------------
Investments are exposed to various risks such as interest rate, market and
credit. Due to the level of risk associated with certain investments and
the level of uncertainty related to changes in the value of investments, it
is at least reasonably possible that changes in risks in the near term
could materially affect the amounts reported in the statements of net
assets available for benefits and the statement of changes in net assets
available for benefits.
The Vanguard International Growth Fund invests in the securities of foreign
companies, which involve special risks and considerations not typically
associated with investing in U.S. companies. These risks included
devaluation of currencies, less reliable information about issuers,
different securities transaction clearance and settlement practices and
possible adverse political and economic developments. Moreover, securities
of many foreign companies and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies.
Administrative Expenses
-----------------------
The Company pays substantially all administrative expenses of the Plan,
except for the administrative costs of mutual funds and loan processing
fees. Participant fees and administrative fees amounted to $54,487 during
plan year 2002.
Payment of Benefits
-------------------
Benefits are recorded when paid.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those
estimates.
9
PNM Resources, Inc.
Master Employee Savings Plan and Trust
Notes to Financial Statements
December 31, 2002 and 2001
NOTE 3 - Investments
The fair market value of individual investments as of December 31, 2002 and
2001, that represent five percent or more of the Plan's net assets at the
respective year-end dates are as follows:
2002
-----------
Vanguard Treasury Money Market Fund $ 23,112,933
Vanguard Wellington Fund 21,374,921
Vanguard PRIMECAP Fund 18,217,933
Vanguard Windsor Fund 17,666,982
Vanguard 500 Index Fund 15,196,429
Vanguard Long-Term Treasury Fund Investor Shares 9,219,397
Vanguard U.S. Growth Fund 8,141,036
2001
-----------
Vanguard Treasury Money Market Fund $ 22,740,052
Vanguard Wellington Fund 21,452,522
Vanguard PRIMECAP Fund 23,138,940
Vanguard Windsor Fund 25,390,532
Vanguard 500 Index Fund 18,765,279
Vanguard U.S. Growth Fund 12,384,234
During 2002 and 2001, the Plan's investments in assets other than temporary
investments and participant loans (depreciated) and appreciated in fair
value as follows:
2002 2001
------------- --------------
Registered investment companies $ (27,412,580) $ (14,421,572)
Company stock fund (865,688) 86,207
Master trust (319,024) (201,047)
-------------- -------------
$ (28,597,292) $ (14,536,412)
============= ==============
The net depreciation in fair value of investments includes realized gains
(losses) and unrealized appreciation (depreciation).
NOTE 4 - Tax Status
The Plan has received a determination letter from the Internal Revenue
Service dated October 27, 1997, stating that the Plan is qualified, in
form, under Section 401(a) of the Internal Revenue Code (the "Code") and,
therefore, the related trust is exempt from taxation. Subsequent amendments
have been structured to, and are intended to, maintain the Plan's tax
10
PNM Resources, Inc.
Master Employee Savings Plan and Trust
Notes to Financial Statements
December 31, 2002 and 2001
NOTE 4 - TAX STATUS (continued)
qualified status. A determination letter for the amendments has been
requested but not yet received. Once qualified, the Plan is required to
operate in conformity with the Code to maintain its qualification. The Plan
Administrator will take any necessary steps to maintain the Plan's tax
qualified status in compliance with the applicable requirements of the Code
and, therefore, believes that the Plan will remain qualified and the
related trust will remain tax exempt.
NOTE 5 - Party-In-Interest Transactions
The Plan presently holds shares of the Company's stock. The Plan was
amended on May 28, 2001 to allow participants to invest their accounts in a
company stock fund. In addition, certain Plan investments are shares of
funds managed by Vanguard Group. Vanguard Fiduciary Trust Company, a
wholly-owned subsidiary of Vanguard Group, is the Trustee as defined by the
Plan, and therefore, these transactions are party-in-interest transactions.
NOTE 6 - Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100%
vested in their account balances remaining after the final allocation of
expenses and fund profits or losses.
NOTE 7 - SUBSEQUENT EVENT
On April 7, 2003, the Plan changed its name to PNM Resources, Inc.
Retirement Savings Plan. Effective January 1, 2004, the Company's
non-elective contribution rate will change from 3% to a graduated rate
based on age as follows:
Under 40 years of age 3%
40-44 years of age 5%
45-49 years of age 6%
50-54 years of age 8%
55 years of age or older 10%
11
PNM Resources, Inc.
Master Employee Savings Plan and Trust
LINE 4(i) -- SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2002
Identity of Party Involved Description of Investment Fair Value
--------------------------------------------------------- ----------------------------- ------------
Vanguard Group:
* Vanguard Treasury Money Market Fund Registered investment company $ 23,112,933
* Vanguard Wellington Fund Registered investment company 21,374,921
* Vanguard PRIMECAP Fund Registered investment company 18,217,933
* Vanguard Windsor Fund Registered investment company 17,666,982
* Vanguard 500 Index Fund Registered investment company 15,196,429
* Vanguard Long-Term Treasury Fund Registered investment company 9,219,397
* Vanguard U.S. Growth Fund Registered investment company 8,141,036
* Vanguard Windsor II Fund Registered investment company 7,184,100
* Vanguard Strategic Equity Fund Registered investment company 4,274,424
* Vanguard Retirement Savings Trust Registered investment company 4,191,110
* Vanguard International Growth Fund Registered investment company 4,049,338
* Vanguard Short-Term Corporate Fund Registered investment company 3,379,726
* Vanguard LifeStrategy Growth Fund Registered investment company 2,677,950
* Vanguard Asset Allocation Fund Registered investment company 2,593,828
* Vanguard LifeStrategy Moderate Growth Fund Registered investment company 2,261,687
* Vanguard Prime Money Market Fund Registered investment company 1,445,467
* Vanguard LifeStrategy Income Fund Registered investment company 937,464
* Vanguard LifeStrategy Conservative Growth Fund Registered investment company 870,868
* Participant Loans Loans 5,477,202
* Public Service Company of New Mexico Common Stock Fund Company stock fund 5,101,593
PIMCO Funds: Total Return Fund; Administrative Registered investment company 2,248,670
PIMCO StocksPLUS Fund- Admin Class Master trust 1,106,095
Baron Growth Fund Registered investment company 432,737
------------
Total investments $161,161,890
============
* Represents a party-in-interest.
The accompanying notes are an integral part
of this schedule.
12
Exhibits filed:
--------------
23.1 Consent of Grant Thornton LLP.
99.1 Explanation regarding Arthur Andersen LLP
13
SIGNATURE
---------
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Committee has duly caused this annual report to be signed by the
undersigned hereunto duly authorized.
PNM RESOURCES, INC.
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
(now known as PNM Resources, Inc.
Retirement Savings Plan)
(Name of Plan)
Date: June 30, 2003 By: /s/Alice Cobb
------------------------------------------
Alice Cobb
Committee Chairperson, PNM Resources, Inc.
Benefits Governance Committee
14