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) February 11, 2004
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(February 10, 2004)
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Commission Name of Registrants, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
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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
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(Former name, former address and former fiscal year,
if changed since last report)
Item 12. Results of Operations and Financial Condition
On February 10, 2004, PNM Resources, Inc. (the "Company") issued a press
release announcing its unaudited results of operations for the three and twelve
months ended December 31, 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 instruction 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 February 10, 2004 and PNM Resources, Inc.
and Subsidiaries Consolidated Statements of Earnings for the
three and twelve months ended December 31, 2003 and 2002.
2
EXHIBIT 99.1
Added Power Contracts, Strong Retail Electric Growth Boost PNM Earnings
Full Year Highlights:
o 2003 GAAP (generally accepted accounting principles) net earnings
of $95.2 million, or $2.37 per diluted share, up from $63.7
million, or $1.61 per diluted share in 2002
o Ongoing earnings (not including one-time gains or charges) of
$1.95 per share for 2003, up 7.7 percent over previous year
o Total operating revenues up 23.2 percent, to $1.5 billion
o Long-term power contracts tripled in 2003, helping boost
wholesale electric revenues to $534.5 million for the year
o Retail electric growth 3.0 percent (weather adjusted)
Fourth Quarter Highlights:
o GAAP reported earnings of $0.32 per diluted share for the final
three months of 2003, compared to GAAP earnings of $0.26 per
diluted share in the fourth quarter of 2002
o Ongoing earnings (not including one-time gains or charges) of
$0.34 per share in the latest quarter, up 6.3 percent over same
period in 2002
o Largely due to mild weather, gas utility earnings were reduced by
$0.04 per share
ALBUQUERQUE, N.M., February 10, 2004 - PNM Resources (NYSE: PNM) today reported
ongoing earnings for 2003, before including one-time gains and charges, of $78.1
million, or $1.95 per diluted share, up 7.7 percent over 2002 ongoing earnings
of $1.81 per share.
GAAP reported net earnings for 2003 included a one-time gain of $0.93 per share
and net charges of $0.51 per share, increasing earnings for the year by a net of
$0.42 per share. In 2002, one-time gains and charges reduced earnings by a net
of $0.20 per share.
"The addition of new long-term power contracts for more than 330 megawatts,
coupled with 3 percent growth in the PNM home service territory and our ongoing
cost control efforts, were primarily responsible for 2003 earnings growth," said
PNM Resources Chairman, President and Chief Executive Officer Jeff Sterba. "The
gains we made in our wholesale power business and our core utility more than
offset an electric rate reduction that took effect in September and a reduction
in gas utility revenues due to warmer weather in 2003."
3
EXHIBIT 99.1 (Continued)
PNM Resources, Inc.
Reconciliation of GAAP Reported to Ongoing Earnings Per Share
Quarter and Year ended December 31, 2003
Three Months Twelve Months
4Q 2003 4Q 2002 2003 2002
----------- ----------- ----------- ----------
GAAP Reported EPS $ 0.32 $ 0.26 $ 2.37 $ 1.61
One-time charges 0.02 0.10 0.51 0.24
One-time gains -- (0.04) (0.93) (0.04)
----------- ----------- ----------- ----------
Ongoing earnings $ 0.34 $ 0.32 $ 1.95 $ 1.81
Average diluted shares (000s) 40,733 39,380 40,137 39,443
Fourth Quarter Performance Summary
Ongoing earnings for the final three months of 2003 grew 6.3 percent, to $0.34
per diluted share, compared to ongoing earnings of $0.32 per diluted share in
the last quarter of 2002.
Compared to the final three months of the previous year, fourth quarter 2003
earnings improved due to long-term wholesale electric growth, customer growth in
the company's retail electric and gas utility, reduced fuel costs and ongoing
cost control efforts.
Fourth quarter earnings were reduced compared to the same period in 2002 by
warmer weather, higher purchased power costs due to reduced plant availability
and an electric rate reduction implemented in September 2003. The delayed
implementation of a planned rate increase for the company's natural gas utility
also reduced results by $0.08 a share below the company's expectations for the
fourth quarter.
Consolidated gross margin (operating revenues less cost of energy) decreased
$6.5 million, or about 4.0 percent, to $155.6 million in the most recent
quarter. Retail electric gross margin decreased $10.5 million, or 10.8 percent,
to $86.4 million, compared to $96.9 million in the fourth quarter 2002.
Wholesale electric margin for the fourth quarter 2003 increased $8.6 million, or
64.0 percent, to $22.0 million, compared to $13.4 million in the same three
months in 2002. (Kirtland Air Force Base became a wholesale power customer in
March 2003, but is shown as a retail customer in the year-over-year comparison.)
As the result of warmer weather during the final months of 2003 compared to the
previous year, gas gross margin was reduced by $3.0 million in the fourth
quarter 2003.
2003 FULL YEAR PERFORMANCE SUMMARY
Significant factors that affected PNM Resources earnings during 2003 included
the addition of new long-term contracts and stabilized wholesale power markets,
strong growth in the company's electric and gas utility, lower fuel costs,
productivity improvements, warmer than normal temperatures that reduced gas
margins, a reduction in retail electric rates and higher power costs due to less
plant availability.
4
EXHIBIT 99.1 (Continued)
Consolidated gross margin (operating revenues less cost of energy) for 2003
increased $34.0 million, or 5.5 percent, to $653.0 million, compared to $618.9
million in the previous year.
Retail electric margin increased about $2.5 million. (Kirtland Air Force Base
became a wholesale power customer in March 2003, but is shown as a retail
customer in the year-over-year comparison.) In addition, the rate reduction that
took effect in September was offset by lower cost of electricity production and
growth. Wholesale electric gross margin was $38.5 million higher in 2003 than in
the previous year. During 2003, PNM added a total of 330 megawatts in new
long-term power contracts, which significantly boosted revenues and margin for
the year.
Weather Impact and Underlying Growth
The year 2003 was one of the warmest in recent New Mexico history. The warmer
temperatures increased retail electric sales during the summer months but
reduced demand for natural gas during the colder months. As the result of warmer
weather and the delay in implementation of new gas rates PNM made zero return on
its gas utility for the year. Adjusting for the impact of weather on electric
sales, the company estimates underlying growth in its New Mexico service
territory was 3.0 percent in 2003.
ONE-TIME AND NON-RECURRING GAINS AND CHARGES
For the full year 2003, PNM Resources recorded a one-time gain of $61.9 million,
or $0.93 per share, reflecting the cumulative effect of a change in accounting
principle. One time charges in 2003 included a charge of $16.6 million, or $0.25
per share, incurred in the refinancing of long-term debt; a charge of $16.7
million, or $0.24 a share, due to the write-off of regulatory assets; and a
charge of $1.3 million, or $0.02 per share, reflecting the cumulative effect of
changing the pension valuation measurement date.
The net of one-time gains and charges in 2003 was a gain of $27.3 million, or
$0.42 per diluted share. In 2002, PNM Resources reported a net charge of $12.8
million, or $0.20 per share, in one-time gains and charges.
OTHER RECENT SIGNIFICANT DEVELOPMENTS AFFECTING PNM RESOURCES:
o On January 13, 2004, New Mexico regulators approved a $22 million
revenue increase for the PNM gas utility. Increased rates for
commercial customers took effect immediately, with the
residential portion of the increase to begin in April.
o On December 22, 2003, PNM entered into an agreement to provide an
Arizona municipal utility with up to 35 megawatts of power. The
10-year contract is expected to produce about $12 million in
revenues for the company in 2004.
o On December 18, the PNM Resources Board of Directors declared the
regular quarterly dividend on common stock of $0.23 per share.
The indicated annual rate of $0.92 per share is unchanged from
the previous quarter.
o In the fourth quarter of 2003, the coal mine operations at San
Juan Generating Station reached commercial operation status for
the first time. In addition the mine completed on schedule its
first long-wall mine changeover to a new coal seam.
5
EXHIBIT 99.1 (Continued)
EARNINGS GUIDANCE FOR 2004
Based on its financial and operating forecasts for 2004, PNM Resources today
reaffirmed existing earnings guidance for the year. The company expects 2004
ongoing earnings will be between $1.90 and $2.15 per diluted share.
"In 2004, we will continue our efforts to expand our wholesale business by
building on existing relationships and forming new long-term relationships,"
Sterba said. "We expect our expanding wholesale business, together with the
impact of higher gas rates, lower fuel costs from the new San Juan underground
mine, and continued productivity improvements, will help us meet our 2004
earnings goals."
EARNINGS TELECONFERENCE SCHEDULED
Additional financial and operating data for the Fourth Quarter and full year
2003 is available on the PNM website at
http://www.pnm.com/invest/news/2004/0210_earnings.htm. The company has scheduled
a teleconference for 9:00 a.m. Eastern Time February 11, 2004, to discuss 2003
earnings and other issues of interest to shareholders and investors. The public
is invited to listen to the teleconference by calling 1-800-838-4403 after 8:45
a.m. ET. A webcast of the teleconference and accompanying slide presentation can
be accessed through http://www.pnm.com/invest/news/2004/0210_earnings.htm
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
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Statements made in this filing and documents the Company files with the SEC that
relate to future events or the Company 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, the Company cautions you not to place undue reliance on these
statements. Many factors could cause actual results to differ, and will affect
the Company's 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 the Company 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 the Company's current and
future Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and the
Company's current and future Current Reports on Form 8-K, filed with the SEC.
6
EXHIBIT 99.1 (Continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------ -------------------------
2003 2002 2003 2002
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(In thousands, except per share amounts)
Operating Revenues:
Electric...................................... $ 252,410 $ 203,867 $ 1,097,136 $ 839,884
Gas........................................... 90,067 87,993 358,267 277,406
Unregulated businesses........................ 174 152 311 1,404
----------- ----------- ------------- -----------
Total operating revenues.................... 342,651 292,012 1,455,714 1,118,694
----------- ----------- ------------- -----------
Operating Expenses:
Cost of energy sold........................... 187,046 129,864 802,731 499,751
Administrative and general.................... 45,465 39,737 158,706 146,231
Energy production costs....................... 36,758 45,117 140,584 149,528
Depreciation and amortization................. 29,165 26,633 115,649 102,409
Transmission and distribution costs........... 13,567 15,933 60,070 63,870
Taxes, other than income taxes................ 9,365 9,655 31,310 34,244
Income taxes.................................. 1,914 4,570 28,072 20,887
----------- ----------- ------------- -----------
Total operating expenses.................... 323,280 271,509 1,337,122 1,016,920
----------- ----------- ------------- -----------
Operating income............................ 19,371 20,503 118,592 101,774
----------- ----------- ------------- -----------
Other Income and Deductions:
Other income.................................. 13,299 9,108 52,705 48,360
Other deductions.............................. (5,460) (2,072) (46,153) (12,306)
Income tax (expense) benefit.................. (285) (1,329) 183 (12,144)
----------- ----------- ------------- -----------
Net other income and deductions............. 7,554 5,707 6,735 23,910
----------- ----------- ------------- -----------
Income before interest charges.............. 26,925 26,210 125,327 125,684
----------- ----------- ------------- -----------
Interest Charges:
Interest on long-term debt.................... 11,490 14,824 59,429 56,409
Other interest charges........................ 1,649 1,017 6,760 5,003
----------- ----------- ------------- -----------
Net interest charges....................... 13,139 15,841 66,189 61,412
----------- ----------- ------------- -----------
Preferred Stock Dividend Requirements of
Subsidiary.................................... 146 146 586 586
----------- ----------- ------------- -----------
Net Earnings Before Cumulative Effect of a
Change in Accounting Principles............... 13,640 10,223 58,552 63,686
Cumulative Effect of a Change in Accounting
Principles Net of Tax of $(525) and $23,999... (801) - 36,621 -
----------- ----------- ------------- -----------
Net Earnings.................................... $ 12,839 $ 10,223 $ 95,173 $ 63,686
=========== =========== ============= ===========
Net Earnings per Common Share:
Basic......................................... $ 0.32 $ 0.26 $ 2.39 $ 1.63
=========== =========== ============= ===========
Diluted....................................... $ 0.32 $ 0.26 $ 2.37 $ 1.61
=========== =========== ============= ===========
Dividends Paid per Share of Common Stock........ $ 0.23 $ 0.22 $ 0.91 $ 0.86
=========== =========== ============= ===========
The accompanying notes are an integral part of these
financial statements.
7
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PNM RESOURCES, INC. AND
PUBLIC SERVICE COMPANY OF NEW MEXICO
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(Registrants)
Date: February 11, 2004 /s/ Tom G. Sategna
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Tom G. Sategna
Vice President and Corporate Controller
(Officer duly authorized to sign this report)
8