Added Power Contracts, Strong Retail Electric Growth Boost PNM Earnings.Energy Editors/Business Editors ALBUQUERQUE Albuquerque (ăl`bəkûr'kē), city (1990 pop. 384,736), seat of Bernalillo co., W central N.Mex., on the upper Rio Grande; inc. 1890. , N.M.--(BUSINESS WIRE)--Feb. 10, 2004 PNM Resources PNM Resources NYSE: PNM is an energy holding company based in the U.S. state of New Mexico. Headquartered in Albuquerque, PNM Resources supplies electricity to 725,000 homes and businesses in New Mexico and Texas and natural gas to 471,000 customers in New Mexico through its (NYSE NYSE See: New York Stock Exchange : PNM PNM Public Service Company of New Mexico PNM People's National Movement (Trinidad) PNM Perpustakaan Negara Malaysia (National Library, Malaysia) PNM Price Negotiation Memorandum ) Full Year Highlights: -- 2003 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). (generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) net earnings of $95.2 million, or $2.37 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, up from $63.7 million, or $1.61 per diluted share in 2002 -- Ongoing earnings (not including one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. gains or charges) of $1.95 per share for 2003, up 7.7 percent over previous year -- Total operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. up 23.2 percent, to $1.5 billion -- Long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. power contracts tripled in 2003, helping boost wholesale electric revenues to $534.5 million for the year -- Retail electric growth 3.0 percent (weather adjusted) Fourth Quarter Highlights: -- 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 -- 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 -- Largely due to mild weather, gas utility earnings were reduced by $0.04 per share PNM Resources 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 September: see month. and a reduction in gas utility revenues due to warmer weather in 2003."
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 Kirtland Air Force Base is located in the southeast quadrant of Albuquerque, New Mexico, adjacent to the Albuquerque International Sunport. The base is the third largest installation in Air Force Materiel Command, covering 51,558 acres (209 km²) and employing over 23,000 people, 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 sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. 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 A reduced gas is a gas with a low oxidation number (or high reduction), and is usually hydrogen-rich. Strongly reduced gases include methane, ammonia, and hydrogen sulfide. Such gases are strongly associated with the origin of life. margins, a reduction in retail electric rates and higher power Higher power is a term used in a 12-step program, such as Alcoholics Anonymous, to describe "a power greater than yourself." Although many participants equate their higher power with God, a belief in God or in formal religion is not mandatory; the higher power is intended as a costs due to less plant availability. 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 New Mexico, state in the SW United States. At its northwestern corner are the so-called Four Corners, where Colorado, New Mexico, Arizona, and Utah meet at right angles; New Mexico is also bordered by Oklahoma (NE), Texas (E, S), and Mexico (S). 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 Refinancing An extension and/or increase in amount of existing debt. of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. ; a charge of $16.7 million, or $0.24 a share, due to the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. 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: -- On January January: see month. 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. -- On December December: see month. 22, 2003, PNM entered into an agreement to provide an Arizona Arizona (âr'əzō`nə), state in the southwestern United States. It is bordered by Utah (N), New Mexico (E), Mexico (S), and, across the Colorado R., Nevada and California (W). 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. -- 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. -- In the fourth quarter of 2003, the coal mine operations at San Juan Juan (IPA: [xwan]) is a Spanish form of the given name John (q.v.). It was the 55th most popular name in the United States as of 2003. Generating Station reached commercial operation status for the first time. In addition the mine completed on schedule its first long-wall mine changeover (programming) changeover - The time when a new system has been tested successfully and replaces the old system. to a new coal seam Noun 1. coal seam - a seam of coal seam, bed - a stratum of ore or coal thick enough to be mined with profit; "he worked in the coal beds" coalface - the part of a coal seam that is being cut . 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 San Juan, city, Argentina San Juan (săn wän, Span. sän hwän), city (1991 pop. 353,476), capital of San Juan prov., W Argentina. It is a commercial and industrial center in an agricultural region. 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 Web site at http://www.pnm.com/invest/news/2004/0210_earnings.htm. The company has scheduled a teleconference for 9 a.m. Eastern Time February February: see month. 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 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, N.M. 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 United States Noun 1. western United States - the region of the United States lying to the west of the Mississippi River West Santa Fe Trail - a trail that extends from Missouri to New Mexico; an important route for settlers moving west in the 19th century . 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. 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 Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Financial Condition and Results of Operations" in our current and future Annual Reports on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. and our current and future Current Reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , filed with the SEC.
PNM RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- ----------------------
2003 2002 2003 2002
--------- --------- ----------- ----------
(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
========= ========= =========== ==========
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