Investor Relations Preliminary Earnings Release; Xcel Energy Reports Lower Second Quarter Results, Reaffirms Earnings Guidance For Year.Business Editors MINNEAPOLIS--(BUSINESS WIRE)--Aug. 1, 2003 Xcel Energy Inc.'s financial results for the second quarter of 2003 were a loss of $169 million, or 42 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , including preliminary results of subsidiary NRG Energy NRG Energy, Inc. (NRG) is a wholesale power generation company founded in 1989, which has an ownership interest in 47 power generating facilities around the world. The diverse portfolio of facilities, are primarily in the Northeast, South Central and Western regions of the United , Inc., compared with earnings of $86 million, or 23 cents per share, for the same period in 2002. Xcel Energy considers the NRG NRG Energy NRG NRG Energy, Inc. NRG Natural Resources Group NRG New Radiancy Group NRG Network Referral Group NRG Network Resource Grapher NRG Numerics Rapporteur Group NRG Neuroprosthetics Research Group NRG notional requirements generator portion of its second quarter financial results to be preliminary because Xcel Energy has not yet completed its review of the amount of NRG losses that it will record for the quarter (see Note 1). Excluding the impacts of NRG, Xcel Energy's pro-forma results from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in the second quarter of 2003 were earnings of $67 million, or 17 cents per share, compared with earnings of $121 million, or 32 cents per share, for the same period in 2002. (See Note 1 for a reconciliation of the pro-forma results to total earnings on the basis of 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 .) Write-downs and asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges at NRG resulted in the second quarter loss. Also contributing to the earnings decrease from the second quarter of 2002 was lower income from utility operations, caused mainly by higher employee benefit costs, reduced dependence on short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. and weather impacts. "The utility business is very seasonal, and quarterly earnings comparisons can be misleading," said Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a C. Kelly Kel·ly , Ellsworth Born 1923. American abstract painter and sculptor whose works are characterized by flat color areas with sharply defined edges. Kelly, Emmett 1898-1979. , vice president and chief financial officer. "We can experience significant variations in quarterly operating and maintenance expenses and weather from year to year, even though annual expenses are less variable. Our primary focus is on our annual performance rather than quarterly earnings. Assuming normal weather for the remainder of the year, we continue to project 2003 annual pro-forma earnings Pro-Forma Earnings Projected earnings based on a set of assumptions and often used to present a business plan (in Latin pro forma means "for the sake of form"). It also refers to earnings which exclude non-recurring items. Pro-forma earnings are not derived by standard GAAP methods. , excluding NRG and the sale of Viking Viking Either of two unmanned U.S. spacecraft launched by NASA in 1975. After nearly yearlong journeys, Vikings 1 and 2 entered orbits around Mars and released landers that touched down on the planet and relayed measurements of properties of its atmosphere and soil, as well Gas, in the range of $1.15 to $1.20 per share." Xcel Energy's preliminary earnings for the second quarter of 2003 consisted of the following: -- Utility earnings from continuing operations of $78 million, or 20 cents per share, compared with $133 million, or 35 cents per share, for the second quarter of 2002; -- Preliminary equity in NRG losses of $236 million, or 59 cents per share (including the impacts of asset impairments as discussed in Note 2), compared with a net NRG loss of $35 million, or 9 cents per share, in the second quarter of 2002; and -- Other subsidiary losses and holding company costs of 3 cents per share, compared with a loss of 3 cents per share for the second quarter of 2002. Because NRG filed for bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most on May 14, Xcel Energy changed its reporting for NRG in the second quarter of 2003. (See Note 5 for further discussion of the impacts of NRG's bankruptcy filing.) At 9 a.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , Aug. 1, Xcel Energy will host a conference call to review second quarter financial results. To participate in the conference call, please dial in five to 10 minutes prior to the scheduled start and follow the operator's instructions. US Dial-In: (800)-374-0832 International Dial-In: (706)-634-5081 The conference call also will be simultaneously broadcast and then archived on Xcel Energy's Web site at www.xcelenergy.com. To access the presentation, click on Investor Information. If you are unable to participate in the live event, the call will be available for replay from 12 p.m. CDT on Aug. 1 through 11:59 p.m. CDT on Aug. 8. Replay Numbers US Dial-In: (800)-642-1687 International Dial-In: (706)-645-9291 Access Code: 1519487 This release includes 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. that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements include statements that are intended to be identified in this document by the words "anticipate," "estimate," "expect," "projected," "forecast," "objective," "outlook," "possible," "potential" and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on access to capital; business conditions in the energy industry; competitive factors; unusual weather; changes in federal or state legislation; regulation; risks associated with the California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). power market; currency translation and transaction adjustments; the higher degree of risk associated with Xcel Energy's nonregulated businesses compared with Xcel Energy's regulated business; risks related to the financial condition of NRG; actions by the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of bankruptcy court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. ; the failure to realize expectations regarding the NRG settlement agreement; actions by regulators, including the Securities and Exchange Commission (SEC) under the Public Utility Holding Company Act Public Utility Holding Company Act The 1935 act that gives the SEC authority over the security issues, the accounting systems, the corporate structures, and the intercompany transactions of public utilities. of 1935 (PUHCA PUHCA Public Utility Holding Company Act ); and the other risk factors listed from time to time by Xcel Energy in reports filed with the SEC, including Exhibit 99.01 to Xcel Energy's report 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. for year 2002. For more information, contact: R J Kolkmann Managing Director, Investor Relations (612) 215-4559 P A Johnson Director, Investor Relations (612) 215-4535 For news media inquiries only, please call Xcel Energy media relations (612) 215-5300 Xcel Energy Internet address: www.xcelenergy.com This information is not given in connection with any sale, offer for sale or offer to buy any security.
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Thousands of Dollars, Except Per Share Data)
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Operating Revenues:
Electric Utility.... $1,378,904 $1,328,898 $2,747,874 $2,560,555
Natural Gas Utility. 273,556 235,635 939,685 799,546
Electric and Natural
Gas Trading Margin. 3,693 (405) 7,267 2,345
Nonregulated and
Other.............. 114,862 634,091 222,771 1,189,877
Equity Earnings from
Unconsolidated NRG
Affiliates......... -- 27,528 -- 42,198
-----------------------------------------------
Total Operating
Revenues........ 1,771,015 2,225,747 3,917,597 4,594,521
Operating Expenses:
Electric Fuel and
Purchased Power -
Utility............ 640,904 544,405 1,233,594 1,032,519
Cost of Natural Gas
Sold and
Transported -
Utility............ 174,893 125,617 654,844 501,232
Cost of Sales -
Nonregulated and
Other.............. 69,766 313,896 147,372 590,959
Other Operating and
Maintenance
Expenses - Utility. 381,845 343,983 763,472 735,474
Other Operating and
Maintenance
Expenses -
Nonregulated....... 38,295 177,892 63,840 372,214
Depreciation and
Amortization....... 210,051 260,324 403,941 508,317
Taxes (Other Than
Income Taxes)...... 81,757 84,708 163,341 167,605
Special Charges..... 7,331 60,536 8,772 74,649
-----------------------------------------------
Total Operating
Expenses........ 1,604,842 1,911,361 3,439,176 3,982,969
-----------------------------------------------
Operating Income...... 166,173 314,386 478,421 611,552
Equity in Losses of
NRG - Preliminary.... (236,192) -- (248,825) --
Minority Interest in
NRG Losses........... -- 6,788 -- 13,580
Interest and Other
Income, net of
Nonoperating Expenses 10,864 12,168 9,100 33,999
Interest Charges and
Financing Costs:
Interest Charges -
Net of Amounts
Capitalized........ 109,928 200,973 215,663 389,578
Distributions on
Redeemable
Preferred
Securities of
Subsidiary Trusts.. 9,566 9,472 19,152 19,172
-----------------------------------------------
Total Interest
Charges and
Financing Costs. 119,494 210,445 234,815 408,750
-----------------------------------------------
Income (Loss) from
Continuing Operations
before Income Taxes.. (178,649) 122,897 3,881 250,381
Income Taxes (Benefit) (11,087) 37,280 52,430 70,835
-----------------------------------------------
Income (Loss) from
Continuing Operations (167,562) 85,617 (48,549) 179,546
Income from
Discontinued
Operations - net of
tax.................. -- 1,685 20,999 11,260
-----------------------------------------------
Net Income (Loss)..... (167,562) 87,302 (27,550) 190,806
Dividend Requirements
on Preferred Stock... 1,060 1,060 2,120 2,120
-----------------------------------------------
Earnings Available for
Common Shareholders -
(Loss)............... $(168,622) $86,242 $(29,670) $188,686
-----------------------------------------------
Weighted average
common shares
outstanding (in
thousands):
Basic............. 398,717 377,983 398,716 365,972
Diluted........... 398,717 378,129 398,716 366,211
Earnings per share -
basic and diluted:
Income (loss) from
continuing
operations.......... $(0.42) $0.23 $(0.12) $0.49
Discontinued
operations.......... $0.00 $0.00 $0.05 $0.03
-----------------------------------------------
Total.............. $(0.42) $0.23 $(0.07) $0.52
-----------------------------------------------
Certain items in the Consolidated Statements of Operations have been
reclassified to conform with reporting requirements. Year-to-date 2003
results now reflect NRG on the equity method of accounting, as
discussed in Note 5, rather than as a consolidated entity for the 2002
presentation. In addition, NRG's 2002 results reflect
reclassifications of discontinued operations for consistency with
NRG's Dec. 31, 2002 presentation (see Note 2).
XCEL ENERGY INC. Notes to Investor Relations Investor relations The process by which the corporation communicates with its investors. Release (Unaudited) Due to the seasonality of Xcel Energy's operating results, quarterly financial results are not necessarily an appropriate base from which to project annual results. Note 1. Operating Results - Utility and Preliminary Total The following table summarizes the earnings-per-share contributions of Xcel Energy's businesses on both a generally accepted accounting principles (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) view and a pro-forma basis. Xcel Energy is presenting pro-forma earnings to reflect its operating results excluding businesses that were or are expected to be divested this year, as assumed in the previously disclosed earnings guidance. The pro-forma results exclude the gain on the sale of Viking Gas Transmission Viking Gas Transmission is a natural gas pipeline which takes gas from TransCanada pipeline in Minnesota and brings it to Wisconsin. It is owned by ONEOK Partners. Its FERC code is 82. Co. and the results of NRG. Viking Gas was sold in January January: see month. 2003, and we expect the outcome of NRG's financial restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). will be the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of NRG. The basic average share level (excluding common stock equivalents of approximately 25 million shares in 2003) is required to be used for both basic and 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. earnings-per-share calculations whenever there is a loss from continuing operations. Due to losses from continuing operations, which are primarily related to significant preliminary losses at NRG, recorded in the second quarter of 2003, Xcel Energy's common shares outstanding are the same for both basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of .
3 months ended 6 months ended
June 30, June 30,
-------------- --------------
2003 2002 2003 2002
------- ------ ------- ------
GAAP Earnings (Loss) Per Share - By
Segment
Utility segment earnings - continuing
operations............................. 0.20 0.35 0.56 0.73
Utility earnings - discontinued
operations (gain on Viking Gas)........ - - 0.05 -
------- ------ ------- ------
Total regulated utility segment
earnings............................. 0.20 0.35 0.61 0.73
NRG earnings (loss) - continuing
operations............................. (0.59) (0.09) (0.62) (0.18)
NRG earnings (loss) - discontinued
operations............................. - - - 0.03
------- ------ ------- ------
Total loss from NRG segment........... (0.59) (0.09) (0.62) (0.15)
Other nonregulated results & holding
company costs.......................... (0.03) (0.03) (0.06) (0.06)
------- ------ ------- ------
Total GAAP earnings (loss) per share -
diluted.............................. $(0.42) $0.23 $(0.07) $0.52
======= ====== ======= ======
Reconciliation of pro-forma results to
GAAP earnings (loss):
Total utility segment earnings -
continuing operations.................. $0.20 $0.35 $0.56 $0.73
Other nonregulated results & holding
company costs.......................... (0.03) (0.03) (0.06) (0.06)
------- ------ ------- ------
Pro-forma earnings - continuing
operations, excluding NRG results.... 0.17 0.32 0.50 0.67
Total NRG segment loss.................. (0.59) (0.09) (0.62) (0.15)
Utility earnings - discontinued
operations (gain on Viking Gas)........ - - 0.05 -
------- ------ ------- ------
Total GAAP earnings (loss) per share -
diluted.............................. $(0.42) $0.23 $(0.07) $0.52
======= ====== ======= ======
Preliminary Status of Results - Xcel Energy's second quarter of 2003 earnings are preliminary at this time, pending the review of NRG results for the quarter, specifically those attributable to activities prior to and conditions as of NRG's bankruptcy filing date of May 14, 2003. At the time of NRG's bankruptcy filing, Xcel Energy began reflecting NRG's 2003 financial results using the equity accounting method. The NRG financial results attributable to activities subsequent to the bankruptcy filing are to be recorded by Xcel Energy, subject to certain limitations, as discussed in Notes 2 and 5. All NRG financial results attributable to time periods prior to the bankruptcy filing date must be reflected by Xcel Energy without limitation. NRG recorded significant impairment and other losses in the second quarter of 2003, and Xcel Energy has not yet completed its assessment of whether its equity in NRG losses for the quarter would exceed the limitations. The equity in NRG losses reflected in this release is at the level of limitations discussed in Note 2. It is possible that Xcel Energy may be required to record additional equity in NRG losses related to periods prior to the bankruptcy filing. Consequently, Xcel Energy considers its second quarter NRG earnings impacts to be preliminary. The final financial results for the second quarter of 2003, including any adjustments resulting from the review of NRG losses for amounts related to pre-bankruptcy activities and conditions, will be reported in the Xcel Energy Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the period ended June June: see month. 30, 2003 that will be filed with the SEC later in August 2003. Common Stock Dilution Stock dilution is a general term that results from the issue of additional common shares by a company. This increase in common shares of a stock can result from a secondary market offering, employees exercising stock options, or by conversion of convertible bonds, preferred shares - Dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. from stock issued in 2002 reduced the utility segment earnings contribution by 1 cent per share for the quarter ended June 30, 2003, and reduced the total loss by 2 cents per share. For the six months ended June 30, 2003, dilution reduced the utility earnings contribution by 5 cents per share and reduced the total loss by 1 cent per share. Estimated Impact of Temperature Changes on Regulated Earnings -The following summarizes the estimated impact of temperature variations on actual utility operating results relative to sales under normal weather conditions (excluding the impact on NRG and energy trading operations).
Earnings per Share Increase (Decrease)
---------------------------------------------
2003 vs. Normal 2002 vs. Normal 2003 vs. 2002
--------------- --------------- -------------
3 months ended June 30... $(0.02) $0.03 $(0.05)
6 months ended June 30... $(0.02) $0.02 $(0.04)
Sales Growth - The following table summarizes Xcel Energy's regulated utility growth for actual and weather-normalized energy sales for the three-month and six-month periods ended June 30, 2003, compared with the same periods in 2002.
3 months ended 6 months ended
June 30 June 30
---------------------------------------
Actual Normalized Actual Normalized
---------------------------------------
Electric residential.......... (3.0)% 2.8% 0.7% 2.8%
Electric commercial &
industrial................... (2.0)% 0.9% 0.3% 1.6%
Total retail electric sales... (2.2)% 1.4% 0.4% 1.9%
Firm natural gas sales........ (3.6)% 2.4% 0.6% 2.8%
Total natural gas sales(a).... (12.6)% (9.9)% (1.9)% (0.6)%
(a) Excludes Viking Gas activity in 2002.
Electric Utility and Commodity Trading Margins - The following table details the changes in revenues, costs and margins (including the trading activity that is now required to be reported to be spoken of; to be mentioned, whether favorably or unfavorably. See also: Report net on the income statement) from Xcel Energy's electric utility and trading operations, excluding NRG:
Base Electric
Electric Short-term Commodity
(Millions of Dollars) Utility Wholesale Trading
----------------------------------------------------------------------
3 months ended 06/30/2003
Electric utility revenue............. $1,340 $39 $-
Electric fuel and purchased power
utility............................. (610) (31) -
Electric and gas trading revenue -
gross............................... - - 75
Electric and gas trading costs....... - - (69)
-------------------------------
Gross margin before operating
expenses............................ 730 8 6
===============================
Margin as a percentage of revenue.... 54.5% 20.5% 8.0%
3 months ended 06/30/2002
Electric utility revenue............. $1,289 $40 $-
Electric fuel and purchased power-
utility............................. (514) (30) -
Electric and gas trading revenue -
gross............................... - - 494
Electric and gas trading costs....... - - (496)
-------------------------------
Gross margin before operating
expenses............................ $775 $10 $(2)
===============================
Margin as a percentage of revenue.... 60.1% 25.0% (0.4)%
6 months ended 06/30/2003
Electric utility revenue............. $2,647 $101 $-
Electric fuel and purchased power
utility............................. (1,162) (72) -
Electric and gas trading revenue -
gross............................... - - 133
Electric and gas trading costs....... - - (129)
-------------------------------
Gross margin before operating
expenses............................ 1,485 29 4
===============================
Margin as a percentage of revenue.... 56.1% 28.7% 3.0%
6 months ended 06/30/2002
Electric utility revenue............. $2,480 $81 $-
Electric fuel and purchased power-
utility............................. (966) (66) -
Electric and gas trading revenue -
gross............................... - - 811
Electric and gas trading costs....... - - (810)
-------------------------------
Gross margin before operating
expenses............................ $1,514 $15 $1
===============================
Margin as a percentage of revenue.... 61.0% 18.5% 0.1%
Natural
Gas
Commodity Inter-Company Consolidated
(Millions of Dollars) Trading Eliminations Total
----------------------------------------------------------------------
3 months ended 06/30/2003
Electric utility revenue........ $- $- $1,379
Electric fuel and purchased
power-utility.................. - - (641)
Electric and gas trading revenue
- gross........................ 80 (8) 147
Electric and gas trading costs.. (82) 8 (143)
------------------------------------
Gross margin before operating
expenses....................... (2) - 742
====================================
Margin as a percentage of
revenue........................ (2.5)% - 48.6%
3 months ended 06/30/2002
Electric utility revenue........ $- $- $1,329
Electric fuel and purchased
power-utility.................. - - (544)
Electric and gas trading revenue
- gross........................ 566 (20) 1,040
Electric and gas trading costs.. (564) 20 (1,040)
------------------------------------
Gross margin before operating
expenses....................... $2 $- $785
====================================
Margin as a percentage of
revenue........................ 0.4% - 33.1%
6 months ended 06/30/2003
Electric utility revenue........ $- $- $2,748
Electric fuel and purchased
power-utility.................. - - (1,234)
Electric and gas trading revenue
- gross........................ 463 (21) 575
Electric and gas trading costs.. (460) 21 (568)
------------------------------------
Gross margin before operating
expenses....................... 3 - 1,521
====================================
Margin as a percentage of
revenue........................ 0.6% - 45.8%
6 months ended 06/30/2002
Electric utility revenue........ $- $- $2,561
Electric fuel and purchased
power-utility.................. - - (1,032)
Electric and gas trading revenue
- gross........................ 1,021 (37) 1,795
Electric and gas trading costs.. (1,020) 37 (1,793)
------------------------------------
Gross margin before operating
expenses....................... $1 $- $1,531
====================================
Margin as a percentage of
revenue........................ 0.1% - 35.1%
Note - The wholesale and trading margins in the above table reflect
the impact of the regulatory sharing of certain margins under the
energy cost adjustment mechanisms in Colorado.
Base electric utility margins, primarily related to retail customers, decreased approximately $45 million for the second quarter of 2003, compared with the second quarter of 2002. The lower base electric margin reflects much cooler temperatures in the second quarter of 2003 compared with 2002, higher purchased capacity costs and the positive impact of incentive cost adjustment mechanisms in 2002, partially offset by weather-normalized sales growth and accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. recovery of certain resource costs. Base electric utility margins decreased approximately $29 million for the first six months of 2003 compared with the first six months of 2002. The lower base electric margin reflects much cooler temperatures, higher purchased capacity costs and the positive impact of incentive cost adjustment mechanisms in 2002, partially offset by weather-normalized sales growth and accrued recovery of certain resource costs. Short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. wholesale margins consist of asset-based electric sales for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. activity. Electric and natural gas commodity trading activity margins consist of non-asset-based trading activity. Short-term wholesale and electric commodity trading sales margins increased approximately $6 million for the second quarter of 2003. The increase reflects more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. prices. Other Operating and Maintenance Expenses - Utility Utility operating and maintenance expenses for the second quarter of 2003 increased by approximately $38 million, or 11.0 percent, compared with 2002. Approximately $13 million of the difference results from the second quarter 2002 reversal of accrued estimated incentive compensation expense, compared with an accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of estimated incentive compensation expense in the second quarter 2003. In addition, benefit costs increased $31 million due to lower pension credits, higher medical and health care costs and restricted stock units Restricted stock units Similar to restricted stock. However, the unit represents a promise that employees will receive stock in the future. The units do not pay dividends until the stock is vested. granted. Utility operating and maintenance expenses also increased due to a planned refueling outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. at the Monticello Monticello (mŏn'tĭsĕl`ō, –chĕl`ō) [Ital.,=little mountain], estate, 640 acres (259 hectares), central Va., near Charlottesville; home of Thomas Jefferson for 56 years. nuclear plant compared with no such nuclear outages in the second quarter of 2002. These cost increases were partially offset by the timing of non-nuclear non-nuclear Adjective not involving or using nuclear power or weapons plant outages and other cost reductions. Utility operating and maintenance expenses for the six months ended June 30, 2003, increased approximately $28 million, or 3.8 percent, compared with the same period in 2002. The increased costs reflect the timing of incentive accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. in 2002 and other higher employee benefit costs in the second quarter of 2003, as discussed previously. On March 28, 2003, the compensation and nominating committee A nominating committee is a group formed usually from inside the membership of an organization for the purpose of nominating candidates for office within the organization. It works similarly to an electoral college, the main difference being that the available candidates, either of Xcel Energy's board of directors granted restricted stock units and performance shares under the Xcel Energy omnibus omnibus: see bus. incentive plan approved by the shareholders in 2000. No stock options have been granted in 2003. Restrictions on the restricted stock units will lapse (language) LAPSE - A single assignment language for the Manchester dataflow machine. ["A Single Assignment Language for Data Flow Computing", J.R.W. Glauert, M.Sc Diss, Victoria U Manchester, 1978]. after one year from the date of grant, the achievement of a 27 percent total shareholder return (TSR (Terminate and Stay Resident) Refers to a program that remains in memory when the user exits it in order that it be immediately available at the press of a hotkey. ) for 10 consecutive business days and other criteria relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Xcel Energy's common equity ratio. If the TSR target is not met within four years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time grant will be forfeited for·feit n. 1. Something surrendered or subject to surrender as punishment for a crime, an offense, an error, or a breach of contract. 2. Games a. . The market price per share of our stock at the grant date was $12.93. During the second quarter of 2003, Xcel Energy accrued approximately $9 million of estimated compensation expense related to the 2.4 million restricted stock units awarded, based on an expectation that the requirements will be met. Interest and Financing Costs Interest and financing costs for 2002 include NRG amounts, which beginning in the second quarter of 2003 are reported as a component of Equity in Losses of NRG. Interest and financing costs of $119 million in the second quarter of 2003 were $26 million higher than during the same period in 2002, excluding NRG financing costs in 2002. This increase is due to the issuance of long- long- Adverb (in combination) for or lasting a long time: long-established, long-lasting and intermediate-term Intermediate-term Typically one-ten years. intermediate-term Of or relating to an investment with an expected holding period somewhere between short-term and long-term. debt to reduce dependence on short-term debt at the holding company, Northern States Power Co.-Minnesota (NSP-Minnesota) and Public Service Co. of Colorado Colorado, state, United States Colorado (kŏlərăd`ə, –răd`ō, –rä`dō), state, W central United States, one of the Rocky Mt. states. (PSCo). Special Charges Holding Company Costs (2003) - During the first six months of 2003, the Xcel Energy holding company incurred approximately $8.8 million for charges related to NRG's financial restructuring, including $7.3 million in the second quarter. NRG Special Charges (2002) - In the second quarter of 2002, NRG expensed a pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charge of $20 million, or 4 cents per share, for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs for employees who had been terminated as of that date. NRG expensed a pretax charge of $36 million, or 6 cents per share, largely related to asset impairments at its NEO Corp. landfill gas operations. NRG also recorded a charge of approximately $4 million, or 1 cent per share, to write down the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of its equity investment in the Collinsville Collinsville, city (1990 pop. 22,446), Madison co., SW Ill.; settled 1817, inc. 1872. Once a coal-mining center, the city now has food-products and clothing industries. Nearby are the Cahokia Mounds, the Native American earthworks. Power Station in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. , based on the price received under a sales agreement. As discussed further in Note 2, all of NRG's results for 2003 are reported in a single line item, Equity in Losses of NRG, due to the deconsolidation of NRG as a result of its bankruptcy filing in May 2003. NRG's 2003 results do reflect some effects of asset impairments and restructuring costs, which are discussed in Note 2 but are not presented as a special charge after 2002. Regulatory Recovery Adjustment (2002) - During the first quarter of 2002, Southwestern Public Service Co. (SPS (Standby Power System) A UPS system that switches to battery backup upon detection of power failure. See UPS. SPS - Symbolic Programming System. Assembly language for IBM 1620. ), a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Xcel Energy, wrote off $5 million, or 1 cent per share, of restructuring costs relating to costs incurred to comply with legislation requiring a transition to retail competition in Texas. Utility Restaffing (2002) - In the first quarter of 2002, Xcel Energy incurred pretax special charges of $9 million, or approximately 1 cent per share, for staff consolidation charges in several utility operating and corporate support areas of Xcel Energy. Sale of Viking Gas In January 2003, Xcel Energy sold Viking Gas for net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of $124 million, resulting in a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta gain of $36 million. This gain, which increased after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. earnings for the first quarter of 2003 by approximately $21 million, or 5 cents per share, has been reported in discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Other quarterly and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. operating results of Viking Gas for 2003 and 2002 were not reclassified to discontinued operations due to immateriality im·ma·te·ri·al·i·ty n. pl. im·ma·te·ri·al·i·ties 1. The state or quality of being immaterial. 2. Something immaterial. Noun 1. . Note 2. Preliminary NRG Results 2003 Change in Accounting for NRG - As a result of NRG's bankruptcy filing in May 2003, the presentation in the accompanying statements of operations of NRG results for 2003 is not comparable to the presentation for 2002. NRG's results for 2003 are presented on the equity method, on a single line - Equity in Losses of NRG. Results for 2002 are presented in the statements of operations with NRG consolidated as part of Xcel Energy. However, pro-forma results for 2002 are presented in Note 5 to provide 2002 information for NRG's results on a basis comparable with the 2003 presentation. Summarized NRG Results - As previously indicated, Xcel Energy's share of NRG losses for 2003 are preliminary and subject to change. Xcel Energy's share of NRG losses may be higher. NRG's preliminary results summarized on an overall basis are as follows:
3 months ended 6 months ended
June 30, June 30,
-------------- ---------------
(in millions) 2003 2002 2003 2002
------- ------ ------- -------
Total preliminary NRG loss(a).......... $(608) $(41) $(620) $(68)
Losses not recorded by Xcel Energy
under the equity method(b)............ 372 -- 372 --
------- ------ ------- -------
Equity in losses of NRG included in
Xcel Energy results................. $(236) $(41) $(248) $(68)
Minority interest in NRG losses(c)..... -- 7 -- 14
(a) Discontinued operations of NRG as reported for 2002 relate to
several projects that have been sold or are pending sale by NRG. In
2003, no distinction is made under the equity method for the
underlying NRG projects, whether discontinued or continuing.
(b) The losses of NRG not recorded by Xcel Energy in 2003 relate to
limitations imposed by the equity method of accounting, as discussed
in Note 5. If it is determined that additional NRG losses are
attributable to pre-bankruptcy periods, such additional losses would
not be subject to these limitations. If the settlement agreement and
bankruptcy proceedings progress as expected and no additional losses
are attributable to the pre-bankruptcy period, we do not anticipate
recording further losses of NRG after the second quarter of 2003.
(c) The minority interest in NRG's losses in 2002 reflects the portion
attributable to minority stockholders of NRG, who until June 2002 held
approximately 26 percent ownership in NRG.
Since its credit downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. in July July: see month. 2002, NRG has experienced credit and liquidity constraints A liquidity constraint in economic theory is a form of imperfection in the capital market. It causes difficulties for models based on intertemporal consumption. Many economic models require individuals to save or borrow money from time to time. and commenced a financial and business restructuring, including a voluntary petition for bankruptcy protection. This restructuring has created significant incremental costs Costs which are additional costs to the Service appropriations that would not have been incurred absent support of the contingency operation. See also financial management. and has resulted in numerous asset impairments as the strategic and economic value of assets under development and in operation has changed. NRG's preliminary results in 2003 (before limitations under the equity method) include restructuring costs of $12 million for the quarter and $33 million for the six months ended June 30. Restructuring costs relate to financial and legal advisers, employee severance and other activities related to NRG's financial restructuring and bankruptcy process. Asset impairments in 2003 include approximately $40 million in first quarter charges related to NRG's NEO landfill gas projects and equity investments and approximately $500 million in second quarter charges. The impairment charges in the second quarter of 2003 resulted from planned disposals of the Loy Yang yang (yang) [Chinese] in Chinese philosophy, the active, positive, masculine principle that is complementary to yin; see yin, under principle. project in Australia and the McClain and Brazos Valley The Brazos Valley is a region in the U.S. state of Texas (Central Texas) consisting of Brazos County, Robertson County, Grimes County, Washington County, Burleson County, Madison County, and Leon County, with Brazos County and the cities of College Station and Bryan at its center. projects in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , and to changing facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or throughout the second quarter that adversely affected NRG's ability to recover the carrying value of certain Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). merchant generation units as of June 30, 2003. As discussed previously, Xcel Energy has not recorded all of these NRG impairment losses due to limitations under the equity method of accounting. In addition to the unusual items discussed above, NRG's operating results have been affected by low power prices in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , which have provided margins insufficient to cover its interest and other fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). and have resulted in continuing operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. in 2003. Beginning in the third quarter of 2002, Xcel Energy announced that the likely tax filing status of NRG for 2002 and future years had changed from being included as part of Xcel Energy's consolidated federal income tax group to filing on a stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." basis. On a stand-alone basis, NRG does not have the ability to recognize all tax benefits that may ultimately accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. from its operating losses and is currently in a net operating loss carryforward carryforward 1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. position for tax purposes. Accordingly, NRG's results for 2003 include no material tax effects. Note 3. Other Nonregulated and Holding Company Results The following table summarizes the earnings-per-share contributions of Xcel Energy's nonregulated businesses other than NRG and holding company.
3 months ended 6 months ended
June 30, June 30,
--------------- ---------------
2003 2002 2003 2002
------- ------- ------- -------
Seren Innovations, Inc................ (0.01) (0.02) (0.02) (0.03)
Planergy.............................. (0.01) 0.00 (0.01) (0.01)
Eloigne Company....................... 0.00 0.00 0.01 0.01
Xcel International.................... 0.01 0.00 0.02 0.00
Financing costs and preferred
dividends............................ (0.03) (0.03) (0.06) (0.05)
Other................................. 0.01 0.02 0.00 0.02
------- ------- ------- -------
Total other nonregulated and holding
company results.................... $(0.03) $(0.03) $(0.06) $(0.06)
======= ======= ======= =======
Seren Seren Chlordiazepoxide, see there - Seren operates a combination cable television, telephone and high-speed Internet See broadband. access system in St. Cloud, Minn., and Contra Costa County, California Contra Costa County is a suburban county in the San Francisco Bay Area of the U.S. state of California. As of the 2000 census, it had a population of 948,816. The county seat is Martinez. . On June 30, 2003, Xcel Energy's investment in Seren was approximately $265 million. Xcel International - Xcel International owns and operates several energy projects in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. . Earnings in the second quarter of 2003 include a gain from a debt restructuring Debt Restructuring A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage. Notes: for one project, which increased earnings by about 1 cent per share. Financing Costs and Preferred Dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) - Nonregulated and holding company results include interest expense and preferred dividend costs, which are incurred at the Xcel Energy and intermediate holding company levels and are not directly assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. to individual subsidiaries. Holding company financing costs increased due to the issuance of convertible debt in November November: see month. 2002. Other - Other nonregulated and holding company results decreased in 2003 due to lower income from Utility Engineering and from NRG-related restructuring costs, as discussed previously. Note 4. Xcel Energy Liquidity Credit Facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities - As of July 30, 2003, Xcel Energy had the following credit facilities available to meet its liquidity needs:
Company Facility Drawn(a) Available Cash Liquidity Maturity
------- -------- -------- --------- ---- --------- ---------
(Millions of
dollars)
------------
NSP-Minnesota.... $275 $155 $120 $31 $151 May-2004
----------------------------------------------------------------------
NSP-Wisconsin.... $0 $0 $0 $3 $3
----------------------------------------------------------------------
PSCo............. $350 $266 $84 $26 $110 May-2004
----------------------------------------------------------------------
PSCo Bridge...... $300 $300 $0 $0 $0 June-2004
----------------------------------------------------------------------
SPS.............. $100 $38 $62 $28 $90 Feb-2004
----------------------------------------------------------------------
Xcel Energy -
Holding Company. $400 $130 $270 $341 $611 Nov-2005
----------------------------------------------------------------------
Total.......... $1,425 $889 $536 $429 $965
----------------------------------------------------------------------
(a) Includes short-term borrowings and letters of credit.
Xcel Energy expects to accumulate Accumulate Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security additional cash at the holding company level during 2003 from the lower federal income tax payments resulting from the expected benefit associated with its investment in NRG (see Note 5) and from the receipt of operating company operating company A business that engages in transactions with outsiders. dividends. Financing Plans - The following details Xcel Energy's financing plan for debt issuances during 2003, subject to favorable market conditions: -- NSP-Minnesota expects to issue up to $375 million of debt to replace debt that matured in March and April of 2003 and to help fund the redemption of $200 million of Trust Originated Preferred Securities (TOPrS) on July 31, 2003. NSP-Minnesota expects to fund this redemption with cash-on-hand, availability under its credit facility and a short-term loan from the Xcel Energy holding company. -- PSCo expects to issue up to $575 million of debt for working capital and repayment of short-term borrowings incurred for the redemption of $194 million of TOPrS and $145 million of 8.75 percent first mortgage bonds. Both issues were redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. on June 30, 2003. PSCo has entered into a bridge financing Bridge Financing A method of financing, used by companies before their IPO, to obtain necessary cash for the maintenance of operations. Notes: These funds are usually supplied by the investment bank underwriting the new issue. arrangement to provide short-term liquidity until it completes its 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. offering. -- Northern States Power Co.-Wisconsin (NSP-Wisconsin) expects to issue up to $150 million of debt to replace debt maturing in 2003 and for possible refinancing Refinancing An extension and/or increase in amount of existing debt. of long-term debt with lower coupon debt. -- SPS may issue up to $100 million of debt for refinancing of higher coupon securities. Dividend Restrictions - As a result of additional write-downs at NRG, Xcel Energy's preliminary retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. were a deficit of approximately $130 million on June 30, 2003. Assuming no additional NRG losses are attributable to pre-bankruptcy periods, based on current retained earnings and assumptions regarding third quarter earnings and the timing of recognition of tax benefits associated with Xcel Energy's investment in NRG, Xcel Energy believes it would have sufficient retained earnings to pay third quarter dividends without a waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. from the SEC under PUHCA. However, it is possible under some circumstances, that Xcel Energy might not have sufficient retained earnings to declare and pay its third quarter dividend as it is normally scheduled. Under the PUHCA, unless there is an order from the SEC, a holding company or any subsidiary may declare and pay dividends only out of retained earnings. In May 2003, Xcel Energy received authorization The right or permission to use a system resource; the process of granting access. See access control. from the SEC to pay an aggregate amount of $152 million of common and preferred dividends out of capital and unearned surplus. Xcel Energy used this authorization to declare and pay approximately $150 million for its first and second quarter dividends in 2003. In addition, the SEC reserved jurisdiction, which would allow Xcel Energy to pay an additional $108 million of common and preferred dividends out of capital and unearned surplus until Sept. 30, 2003, if authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: by further action of the SEC. If it appears that retained earnings would be insufficient to declare and pay a third quarter dividend as normally scheduled, Xcel Energy would request authorization from the SEC to pay its third quarter dividend out of capital and unearned surplus. In the event that authorization is not received from the SEC to pay the third quarter dividend in that manner, and assuming that the NRG plan of reorganization is approved by NRG's creditors as expected, Xcel Energy currently expects to have retained earnings sufficiently positive before the end of 2003 to pay dividends from retained earnings at that time. Xcel Energy intends to make every effort to pay the full annual dividend of 75 cents per share during 2003. Note 5. NRG Bankruptcy and Related Developments NRG Bankruptcy Filing On May 14, 2003, NRG filed to restructure its obligations under Chapter 11 of the U.S. Bankruptcy Code Bankruptcy Code may refer to:
Under the settlement, Xcel Energy will make the following payments for the benefit of NRG's creditors in partial consideration for their waiver of any existing and potential claims against Xcel Energy: -- $350 million would be paid 90 days after the bankruptcy court enters an order confirming NRG's reorganization plan A scheme authorized by federal law and promulgated by the president whereby he or she alters the structure of federal agencies to promote government efficiency and economy through a transfer, consolidation, coordination, authorization, or abolition of functions. . It is expected this payment would be made in early 2004; -- $50 million in early 2004; and -- $352 million in April 2004, at which time Xcel Energy anticipates receiving a tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. based on the loss of its investment in NRG. The following is the expected timeline
Timeline may refer to:
-- NRG's disclosure statement filed with the SEC under PUHCA in July 2003 -- SEC acts on NRG's disclosure statement in September September: see month. 2003 -- Completion of the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual process of NRG's reorganization plan in October 2003 -- Confirmation hearing on NRG's plan of reorganization in November 2003 We cannot assure investors the NRG plan of reorganization will be approved or that NRG will complete the proposed restructuring. Financial Statement Impact of NRG's Bankruptcy Filing The accompanying Xcel Energy statements of operations include the consolidated results of NRG for the three- and six-month periods ended June 30, 2002. As a result of NRG's bankruptcy filing, we no longer control NRG's operations. Accordingly, we began accounting for the investment in NRG, as of the bankruptcy filing date in May 2003, in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Accounting Principles Board The Accounting Principles Board (APB) is the former authoritative body of the American Institute of Certified Public Accountants (AICPA). It was created by the American Institute of Certified Public Accountants in 1959 and issued pronouncements on accounting principles until 1973, Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stock." Under the equity method, Xcel Energy will stop recognizing equity in the losses incurred by NRG after May 14, 2003, to the extent our recognized cumulative losses, in excess of our investment in NRG, have reached the potential $752-million financial commitment to NRG as part of the settlement agreement. As discussed above, as of June 30, 2003, the preliminary cumulative losses recognized equal the potential $752 million financial commitment to NRG. Accordingly, Xcel Energy will not recognize additional losses in NRG incurred after May 14, 2003. Losses incurred by NRG prior to May 14, 2003, must be fully recognized by Xcel Energy without limitation. Beginning with June 30, 2003, quarterly reporting (the first period that includes the bankruptcy filing date), Xcel Energy began classifying the 2003 net operating results of NRG as equity in losses of NRG in the statement of operations See Income statement. as permitted under the accounting rules governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. a mid-year change from consolidating a subsidiary to accounting for the investment using the equity method, retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to Jan. 1, 2003. However, the presentation of NRG in the historical financial statements as a consolidated subsidiary in 2002 will not change from the prior presentation. The following table summarizes pro-forma financial information for Xcel Energy in 2002 assuming the deconsolidation of NRG (that is, accounting for NRG under the equity method) as of Jan. 1, 2002, and comparable amounts reported for 2003.
Xcel Energy Inc. and Subsidiaries
Summary Consolidated Financial Information
6 Months Ended June 30,
2003 2002
Statement of Operations As Reported Pro-forma
----------------------- ----------- -----------
Total operating revenues...................... $3,917,597 $3,529,043
Total operating expenses...................... 3,439,176 3,004,107
----------- -----------
Operating income............................ 478,421 524,936
Equity in losses of NRG....................... (248,825) (67,815)
Interest and financing costs.................. 234,815 177,978
Other - net................................... 9,100 37,298
Income tax expense (benefit).................. 52,430 125,635
----------- -----------
Income (loss) from continuing operations...... $(48,549) $190,806
=========== ===========
Earnings per share - basic and diluted:
Income (loss) from continuing operations.... $(0.12) $0.52
=========== ===========
The pro-forma 2002 earnings include income of 3 cents per share from discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: NRG operations that are reclassified to continuing operations under the equity method of accounting, applied on a pro-forma basis. Tax Benefits Related to Investment in NRG - Based on the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. effects of a settlement agreement with the major NRG creditors, including an expected 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 Xcel Energy's investment in NRG for tax purposes, Xcel Energy recognized an estimate of the expected tax benefits of the write-off in 2002 in the amount of $706 million. This benefit was based on the estimated tax Federal and state tax laws require a quarterly payment of estimated taxes due from corporations, trusts, estates, non-wage employees, and wage employees with income not subject to withholding. basis of Xcel Energy's cash and stock investments already made in NRG, and their deductibility for federal tax purposes. Xcel Energy is currently evaluating additional tax benefits that may be available related to its investment in NRG. These evaluations include an analysis of potential state tax effects of the NRG investment write off and refinements in Xcel Energy's tax basis calculations. Assuming these evaluations are completed as expected later in 2003, additional tax benefits may be recorded at that time, which could increase Xcel Energy's cumulative income tax benefits related to the investment in NRG by up to $100 million. The actual amount of such additional tax benefits, if any, cannot be determined at this time. In addition, tax benefits associated with the expected settlement payments (discussed previously) will be reflected once it is considered probable that NRG's creditors will approve the NRG plan of reorganization. Assuming all settlement payments are fully deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). , additional tax benefits of more than $260 million could be recorded later in 2003, at the time that such benefits are considered likely of realization. The timing of recording these benefits would be based on a judgment as to when the payments of financial assistance to NRG, including payments under the settlement agreement, become probable for tax purposes. Note 6. Xcel Energy Earnings Guidance Xcel Energy's 2003 earnings per share (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ) guidance and key assumptions are detailed in the following table. The guidance also includes a pro-forma forecast of earnings from continuing operations for 2003 that does not include NRG impacts, various tax benefits associated with Xcel Energy's investment in NRG and settlement agreement with NRG and its creditors or the gain on the sale of Viking Gas.
2003 EPS Range
--------------
Utility operations $1.25 - $1.30
Seren Innovations ($0.05)
Eloigne Company $0.03
Holding company financing ($0.09)
Other nonregulated subsidiaries $0.01
--------------
Xcel Energy - Pro-Forma Continuing Operations $1.15 - $1.20
Xcel Energy's share of NRG's losses ($0.62)
Tax effect of settlement payments $0.65
Additional tax benefit associated with investment in
NRG Not yet
determinable
Gain on the sale of Viking Gas $0.05
--------------
Xcel Energy - GAAP $1.23 - $1.28
Key Assumptions: -- Xcel Energy's share of NRG losses is limited by the maximum amount of financial commitments Xcel Energy has for NRG, and divestiture of NRG occurs by year-end; -- The NRG settlement payments are tax deductible; -- Average common stock and equivalents of approximately 425 million shares in 2003, including the dilutive effects Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of common stock equivalents for the convertible notes issued in 2002, based on the "If Converted" method; and -- No common equity issuance In financial markets, an Equity Issuance is the sale of new equity or "stocks" by a firm to investors. Equity Issuance can involve a private sale, in which the transaction between investors and the firm takes place directly, or publicly, in which case the firm has to during 2003, with the exception of the potential issuance of shares through the dividend reinvestment plan reinvestment plan See dividend reinvestment plan (DRIP). , the direct purchase plan or conversion by convertible bondholders. Xcel Energy expects its cash from operations to be approximately $1.3 billion and projects capital expenditures to be approximately $900 million in 2003. These cash flows assume NRG is deconsolidated and its cash flows are therefore excluded. In addition, these cash flows do not include the impact from the tax benefits associated with the write off of Xcel Energy's investment in NRG or the payments associated with the settlement with NRG creditors.
XCEL ENERGY INC.
UNAUDITED EARNINGS RELEASE SUMMARY
All dollars in thousands, except earnings per share
3 months ended June 30, 2003 2002
----------------------------------------------------------------------
Operating revenues:
Electric and natural gas utility revenue,
and trading margins....................... $1,656,153 $1,564,128
Nonregulated and other revenue............. 114,862 78,910
----------- -----------
Revenue, excluding NRG................... 1,771,015 1,643,038
NRG revenue and equity income.............. - 582,709
-----------------------
Total revenue................................. $1,771,015 $2,225,747
Income (loss) from continuing operations...... $(167,562) $85,617
Income from discontinued operations........... - 1,685
-----------------------
Net income.................................... $(167,562) $87,302
Earnings available for common shareholders.... $(168,622) $86,242
Average shares - common and potentially
dilutive (1000's)............................ 398,717 378,129
Segments and Components of Earnings per share
- diluted
---------------------------------------------
Utility earnings - continuing operations...... $0.20 $0.35
NRG, including losses on an equity basis after
2002......................................... (0.59) (0.09)
Other nonregulated subsidiaries and holding
company costs................................ (0.03) (0.03)
-----------------------
Total earnings (loss) per share - GAAP...... $(0.42) $0.23
=======================
6 months ended June 30, 2003 2002
----------------------------------------------------------------------
Operating revenue:
Electric and natural gas utility revenue,
and trading margins....................... $3,694,826 $3,362,446
Nonregulated and other revenue............. 222,771 166,596
----------- -----------
Revenue, excluding NRG.................. 3,917,597 3,529,042
NRG revenue and equity income.............. - 1,065,479
-----------------------
Total revenue................................. $3,917,597 $4,594,521
Income (loss) from continuing operations...... $(48,549) $179,546
Income (loss) from discontinued operations.... 20,999 11,260
-----------------------
Net income (loss)............................. $(27,550) $190,806
Earnings (loss) available for common
shareholders................................. $(29,670) $188,686
Average shares - common and potentially
dilutive (1000's)............................ 398,716 366,211
Segments and Components of Earnings per share
- diluted
---------------------------------------------
Utility earnings - continuing operations...... $0.56 $0.73
NRG continuing operations, including losses on
an equity basis after 2002 and excluding
discontinued operations prior to 2003........ (0.62) (0.18)
Other nonregulated subsidiaries and holding
company costs................................ (0.06) (0.06)
Discontinued operations - Viking Gas in 2003;
NRG in 2002.................................. 0.05 0.03
-----------------------
Total earnings (loss) per share - GAAP...... $(0.07) $0.52
=======================
Book value per share.......................... $11.43 $18.57
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