Exhibit 99.1
PNM Resources Reports Earnings For Second Quarter
ALBUQUERQUE, N.M., July 22, 2002 - PNM Resources (NYSE:PNM) today reported net
earnings for the three months ended June 30, 2002, of $11.2 million, or $0.28
per share of common stock (diluted). In the comparable three months in 2001,
earnings were $49.6 million, or $1.24 per diluted share. Operating revenues for
the quarter totaled $264.6 million, compared to $666.1 million in the same
period last year.
There were no one-time items or non-recurring gains or losses included in
earnings for the second quarter 2002. In the comparable three months last year,
one-time items or non-recurring gains or losses reduced earnings by $22.3
million, or $0.34 per diluted share. Ongoing earnings were $1.58 per diluted
share for the second quarter 2001.
Net earnings for the first six months of 2002 totaled $36.1 million, or $0.90
per diluted share, down from $113.1 million, or $2.84 per diluted share, in the
comparable period in 2001. Operating revenues for the six months ended June 30,
2002, totaled $578.6 million, compared to total operating revenues of $1.4
billion for the first half of the previous year.
The decline in revenues and earnings in 2002 is due to lower prices and a sharp
drop in activity in the wholesale power market, according to PNM Resources
Chairman, President and Chief Executive Officer Jeff Sterba.
The non-recurring charges, which reduced earnings by $0.34 per share for the
second quarter 2001 and by $0.48 per share for the six months ended June 30,
2001, included a contribution to the PNM Foundation, the write-off of
non-recoverable coal mine decommissioning costs, a write-off of an Avistar
investment and costs associated with the terminated Western Resources
transaction.
PNM Power Marketing
- -------------------
Wholesale electric revenues for the latest quarter totaled $166.2 million, down
from $524.8 million for the comparable period last year. The amount of power
sold through the wholesale market during the second quarter 2002 was 2.4 million
megawatt-hours (MWh), compared to 3.2 million MWh during the second quarter of
2001. Wholesale power prices averaged about $28 a megawatt-hour during the
second quarter 2002, compared to $147 a MWh during the second quarter of 2001.
"The significant wholesale trading activity in 2000 and 2001 was a result of
many factors, such as increased demand in California, a lack of generating
assets to serve the market, and the impact of extreme weather," Sterba said.
"This year, a reduction in market liquidity, the relatively mild weather in the
West, together with an abundance of cheap hydropower and economic conditions in
the region all contributed to a slowdown. In addition, there are significant
political and regulatory issues that remain to be resolved.
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"As a result, PNM spot market and short-term sales have suffered from the low
prices and lack of liquidity in the market," Sterba said. PNM is focusing its
efforts on acquiring additional long-term power contracts, while remaining in
the short-term market with a conservative posture.
"More than 75 percent of PNM's generation capacity is committed to serving
customers under long-term contract, and these relationships are a key part of
our wholesale strategy," Sterba noted. "For example, we recently extended our 29
MW contract with the City of Gallup into 2013. This and similar commitments
provide PNM with a stable, predictable revenue stream that helps dampen earnings
volatility on the wholesale side."
PNM Utility Operations
- ----------------------
Retail electric revenues totaled approximately $134.4 million for the quarter
ended June 30, compared to $129.6 million in the second quarter of 2001. Retail
electric sales in the quarter totaled 1.8 million megawatt hours, up 3.1 percent
from the comparable period last year. The company estimates underlying retail
electric growth in the PNM service territory (normalized for weather) for the
quarter at between 2.5 and 3.5 percent on an annual basis.
Retail gas revenues totaled $44.4 million for the latest quarter, down from
about $87.1 million in the comparable period in 2001. Gas gross margin
(operating revenues less the cost of gas purchased for resale) was $25.5 million
in the second quarter 2002, compared to $29.3 million in the second quarter of
2001. The decline in gas revenues and margin was primarily due to warmer
temperatures compared to the same period last year and to lower consumption of
gas for electric generation during the quarter. PNM plans to file a gas rate
case later this year to reflect the company's continuing investment in the gas
utility distribution system since retail rates were last adjusted.
Earnings Guidance
- -----------------
Based on results through the first half of 2002 and management's forecast of
wholesale price trends through the remainder of the year, PNM Resources has
revised its 2002 earnings guidance to between $1.90 and $2.10 per diluted share.
Among the factors that could affect results in the final two quarters of 2002
are: uncertainties prevailing in the wholesale power market; regulatory
decisions; performance of PNM's generating plants; increased coal costs at San
Juan Generating Station, the weather and the pace and strength of the economic
recovery in the region.
PNM Resources is an energy holding company based in Albuquerque, New Mexico. Its
principal subsidiary is New Mexico's largest electric and natural gas utility.
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.
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Operating Revenues
Electric........................................ $220,516 $577,730 $424,479 $1,122,324
Gas............................................. 43,968 87,084 153,169 279,020
Unregulated..................................... 85 1,277 917 1,277
------------ ------------ ------------ ------------
Total operating revenues...................... 264,569 666,091 578,565 1,402,621
------------ ------------ ------------ ------------
Operating Expenses
Cost of energy sold............................. 122,692 433,841 277,800 930,939
Administrative and general...................... 36,389 38,766 68,453 78,256
Energy production costs......................... 34,202 37,879 69,173 72,903
Depreciation and amortization................... 25,217 23,929 49,996 48,148
Transmission and distribution costs............. 15,451 15,081 31,988 30,357
Taxes, other than income taxes.................. 9,028 7,839 17,512 15,056
Income taxes, net............................... 2,141 28,209 11,507 69,115
------------ ------------ ------------ ------------
Total operating expenses...................... 245,120 585,544 526,429 1,244,774
------------ ------------ ------------ ------------
Operating income.............................. 19,449 80,547 52,136 157,847
------------ ------------ ------------ ------------
Other Income and Deductions, Net of Tax............ 6,397 (14,588) 13,785 (11,954)
------------ ------------ ------------ ------------
Income before interest charges................ 25,846 65,959 65,921 145,893
Net Interest Charges............................... 14,689 16,362 29,815 32,744
------------ ------------ ------------ ------------
Net Earnings....................................... 11,157 49,597 36,106 113,149
Preferred Stock Dividend Requirements.............. 147 147 293 293
------------ ------------ ------------ ------------
Net Earnings Applicable to Common Stock............ $ 11,010 $ 49,450 $ 35,813 $112,856
============ ============ ============ ============
Earnings Per Share of Common Stock (Basic)......... $ 0.28 $ 1.26 $ 0.92 $ 2.89
============ ============ ============ ============
Average Shares Outstanding (Basic)................. 39,118 39,118 39,118 39,118
============ ============ ============ ============
Earnings Per Share of Common Stock (Diluted)....... $ 0.28 $ 1.24 $ 0.90 $ 2.84
============ ============ ============ ============
Average Shares Outstanding (Diluted)............... 39,586 39,966 39,612 39,782
============ ============ ============ ============
Dividends Paid Per Share of Common Stock........... $ 0.22 $ 0.20 $ 0.42 $ 0.40
============ ============ ============ ============
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
-------------- --------------
2002 2001
-------------- --------------
(Unaudited)
(In thousands)
ASSETS
Total utility plant................................................ $2,767,442 $2,738,990
Accumulated depreciation and amortization.......................... (1,272,484) (1,234,629)
Construction work in progress...................................... 341,261 249,656
Nuclear fuel, net of accumulated amortization...................... 26,586 26,940
-------------- --------------
Net Utility Plant................................................ 1,862,805 1,780,957
-------------- --------------
Other Property and Investments..................................... 431,537 554,237
-------------- --------------
Current Assets
Cash and cash equivalents.......................................... 46,202 26,057
Accounts receivables, net of allowance for uncollectible accounts.. 106,087 147,787
Other receivables.................................................. 48,938 52,158
Inventories........................................................ 37,258 36,483
Short-term investments............................................. 108,297 45,111
Other current assets............................................... 27,069 41,901
-------------- --------------
Total Current Assets............................................. 373,851 349,497
-------------- --------------
Deferred Charges...................................................... 271,210 249,947
-------------- --------------
Total Assets..................................................... $2,939,403 $2,934,638
============== ==============
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
-------------- --------------
2002 2001
-------------- --------------
(Unaudited)
(In thousands)
CAPITALIZATION AND LIABILIITES
Capitalization
Common stock.............................................. $ 622,468 $ 625,632
Accumulated other comprehensive income, net of tax........ (31,038) (28,996)
Retained earnings......................................... 442,596 415,388
Minority interest......................................... 12,056 11,652
Preferred stock........................................... 12,800 12,800
Long-term debt, less current maturities................... 953,912 953,884
-------------- --------------
Total Capitalization.................................... 2,012,794 1,990,360
-------------- --------------
Current Liabilities
Short-term debt........................................... 100,000 35,000
Accounts payable.......................................... 98,628 120,918
Accrued interest and taxes................................ 54,452 72,022
Other current liabilities................................. 67,456 101,697
-------------- --------------
Total Current Liabilities............................... 320,536 329,637
-------------- --------------
Deferred Credits
Accumulated deferred income taxes......................... 129,706 120,153
Accumulated deferred investment tax credits............... 43,149 44,714
Other deferred credits.................................... 433,218 449,774
-------------- --------------
Total Deferred Credits.................................. 606,073 614,641
-------------- --------------
Total Capitalization and Liabilities.................... $ 2,939,403 $ 2,934,638
============== ==============
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
---------------------------------
2002 2001
--------------- ---------------
(Unaudited)
(In thousands)
Cash Flows From Operating Activities:
Net earnings...................................................... $ 36,106 $ 113,149
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Depreciation and amortization................................. 51,189 53,083
Other, net.................................................... (23,875) 29,117
Changes in certain assets and liabilities:
Accounts receivables........................................ 41,700 (42,693)
Other assets................................................ (9,684) 31,405
Accounts payable............................................ (22,291) 1,081
Other liabilities........................................... (17,323) 72,339
--------------- ---------------
Net cash flows provided from operating activities..... 55,822 257,481
--------------- ---------------
Cash Flows From Investing Activities:
Utility plant additions........................................... (139,130) (115,941)
Redemption of short term investments.............................. 45,000 -
Return of principle of PVNGS lease lessor notes................... 8,996 8,535
Other investing................................................... 4,897 (5,544)
--------------- ---------------
Net cash flows used in investing activities........... (80,237) (112,950)
--------------- ---------------
Cash Flows From Financing Activities:
Borrowings........................................................ 65,000 -
Exercise of employee stock options................................ (3,312) (2,682)
Dividends paid.................................................... (16,723) (15,935)
Other Financing................................................... (405) (285)
--------------- ---------------
Net cash flows provided by (used for) financing activities.... 44,560 (18,902)
--------------- ---------------
Increase in Cash and Cash Equivalents............................. 20,145 125,629
Beginning of Period............................................... 26,057 107,691
--------------- ---------------
End of Period..................................................... $ 46,202 $233,320
=============== ===============
Supplemental Cash Flow Disclosures:
Interest paid..................................................... $ 28,914 $ 31,382
=============== ===============
Income taxes paid, net of refunds................................. $ 41,784 $ 52,150
=============== ===============
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following table shows electric revenues by customer class and average
customers:
Electric Revenues
(Thousands of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---------- ---------- ----------- -----------
Residential..................... $45,408 $43,332 $96,418 $92,843
Commercial...................... 62,867 61,126 117,582 114,950
Industrial...................... 20,792 20,488 40,420 40,325
Other........................... 11,432 11,600 21,497 22,951
---------- ---------- ----------- -----------
$140,499 $136,546 $275,917 $271,069
========== ========== =========== ===========
Average customers............... 384,000 377,000 383,000 376,000
========== ========== =========== ===========
The following table shows electric sales by customer class:
Electric Sales
(Megawatt hours)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
----------- ----------- ------------ -----------
Residential................ 530,300 506,712 1,123,413 1,083,085
Commercial................. 827,335 806,003 1,534,477 1,515,027
Industrial................. 405,571 396,832 797,917 784,967
Other...................... 62,491 61,667 109,365 106,700
----------- ----------- ------------ -----------
1,825,697 1,771,214 3,565,172 3,489,779
=========== =========== ============ ===========
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following table shows gas revenues by customer and average customers:
Gas Revenues
(Thousands of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---------- ----------- ---------- -----------
Residential.................. $25,618 $44,802 $97,724 $166,396
Commercial.................. 8,185 12,881 30,590 49,675
Industrial.................. 415 12,381 1,064 25,918
Transportation*............. 5,134 6,411 8,745 10,413
Other....................... 5,086 10,609 15,516 26,618
---------- ----------- ---------- -----------
$ 44,438 $87,084 $153,639 $279,020
========== =========== ========== ===========
Average customers........... 444,000 435,000 444,000 435,000
========== =========== ========== ===========
*Customer-owned gas.
The following table shows gas throughput by customer class:
Gas Throughput
(Thousands of decatherms)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
---------- ---------- ----------- ----------
Residential................ 3,041 3,557 16,500 16,020
Commercial................. 1,537 1,466 6,564 5,691
Industrial................. 125 1,540 296 3,520
Transportation*............ 14,076 15,223 21,473 24,401
Other...................... 1,113 1,112 3,104 2,779
---------- ---------- ----------- ----------
19,892 22,898 47,937 52,411
========== ========== =========== ==========
*Customer-owned gas.
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Exhibit 99.1 (continued)
PNM RESOURCES, INC. AND SUBSIDIARIES
COMPARATIVE OPERATING STATISTICS
The following table shows revenues by customer class:
Generation and Trading Revenues By Market
(Thousands of dollars)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------ ------------ ------------ -----------
Intersegment sales..... $ 86,012 $ 83,396 $ 167,962 $ 164,313
Long-term contracts.... 10,562 16,981 24,899 45,795
Trading *.............. 64,398 424,381 115,874 802,432
Other.................. 5,234 - 8,141 3,383
------------ ------------ ------------ -----------
$ 166,206 $ 524,758 $ 316,876 $1,015,923
============ ============ ============ ===========
*Includes mark-to-market gains/(losses).
The following table shows sales by customer class:
Generation and Trading Sales By Market
(Megawatt hours)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
------------ ------------ ------------ -----------
Intersegment sales...... 1,825,697 1,771,214 3,565,172 3,489,779
Long-term contracts..... 227,000 368,894 508,153 846,947
Trading................. 2,202,453 2,782,462 4,262,695 5,462,540
------------ ------------ ------------ -----------
4,255,150 4,922,570 8,336,020 9,799,266
============ ============ ============ ===========
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