FORM 8-K
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 23, 2001
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No
1-9513 CMS ENERGY CORPORATION 38-2726431
(A Michigan Corporation)
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
(313) 436-9261
1-5611 CONSUMERS ENERGY COMPANY 38-0442310
(A Michigan Corporation)
212 West Michigan Avenue
Jackson, Michigan
(517) 788-1030
ITEM 5. OTHER EVENTS.
On February 23, 2001, CMS Energy Corporation issued a press release
announcing that it sold 10 million shares of its common stock, $.01 par value,
in a block trade. The shares were issued as part of a program to strengthen CMS
Energy's balance sheet. As a result of this issuance, CMS Energy has deferred
indefinitely the previously announced initial public offering of its subsidiary,
CMS Oil and Gas Company.
2000 Earnings. On January 24, 2001, CMS Energy reported year 2000
consolidated net income of $36 million, compared to $269 million in 1999.
Earnings per diluted share were $.32 per share in 2000 compared to $2.17 per
diluted share in 1999. Year 2000 results include (i) the $2.37 per share
after-tax write-down of the Loy Yang A power plant in Australia, (ii) $.20 per
share of gains from asset sales which exceed the amount CMS Energy expects to
sustain in future years, and (iii) a $.04 per share decrease as a result of a
Securities Exchange Commission-mandated change in the method for accounting for
inventories that has affected the accounting for CMS Oil and Gas Company's oil
and gas inventories. After making these adjustments, CMS Energy's sustainable
2000 earnings were $2.53 per diluted share, compared to $2.85 per diluted share
of sustainable earnings in 1999. Year 2000 consolidated operating revenue
totaled approximately $9 billion, up 47% from $6.1 billion in 1999.
For the fourth quarter of 2000, CMS Energy reported a consolidated loss of
$171 million, or $1.44 per diluted share, compared to net income of $21 million,
or a loss of $.08 per diluted share for the same period in 1999 which includes
the allocation of the premium on redemption of CMS Energy's Class G Common
Stock, which decreased diluted earnings per share of CMS Energy by $.25 per
share. The fourth quarter 2000 results include the effects of the $268 million
after-tax write-down for Loy Yang ($2.25 per share), and $.03 per share of gains
from asset sales which exceed the amount CMS Energy expects to sustain in future
years. Operating revenue for the fourth quarter 2000 totaled $3.19 billion, up
80% from $1.77 billion in the fourth quarter 1999. Sustainable earnings for the
fourth quarter of 2000, before the $268 million Loy Yang A write down were $.78
per share, compared to $.60 per share in the fourth quarter of 1999, before a
$49 million after-tax gas processing write down.
Fourth quarter 2000 earnings before non-recurring items reflect strong
electric and gas utility sales, independent power sales, and marketing and
trading profits. The growth in fourth quarter 2000 consolidated operating
revenue primarily reflects increased lower-margin energy marketing and trading
transactions.
Sale of Assets. In December 2000, CMS Energy executed an agreement to sell
its 48 percent ownership interest in Empresa Distribuidora de Electricidad de
Entre Rios, S.A., an electric distribution utility serving the province of Entre
Rios, Argentina, for approximately $107.3 million to be received in 2001. In
addition to the proceeds, the sale agreement eliminated approximately $81
million of debt from CMS Energy's consolidated balance sheet. As of December 31,
2000, CMS Energy had received approximately $1.2 billion of asset sale cash
proceeds and balance sheet debt reductions as part of its asset optimization
program. In 2001, CMS Energy anticipates selling additional assets, which could
include the sale of electric transmission facilities of CMS Energy's public
utility subsidiary, Consumers Energy Company (discussed below under "Transfer of
Transmission Assets"), that it anticipates will result in cash proceeds and
associated debt reduction of consolidated project debt of approximately $450
million.
Transfer of Transmission Assets. In January 2001, the Federal Energy
Regulatory Commission granted Consumers' application to transfer ownership and
control of its transmission facilities to a wholly owned subsidiary, Michigan
Electric Transmission Company. The transfer of control to Michigan Electric
Transmission Company is expected to occur later this year. This represents the
first step in Consumers' plan to either divest its transmission business to a
third party or to transfer control of or to sell it to a regional transmission
organization. In either event, Consumers' current plan is to remain in the
business of generating and distributing electric power to retail customers. In
addition, in response to an application that Consumers filed with the MPSC, the
MPSC issued an order that stated in part that, if Consumers sells its
transmission facilities in the manner described in its application, it would be
in compliance with applicable requirements of the Customer Choice and
Electricity Reliability Act.
Securitization. In July 2000, in accordance with the Customer Choice and
Electricity Reliability Act, Consumers filed an application with the Michigan
Public Service Commission (MPSC) to begin the securitization process.
Securitization typically involves the issuance of asset backed bonds with a
higher credit rating than conventional utility corporate financing. In October
2000 and January 2001, the MPSC issued a financing order and a final order,
respectively, authorizing securitization of approximately $470 million in
qualified costs, which were primarily regulatory assets, consisting of electric
utility stranded generation costs, plus recovery of the expenses of the
securitization. Cost savings from securitization depend upon the level of debt
or equity securities ultimately retired, the amortization schedule for the
securitized qualified costs and the interest rate of the retired debt securities
and the interest rate for the securitization bonds. These savings will only be
determined once the securitization bonds are issued and will offset up to the
full amount of the revenue impact of the five percent residential rate
reduction, $51 million on an annual basis, that Consumers was required to
implement by the Customer Choice Act. Consumers accepted the final financing
order. The financing orders have been appealed by the Attorney General of
Michigan. Consumers cannot predict the outcome of the appeal or its effect on
the schedule for issuance of the securitization bonds. Beginning January 1, 2001
and continuing during the appeal period, the amortization of the approved
regulatory assets being securitized as qualified costs is being deferred which
effectively offsets the loss in revenue resulting from the five percent
residential rate reduction. The amortization will be reestablished later, after
the securitization bond sale, based on a schedule that is the same as the
recovery of the principal amounts of the securitized qualified costs.
Ultimately, sale of securitization bonds will be required to offset the rate
reduction over the term of the bonds.
Nuclear Management Company. In November 2000, Consumers signed an agreement
to acquire an interest in Nuclear Management Company LLC, a Wisconsin company.
In connection with this agreement, Consumers requested approval from the Nuclear
Regulatory Commission for an amendment to Palisades' operating license
designating Nuclear Management Company as the plant's operator. Consumers will
retain ownership of Palisades, its 789 MW output, the spent fuel on site, and
ultimate responsibility for the safe operation, maintenance and decommissioning
of the plant. Under this agreement, salaried Palisades employees will become
Nuclear Management Company employees by mid-year 2001. Union employees will work
under the supervision of Nuclear Management Company pursuant to their existing
labor contract as Consumers' employees. Consumers will benefit by consolidating
expertise and controlling costs and resources among all of the nuclear plants
being operated on behalf of the five Nuclear Management Company member
companies. With Consumers as a partner, Nuclear Management Company will have
responsibility for operating eight units with 4,500 megawatts of generating
capacity in Wisconsin, Minnesota, Iowa and Michigan.
This document contains "forward-looking statements" that are subject to
risks and uncertainties. The words "anticipates", "believes", "estimates",
"expects", "intends", and "plans", and variations of such words and similar
expressions, are intended to identify forward looking statements. They should be
read in conjunction with "Forward-Looking Statements Cautionary Factors" in CMS
Energy's and Consumers' Form 10-K, Item 1 (incorporated by reference herein)
that discusses important factors that could cause CMS Energy's or Consumers'
results to differ materially from those anticipated in such statements.
ITEM 7. EXHIBITS
(c) Exhibits
99 -- CMS Energy Corporation Digest of Consolidated Earnings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: February 23, 2001 By: /s/Alan M. Wright
Alan M. Wright
Executive Vice President,
Chief Financial and
Administrative Officer
CONSUMERS ENERGY COMPANY
Dated: February 23, 2001 By: /s/Alan M. Wright
Alan M. Wright
Executive Vice President,
Chief Financial and
Administrative Officer
INDEX TO EXHIBITS
EXHIBIT No.
99 CMS Energy Corporation Digest of Consolidated Earnings
EXHIBIT 99
CMS ENERGY CORPORATION
Digest of Consolidated Earnings
(Millions, Except Per Share Amounts)
2000 1999
Twelve Months Ended December 31 (unaudited)
Operating Revenue $8,998 $ 6,103
Consolidated Net Income $ 36(1) $ 277
Net Income Attributable To:
CMS Energy Common Stock $ 36 $ 269
Class G Common Stock - 8
Net Income Before Losses on Investments $ 304 $ 318
Effects of Losses on Investments in Loy Yang (268) -
Effects of Losses on Investments in Nitrotec - (49)
______ _______
Net Income Attributable to
CMS Energy Common Stock $ 36 $ 269
______ _______
Average Number of Common Shares Outstanding:
Basic 113 110
Diluted 113 115
Basic Earnings Per Average Common Share:
Earnings Per Share After Reconciling Items $ .32(1) $ 2.18
Effects of Class G Common Stock Exchange (2) - .26
Effects of Losses on Investments in Loy Yang 2.37 -
Effects of Losses on Investments in Nitrotec - .45
Non-sustainable Level of Gains from Asset Sales (.20) -
Cumulative Effect of Change in Accounting
for Inventories .04 -
______ _______
Earnings Per Share Before
Reconciling Items $ 2.53 $ 2.89
______ _______
Diluted Earnings Per Average Common Share:
Earnings Per Share After Reconciling Items $ .32(1) $ 2.17
Effects of Class G Common Stock Exchange (2) - .25
Effects of Losses on Investment 2.37 -
Effects of Losses on Investments in Nitrotec - .43
Non-sustainable Level of Gains from Asset Sales (.20) -
Cumulative Effect of Change in Accounting
for Inventories .04 -
______ _______
Earnings Per Share Before Reconciling Items $ 2.53 $ 2.85
______ _______
Dividends Declared per Common Share $ 1.46 $ 1.39
In the opinion of Management, the above unaudited amounts reflect all
adjustments necessary to assure the fair presentation of the results of
operations for the periods presented.
(1) In 2000, CMS Energy adopted the provisions of the SEC's Staff Accounting
Bulletin (SAB) No. 101 summarizing the SEC staff's views on revenue
recognition policies based upon existing generally accepted accounting
principles. As a result, the oil and gas exploration and production
industry's long-standing practice of recording inventories at their net
realizable amount at the time of production was viewed as inappropriate.
Rather, inventories should be presented at the lower of cost or market.
Consequently, in accordance with the provisions of SAB No. 101, CMS Energy
implemented a change in the recording of these oil and gas exploration and
production inventories as of January 1, 2000. The cumulative effect of this
one-time accounting change decreased 2000 pre-tax operating income by $7
million, and earnings, net of tax, by $5 million, or $.04 per basic and
diluted share of CMS Energy Common Stock.
(2) Reflects the reallocation of earnings per share on exchange of Class G
Common Stock in October 1999. As a result, CMS Energy's basic and diluted
earnings per share were reduced $.26 and $.25, respectively and Class G's
basic and diluted earnings per share were increased $3.31.
CMS ENERGY CORPORATION
Digest of Consolidated Earnings
(Millions, Except Per Share Amounts)
2000 1999
Three Months Ended December 31 (unaudited)
Operating Revenue $3,187 $1,768
Consolidated Net Income $ (171) $ 21
Net Income Before Losses on Investments $ 97 $ 70
Effects of Losses on Investments in Loy Yang (268) -
Effects of Losses on Investments in Nitrotec - (49)
______ ______
Net Income (Loss) Attributable to
CMS Energy Common Stock $ (171) $ 21
______ ______
Average Number of Common Shares Outstanding:
Basic 119 114
Diluted 119 119
Basic Earnings (Loss) Per Average Common Share:
Earnings (Loss) Per Share After Reconciling Items $(1.44) $ (.08)
Effects of Class G Common Stock Exchange (1) - .26
Effects of Losses on Investments in Loy Yang 2.25 -
Effects of Losses on Investments in Nitrotec - .45
Non-sustainable Level of Gains from Asset Sales (.03) -
_______ _______
Earnings Per Share Before Reconciling Items $ .78 $ .63
_______ _______
Diluted Earnings (Loss) Per Average Common Share:
Earnings (Loss) Per Share After Reconciling Items $(1.44) $ (.08)
Effects of Class G Common Stock Exchange (1) - .25
Effects of Losses on Investments in Loy Yang 2.25 -
Effects of Losses on Investments in Nitrotec - .43
Non-sustainable Level of Gains from Asset Sales (.03) -
_______ _______
Earnings Per Share Before Reconciling Items $ .78 $ .60
_______ _______
Dividends Declared per Common Share $ .365 $ .365
In the opinion of Management, the above unaudited amounts reflect all
adjustments necessary to assure the fair presentation of the results of
operations for the periods presented.
(1) Reflects the reallocation of earnings per share on exchange of Class G
Common Stock in October 1999. As a result, CMS Energy's basic and diluted
earnings per share were reduced $.26 and $.25, respectively and Class G's
basic and diluted earnings per share were increased $3.31.