UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended: September 30, 2004 | Commission File Number: 001-15891 |
NRG Energy, Inc.
| Delaware (State or other jurisdiction of incorporation or organization) |
41-1724239 (I.R.S. Employer Identification No.) |
|
| 901 Marquette Avenue, Suite 2300 Minneapolis, Minnesota (Address of principal executive offices) |
55402 (Zip Code) |
(612) 373-5300
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act).
Yes x No o
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Securities and Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes x No o
As of November 2, 2004, there were 100,008,053 shares of common stock outstanding.
TABLE OF CONTENTS
Index
| Page No. |
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Part I — FINANCIAL INFORMATION |
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Item 1 Consolidated Financial Statements and Notes |
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| 3 | ||||||||
| 4 | ||||||||
| 6 | ||||||||
| 8 | ||||||||
| 9 | ||||||||
| 38 | ||||||||
| 56 | ||||||||
| 58 | ||||||||
| 59 | ||||||||
| 59 | ||||||||
| 59 | ||||||||
| 59 | ||||||||
| 59 | ||||||||
| 60 | ||||||||
| 61 | ||||||||
| 62 | ||||||||
| Form of Long-Term Incentive Plan Non-Qualified Stock Option Agreement | ||||||||
| Form of Long-Term Incentive Plan Restricted Stock Unit Agreement | ||||||||
| Certification of CEO Pursuant to Section 302 | ||||||||
| Certification of CFO Pursuant to Section 302 | ||||||||
| Certification of Controller Pursuant to Section 302 | ||||||||
| Certification of CEO, CFO and Controller Pursuant to Section 906 | ||||||||
2
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Reorganized | Predecessor | Reorganized | Predecessor | |||||||||||||
| NRG |
Company |
NRG |
Company |
|||||||||||||
| Three Months | Nine Months | |||||||||||||||
| Ended |
Ended |
|||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (In thousands, except for per share amounts) | ||||||||||||||||
Operating Revenues |
||||||||||||||||
Revenues from majority-owned operations |
$ | 606,663 | $ | 570,701 | $ | 1,780,551 | $ | 1,507,186 | ||||||||
Operating Costs and Expenses |
||||||||||||||||
Cost of majority-owned operations |
381,010 | 384,386 | 1,116,021 | 1,142,976 | ||||||||||||
Depreciation and amortization |
51,373 | 56,510 | 159,547 | 179,225 | ||||||||||||
General, administrative and development |
54,307 | 34,420 | 136,445 | 122,052 | ||||||||||||
Other charges |
||||||||||||||||
Legal settlement |
— | 396,000 | — | 396,000 | ||||||||||||
Corporate relocation charges |
5,713 | — | 12,474 | — | ||||||||||||
Reorganization items |
(5,245 | ) | 20,698 | (1,656 | ) | 27,032 | ||||||||||
Restructuring and impairment charges |
40,507 | 6,252 | 42,183 | 298,019 | ||||||||||||
Total operating costs and expenses |
527,665 | 898,266 | 1,465,014 | 2,165,304 | ||||||||||||
Operating Income/(Loss) |
78,998 | (327,565 | ) | 315,537 | (658,118 | ) | ||||||||||
Other Income (Expense) |
||||||||||||||||
Minority interest in (earnings) losses of consolidated subsidiaries |
128 | — | (581 | ) | — | |||||||||||
Equity in earnings of unconsolidated affiliates |
53,373 | 63,272 | 117,187 | 155,758 | ||||||||||||
Write downs and gains/(losses) on sales of equity method investments |
(13,524 | ) | 12,310 | (14,057 | ) | (136,717 | ) | |||||||||
Other income, net |
5,502 | 7,300 | 17,210 | 10,118 | ||||||||||||
Interest expense |
(66,883 | ) | (34,424 | ) | (226,254 | ) | (294,460 | ) | ||||||||
Total other income (expense) |
(21,404 | ) | 48,458 | (106,495 | ) | (265,301 | ) | |||||||||
Income/(Loss) From Continuing Operations Before Income Taxes |
57,594 | (279,107 | ) | 209,042 | (923,419 | ) | ||||||||||
Income Tax Expense |
14,264 | 5,437 | 64,866 | 42,779 | ||||||||||||
Income/(Loss) From Continuing Operations |
43,330 | (284,544 | ) | 144,176 | (966,198 | ) | ||||||||||
Income/(Loss) From Discontinued Operations, net of Income Taxes |
10,891 | (250 | ) | 23,304 | 60,371 | |||||||||||
Net Income/(Loss) |
$ | 54,221 | $ | (284,794 | ) | $ | 167,480 | $ | (905,827 | ) | ||||||
Weighted Average Number of Common Shares Outstanding — Basic |
100,101 | 100,066 | ||||||||||||||
Income From Continuing Operations per Weighted Average Common Share
— Basic |
$ | 0.43 | $ | 1.44 | ||||||||||||
Income From Discontinued Operations per Weighted Average Common
Share — Basic |
0.11 | 0.23 | ||||||||||||||
Net Income per Weighted Average Common Share — Basic |
$ | 0.54 | $ | 1.67 | ||||||||||||
Weighted Average Number of Common Shares Outstanding — Diluted |
100,616 | 100,328 | ||||||||||||||
Income From Continuing Operations per Weighted Average Common Share
— Diluted |
$ | 0.43 | $ | 1.44 | ||||||||||||
Income From Discontinued Operations per Weighted Average Common
Share — Diluted |
0.11 | 0.23 | ||||||||||||||
Net Income per Weighted Average Common Share — Diluted |
$ | 0.54 | $ | 1.67 | ||||||||||||
See notes to consolidated financial statements.
3
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)
(Unaudited)
| September 30, | December 31, | |||||||
| 2004 |
2003 |
|||||||
| (In thousands) | ||||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 1,104,783 | $ | 551,223 | ||||
Restricted cash |
148,919 | 116,067 | ||||||
Accounts receivable — trade, less allowance for doubtful accounts of $908 and $0 |
242,245 | 201,921 | ||||||
Xcel Energy settlement receivable |
— | 640,000 | ||||||
Current portion of notes receivable — affiliates |
— | 200 | ||||||
Current portion of notes receivable |
121,599 | 65,141 | ||||||
Taxes receivable |
30,931 | — | ||||||
Inventory |
214,980 | 194,926 | ||||||
Derivative instruments valuation |
5,516 | 772 | ||||||
Prepayments and other current assets |
196,078 | 222,138 | ||||||
Current deferred income taxes |
989 | 1,850 | ||||||
Current assets — held for sale |
43,851 | — | ||||||
Current assets — discontinued operations |
3,042 | 119,601 | ||||||
Total current assets |
2,112,933 | 2,113,839 | ||||||
Property, Plant and Equipment |
||||||||
In service |
3,439,499 | 3,885,465 | ||||||
Under construction |
68,135 | 139,171 | ||||||
Total property, plant and equipment |
3,507,634 | 4,024,636 | ||||||
Less accumulated depreciation |
(156,643 | ) | (11,800 | ) | ||||
Net property, plant and equipment |
3,350,991 | 4,012,836 | ||||||
Other Assets |
||||||||
Equity investments in affiliates |
689,974 | 737,998 | ||||||
Notes receivable, less current portion — affiliates |
118,200 | 130,152 | ||||||
Notes receivable, less current portion |
612,443 | 691,444 | ||||||
Intangible assets, net of accumulated amortization of $45,593 and $5,212 |
326,030 | 432,361 | ||||||
Debt issuance costs, net of accumulated amortization of $7,372 and $454 |
60,658 | 74,337 | ||||||
Derivative instruments valuation |
48,928 | 59,907 | ||||||
Funded letter of credit |
250,000 | 250,000 | ||||||
Other assets |
95,441 | 118,940 | ||||||
Non-current assets — held for sale |
519,986 | — | ||||||
Non-current assets — discontinued operations |
— | 623,173 | ||||||
Total other assets |
2,721,660 | 3,118,312 | ||||||
Total Assets |
$ | 8,185,584 | $ | 9,244,987 | ||||
See notes to consolidated financial statements.
4
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (REORGANIZED COMPANY)
(Unaudited)
| September 30, | December 31, | |||||||
| 2004 |
2003 |
|||||||
| (In thousands, except for | ||||||||
| share data) | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current Liabilities |
||||||||
Current portion of long-term debt and capital leases |
$ | 100,105 | $ | 801,229 | ||||
Short-term debt |
— | 19,019 | ||||||
Accounts payable — trade |
115,270 | 158,646 | ||||||
Accounts payable — affiliates |
5,301 | 3,092 | ||||||
Accrued taxes |
— | 16,095 | ||||||
Accrued property, sales and other taxes |
13,672 | 22,301 | ||||||
Accrued salaries, benefits and related costs |
33,362 | 19,330 | ||||||
Accrued interest |
65,011 | 8,982 | ||||||
Derivative instruments valuation |
18,038 | 429 | ||||||
Creditor pool obligation |
25,000 | 540,000 | ||||||
Other bankruptcy settlement |
220,492 | 220,000 | ||||||
Other current liabilities |
127,073 | 102,860 | ||||||
Current liabilities — held for sale |
6,855 | — | ||||||
Current liabilities — discontinued operations |
1,752 | 114,198 | ||||||
Total current liabilities |
731,931 | 2,026,181 | ||||||
Other Liabilities |
||||||||
Long-term debt and capital leases |
3,511,231 | 3,327,782 | ||||||
Deferred income taxes |
143,129 | 149,493 | ||||||
Postretirement and other benefit obligations |
113,640 | 105,946 | ||||||
Derivative instruments valuation |
140,787 | 153,503 | ||||||
Other long-term obligations |
385,496 | 480,937 | ||||||
Non-current liabilities — held for sale |
555,546 | — | ||||||
Non-current liabilities — discontinued operations |
1,081 | 558,885 | ||||||
Total non-current liabilities |
4,850,910 | 4,776,546 | ||||||
Total Liabilities |
5,582,841 | 6,802,727 | ||||||
Minority Interest |
5,592 | 5,004 | ||||||
Commitments and Contingencies |
||||||||
Stockholders’ Equity |
||||||||
Serial Preferred Stock; 10,000,000 shares
authorized, none issued and outstanding at
September 30, 2004 and December 31, 2003 |
— | — | ||||||
Common stock; $.01 par value; 500,000,000 shares
authorized; 100,008,053 shares at September 30,
2004 and 100,000,000 shares at December 31, 2003
issued and outstanding |
1,000 | 1,000 | ||||||
Additional paid-in capital |
2,413,962 | 2,403,429 | ||||||
Retained earnings |
178,505 | 11,025 | ||||||
Accumulated other comprehensive income |
3,684 | 21,802 | ||||||
Total stockholders’ equity |
2,597,151 | 2,437,256 | ||||||
Total Liabilities and Stockholders’ Equity |
$ | 8,185,584 | $ | 9,244,987 | ||||
See notes to consolidated financial statements.
5
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
AND COMPREHENSIVE INCOME/(LOSS)
Three Months Ended September 30, 2004 and 2003
(Unaudited)
| Common |
Additional | Accumulated Other |
Total | |||||||||||||||||||||
| Paid-in | Retained Earnings/ | Comprehensive | Stockholders’ | |||||||||||||||||||||
| Stock |
Shares |
Capital |
(Accumulated Deficit) |
Income/(Loss) |
Equity/(Deficit) |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Balances at June
30, 2003
(Predecessor
Company) |
$ | — | — | $ | 2,227,692 | $ | (3,449,966 | ) | $ | (56,072 | ) | $ | (1,278,346 | ) | ||||||||||
Net loss |
(284,794 | ) | (284,794 | ) | ||||||||||||||||||||
Foreign currency
translation
adjustments and
other |
(3,133 | ) | (3,133 | ) | ||||||||||||||||||||
Deferred unrealized
gain on
derivatives, net |
35,056 | 35,056 | ||||||||||||||||||||||
Comprehensive loss
for the three
months ended
September 30, 2003 |
(252,871 | ) | ||||||||||||||||||||||
Balances at
September 30, 2003
(Predecessor
Company) |
$ | — | — | $ | 2,227,692 | $ | (3,734,760 | ) | $ | (24,149 | ) | $ | (1,531,217 | ) | ||||||||||
Balances at June
30, 2004
(Reorganized NRG) |
$ | 1,000 | 100,007 | $ | 2,410,751 | $ | 124,284 | $ | 43 | $ | 2,536,078 | |||||||||||||
Net income |
54,221 | 54,221 | ||||||||||||||||||||||
Foreign currency
translation
adjustments and
other |
22,434 | 22,434 | ||||||||||||||||||||||
Deferred unrealized
loss on
derivatives, net |
(18,793 | ) | (18,793 | ) | ||||||||||||||||||||
Comprehensive
income for the
three months ended
September 30, 2004 |
57,862 | |||||||||||||||||||||||
Equity based
compensation |
1 | 3,211 | 3,211 | |||||||||||||||||||||
Balances at
September 30, 2004
(Reorganized NRG) |
$ | 1,000 | 100,008 | $ | 2,413,962 | $ | 178,505 | $ | 3,684 | $ | 2,597,151 | |||||||||||||
See notes to consolidated financial statements.
6
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/(DEFICIT)
AND COMPREHENSIVE INCOME/(LOSS)
Nine Months Ended September 30, 2004 and 2003
(Unaudited)
| Common |
Additional | Accumulated Other |
Total | |||||||||||||||||||||
| Paid-in | Retained Earnings/ | Comprehensive | Stockholders’ | |||||||||||||||||||||
| Stock |
Shares |
Capital |
(Accumulated Deficit) |
Income/(Loss) |
Equity/(Deficit) |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
Balances at
December 31, 2002
(Predecessor
Company) |
$ | — | — | $ | 2,227,692 | $ | (2,828,933 | ) | $ | (94,958 | ) | $ | (696,199 | ) | ||||||||||
Net loss |
(905,827 | ) | (905,827 | ) | ||||||||||||||||||||
Foreign currency
translation
adjustments and
other |
87,734 | 87,734 | ||||||||||||||||||||||
Deferred unrealized
loss on
derivatives, net |
(16,925 | ) | (16,925 | ) | ||||||||||||||||||||
Comprehensive loss
for the nine months
ended September 30,
2003 |
(835,018 | ) | ||||||||||||||||||||||
Balances at
September 30, 2003
(Predecessor
Company) |
$ | — | — | $ | 2,227,692 | $ | (3,734,760 | ) | $ | (24,149 | ) | $ | (1,531,217 | ) | ||||||||||
Balances at
December 31, 2003
(Reorganized NRG) |
$ | 1,000 | 100,000 | $ | 2,403,429 | $ | 11,025 | $ | 21,802 | $ | 2,437,256 | |||||||||||||
Net income |
167,480 | 167,480 | ||||||||||||||||||||||
Foreign currency
translation
adjustments and
other |
(13,499 | ) | (13,499 | ) | ||||||||||||||||||||
Deferred unrealized
loss on
derivatives, net |
(4,619 | ) | (4,619 | ) | ||||||||||||||||||||
Comprehensive
income for the nine
months ended
September 30, 2004 |
149,362 | |||||||||||||||||||||||
Equity based
compensation |
8 | 10,533 | 10,533 | |||||||||||||||||||||
Balances at
September 30, 2004
(Reorganized NRG) |
$ | 1,000 | 100,008 | $ | 2,413,962 | $ | 178,505 | $ | 3,684 | $ | 2,597,151 | |||||||||||||
See notes to consolidated financial statements.
7
NRG ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Reorganized | Predecessor | |||||||
| NRG |
Company |
|||||||
| Nine Months Ended | ||||||||
| September 30, |
||||||||
| 2004 |
2003 |
|||||||
| (In thousands) | ||||||||
Cash Flows from Operating Activities |
||||||||
Net income/(loss) |
$ | 167,480 | $ | (905,827 | ) | |||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities |
||||||||
Distributions less than equity in earnings of unconsolidated affiliates |
(13,703 | ) | (47,500 | ) | ||||
Depreciation and amortization |
164,872 | 211,201 | ||||||
Amortization of debt issuance costs |
22,440 | 14,306 | ||||||
Amortization of debt discount |
15,685 | — | ||||||
Deferred income taxes |
67,655 | 18,502 | ||||||
Minority interest |
1,961 | 2,010 | ||||||
Unrealized gains on derivatives |
(33,232 | ) | (12,500 | ) | ||||
Asset impairment |
42,183 | 353,871 | ||||||
Write downs and losses on sales of equity method investments |
14,057 | 136,531 | ||||||
Gain on sale of discontinued operations |
(29,924 | ) | (217,920 | ) | ||||
Amortization of power contracts and emission credits |
42,822 | — | ||||||
Reserve for note and interest receivable |
4,572 | — | ||||||
Cash provided (used) by changes in certain working capital items |
||||||||
Accounts receivable |
(29,480 | ) | (103,377 | ) | ||||
Xcel Energy settlement receivable |
640,000 | — | ||||||
Accrued taxes |
(45,555 | ) | (16,495 | ) | ||||
Inventory |
(27,586 | ) | 12,314 | |||||
Prepayments and other current assets |
24,436 | (28,748 | ) | |||||
Accounts payable |
(54,611 | ) | 618,099 | |||||
Accounts payable — affiliates |
4,271 | 36,571 | ||||||
Accrued property, sales and other taxes |
(6,415 | ) | 1,733 | |||||
Accrued salaries, benefits and related costs |
22,291 | (10,605 | ) | |||||
Accrued interest |
45,625 | 129,585 | ||||||
Other current liabilities |
(486,084 | ) | (118,365 | ) | ||||
Cash provided by changes in other assets and liabilities |
41,661 | 47,929 | ||||||
Net Cash Provided by Operating Activities |
595,421 | 121,315 | ||||||
Cash Flows from Investing Activities |
||||||||
Proceeds on sale of equity method investments |
29,693 | 102,546 | ||||||
Proceeds on sale of discontinued operations |
246,498 | 1,011 | ||||||
Proceeds on sales of subsidiaries |
— | 1,000 | ||||||
Investments in equity method investments and projects |
(672 | ) | (369 | ) | ||||
Decrease in notes receivable, net |
36,609 | 9,450 | ||||||
Capital expenditures |
(78,293 | ) | (85,635 | ) | ||||
Increase in restricted cash and trust funds |
||||||||