UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-16455
RELIANT ENERGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 76-0655566 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
1000 Main Street
Houston, Texas 77002
(Address of Principal Executive Offices) (Zip Code)
(713) 497-3000
(Registrants Telephone Number, Including Area Code)
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 shorter 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨.
As of August 2, 2004, the last practicable date for determination, Reliant Energy, Inc. had 298,339,179 shares of common stock outstanding, excluding 1,464,821 shares held by the registrant as treasury stock.
RELIANT ENERGY, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
Table of Contents
| PART I. FINANCIAL INFORMATION |
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| Item 1. |
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| Consolidated Statements of Operations (unaudited) Three and Six Months Ended June 30, 2004 and 2003 |
1 | |||
| Consolidated Balance Sheets (unaudited) June 30, 2004 and December 31, 2003 |
2 | |||
| Consolidated Statements of Cash Flows (unaudited) Six Months Ended June 30, 2004 and 2003 |
3 | |||
| Notes to Unaudited Consolidated Interim Financial Statements |
4 | |||
| Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
29 | ||
| 29 | ||||
| 30 | ||||
| 43 | ||||
| Item 3. |
48 | |||
| Item 4. |
52 | |||
| PART II. OTHER INFORMATION |
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| Item 1. |
53 | |||
| Item 4. |
53 | |||
| Item 6 |
54 | |||
i
Cautionary Statement Regarding Forward-Looking Information
When we make statements containing projections, estimates or assumptions about our revenues, income and other financial items, our plans for the future, future economic performance, transactions for the sale of parts of our operations and financings related thereto, we are making forward-looking statements. Forward-looking statements relate to future events and anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. In many cases you can identify forward-looking statements by terminology such as anticipate, estimate, believe, continue, could, intend, may, plan, potential, predict, should, will, expect, objective, projection, forecast, goal, guidance, outlook, effort, target and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. Although we believe that the expectations and the underlying assumptions reflected in our forward-looking statements are reasonable, there can be no assurance that these expectations will prove to be correct. Forward-looking statements are not guarantees of future performance or events. Such statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed in the forward-looking statements.
Among other things, the matters described in (a) (i) Managements Discussion and Analysis of Financial Condition and Results of Operations Risk Factors in Item 7 and (ii) note 15 to our consolidated financial statements, each included in our Annual Report on Form 10-K for the year ended December 31, 2003 (Form 10-K), (b) (i) notes 11 and 12 to our interim financial statements and (ii) Managements Discussion and Analysis of Financial Condition and Results of Operations, each included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004 (First Quarter Form 10-Q) and (c) (i) Managements Discussion and Analysis of Financial Condition and Results of Operations and (ii) notes 12 and 13 to our interim financial statements could cause actual results to differ materially from those expressed or implied in our forward-looking statements.
Each forward-looking statement speaks only as of the date of the particular statement and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
ii
RELIANT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars, except per share amounts)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Revenues: |
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| Revenues (including $(3,958), $(6,417), $1,501 and $(14,069) unrealized (losses) gains) |
$ | 2,227,546 | $ | 2,686,224 | $ | 3,928,978 | $ | 5,203,748 | ||||||||
| Trading margins |
(5,418 | ) | 12,384 | (2,660 | ) | (71,299 | ) | |||||||||
| Total |
2,222,128 | 2,698,608 | 3,926,318 | 5,132,449 | ||||||||||||
| Expenses: |
||||||||||||||||
| Fuel and cost of gas sold (including $(514), $(1,594), $7,108 and $(8,017) unrealized (losses) gains) |
486,930 | 294,828 | 736,391 | 640,295 | ||||||||||||
| Purchased power (including $(67,146), $(5,166), $(58,796) and $(7,057) unrealized losses) |
1,280,932 | 1,896,108 | 2,279,399 | 3,542,448 | ||||||||||||
| Accrual for payment to CenterPoint Energy, Inc. |
| | 1,658 | 46,700 | ||||||||||||
| Operation and maintenance |
233,511 | 243,097 | 465,723 | 454,733 | ||||||||||||
| Selling and marketing |
21,261 | 29,044 | 38,927 | 48,553 | ||||||||||||
| Bad debt expense |
11,564 | 19,798 | 20,308 | 36,844 | ||||||||||||
| Other general and administrative |
44,222 | 73,987 | 100,263 | 131,819 | ||||||||||||
| Depreciation |
122,906 | 81,478 | 223,693 | 157,310 | ||||||||||||
| Amortization |
10,916 | 7,839 | 19,345 | 16,915 | ||||||||||||
| Total |
2,212,242 | 2,646,179 | 3,885,707 | 5,075,617 | ||||||||||||
| Operating Income |
9,886 | 52,429 | 40,611 | 56,832 | ||||||||||||
| Other Income (Expense) : |
||||||||||||||||
| (Losses) gains from investments, net |
(496 | ) | 211 | (665 | ) | 1,855 | ||||||||||
| Loss of equity investments |
(8,783 | ) | (2,390 | ) | (9,588 | ) | (3,599 | ) | ||||||||
| Loss on sales of receivables |
(10,063 | ) | (4,039 | ) | (19,250 | ) | (7,874 | ) | ||||||||
| Other, net |
3,117 | 2,061 | 3,877 | 2,860 | ||||||||||||
| Interest expense |
(104,010 | ) | (101,064 | ) | (200,628 | ) | (184,153 | ) | ||||||||
| Interest income |
7,405 | 5,002 | 12,531 | 19,133 | ||||||||||||
| Total other expense |
(112,830 | ) | (100,219 | ) | (213,723 | ) | (171,778 | ) | ||||||||
| Loss from Continuing Operations Before Income Taxes |
(102,944 | ) | (47,790 | ) | (173,112 | ) | (114,946 | ) | ||||||||
| Income tax benefit |
(33,654 | ) | (13,681 | ) | (57,835 | ) | (31,899 | ) | ||||||||
| Loss from Continuing Operations |
(69,290 | ) | (34,109 | ) | (115,277 | ) | (83,047 | ) | ||||||||
| (Loss) income from discontinued operations before income taxes |
(6,642 | ) | 52,728 | (8,900 | ) | (315,220 | ) | |||||||||
| Income tax (benefit) expense |
(4,256 | ) | 25,390 | (6,840 | ) | 35,989 | ||||||||||
| (Loss) income from discontinued operations |
(2,386 | ) | 27,338 | (2,060 | ) | (351,209 | ) | |||||||||
| Loss Before Cumulative Effect of Accounting Changes |
(71,676 | ) | (6,771 | ) | (117,337 | ) | (434,256 | ) | ||||||||
| Cumulative effect of accounting changes, net of tax |
$ | | $ | 862 | $ | 7,290 | $ | (24,055 | ) | |||||||
| Net Loss |
$ | (71,676 | ) | $ | (5,909 | ) | $ | (110,047 | ) | $ | (458,311 | ) | ||||
| Basic and Diluted (Loss) Earnings per Share: |
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| Loss from continuing operations |
$ | (0.23 | ) | $ | (0.12 | ) | $ | (0.39 | ) | $ | (0.28 | ) | ||||
| (Loss) income from discontinued operations, net of tax |
(0.01 | ) | 0.10 | | (1.21 | ) | ||||||||||
| Loss before cumulative effect of accounting changes |
(0.24 | ) | (0.02 | ) | (0.39 | ) | (1.49 | ) | ||||||||
| Cumulative effect of accounting changes, net of tax |
| | 0.02 | (0.08 | ) | |||||||||||
| Net loss |
$ | (0.24 | ) | $ | (0.02 | ) | $ | (0.37 | ) | $ | (1.57 | ) | ||||
See Notes to our Unaudited Consolidated Interim Financial Statements
1
RELIANT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, except share amounts)
(Unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 155,285 | $ | 146,244 | ||||
| Restricted cash |
192,283 | 234,113 | ||||||
| Accounts and notes receivable, principally customer, net of allowance of $40,849 and $73,940 |
532,567 | 569,403 | ||||||
| Notes receivable related to receivables facility |
414,867 | 393,822 | ||||||
| Net California receivables subject to refund |
| 198,609 | ||||||
| Inventory |
251,004 | 266,430 | ||||||
| Trading and derivative assets |
518,864 | 493,046 | ||||||
| Margin deposits on energy trading and hedging activities |
294,020 | 76,871 | ||||||
| Prepayments and other current assets |
281,091 | 245,787 | ||||||
| Current assets of discontinued operations |
58,203 | 65,327 | ||||||
| Total current assets |
2,698,184 | 2,689,652 | ||||||
| Property, plant and equipment, gross |
8,723,172 | 8,695,694 | ||||||
| Accumulated depreciation |
(857,039 | ) | (705,149 | ) | ||||
| Property, Plant and Equipment, net |
7,866,133 | 7,990,545 | ||||||
| Other Assets: |
||||||||
| Goodwill |
435,534 | 482,534 | ||||||
| Other intangibles, net |
667,975 | 650,549 | ||||||
| Net California receivables subject to refund |
224,000 | | ||||||
| Equity investments |
84,639 | 95,223 | ||||||
| Trading and derivative assets |
234,312 | 199,716 | ||||||
| Prepaid lease |
214,275 | 217,781 | ||||||
| Restricted cash |
29,812 | 36,916 | ||||||
| Other |
320,614 | 327,904 | ||||||
| Long-term assets of discontinued operations |
654,752 | 617,828 | ||||||
| Total other assets |
2,865,913 | 2,628,451 | ||||||
| Total Assets |
$ | 13,430,230 | $ | 13,308,648 | ||||
| LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
| Current Liabilities: |
||||||||
| Current portion of long-term debt and short-term borrowings |
$ | 365,379 | $ | 391,403 | ||||
| Accounts payable, principally trade |
642,819 | 509,499 | ||||||
| Trading and derivative liabilities |
349,208 | 348,614 | ||||||
| Margin deposits from customers on energy trading and hedging activities |
7,007 | 36,136 | ||||||
| Retail customer deposits |
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