<PAGE> 1
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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) JANUARY 31, 2000
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
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<PAGE> 2
ITEM 5. OTHER EVENTS.
On January 31, 2000, CMS Energy Corporation issued a press release
announcing its earnings for the fourth quarter and full year 1999. On February
1, 2000, CMS Energy issued a press release announcing (a) a major financial
restructuring plan, including the intent to publicly issue a tracking stock
representing a financial interest in its electric and gas utility subsidiary,
Consumers Energy Company, as well as (b) Board of Directors' approval of (i) the
repurchase from time to time of up to 10 million CMS Energy common shares in
open market purchases or in privately negotiated transactions and (ii) a
reduction in the annual rate of the CMS Energy common dividend from $1.46 to
$.40 per share, effective at the time of the intended public offering of the
tracking stock. Because these press releases contain "forward-looking
statements" within the meaning of the safe-harbor provisions of the federal
securities laws, they should be read in conjunction with CMS Energy and
Consumers Energy Forward-Looking Statements Cautionary Factors. Copies of such
press releases and the Forward-Looking Statements Cautionary Factors are
attached as Exhibits 99(a), (b) and (c) and are incorporated by reference
herein. CMS Energy's written presentation used in its February 1, 2000 meeting
reviewing the financial restructuring plan, growth outlook, 1999 financial
results and 2000 through 2002 financial outlook is available on the Internet at
www.cmsenergy.com.
ITEM 7. EXHIBITS.
(c) Exhibits:
99(a) - CMS Energy Corporation Press Release dated January 31, 2000.
99(b) - CMS Energy Corporation Press Release dated February 1, 2000.
99(c) - CMS Energy Corporation and Consumers Energy Company Forward-
Looking Statements Cautionary Factors
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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 1, 2000 By: /s/ Alan M. Wright
---------------------------------
Alan M. Wright
Senior Vice President and
Chief Financial Officer
CONSUMERS ENERGY COMPANY
Dated: February 1, 2000 By: /s/ Alan M. Wright
---------------------------------
Alan M. Wright
Senior Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(c) Exhibits:
99(a) - CMS Energy Corporation Press Release dated January 31, 2000.
99(b) - CMS Energy Corporation Press Release dated February 1, 2000.
99(c) - CMS Energy Corporation and Consumers Energy Company Forward-
Looking Statements Cautionary Factors
<PAGE> 1
EXHIBIT 99(a)
DEARBORN, Mich., January 31, 2000 -- CMS Energy Corporation (NYSE:CMS)
today announced consolidated 1999 net income, before a charge related to its gas
processing investment in Nitrotec Corporation, of $326 million, or $2.89 per
share, compared to $285 million, or $2.65 per share, in 1998. Including a $49
million net charge related to Nitrotec, net income was $277 million, or $2.44
per share. CMS Energy's October 1999 exchange of common stock for its
previously-issued Class G stock caused a further one time, non-cash reduction of
earnings per share on CMS common by 26 cents due to the allocation of a premium
paid on the repurchase of outstanding Class G shares. The per share allocation
does not affect CMS Energy net income.
Consolidated operating revenue for 1999 grew 19 percent to $6.10 billion,
from $5.14 billion in 1998. Total revenue, including CMS Energy's share from
unconsolidated investments, totaled $7.54 billion.
Consolidated net income for the fourth quarter, before the $49 million
special charge, was $70 million, or 63 cents per share, compared to $51 million,
or 44 cents per share, in the fourth quarter of 1998. The effect of the Nitrotec
writeoff and the Class G stock exchange premium reduced fourth quarter earnings
per share by 45 cents and 26 cents, respectively. Fourth quarter operating
revenue totaled $1.77 billion, up from $1.35 billion in the fourth quarter of
1998.
Significant developments for CMS Energy in 1999 included:
-- acquiring the CMS Panhandle companies for $2.2 billion, including
assumption of $300 million of debt. The Panhandle companies comprise 10,400
miles of mainline natural gas pipeline from the Gulf Coast and from the
Kansas/Oklahoma mid-continent region to the upper Midwest with a combined
capacity of 4.4 billion cubic feet per day, and 85 billion cubic feet of
underground gas storage facilities. The acquisition also included the Trunkline
LNG facility, the largest operating liquified natural gas (LNG) terminal in the
U.S.;
-- closing a $600 million project financing and initiating construction of
the 710 megawatt, 50 million gallon per day Al Taweelah A2 power and
desalination facility in Abu Dhabi, United Arab Emirates, which is scheduled to
be completed in summer of 2001;
-- closing a $125 million financing and initiating construction of a 2,500
metric ton per day methanol production facility in Equatorial Guinea, west
Africa;
-- arranging 27 cargoes of LNG into its Lake Charles regasification
facility with attendant gas marketing and transportation revenues;
-- placing into commercial operation the $750 million GasAtacama
pipeline-power project, which transports natural gas from Argentina to northern
Chile, and the first 370 megawatt unit of GasAtacama's natural gas-fueled NOPEL
electric generating plant at Mejillones, Chile;
<PAGE> 2
-- placing into commercial operation the first 160-megawatt peaking
generator on the site of the 710-megawatt Dearborn Industrial Generation plant,
an approximately $300 million project being constructed principally to provide
electricity and steam to the Rouge Steel Company and Ford Motor Company complex
in Dearborn, Michigan;
-- placing into commercial operation two other new gas-fueled electric
generating peaking plants in Michigan, totaling 199 megawatts of capacity, in
time to serve the state's peak summer power demand;
-- placing into commercial operation a $274 million, 300-megawatt
coal-fueled electric generating plant in Thailand, National Power Supply Units 7
and 8;
-- increasing proved oil and gas reserves by 35 percent to 248 million
barrels of oil equivalent, and more than tripling the SEC PV10 value to $1.2
billion from $0.4 billion in 1999. In part this results from:
-- completing a significant natural gas discovery and two development
wells in Midland, Texas, 100 percent owned by CMS Oil and Gas Co., in which the
initial well flowed at a rate of 5.7 million cubic feet of gas per day and the
subsequent development wells in the same Devonian formation flowed at rates of
10 million cubic feet and 12 million cubic feet per day, respectively;
-- completing a significant development well in Ecuador's Ginta field of
Block 16, where initial production test results from the Ginta B-4H well have
yielded flow rates of up to 17,750 barrels of oil and 550 barrels of water per
day. CMS Oil and Gas holds a 14 percent interest in the Block;
-- discovering a major new oil field in the Colon Block of western
Venezuela, where an exploratory well tested at a rate of 5,000 barrels of oil
per day. CMS Oil and Gas holds a 43.75 percent interest in the Colon Block;
-- initiating construction of two 110-megawatt, natural gas-fueled, turbine
generators at the Volta River Authority's Takoradi Thermal Power Plant in Ghana,
to be completed this year;
-- and closing $220 million of financing and initiating construction of the
Company's third power plant in India, the 250-megawatt Neyveli project in Tamil
Nadu.
For the year, operating earnings of CMS Energy's non-utility, diversified
energy businesses were up 64 percent, to $286 million. Operating earnings of
these businesses during the fourth quarter totaled $50 million, or 91 percent
higher than the $26 million in 1998, despite the Nitrotec writeoff of $84
million, pre-tax.
Operating earnings of the natural gas pipeline, storage and processing
business for the year were $91 million, up 176 percent, due to acquisition of
the CMS Panhandle Pipe Line companies, which more than offset writeoff of the
investments in Nitrotec. For the fourth quarter, the natural gas pipeline,
storage and processing business recorded an operating loss of $11 million, due
principally to the Nitrotec writeoff.
<PAGE> 3
Independent power production operating earnings for 1999 were $157 million,
up nine percent from $144 million in 1998, due primarily to increased power
plant earnings and operating fees. In the fourth quarter, independent power
operating earnings were $36 million, up 75 percent from the same period last
year, due principally to increased power plant earnings and operating fees.
Oil and gas exploration and production operating earnings for the year
increased 171 percent to $17 million, due to higher oil prices and lower
exploration expenses. Fourth quarter exploration and production operating
earnings totaled $5 million compared to a loss of $5 million in 1998 due to
higher oil prices and lower exploration expenses.
Operating earnings of CMS Energy's principal subsidiary, Consumers Energy,
increased by four percent in 1999 to $626 million, from $601 million the year
before. Total electric sales increased 2.5 percent to 41 billion kilowatt-hours.
Natural gas deliveries grew by eight percent, to 389 billion cubic feet.
Consumers Energy's customer base grew during the year, with more than 25,700 new
natural gas customers connected, and 25,000 new electric customers added.
CMS Energy Corporation has annual sales of more than $6 billion and assets
of about $15 billion throughout the U.S. and in 22 countries around the world
with businesses in electric and natural gas utility operations; independent
power production; natural gas pipelines, gathering, processing and storage; oil
and gas exploration and production; and energy marketing, services and trading.
<PAGE> 4
CMS ENERGY CORPORATION
Digest of Consolidated Earnings
(Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Twelve Months Ended December 31 (unaudited)
Operating Revenue $ 6,103 $ 5,141
Consolidated Net Income $ 277 $ 285 (2)
Net Income Attributable To:
CMS Energy Common Stock $ 269 $ 272
Class G Common Stock 8 13
Net Income Before Losses on Investments in Nitrotec $ 318 $ 272
Effects of Losses on Investments in Nitrotec (49) -
Net Income Attributable to --------- ---------
CMS Energy Common Stock $ 269 $ 272
========= =========
Average Number of Common Shares Outstanding:
Basic 110 102
Diluted 115 107
Basic Earnings Per Average Common Share:
Earnings Per Share After Reconciling Items $ 2.18 $ 2.65 (2)
Effects of Class G Common Stock Exchange (1) 0.26 -
--------- --------
2.44 2.65
Effects of Losses on Investments in Nitrotec 0.45 -
--------- --------
Earnings Per Share Before Reconciling Items $ 2.89 $ 2.65
========= ========
Diluted Earnings Per Average Common Share:
Earnings Per Share After Reconciling Items $ 2.17 $ 2.62 (2)
Effects of Class G Common Stock Exchange (1) 0.25 -
--------- --------
2.42 2.62
Effects of Losses on Investments in Nitrotec 0.43 -
--------- --------
Earnings Per Share Before Reconciling Items $ 2.85 $ 2.62
========= ========
Dividends Declared per Common Share $ 1.39 $ 1.26
</TABLE>
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 October 1999, CMS Energy exchanged .7041 shares of CMS Energy Common
Stock for each of the approximately 8.7 million issued and outstanding
shares of Class G Common Stock. This exchange ratio represented the fair
market value of CMS Energy Common Stock equal to 115 percent of the fair
market value of one share of Class G Common Stock, and resulted in a
reallocation of earnings per share. CMS Energy's basic and diluted
earnings per
<PAGE> 5
share were reduced $.26 and $.25, respectively and Class G's basic and
diluted earnings per share were increased $3.31.
(2) Includes the cumulative effect of an accounting change for property taxes
which increased first quarter 1998 net income attributable to CMS Energy
Common Stock $43 million ($.40 per share - basic and diluted).
<PAGE> 6
CMS ENERGY CORPORATION
Digest of Consolidated Earnings
(Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Three Months Ended December 31 (unaudited)
Operating Revenue $ 1,768 $ 1,349
Consolidated Net Income $ 21 $ 51
Net Income Attributable To:
CMS Energy Common Stock $ 21 $ 46
Class G Common Stock - 5
Net Income Before Losses on Investments in Nitrotec $ 70 $ 46
Effects of Losses on Investments in Nitrotec (49) -
--------- --------
Net Income Attributable to
CMS Energy Common Stock $ 21 $ 46
========= ========
Average Number of Common Shares Outstanding:
Basic 114 106
Diluted 119 111
Basic Earnings Per Average Common Share:
Earnings Per Share After Reconciling Items $ (0.08) $ 0.44
Effects of Class G Common Stock Exchange (1) 0.26 -
--------- ---------
0.18 0.44
Effects of Losses on Investments in Nitrotec 0.45 -
--------- ---------
Earnings Per Share Before Reconciling Items $ 0.63 $ 0.44
========= =========
Diluted Earnings Per Average Common Share:
Earnings Per Share After Reconciling Items $ (0.08) $ 0.44
Effects of Class G Common Stock Exchange (1) 0.25 -
--------- ---------
0.17 0.44
Effects of Losses on Investments in Nitrotec 0.43 -
--------- ---------
Earnings Per Share Before Reconciling Items $ 0.60 $ 0.44
========= =========
Dividends Declared per Common Share $ 0.365 $ 0.33
</TABLE>
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 October 1999, CMS Energy exchanged .7041 shares of CMS Energy Common
Stock for each of the approximately 8.7 million issued and outstanding
shares of Class G Common Stock. This exchange ratio represented the fair
market value of CMS Energy Common Stock equal to 115 percent of the fair
market value of one share of Class G Common Stock, and resulted in a
reallocation of earnings per share. CMS Energy's basic and diluted earnings
per
<PAGE> 7
share were reduced of $.26 and $.25, respectively and Class G's basic and
diluted earnings per share were increased $3.31.
<PAGE> 1
EXHIBIT 99(b)
DEARBORN, Mich., February 1, 2000 -- CMS Energy Corporation (NYSE:CMS)
announced today a major financial restructuring plan to strengthen significantly
the Company's balance sheet and to provide for enhanced future earnings per
share growth.
The Company intends, as soon as practicable, to make an initial public
offering (IPO) of approximately $600 million of a tracking stock representing 20
percent of the financial interest in its electric and gas utility, Consumers
Energy. About 75 percent of Consumers Energy's earnings are expected to be paid
as dividends to CMS Energy and to the new tracking stock's public shareholders.
The $600 million proceeds will supplement the $600-750 million currently
being raised through the disposition of non-strategic assets. These funds will
be used mostly for reduction of debt and fixed charges, thus improving the
Company's financial flexibility. Some of the proceeds will also be used for
repurchase of CMS Energy common stock, which the Company believes is currently
undervalued. In this regard, the Company also announced that its Board of
Directors has approved an authorization to repurchase up to 10 million shares of
CMS Energy common stock, from time to time, in open market or private
transactions.
In addition, the Company announced that the CMS Energy dividend, currently
at an annual rate of $1.46 per share, will be reduced at the time of completion
of the IPO to $.40 per share to enhance the earnings growth of the Company. This
action will also bring the dividend payout into line with comparable
higher-growth energy companies. The Board has also authorized, at the time of
the IPO, a tax-free exchange offer to provide an opportunity for CMS Energy
common stock to be converted into the new tracking stock for those shareholders
who would prefer to invest in a yield-oriented security.
William T. McCormick, Jr., Chairman and CEO, said that "this restructuring
program, along with the ongoing asset optimization program and dividend actions,
will quickly improve CMS Energy's balance sheet and will eliminate the need to
issue any CMS Energy common stock in the future except for a major acquisition.
It will also increase annual cash flow by about $125 million and should deliver
10-12 percent earnings per share growth in 2001 over 2000 and 12-15 percent
annually thereafter."
Mr. McCormick also said "the restructuring, which will now provide a market
valuation of CMS Energy's utility and diversified energy business, should result
in a better market recognition of the value of these businesses. This, coupled
with higher earnings per share growth rates, should lead to an improved CMS
Energy price-to-earnings ratio."
<PAGE> 2
Because of the restructuring program, higher interest rates, loss of
earnings from some asset sales and other reasons, CMS Energy is providing a
lower year 2000 earnings outlook of $2.80- 2.90 per share which is composed of
$2.50 per share from sustainable earnings and $0.30-0.40 per share from
additional gains on asset sales. In the year 2001, the Company forecasts
sustainable earnings of $2.75-2.80 per share and, in the year 2002, sustainable
earnings of $3.10- 3.20 per share.
Dearborn, Mich.,-based CMS Energy Corporation has annual sales of over $6
billion and assets of about $15 billion throughout the U.S. and in 22 countries
around the world with businesses in electric and natural gas utility operations;
independent power production; natural gas pipelines, gathering, processing and
storage; oil and gas exploration and production; and energy marketing, services
and trading.
This document contains "forward-looking statements" within the meaning of
the safe-harbor provisions of federal securities laws. These forward-looking
statements are subject to various factors which could cause our actual results
to differ materially from those anticipated in such statements. Please refer to
the various assumptions, risks and uncertainties discussed in our SEC filings,
including particularly those discussed in the section entitled Forward-Looking
Statements Cautionary Factors in our Form 8-K, filed on February 1, 2000, for
further explanation of such factors.
###
Please visit CMS Energy's website at www.cmsenergy.com for a copy of the
materials distributed at the Company's presentation to Security Analysts on
February 1, 2000.
<PAGE> 1
EXHIBIT 99(c)
CMS ENERGY CORPORATION AND CONSUMERS ENERGY COMPANY
FORWARD-LOOKING STATEMENTS CAUTIONARY FACTORS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage such disclosures without the
threat of litigation, providing those statements are identified as
forward-looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results to differ
materially from those projected in the statement. Forward-looking statements
give our expectations or forecasts of future events. You can identify these
statements by the fact that they do not relate strictly to historical or current
facts. Forward-looking statements have been and will be made in our written
documents (such as press releases, visual presentations, and securities
disclosure documents) and oral presentations (such as analyst conference calls).
Such statements are based on management's beliefs as well as assumptions made by
and information currently available to management. When used in our documents or
oral presentations, the words "anticipate", "believe", "estimate", "expect",
"forecast", "intend", "objective", "plan", "possible", "potential", "project"
and variations of such words and similar expressions are intended to identify
forward-looking statements that involve risk and uncertainty.
Any or all of our forward-looking statements in oral or written
statements or in other publications may turn out to be wrong. They can be
affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Many such factors will be important in determining our actual
future results. Consequently, no forward-looking statement can be guaranteed.
In addition to any assumptions and other factors referred to
specifically in connection with such forward-looking statements, factors that
could cause our actual results to differ materially from those contemplated in
any forward-looking statements include, among others, the following: ability to
sell assets in accordance with our plans; ability to achieve operating synergies
and revenue enhancements; capital and financial market conditions, including
current price of our common stock, interest rates and availability of financing;
market perceptions of the energy industry, our company, or any of our
subsidiaries; our, or any of our subsidiaries', securities ratings; currency
exchange controls; factors affecting utility and diversified energy operations
such as unusual weather conditions, catastrophic weather-related damage,
unscheduled generation outages, maintenance or repairs, unanticipated changes to
fossil fuel, nuclear fuel or gas supply costs or availability due to higher
demand, shortages, transportation problems or other developments; environmental
incidents; electric transmission or gas pipeline system constraints;
international, national, regional and local economic, competitive and regulatory
conditions and developments, particularly the trade, monetary, fiscal, taxation
and environmental policies of governments, agencies and similar organizations in
geographic areas where we have a financial interest; adverse regulatory or legal
decisions, including environmental laws and regulations; pace, implementation
and provisions for deregulation of the natural gas and electric industries
whether by legislative or regulatory action, particularly the ability of our
utility business to purchase gas at prices below that allowed in its rates due
to frozen power supply cost recovery, the extension of the direct access pilot
program to all our gas utility business customers, the ability of our electric
utility business to recover its current investment in generating facilities and
the cost of purchased power, the number of customers that will elect other power
suppliers when customer choice becomes available to them, former customers
generating their own power and new pricing structures; federal regulation of
electric sales and transmission of electricity that grants independent power
producers and electricity
<PAGE> 2
marketers "direct access" to the interstate electric transmission systems owned
by electric utilities creating opportunity for competitors to market electricity
to our wholesale customers; energy markets, including the timing and extent of
unanticipated changes in commodity prices for oil, coal, natural gas, natural
gas liquids, electricity and certain related products due to higher demand,
shortages, transportation problems or other developments; the timing and success
of business development efforts, including significant sums of money spent for
international development start-up and obtaining finance is at risk until all
elements of the project development are successfully finalized, international
projects may be expropriated, required agreements, licenses, permits and other
approvals may be changed or terminated in violation of their terms, or newer or
higher taxes may be imposed upon the project, the local foreign currency may be
devalued or the conversion of the currency may be restricted or prohibited or
other actions may be taken which adversely affect the value and the recovery of
the investment such as taxes, royalties, or import duties being increased, and
adverse financial, operating, management, or other issues with project partners;
the increased competition caused by Federal Energy Regulatory Commission
approval of new pipeline and pipeline expansion projects that transport large
additional volumes of natural gas to the Midwest from Canada which could reduce
volumes of gas transported by our natural gas transmission businesses or cause
them to lower rates in order to meet competition; potential disruption,
expropriation or interruption of facilities or operations due to accidents or
political events; nuclear power performance, policies, procedures, incidents,
and regulation, including spent nuclear fuel storage availability; technological
developments in energy production, delivery and usage that may result in
competitive disadvantages and create the potential for impairment of existing
assets; financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange Commission,
the Federal Energy Regulatory Commission, the Michigan Public Service Commission
and similar entities with regulatory oversight; cost and other effects of legal
and administrative proceedings, settlements, investigations and claims; certain
project investments made by our subsidiaries consist of minority interests, and
some future investments may take the form of minority interests, which limits
our ability to control the development or operation of the project; other
uncertainties, all of which are difficult to predict and many of which are
beyond our control; other business or investment considerations that may be
disclosed from time to time in CMS Energy's Securities and Exchange Commission
filings or in other publicly disseminated written documents.
CMS Energy and its affiliates undertake no obligation to update or
revise any forward- looking statements, whether as a result of new information,
future events or otherwise. The foregoing review of factors pursuant to the
Private Securities Litigation Reform Act should not be construed as exhaustive
or as any admission regarding the adequacy of our disclosures prior to the
effective date of the Act. Certain risk factors are detailed from time to time
in our various public filings. You are advised, however to consult any further
disclosures we make on related subjects in our reports to the Securities and
Exchange Commission. In particular, you should read the discussion in the
section entitled "Forward-Looking Statements" in our most recent Form 10-K
report to the Securities and Exchange Commission, as it may be updated in our
subsequent Form 10-Q or Form 8-K reports.
