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) AUGUST 17, 2004
COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
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1-9513 CMS ENERGY CORPORATION 38-2726431
(A MICHIGAN CORPORATION)
ONE ENERGY PLAZA
JACKSON, MICHIGAN 49201
(517) 788-0550
ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On August 17, 2004, CMS Energy Corporation ("CMS Energy") completed the
previously announced sale of its interests in the Parmelia Pipeline ("Parmelia")
and the Goldfields Gas Transmission Pipeline ("Goldfields") in Western Australia
to the Australian Pipeline Trust for about $147 million in U.S. dollars
(approximately $206 million in Australian dollars). Prior to this transaction,
the Australian Pipeline Trust owned 48.5 percent of Goldfields. Consideration
for the sale was established as a result of a bid process and arms-length
negotiations between the parties.
Goldfields, in which CMS Energy indirectly owned a 39.7 percent equity interest,
is a 16/14 inch natural gas pipeline which extends 860 miles from Yarraloola to
Kalgoorlie in Western Australia. Goldfields has a capacity of approximately 100
million cubic feet/day. In addition to the mainline, Goldfields' facilities also
include a number of laterals, an inlet meter station, four operational
compressor stations, scraper stations, main line valves and maintenance bases.
In addition to its share ownership position, CMS Energy also held the role of
commercial and regulatory manager for Goldfields.
CMS Energy was the sole owner of Parmelia and its related businesses, which
included the Dongara processing facilities and the Mondarra gas storage
facility. Parmelia is a 260 mile natural gas pipeline, with a capacity of
approximately 65 million cubic feet/day as currently configured, which
transports natural gas from fields in the Perth Basin in Western Australia and
from the North West Shelf Western Australia through an interconnect with
natural gas transmission system. It primarily serves customers in the
industrial centers in the southwest region around Perth, Western Australia.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
The accompanying unaudited pro forma condensed consolidated financial statements
reflect adjustments to the historical consolidated financial statements of CMS
Energy to give effect to the sale of Parmelia and Goldfields, assuming the sale
had been effective for the periods indicated.
CMS Energy's consolidated financial statements as of and for the six months
ended June 30, 2004, reported Parmelia as a discontinued operation under
Statement of Financial Accounting Standards No. 144 - Accounting for the
Impairment or Disposal of Long-Lived Assets and Goldfields as an equity
investment in accordance with APB Opinion No. 18 - The Equity Method of
Accounting for Investments in Common Stock.
Certain information and notes normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United States
have been omitted pursuant to the rules and regulations of the Securities and
Exchange Commission governing pro forma
information. The unaudited pro forma condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements of CMS
Energy as contained in its 2003 Annual Report on Form 10-K/A and Quarterly
Report on Form 10-Q as of and for the six months ended June 30, 2004.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet assumes the
Parmelia and Goldfields sale was consummated on June 30, 2004. Therefore, the
gain on sale recognized at June 30, 2004 will ultimately differ from the actual
gain that occurred at the August 17, 2004 date of sale. The Unaudited Pro Forma
Condensed Consolidated Statements of Income assume the Parmelia and Goldfields
disposition occurred on January 1, 2003. The unaudited pro forma condensed
consolidated financial statements are presented for purposes of illustration
only, in accordance with the assumptions set forth below, and are not
necessarily indicative of the financial position or results of operations that
would have occurred had the sale been consummated on the dates as of which, or
at the beginning of the period which, the sale is being given effect, nor are
they necessarily indicative of future operating results or financial position of
CMS Energy.
CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2004
(In millions)
HISTORICAL SALE OF PARMELIA PRO FORMA PRO FORMA
CMS ENERGY AND GOLDFIELDS ADJUSTMENTS CMS ENERGY
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(NOTE 1) (NOTE 2)
ASSETS
Plant and property (at cost) $ 14,094 $ 14,094
Less accumulated depreciation, depletion and amortization 5,958 5,958
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8,136 8,136
Construction work-in-progress 392 392
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Net plant and property 8,528 8,528
Investments 778 $ (87) 691
Cash and cash equivalents and restricted cash 696 147 $ (147) (a) 696
Other current assets 2,142 (6) 2,136
Current assets held for sale 14 (14) -
Non-current assets 3,149 3,149
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TOTAL ASSETS $ 15,307 $ 40 $ (147) $ 15,200
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STOCKHOLDERS' INVESTMENT AND LIABILITIES
Common stockholders' equity and other paid-in-capital $ 3,850 $ 3,850
Accumulated other comprehensive loss (313) $ (1) (314)
Retained deficit (1,835) 34 (1,801)
Preferred stock 305 305
Long-term debt 6,500 $ (147) (a) 6,353
Non-current portion of capital and finance leases 338 338
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Total capitalization 8,845 33 (147) 8,731
Minority interests 740 740
Current liabilities 2,159 18 2,177
Current liabilities held for sale 2 (2) -
Non-current liabilities 3,561 (9) 3,552
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TOTAL STOCKHOLDERS' INVESTMENT AND LIABILITIES $ 15,307 $ 40 $ (147) $ 15,200
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See Notes to pro forma condensed consolidated financial statements.
CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2003
(In millions, except per share amounts)
HISTORICAL PRO FORMA PRO FORMA
CMS ENERGY ADJUSTMENTS CMS ENERGY
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(NOTE 2)
OPERATING REVENUE $ 5,513 $ 5,513
EARNINGS FROM EQUITY METHOD INVESTEES 164 $ (14) (b) 150
OPERATING EXPENSES 5,082 5,082
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OPERATING INCOME 595 (14) 581
OTHER INCOME 14 14
FIXED CHARGES 594 (12) (c) 582
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INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 15 (2) 13
INCOME TAX EXPENSE (BENEFIT) 58 (1) (d) 57
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LOSS FROM CONTINUING OPERATIONS $ (43) $ (1) $ (44)
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LOSS FROM CONTINUING OPERATIONS PER SHARE:
BASIC - AVERAGE COMMON SHARES OUTSTANDING 150 150
- LOSS PER AVERAGE COMMON SHARE $ (0.30) $ - $ (0.30)
DILUTED - AVERAGE COMMON SHARES OUTSTANDING 150 150
- LOSS PER AVERAGE COMMON SHARE $ (0.30) $ - $ (0.30)
See Notes to pro forma condensed consolidated financial statements.
CMS ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2004
(In millions, except per share amounts)
HISTORICAL PRO FORMA PRO FORMA
CMS ENERGY ADJUSTMENTS CMS ENERGY
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(NOTE 2)
OPERATING REVENUE $ 2,847 $ 2,847
EARNINGS FROM EQUITY METHOD INVESTEES 60 $ (6) (b) 54
OPERATING EXPENSES 2,614 2,614
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OPERATING INCOME 293 (6) 287
OTHER INCOME 22 22
FIXED CHARGES 296 (6) (c) 290
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INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 19 19
INCOME TAX EXPENSE (BENEFIT) (10) - (d) (10)
MINORITY INTERESTS 12 12
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INCOME FROM CONTINUING OPERATIONS $ 17 $ - $ 17
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INCOME FROM CONTINUING OPERATIONS PER SHARE(*):
BASIC - AVERAGE COMMON SHARES OUTSTANDING 161 161
- EARNINGS PER AVERAGE COMMON SHARE $ 0.07 $ - $ 0.07
DILUTED - AVERAGE COMMON SHARES OUTSTANDING 162 162
- EARNINGS PER AVERAGE COMMON SHARE $ 0.07 $ - $ 0.07
(*) Adjusted for CMS Energy preferred dividends of $6 million.
See Notes to pro forma condensed consolidated financial statements.
Note 1 - Sale of Parmelia and Goldfields
As discussed in Item 2.01, CMS Energy has reflected, in the accompanying
unaudited pro forma condensed consolidated financial statements, that the sale
yielded CMS Energy total cash consideration, including adjustments to working
capital, of approximately $147 million. The assets sold had a book value of
approximately $94 million. The sale also included $2 million of selling
expenses, $18 million of taxes, and the recognition of $1 million of cumulative
foreign currency translation adjustments, resulting in an after-tax gain of $34
million calculated as of June 30, 2004 and reflected in retained deficit.
Additionally, certain deferred taxes included in non-current liabilities were
assumed by the buyer.
Note 2 - Pro Forma Adjustments
The following is a summary of pro forma adjustments:
Condensed Consolidated Balance Sheet:
a. To reflect the retirement of $147 million of long-term debt.
Condensed Consolidated Statements of Income:
b. To reflect the elimination of equity earnings from Goldfields,
assuming the disposition occurred at the beginning of the year ended
December 31, 2003, and the six months ended June 30, 2004.
c. To reflect reduced interest expense from the use of $147 million of
proceeds to reduce long-term debt outstanding at the beginning of
the year ended December 31, 2003, and the six months ended June 30,
2004, at average interest rates of 8 percent for both periods.
d. To reflect the income tax effects of the pro forma adjustments.
(c) Exhibits
(10)(a) Sale and Purchase Agreement by and between CMS International Ventures
L.L.C., CMS Enterprises Company, APT Pipelines Investments, and APT Pipelines
Limited dated as of July 29, 2004.
This Form 8-K contains "forward-looking statements" as defined in Rule 3b-6 of
the Securities Exchange Act of 1934, as amended, Rule 175 of the Securities Act
of 1933, as amended, and relevant legal decisions. The forward-looking
statements are subject to risks and uncertainties. They should be read in
conjunction with "FORWARD-LOOKING STATEMENTS AND RISK FACTORS" found in the
MANAGEMENT'S DISCUSSION AND ANALYSIS sections of CMS Energy's Form 10-K/A for
the Fiscal Year Ended December 31, 2003 (incorporated herein by reference), that
discuss important factors that could cause CMS Energy's results to differ
materially from those anticipated in such statements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: August 31, 2004
By: /s/ Thomas J. Webb
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Thomas J. Webb
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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(10)(a) Sale and Purchase Agreement by and between CMS International Ventures
L.L.C., CMS Enterprises Company, APT Pipelines Investments, and APT
Pipelines Limited dated as of July 29, 2004