UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 5, 2004
RELIANT ENERGY, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 1-16455 76-0655566
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1000 MAIN STREET
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 497-3000
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In this Form 8-K, and in the Exhibit included as part of the Form 8-K, "Reliant
Energy" refers to Reliant Energy, Inc., and "we," "us" and "our" refer to
Reliant Energy, Inc. and its subsidiaries, unless we specify or the context
indicates otherwise.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On May 5, 2004, we issued a press release setting forth our earnings for the
quarterly period ended March 31, 2004. A copy of the press release is attached
as Exhibit 99.1 to this Form 8-K
In our press release, and in our investor presentation materials published on
our corporate website in conjunction with the release of earnings, we use a
number of non-GAAP measures. We discuss each of these non-GAAP measures below.
Included in our discussion is a statement disclosing the reasons why our
management believes that these measures provide useful information to investors
regarding our financial condition, results of operations, cash flows, as
applicable, and, to the extent material, disclosing the additional purposes for
which these measures are used.
As defined in Regulation G, "Conditions for Use of Non-GAAP Financial Measures,"
a non-GAAP financial measure is a numerical measure of a company's historical or
future performance, financial position or cash flow that excludes (includes)
amounts or adjustments that are included (excluded) in the most directly
comparable measure calculated in accordance with generally accepted accounting
principles (GAAP).
"Adjusted Gross Margin." We use the non-GAAP financial measure "adjusted gross
margin" to track and analyze the results of operations of our two business
segments, retail energy and wholesale energy. We also use this measure in
communications with investors, analysts, rating agencies, banks and other
parties. As used in our press release and related investor presentation material
for the first quarter ended March 31, 2004, adjusted gross margin excludes the
following items:
o Gains Recorded in Prior Periods that Were Realized/Collected In Current
Period (EITF No. 02-03). We have included income recorded by us prior to
2003 under certain contracts accounted for under the mark-to-market
method of accounting with respect to deliveries of electricity in the
current period. Since we currently apply the accrual method of
accounting to these types of contracts, we believe that including this
income in the delivery period in which it is realized/collected for such
contracts provides a more meaningful representation of our quarterly
earnings performance in that including this income is consistent with
our current accounting treatment for these types of energy sale
contracts. For additional information, see Note to 2(d) to the financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2003.
o Net Reduction of California-Related Reserves. We have excluded these
reserves and the impact of changes in these reserves from quarter to
quarter because of the unique and non-recurring nature of the
transactions, market conditions and regulatory events that underlie the
reserves. The reserves relate to certain energy sales from October 2000
through June 2001. Excluding this item is useful to investors, analysts
and others because it provides a fairer representation of our results of
operations on an ongoing basis. For additional information, see Note
15(b) to the consolidated financial statement in our Annual Report of
Form 10-K for the year ended December 31, 2003.
o Non-Trading Unrealized Energy Derivative Gains/Losses. We enter into
transactions to hedge the economics of our business operations by (i)
buying power supply for our retail business and (ii) selling generation
output and buying fuel for our wholesale business. These activities are
subject to complex accounting rules and can result in different
accounting treatments (mark-to-market accounting versus accrual method).
Since the application of mark-to-market accounting has the effect of
pulling forward into current periods non-cash gains/losses relating to
future delivery periods, analysis of results of operations from one
period to another can be difficult. Accordingly, we believe that
excluding these unrealized gains/losses is useful to investors, analysts
and others in facilitating their analysis of our results of
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operations from one period to another and provides a more meaningful
representation of our economic performance in the reporting period.
"Adjusted Income (Loss) from Continuing Operations." We use the non-GAAP
financial measure "adjusted income (loss) from continuing operations" to track
and analyze our financial condition and results of operations on a consolidated
basis. We also use this measure in communications with investors, analysts,
rating agencies, banks and other parties. As used in our press release and
related investor presentation material for the first quarter ended March 31,
2004, "adjusted income (loss) from continuing operations" excludes, in addition
to the items excluded from "adjusted gross margin" discussed above, the
following items:
o Accruals For Certain Payments To CenterPoint Energy, Inc. (CenterPoint).
We have excluded this item because of its non-recurring nature.
CenterPoint is required to make this one-time payment pursuant to a
provision of the Texas electric restructuring law and we committed to
CenterPoint in our separation agreements to make this payment to
CenterPoint. Excluding this item is useful to investors, analysts and
others because it provides a fairer representation of our results of
operations on an ongoing basis. For additional information, see Note
14(d) to the consolidated financial statement in our Annual Report of
Form 10-K for the year ended December 31, 2003.
o Accelerated Depreciation Related to Asset Retirement. Our decision to
retire the Wayne generation facility (a 66 megawatt, oil-fueled
generation facility in Pennsylvania) was made in connection with our
current review of our wholesale energy business. Although we may retire
additional generation assets, we do not believe this asset retirement is
representative of our normal ongoing operations. We believe that
excluding this item is useful to investors, analysts and others because
it provides a more meaningful representation of our results of
operations on an ongoing basis. For additional information, see Note 6
to the consolidated financial statement in our Annual Report of Form
10-K for the year ended December 31, 2003
o Severance and Restructuring Charges. We have excluded severance and
restructuring charges incurred in connection with our cost reduction
programs. We have undertaken the cost reduction programs in connection
with a specific plan to reposition the company to capitalize on industry
restructuring. We do not believe that the level of these costs is
representative of our ongoing business operations. Therefore, excluding
these costs is useful in that it provides a more meaningful
representation of our results of operations on a long-term, normalized
basis.
o Net Reduction of California-Related Reserves - Interest Income. See
discussion above.
"Free Cash Flow." In certain of our earnings presentations, including the
presentation to analysts and investors published on our corporate web site in
connection with the release of earnings for the quarterly period ended March 31,
2004, we use the non-GAAP financial measure "Free Cash Flow." We define "free
cash flow" as operating cash flow (a GAAP measure) excluding cash severance
costs and changes in cash collateral postings, accounts receivable factoring and
restricted cash less capital expenditures. In addition, our estimate for "free
cash flow" for 2004 excludes the payment required to be made to CenterPoint as
described above. "Free cash flow" may not be representative of the amount of
residual cash flow that is available to us for discretionary expenditures, since
it may not include deductions for all non-discretionary expenditures. Our
management believes, however, that "free cash flow" is a useful measure in that
it provides a representation of our cash level available to service debt on a
normalized basis.
"EBIT and EBITDA." We sometimes use in our investor presentations the non-GAAP
terms, "earnings (loss) before interest and taxes (EBIT)," "adjusted EBIT,"
"earnings (loss) before interest, taxes, depreciation and amortization (EBITDA)"
and "adjusted EBITDA." We believe that EBIT, adjusted EBIT, EBITDA and adjusted
EBITDA can provide a more meaningful representation of our performance for
purposes of communicating with analysts and investors about earnings outlook and
results. Most analysts and investors use EBIT and EBITDA to evaluate financial
performance. In addition, we use EBIT as a measure to evaluate segment
performance. For information regarding items that we exclude from EBIT and
EBITDA in calculating adjusted EBIT or adjusted EBITDA, see the information of
excluded items discussed above.
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The foregoing non-GAAP financial measures and other reported adjusted items are
used in addition to and in conjunction with results presented in accordance with
GAAP. These non-GAAP financial measures should not be relied upon to the
exclusion of GAAP financial measures. These non-GAAP financial measures reflect
an additional way of viewing aspects of our operations that, when viewed with
our GAAP results and the accompanying reconciliations to corresponding GAAP
financial measures, may provide a more complete understanding of factors and
trends affecting our business. We strongly encourage investors to review our
financial statements and publicly filed reports in their entirety and to not
rely on any single financial measure.
Because non-GAAP financial measures are not standardized, it may not be possible
to compare these financial measures with other companies' non-GAAP financial
measures having the same or similar names.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This report and the exhibits attached hereto contain "forward-looking
statements." Forward-looking statements are statements that contain projections
about our revenues, income, earnings and other financial items, our plans and
objectives for the future, future economic performance, or other projections or
estimates about our assumptions relating to these types of statements. These
statements usually 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. We have based our
forward-looking statements on management's beliefs and assumptions based on
information available to management at the time the statements are made. Actual
results may differ materially from those expressed or implied by forward-looking
statements as a result of many factors or events, including legislative and
regulatory developments, the outcome of pending lawsuits, governmental
proceedings and investigations, the effects of competition, financial market
conditions, access to capital, the timing and extent of changes in commodity
prices and interest rates, weather conditions, changes in our business plan and
other factors we discuss in our other filings with the Securities and Exchange
Commission. 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.
In addition to the matters described in this report and the exhibits attached
hereto, the following are some of the factors that could cause actual results to
differ materially from those expressed or implied in our forward-looking
statements:
o Changes in laws and regulations, including deregulation, re-regulation
and restructuring of the electric utility industry, changes in or
application of environmental and other laws and regulations to which we
are subject, and changes in or application of laws or regulations
applicable to other aspects of our business, such as hedging activities;
o The outcome of pending lawsuits, governmental proceedings and
investigations;
o The effects of competition, including the extent and timing of the entry
of additional competitors in our markets;
o Liquidity concerns in our markets;
o Our pursuit of potential business strategies;
o The timing and extent of changes in commodity prices and interest rates;
o The availability of adequate supplies of fuel, water, and associated
transportation necessary to operate our portfolio of generation assets;
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o Weather variations and other natural phenomena, which can affect the
demand for power from or our ability to produce power at our generating
facilities;
o Financial market conditions and our access to capital, including
availability of funds in the capital markets for merchant generation
companies;
o The creditworthiness or bankruptcy or other financial distress of our
counterparties;
o Actions by rating agencies with respect to us or our competitors;
o Acts of terrorism or war;
o The availability and price of insurance;
o Political, legal, regulatory and economic conditions and developments;
o The successful operation of deregulating power markets; the reliability
of the systems, procedures and other infrastructure necessary to operate
our retail electric business, including the systems owned and operated
by the independent system operator in ERCOT; and
o The resolution of the refusal by certain California market participants
to pay our receivables balances and the resolution of the refund
methodologies.
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.
The information in this Item 12 is being furnished, not filed. Accordingly, the
information in this Item 12 will not be incorporated by reference into any
registration statement filed by Reliant Energy under the Securities Act of 1933,
as amended, unless specifically identified therein as being incorporated therein
by reference. The furnishing of the information in this report is not intended
to, and does not, constitute a determination or admission by Reliant Energy that
(i) the information in this report is material or complete or (ii) investors
should consider this information before making an investment decision with
respect to any security of Reliant Energy or any of its affiliates.
A copy of this report has been made available on our web site found at
http://www.reliant.com/corporate in the investor relations section.
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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.
RELIANT ENERGY, INC.
(Registrant)
Date: May 5, 2004 By: /s/ Thomas C. Livengood
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Thomas C. Livengood
Vice President and Controller
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EXHIBIT INDEX
Exhibit
Number Exhibit Description
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99.1 Press release issued by Reliant Energy, Inc. on May 5, 2004
announcing the earnings of Reliant Energy, Inc. for the quarterly
period ended March 31, 2004.