10-QPeriod: Q3 FY2003

CMS ENERGY CORP Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 12, 2003For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation reported a net loss of $77 million for the three months ended September 30, 2003, or $0.51 per diluted share, a significant decline from the $37 million net income in the same period of 2002. This downturn was driven by various factors, including a $42 million after-tax asset impairment charge at its Enterprises segment, $28 million in debt retirement and refinancing costs, and the impact of cooler summer weather on electric utility deliveries. The company continued its "back-to-basics" strategy, focusing on strengthening its core utility business and divesting non-strategic assets to improve liquidity and reduce risk. For the nine-month period ended September 30, 2003, CMS Energy reported a net loss of $43 million, compared to a net income of $5 million in the prior year. Key contributors to this loss included the aforementioned asset impairment, a $30 million after-tax loss on the sale of Panhandle, and debt-related costs. While the gas utility segment showed improved earnings, this was insufficient to offset the declines in other areas. The company's liquidity remains a focus, with efforts to reduce debt through asset sales and improved cash flow generation, though the outlook indicates a cautious approach to meeting debt maturities through 2004.

Key Highlights

  • 1Net loss of $77 million for Q3 2003, a reversal from a $37 million net income in Q3 2002.
  • 2Nine-month net loss of $43 million compared to a $5 million net income in the prior year.
  • 3A $42 million after-tax asset impairment charge impacted the Enterprises segment.
  • 4Significant debt retirement and refinancing costs totaling $28 million after-tax.
  • 5Electric utility deliveries declined due to cooler weather and customer switching, impacting revenue.
  • 6Continued progress on asset sales and strategic divestitures as part of the "back-to-basics" strategy.
  • 7Company believes current cash and borrowing capacity are sufficient to meet liquidity needs through 2003, with caution advised for 2004.

Frequently Asked Questions

The net loss of $77 million for the third quarter of 2003 was primarily driven by a $42 million after-tax asset impairment charge at the Enterprises segment, $28 million in debt retirement and refinancing costs, and reduced electric utility deliveries due to cooler summer weather.

The company is continuing to implement its "back-to-basics" strategy, which involves divesting non-strategic or under-performing assets and focusing on its core utility business. This strategy aims to generate cash for debt reduction, reduce business risk, and improve operating revenues and earnings predictability. Significant asset sales have occurred, contributing to liquidity.

CMS Energy reported $869 million in consolidated cash as of September 30, 2003. Management believes that its current cash position and borrowing capacity, along with anticipated cash flows from operations and investing activities, will be sufficient to meet its liquidity needs through 2003. However, the company expresses caution regarding its ability to meet debt maturities through 2004.

The company is involved in several legal and regulatory matters, including securities class action lawsuits, investigations related to trading practices, and various environmental and litigation matters. While the company intends to defend vigorously against these actions, the outcomes are unpredictable and could potentially impact its business.