Why should investors not rely on Xcel Energy's previously issued financial statements?

Xcel Energy has decided to reclassify the operations of its subsidiary, PSR Investments, Inc. (PSRI), from discontinued operations to continuing operations. This change in accounting treatment, prompted by SEC staff review, necessitates that previously issued financial statements and related audit reports for certain periods should no longer be relied upon.

What is the financial impact of this restatement on Xcel Energy?

The company expects the restatement to have no impact on reported net income for periods up to March 31, 2007. For the second quarter of 2007, an immaterial adverse impact (less than $0.02 per share) is anticipated. For the third and fourth quarters of 2007, an immaterial positive impact (less than $0.01 per share) is expected. Crucially, the restatement is not expected to negatively affect the company's anticipated year-end 2007 financial results or its 2008 earnings guidance.

What specific operations are being reclassified?

The reclassification pertains to the operations of PSR Investments, Inc. (PSRI), which is a wholly owned subsidiary of Public Service Company of Colorado (PSCo), itself a subsidiary of Xcel Energy. PSRI was involved in owning and managing corporate-owned life insurance (COLI) policies on the lives of PSCo employees.

When will investors see the corrected financial information?

Xcel Energy plans to file amendments to its Form 10-Q for the quarters ended June 30, 2007, and September 30, 2007, as well as its Form 8-K filed on August 8, 2007. This restatement is anticipated to be completed in December 2007.

XEL/XELLL 8-K: Financial Events

Summary

Xcel Energy Inc. (XEL) has filed a Form 8-K on December 5, 2007, to announce that its previously issued financial statements and audit reports related to certain periods should no longer be relied upon. This non-reliance is due to a decision to reclassify the operations of PSR Investments, Inc. (PSRI), a subsidiary involved in corporate-owned life insurance (COLI) policies, from discontinued operations to continuing operations. This change in accounting treatment stems from SEC staff inquiries regarding the appropriateness of the prior classification under SFAS 144. The company has stated that this restatement is expected to have no impact on reported net income for periods up to March 31, 2007. For subsequent periods, the impact on net income per share is immaterial (less than $0.02 adverse for Q2 2007 and less than $0.01 positive for Q3 and Q4 2007). Importantly, the restatement is not anticipated to adversely affect Xcel Energy's projected year-end 2007 financial results or its previously issued 2008 earnings guidance. Amendments to prior filings are planned for December 2007.

Key Highlights

1Xcel Energy is restating prior financial information, indicating previously issued financial statements and audit reports should not be relied upon.
2The restatement concerns the accounting treatment of PSR Investments, Inc. (PSRI) and its COLI policies.
3Operations of PSRI will be reclassified from 'discontinued operations' to 'continuing operations'.
4The change is a result of discussions with the SEC staff regarding accounting standards (SFAS 144).
5The financial impact of the restatement on net income per share is expected to be immaterial for 2007 periods.
6No adverse impact is expected on projected 2007 year-end results or 2008 earnings guidance.
7Xcel Energy plans to file amended reports to reflect the restatement in December 2007.

XCEL ENERGY INC 8-K Report, Financial Restatement (Dec 5, 2007)

Summary

Key Highlights

Frequently Asked Questions