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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 333-69502
CENTERPOINT ENERGY, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-0694415
(State or other jurisdiction of incorporation or
organization) (I.R.S. Employer Identification Number)
1111 LOUISIANA
HOUSTON, TEXAS 77002 (713) 207-3000
(Address and zip code of principal executive
offices) (Registrant's telephone number, including area code)
CENTERPOINT ENERGY, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE
REDUCED DISCLOSURE FORMAT.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 8, 2002, all 1,000 shares of CenterPoint Energy, Inc. common
stock were held by Reliant Energy, Incorporated.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.................................................................1
Statements of Consolidated Operations
Three and Six Months Ended June 30, 2002 (unaudited)...................................1
Consolidated Balance Sheets
December 31, 2001 and June 30, 2002 (unaudited)........................................2
Statement of Consolidated Cash Flows
Six Months Ended June 30, 2002 (unaudited).............................................3
Note to Unaudited Consolidated Financial Statements......................................4
Item 2. Management's Narrative Analysis of the Results of Operations of CenterPoint
Energy, Inc. and its Consolidated Subsidiaries...........................................5
PART II. OTHER INFORMATION
Item 5. Other Information....................................................................6
Item 6. Exhibits and Reports on Form 8-K.....................................................6
i
PART I. FINANCIAL INFORMATION
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2002
------------------ ----------------
Operating expenses ............. $ 1,645 $ 8,825
Income tax benefit ............. 576 3,089
------------- -------------
Net loss ................... $ 1,069 $ 5,736
============= =============
See Note to the Company's Consolidated Financial Statements
1
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
DECEMBER 31, JUNE 30,
2001 2002
------------- -------------
Cash ..................................................................... $ 3,000 $ 5,275
Taxes receivable ......................................................... -- 3,089
Other .................................................................... -- 900
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TOTAL ASSETS .................................................... $ 3,000 $ 9,264
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY
STOCKHOLDER'S EQUITY:
Preferred stock, $.01 par value, 20,000,000 shares authorized, none issued
and outstanding ....................................................... $ -- $ --
Common stock, $.01 par value, 1,000,000,000 shares authorized, 1,000
shares issued and outstanding ......................................... 10 10
Additional paid-in capital ............................................... 2,990 14,990
Retained deficit ......................................................... -- (5,736)
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STOCKHOLDER'S EQUITY ..................................................... 3,000 9,264
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ...................... $ 3,000 $ 9,264
============= =============
See Note to the Company's Consolidated Financial Statements
2
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30, 2002
----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $ (5,736)
Changes in other assets:
Taxes receivable ............................... (3,089)
Other assets ................................... (900)
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Net cash used in operating activities .......... (9,725)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from parent ................. 12,000
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Net cash provided by financing activities ...... 12,000
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NET INCREASE IN CASH ........................... 2,275
CASH AT BEGINNING OF PERIOD .................... 3,000
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CASH AT END OF PERIOD .......................... $ 5,275
=============
See Note to the Company's Consolidated Financial Statements
3
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
On August 31, 2001, Reliant Energy, Incorporated (Reliant Energy) formed a
new corporation, Reliant Energy Regco, Inc., a Texas corporation, to become its
holding company. Reliant Energy Regco, Inc. is a direct wholly owned subsidiary
of Reliant Energy. On September 10, 2001, Reliant Energy Regco, Inc. formed a
new wholly owned Delaware limited liability company subsidiary named Utility
Holding, LLC. On September 12, 2001, Utility Holding, LLC formed a new wholly
owned Texas corporate subsidiary named Reliant Energy MergerCo, Inc. (MergerCo).
To effect the holding company structure, Reliant Energy will merge with MergerCo
(Merger). On October 9, 2001, Reliant Energy Regco, Inc.'s corporate charter was
amended to change its corporate name to CenterPoint Energy, Inc. Effective March
27, 2002, the Amended and Restated Articles of Incorporation of CenterPoint
Energy, Inc. were amended to change the par value of the common stock and the
preferred stock from no par value to $.01 par value per share. CenterPoint
Energy, Inc. has 1,020,000,000 authorized shares of capital stock, comprised of
1,000,000,000 shares of $.01 par value common stock and 20,000,000 shares of
$.01 par value preferred stock. The capital accounts of CenterPoint Energy, Inc.
have been restated as of December 31, 2001 to give effect to the change in par
value per share.
The Merger is the mechanical step necessary for Reliant Energy to become a
subsidiary of the new holding company in order to comply with regulatory
legislation related to the deregulation of the Texas electric industry. Upon
completion of the Merger, which currently is expected to occur by August 31,
2002, Reliant Energy and Reliant Energy's subsidiaries will be indirect
subsidiaries of CenterPoint Energy, Inc. CenterPoint Energy, Inc. has not, to
date, conducted any activities other than incurring general and administrative
expenses associated with maintaining its corporate structure. Upon the
consummation of the Merger, CenterPoint Energy, Inc. will adopt the accounting
policies of Reliant Energy.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The interim financial statements reflect all normal recurring
adjustments that are, in the opinion of management, necessary to present fairly
the financial position for the respective periods.
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MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS OF CENTERPOINT
ENERGY, INC. AND ITS CONSOLIDATED SUBSIDIARIES
In August 2001, CenterPoint Energy, Inc. (CenterPoint Energy) was
incorporated as a wholly owned subsidiary of Reliant Energy, Incorporated
(Reliant Energy). Reliant Energy is in the process of separating its regulated
and unregulated businesses into two publicly traded companies that will be
independent of each other: CenterPoint Energy and Reliant Resources, Inc.
(Reliant Resources). In December 2000, Reliant Energy transferred a significant
portion of its unregulated businesses to Reliant Resources, which, at the time,
was a wholly owned subsidiary of Reliant Energy. Reliant Resources conducted an
initial public offering of approximately 20% of its common stock in May 2001. In
December 2001, Reliant Energy's shareholders approved an agreement and plan of
merger by which, subject to regulatory approvals, the following will occur
(which is referred to herein as the Restructuring):
o CenterPoint Energy will become the holding company for the Reliant
Energy group of companies;
o Reliant Energy and its subsidiaries will become subsidiaries of
CenterPoint Energy; and
o each share of Reliant Energy common stock will be converted into one
share of CenterPoint Energy common stock.
After the Restructuring, Reliant Energy plans, subject to further corporate
approvals, market and other conditions, to complete the separation of its
regulated and unregulated businesses by distributing the shares of common stock
of Reliant Resources that CenterPoint Energy owns to the CenterPoint Energy's
shareholders (which is referred to herein as the Distribution). CenterPoint
Energy currently expects Reliant Energy to complete the Restructuring by August
31, 2002 and the Distribution early in the fall of 2002. However, no assurance
can be provided that the Distribution will occur as described above or that it
will occur within this time period. From the consummation of the Restructuring
until the Distribution, CenterPoint Energy expects that it will do business
under the name Reliant Energy, Incorporated and that CenterPoint Energy's common
stock will trade under the symbol "REI.
On July 5, 2002, Reliant Energy received an order from the Securities and
Exchange Commission approving Reliant Energy's restructuring plan and the
Distribution under the Public Utility Holding Company Act of 1935 (1935 Act).
On July 31, 2002, Reliant Energy received a private letter ruling from the
Internal Revenue Service which confirms that the Distribution will be tax-free
to Reliant Energy and its shareholders.
Contemporaneous with the Restructuring, CenterPoint Energy expects to
register and become subject, with its subsidiaries, to regulation as a
registered holding company system under the 1935 Act. The 1935 Act directs the
SEC to regulate, among other things, financings, sales or acquisitions of assets
and intra-system transactions.
In connection with the Restructuring, in order to enable CenterPoint
Energy ultimately to satisfy the requirements for an exemption from
regulation as a registered holding company under the 1935 Act, Reliant Energy is
seeking authority to divide the gas distribution businesses conducted by Reliant
Energy Resource Corp.'s three unincorporated gas distribution divisions, Reliant
Energy Entex, Reliant Energy Arkla and Reliant Energy Minnegasco, among three
separate entities. The entity that will hold the Reliant Energy Entex assets
will also hold ownership of Reliant Energy Resource Corp.'s natural gas
pipelines and gathering business. Reliant Energy has obtained approval of these
transactions from the public service commissions of Minnesota, Louisiana,
Mississippi, Oklahoma and Arkansas. Although CenterPoint Energy expects that
this business restructuring of Reliant Energy Resources Corp. can be completed,
CenterPoint Energy can provide no assurance that this will, in fact, occur, or
that CenterPoint Energy will ultimately be exempt from registration under the
1935 Act.
CenterPoint Energy has had no shareholder other than Reliant Energy since
its incorporation. Net loss of $1,069 and $5,736 for the three and six months
ended June 30, 2002, respectively, represents general and administrative
expenses related to maintaining our corporate structure.
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PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Forward-Looking Statements. From time to time, we make statements
concerning our expectations, beliefs, plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other statements,
which are not historical facts. These statements are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Actual results may differ materially from those expressed or implied
by these statements. You can generally identify our forward-looking statements
by the words "anticipate," "believe," "continue," "could," "estimate," "expect,"
"intend," "may," "plan," "potential," "predict," "should," "will," "forecast,"
"goal," "objective," "projection," or other similar words.
We have based our forward-looking statements on our management's beliefs
and assumptions based on information available to our management at the time the
statements are made. We caution you that assumptions, beliefs, expectations,
intentions and projections about future events may and often do vary materially
from actual results. Therefore, we cannot assure you that actual results will
not differ materially from those expressed or implied by our forward-looking
statements.
The following are some of the factors that could cause actual results to
differ materially from those expressed or implied in forward-looking statements:
o state, federal and international legislative and regulatory
developments, including deregulation; re-regulation and restructuring
of the electric utility industry; and changes in, or application of
environmental, siting and other laws and regulations to which we are
subject;
o timing of the implementation of our business separation plan;
o the effects of competition, including the extent and timing of the
entry of additional competitors in our markets;
o industrial, commercial and residential growth in our service
territories;
o our pursuit of potential business strategies, including acquisitions or
dispositions of assets or the development of additional power
generation facilities;
o state, federal and other rate regulations in the United States and in
foreign countries in which we operate or into which we might expand our
operations;
o the timing and extent of changes in commodity prices, particularly
natural gas;
o weather variations and other natural phenomena;
o political, legal and economic conditions and developments in the United
States and in foreign countries in which we operate or into which we
might expand our operations, including the effects of fluctuations in
foreign currency exchange rates;
o financial market conditions and the results of our financing efforts,
including our ability to replace substantial bank credit facilities
that are due to terminate in 2002 and early 2003;
o ramifications from the bankruptcy filing of Enron Corp.;
o any direct or indirect effect on our business resulting from the
September 11, 2001 terrorist attacks or any similar incidents or
responses to such incidents;
o the performance of our projects;
o the outcome of pending securities lawsuits; and
o other factors we discuss in the CenterPoint Energy Form 10-K.
You should not place undue reliance on forward-looking statements. 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 statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
6
SIGNATURES
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, thereunto duly authorized, in the City of Houston, the State
of Texas, on the 14th day of August, 2002.
CENTERPOINT ENERGY, INC.
(Registrant)
By: /s/ Mary P. Ricciardello
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Mary P. Ricciardello
Senior Vice President and
Chief Accounting Officer
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