UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the fiscal year ended December 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from ________ to _______
Commission Name of Registrants, State of Incorporation, I.R.S. Employer
File Number Address and Telephone Number Identification No.
----------- -------------------------------------------- ------------------
333-32170 PNM Resources, Inc. 85-0468296
(A New Mexico Corporation)
Alvarado Square
Albuquerque, New Mexico 87158
(505) 241-2700
PNM RESOURCES, INC.
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
(Full title of the plan)
PNM Resources, Inc.
(Name of issuer)
Alvarado Square
Albuquerque, New Mexico 87158
(Address of issuer's principal executive office)
CONTENTS
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...........................3
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits as of
December 31, 2003 and 2002...........................................4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2003....................................5
Notes to Financial Statements...........................................6
Supplemental Schedule:
Schedule I: Line 4(i) - Schedule of Assets
(Held at End of Year) - December 31, 2003...........................11
Signature..............................................................13
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Plan Administrator of the
PNM Resources, Inc.
Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the PNM Resources, Inc. Retirement Savings Plan (the "Plan") as of December
31, 2003 and 2002, and the related statement of changes in net assets available
for benefits for the year ended December 31, 2003. These financial statements
and the schedule referred to below are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year) for investment purposes is presented for purposes of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule has been subjected to the
auditing procedures applied in the audit of the December 31, 2003 basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the December 31, 2003 basic financial statements, taken
as a whole.
/s/ GRANT THORNTON LLP
Albuquerque, New Mexico
June 4, 2004
PNM Resources, Inc.
Retirement Savings Plan
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31,
2003 2002
--------------- -----------------
Investments, at fair value:
Shares of registered investment companies $ 191,204,192 $ 146,391,985
Shares of common/collective trusts 9,162,812 4,191,110
PNM Resources, Inc. Common Stock Fund 6,061,509 5,101,593
Participant loans 5,664,305 5,477,202
--------------- -----------------
Total investments 212,092,818 161,161,890
--------------- -----------------
Receivables:
Employer contributions 582,257 623,386
Employee contributions 437,245 314,901
--------------- -----------------
Total receivables 1,019,502 938,287
--------------- -----------------
Net assets available for benefits $ 213,112,320 $ 162,100,177
=============== =================
The accompanying notes are an integral part of these financial statements.
4
PNM Resources, Inc.
Retirement Savings Plan
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended December 31, 2003
Additions to net assets:
Investment income-
Interest and dividend income $ 3,985,732
Net appreciation in fair value of investments 32,373,326
-----------------
Total income 36,359,058
-----------------
Contributions-
Participants' contributions 12,690,273
Employer's contributions 9,278,642
-----------------
Total contributions 21,968,915
-----------------
Total additions 58,327,973
-----------------
Deductions from net assets:
Benefits paid to participants 7,262,910
Administrative expenses 52,920
-----------------
Total deductions 7,315,830
-----------------
Net increase in net assets available for benefits 51,012,143
Net assets available for benefits, beginning of year 162,100,177
-----------------
Net assets available for benefits, end of year $ 213,112,320
=================
The accompanying notes are an integral part of these financial statements.
5
PNM Resources, Inc.
Retirement Savings Plan
Notes to Financial Statements
December 31, 2003 and 2002
NOTE 1 - Plan Description
The following description of the PNM Resources, Inc. (the "Company")
Retirement Savings Plan (the "Plan") is provided for general information
purposes only. More complete information regarding the Plan's provisions
may be found in the Plan document.
General
-------
The Plan is a defined contribution plan covering all employees of the
Company who meet the eligibility requirements as defined by the Plan. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
The Plan was amended and restated on May 28, 2001 to allow participants to
direct their respective contributions into Company stock. Previous
amendments effective January 1, 1998, provided for the following: immediate
participation in the Plan by all employees upon employment; employees must
complete one year of employment in order to receive a Company contribution;
Company matching contributions of 75% of participant's contributions up to
6% of their eligible compensation (maximum contribution of 4.5%); an
additional Company contribution of 3% of participant's eligible
compensation, regardless of other Company matching contributions; immediate
vesting in employee and employer contributions; addition of loan and
hardship withdrawal features; portable benefits; expanded fund investment
options; the sharing of Plan funding by the Company and employee and
investment risk and/or benefit are with the employee. On April 7, 2003, the
Plan changed its name to PNM Resources, Inc. Retirement Savings Plan.
Effective January 1, 2004, the Company's non-elective contribution rate
changed from 3% to a graduated rate based on age as follows:
Under 40 years of age 3%
40-44 years of age 5%
45-49 years of age 6%
50-54 years of age 8%
55 years of age or older 10%
The retirement benefit provided by this Plan is dependent upon the
contributions made by the employee, including any Company match, and the
rate of return on the investments (risk and benefit). Should an employee
not participate in the matching contributions, a retirement benefit will be
provided by the graduated rate based on age of 3% to 10% non-matching
contribution made by the Company. Should an employee take full advantage of
the matching portions by contributing the 6%, a retirement benefit ranging
from 13.5% to 20.5% can be accrued each year along with any investment gain
or loss.
Contributions and Vesting
-------------------------
Eligible employees can contribute an amount up to 100%, but not less than
1%, of compensation as defined by the Plan, limited by requirements of the
Internal Revenue Code ("IRC") and the nature of the participant
contribution. Participants are fully vested in their contributions and
earnings thereon. There were no forfeitures during the Plan year.
6
PNM Resources, Inc.
Retirement Savings Plan
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2003 and 2002
NOTE 1 - Plan Description (continued)
Benefits
--------
Upon termination of service for any reason, a participant may elect to
receive benefits via a distribution in a lump sum, can take installment
distributions not to exceed a period longer than his or her life
expectancy, direct a rollover of the account balance to another qualified
plan or IRA or can leave the account in the Plan if the balance is $5,000
or greater.
Participant Accounts
--------------------
Individual accounts are maintained for each of the Plan's participants to
reflect the participant's share of the Plan's income and expenses and the
participant's contribution. Allocations are based on participant account
balances, as defined in the Plan document.
Investment Options
------------------
During the plan year ending December 31, 2003, participants were able to
allocate their contributions among various investment options.
Participant Loans
-----------------
Participants may borrow from their fund accounts a minimum of $1,000 up to
a maximum aggregate equal to the lesser of $50,000 or 50% of their account
balance. Loan terms range from 1-5 years. Loans for the purchase of a
primary residence may be repaid over a longer period of time, as determined
by a committee established to administer the Plan (the "Committee"). All
loans shall be repaid with a substantially level amortization of both
principal and interest on a schedule prescribed by the Committee with
payments made at least quarterly. The loans are secured by 50% of the
balance in the participant's account and bear interest at a rate
commensurate with the interest rates charged by persons in the business of
lending money for loans which would be made under similar circumstances, as
determined by the Committee. Interest rates on outstanding loans at
December 31, 2003 range from 5.62% to 9.75%.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
---------------------
The accompanying financial statements have been prepared using the accrual
basis of accounting.
Income Recognition
------------------
Interest income is recorded as earned on the accrual basis. Dividend income
is recorded on the ex-dividend date.
7
PNM Resources, Inc.
Retirement Savings Plan
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2003 and 2002
NOTE 2 - Summary of Significant Accounting Policies (continued)
Investment Valuation
--------------------
Investments of the Plan are stated at fair value. Securities traded in
public markets are valued at their quoted market prices. Participant loans
are valued at cost, which approximates fair value. Purchases and sales of
securities are reflected on a trade-date basis.
Risks and Uncertainties
-----------------------
Investments are exposed to various risks such as interest rate, market and
credit. Due to the level of risk associated with certain investments and
the level of uncertainty related to changes in the value of investments, it
is at least reasonably possible that changes in risks in the near term
could materially affect the amounts reported in the statements of net
assets available for benefits and the statement of changes in net assets
available for benefits.
The Vanguard International Growth Fund invests in the securities of foreign
companies, which involve special risks and considerations not typically
associated with investing in U.S. companies. These risks included
devaluation of currencies, less reliable information about issuers,
different securities transaction clearance and settlement practices and
possible adverse political and economic developments. Moreover, securities
of many foreign companies and their markets may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies.
Administrative Expenses
-----------------------
The Company pays substantially all administrative expenses of the Plan,
except for the administrative costs of mutual funds and loan processing
fees. Participant fees and administrative fees amounted to $52,920 during
plan year 2003.
Payment of Benefits
-------------------
Benefits are recorded when paid.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those
estimates.
8
PNM Resources, Inc.
Retirement Savings Plan
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2003 and 2002
NOTE 3 - Investments
The fair market value of individual investments as of December 31, 2003 and
2002, that represent five percent or more of the Plan's net assets at the
respective year-end dates are as follows:
2003
-------------
Vanguard Wellington Fund $ 26,812,965
Vanguard PRIMECAP Fund 26,424,322
Vanguard 500 Index Fund 22,536,160
Vanguard Treasury Money Market Fund 22,474,910
Vanguard Windsor Fund 22,257,180
2002
-------------
Vanguard Treasury Money Market Fund $ 23,112,933
Vanguard Wellington Fund 21,374,921
Vanguard PRIMECAP Fund 18,217,933
Vanguard Windsor Fund 17,666,982
Vanguard 500 Index Fund 15,196,429
Vanguard Long-Term Treasury Fund Investor Shares 9,219,397
Vanguard U.S. Growth Fund 8,141,036
During 2003, the Plan's investments in assets other than temporary
investments and participant loans appreciated and (depreciated) in fair
value as follows:
2003
-------------
Registered investment companies $ 31,432,107
Company stock fund 941,219
-------------
$ 32,373,326
=============
The net appreciation in fair value of investments includes both realized
gains (losses) and unrealized appreciation (depreciation).
NOTE 4 - Tax Status
The Plan has received a determination letter from the Internal Revenue
Service dated April 19, 2004, stating that the Plan is qualified, in form,
under Section 401(a) of the Internal Revenue Code (the "Code") and,
therefore, the related trust is exempt from taxation. Once qualified, the
Plan is required to operate in conformity with the Code to maintain its
qualification. The Plan Administrator will take any necessary steps to
maintain the Plan's tax qualified status in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan will remain
qualified and the related trust will remain tax exempt.
9
NOTE 5 - Party-In-Interest Transactions
The Plan presently holds shares of the Company's stock. The Plan was
amended on May 28, 2001 to allow participants to invest their accounts in a
company stock fund. In addition, certain Plan investments are shares of
funds managed by Vanguard Group. Vanguard Fiduciary Trust Company, a
wholly-owned subsidiary of Vanguard Group, is the Trustee as defined by the
Plan and, therefore, these transactions are party-in-interest transactions.
NOTE 6 - Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, participants will become 100%
vested in their account balances remaining after the final allocation of
expenses and fund profits or losses.
10
PNM Resources, Inc.
Retirement Savings Plan
LINE 4(i) -- SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2003
Identity of Party Involved Description of Investment Fair Value
-------------------------------------------------------- ------------------------------ --------------
Vanguard Group:
* Vanguard Wellington Fund Registered investment company $26,812,965
* Vanguard PRIMECAP Fund Registered investment company 26,424,322
* Vanguard 500 Index Fund Registered investment company 22,536,160
* Vanguard Treasury Money Market Fund Registered investment company 22,474,910
* Vanguard Windsor Fund Registered investment company 22,257,180
* Vanguard U.S. Growth Fund Registered investment company 10,355,397
* Vanguard Windsor II Fund Registered investment company 10,269,972
* Vanguard Long-Term Treasury Fund Registered investment company 9,093,390
* Vanguard Strategic Equity Fund Registered investment company 8,907,033
* Vanguard International Growth Fund Registered investment company 6,075,322
* Vanguard Short-Term Corporate Fund Registered investment company 4,115,148
* Vanguard LifeStrategy Growth Fund Registered investment company 3,987,393
* Vanguard Asset Allocation Fund Registered investment company 3,620,740
* Vanguard LifeStrategy Moderate Growth Fund Registered investment company 3,526,685
* Vanguard LifeStrategy Income Fund Registered investment company 1,796,782
* Vanguard LifeStrategy Conservative Growth Fund Registered investment company 1,316,745
* Vanguard Prime Money Market Fund Registered investment company 1,304,030
* Vanguard Retirement Savings Trust Common/Collective Trust 9,162,812
* PIMCO Funds: Total Return Fund; Administrative Registered investment company 2,650,391
* PIMCO StocksPLUS Fund- Admin Class Registered investment company 1,573,212
* Baron Growth Fund Registered investment company 1,809,567
* American Funds Growth Fund Registered investment company 296,848
* Participant Loans Loans 5,664,305
* PNM Resources, Inc. Common Stock Fund Company stock fund 6,061,509
--------------
Total investments $ 212,092,818
==============
* Represents a party-in-interest.
The accompanying notes are an integral part of these financial statements.
11
Exhibits filed:
--------------
23.1 Consent of Grant Thornton LLP.
12
SIGNATURE
---------
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the Committee has duly caused this annual report to be signed by the
undersigned hereunto duly authorized.
PNM RESOURCES, INC.
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
(now known as PNM Resources, Inc.
Retirement Savings Plan)
(Name of Plan)
Date: June 28, 2004 By: /s/Alice Cobb
------------------------------------------
Alice Cobb
Committee Chairperson, PNM Resources, Inc.
Benefits Governance Committee
13