FORM 8-K
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 4, 2002
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-9513 CMS ENERGY CORPORATION 38-2726431
(A Michigan Corporation)
Fairlane Plaza South, Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
(313) 436-9261
1-5611 CONSUMERS ENERGY COMPANY 38-0442310
(A Michigan Corporation)
212 West Michigan Avenue
Jackson, Michigan
(517) 788-1030
1-2921 PANHANDLE EASTERN PIPE LINE COMPANY 44-0382470
(A Delaware Corporation)
5444 Westheimer Road, P.O. Box 4967
Houston, Texas 77210-4967
(713) 989-7000
ITEM 5. OTHER EVENTS
On February 4, 2002, CMS Energy Corporation issued a press release announcing its fourth quarter and full year 2001
earnings and webcast a conference call on those 2001 earnings and the Corporation's financial outlook. Substantially
the following disclosures were provided in that press release and/or webcast conference call:
CMS Energy's Consolidated Earnings
For the year 2001, CMS Energy's net operating earnings were $1.41 per share or $185 million, compared to 2000 net
operating earnings of $2.21 per share or $246 million. Consolidated reported net income for 2001 was a loss of $545
million, or $4.17 loss per share, compared to reported net income of $36 million, or $0.32 per share, in 2000.
Reconciling items excluded from net operating earnings reduced earnings by $730 million, $613 million of which were
previously recorded in the third quarter of 2001. These items included the effects of loss contracts ($212 million),
reduced asset valuations ($249 million), asset sales ($37 million), discontinued operations ($185 million), early debt
retirement ($18 million), Argentina-related charge ($18 million) and the cumulative effect of a change in accounting
for purchased power options ($11 million). Items that were excluded from 2000 net operating earnings reduced earnings
by $210 million.
CMS Energy's 2001 net operating earnings were negatively affected primarily by increased power purchase costs due to a
six month unplanned outage at the Palisades nuclear plant, near-record warm weather in the fourth quarter and the
impact of the economic slowdown on electric and gas sales. The Palisades nuclear plant, which was returned to service
in January 2002, is owned by Consumers Energy Company, which is CMS Energy's Michigan utility subsidiary.
CMS Energy's net operating earnings for the fourth quarter 2001 totaled a loss of $0.13 per share, or a net loss of
$17 million, compared to fourth quarter 2000 net operating earnings of $0.79 per share, or $94 million. Reported
earnings for the fourth quarter of 2001 were a loss of $1.03 per share, or a loss of $138 million, compared to
reported loss of $1.44 per share, or a loss of $171 million, in the fourth quarter of 2000. The fourth quarter 2001
net operating loss was due in part to increased power supply costs because of the Palisades outage (18 cents per
share), and near-record warm fourth quarter weather and continued weak economic conditions negatively affecting
Consumers Energy (22 cents per share).
Consumers Energy's Consolidated Earnings
For the year 2001, Consumers Energy's net income available to the common stockholder totaled $57 million, a decrease
of $211 million from the previous year. The decrease in earnings reflects an $82 million after-tax loss, recorded in
September 2001, related to Consumer Energy's Power Purchase Agreement with the Midland Cogeneration Venture (MCV).
The earnings decrease also reflects significantly increased operating expense in 2001, primarily $59 million of after
tax costs for replacement power supply costs due to a six month unscheduled outage at the Palisades nuclear plant.
Net income for 2001 was also adversely impacted by $11 million net of tax due to the implementation of a change in
accounting principle for certain electric call option contracts. In addition, 2001 earnings decreased due to the
impact of reduced gas deliveries resulting from milder temperatures during both the first quarter and fourth quarter.
Electric and gas revenues were also adversely impacted by a decrease in electricity and gas delivered to industrial
customers, reflecting the yearlong impact of an economic slowdown throughout Michigan. Electric sales for the year
totaled 40 billion kilowatt-hours, down 3.5 percent from the previous year. Natural gas deliveries were 367 billion
cubic feet, down 10 percent from 2000. Consumers Energy hooked up 20,500 new electric customers and 19,035 new natural
gas customers to its system.
Financial Improvement
In October 2001, CMS Energy announced significant changes in its business strategy in order to strengthen its balance
sheet, provide more transparent and predictable future earnings, and lower its business risk by focusing its future
business growth primarily in North America. Several significant steps have been taken subsequent to October 2001 in
support of this strategy. In November 2001, a special purpose consolidated subsidiary of Consumers Energy issued $469
million of securitization bonds, which are asset-backed bonds with a higher credit rating than Consumers Energy's
conventional corporate bonds. In December 2001, CMS Energy completed a previously announced $320 million monetization
of its CMS Trunkline LNG business and the value created by a long-term contract for capacity at the CMS Trunkline LNG
Lake Charles, Louisiana terminal. This monetization was structured as a new joint venture, including $290 million of
newly issued debt, which will not be consolidated with CMS Energy and Panhandle reflecting their lack of control of
the joint venture. In January 2002, CMS Energy completed the sale of its assets in Equatorial Guinea, Africa, for $993
million. The majority of the net proceeds from these three transactions were used to retire debt of CMS Energy,
Consumers Energy and Panhandle Eastern Pipe Line Company. In addition to the Equatorial Guinea assets, additional CMS
Energy assets have been identified and are currently being marketed for sale. The proceeds realized upon the sale of
these remaining assets may be materially different than the book value of these assets. CMS Energy anticipates,
however, that the sales will result in additional cash proceeds that it will use to retire additional debt of CMS
Energy, Consumers Energy and/or Panhandle. Even though these assets have been identified for sale, management cannot
predict when, nor make any assurances that, these asset sales will occur.
CMS Energy currently estimates the capital expenditures, including new lease commitments and investments in new
business developments through partnership and unconsolidated subsidiaries, will total $2.9 billion during the years
2002 through 2004. This estimate includes a 2002 capital expenditure estimate of $975 million, reduced $50 million
from the previous 2002 estimate. These estimates are prepared for planning purposes and are subject to revision.
Argentina
In January 2002, the Republic of Argentina enacted the Law of Public Emergency and Foreign Exchange System. This law,
among other things, repeals the fixed exchange rate of one US Dollar to one Argentina Peso previously established by
Argentine law and converts all Dollar-denominated utility tariffs and energy contract obligations into Pesos at the
same one-to-one exchange rate and empowers the President of Argentina to renegotiate such tariffs. Since
exchangeability between the two currencies was temporarily suspended at December 31, 2001, CMS Energy used the first
subsequently available, free-floating exchange rate of 1.65 Pesos per Dollar on January 11, 2002, as required by
Statement of Financial Accounting Standard No. 52 on Foreign Currency Translation, to record an $18 million loss
resulting from the translation of Peso-denominated monetary assets and liabilities.
In February 2002, the Republic of Argentina issued additional decrees that required all monetary obligations due and
payable in foreign currencies and all debts in foreign currencies to be converted into Pesos. These February decrees
also allow the Argentine judiciary essentially to rewrite private contacts denominated in Dollars or other foreign
currencies if the parties cannot agree on how to share equitably the impact of the conversion of their contracts into
Pesos.
The exchange rate on March 6, 2002 was 2.11 Pesos to the Dollar. While CMS Energy management cannot predict the most
likely average or end-of-period Peso/Dollar exchange rates for 2002, the following table contains management's current
estimates of the impacts at various exchange rates that the changes in Argentine laws, the potential impacts of
contract and tariff changes, the currency devaluation and other recent events in Argentina could have on CMS Energy's
results of operation and financial condition. Amounts are calculated assuming that the exchange rates remain constant
throughout the year. The initial adjustments include reductions to net income that could result from the recognition
of a change in functional currency from the Dollar to the Peso and corresponding losses on Dollar-denominated
liabilities, as well as reduced asset valuations resulting from the unilateral actions of the Republic of Argentina.
Operating income reductions could result from the potential impacts on net project revenues of the conversion to Pesos
of utility tariffs and energy contract obligations that were previously tied to the Dollar. These operating income
reductions are divided between Argentine investments that CMS Energy intends to retain and those investments it
intends to sell. Investments in the latter category eventually may be classified as discontinued operations in CMS
Energy's financial statements. Balance sheet exposures reflect the reduction to shareholders' equity due to the
effects of lower net income on retained earnings. The amounts shown below are only estimates; management is continuing
to assess the impacts that the events in Argentina could have on CMS Energy's results of operations and financial
condition.
Income Statement
Exchange rate of Pesos to one Dollar 1.65 2.00 3.00
Initial net income adjustments
(in millions) $ (84) $(110) $(150)
Operating income reductions
(in cents per share):
Retained investments $(0.14) $(0.18) $(0.25)
Investments for sale $(0.10) $(0.11) $(0.12)
Balance Sheet
Exchange rate of Pesos to one Dollar 1.65 2.00 3.00
Reductions to shareholders' equity
(in millions) $(116) $(148) $(199)
FORWARD LOOKING STATEMENTS
This Form 8-K contains "forward-looking statements" that are subject to risks and uncertainties. They should be read
in conjunction with the "Forward-Looking Statement Cautionary Factors" in CMS Energy's, Consumers Energy's and
Panhandle's Form 10-K, Item 1 (incorporated by reference herein) that discusses important factors that could cause CMS
Energy's, Consumers Energy's and Panhandle's results to differ materially from those anticipated in such statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to
be signed on their behalf by the undersigned hereunto duly authorized.
CMS ENERGY CORPORATION
Dated: March 7, 2002 By: /s/ Alan M. Wright
Alan M. Wright
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer
CONSUMERS ENERGY COMPANY
Dated: March 7, 2002 By: /s/ Alan M. Wright
Alan M. Wright
Executive Vice President, Chief Financial
Officer and Chief Administrative Officer
PANHANDLE EASTERN PIPE LINE COMPANY
Dated: March 7, 2002 By: /s/ Gary W. Lefelar
Gary W. Lefelar
Vice President and Controller