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, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from ________ to _______
Commission Registrant, 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
1-6986 Public Service Company of New Mexico 85-0019030
(A New Mexico Corporation)
Alvarado Square
Albuquerque, New Mexico 87158
(505) 241-2700
PUBLIC SERVICE COMPANY OF NEW MEXICO
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
(Full title of the plan)
Public Service Company of New Mexico
(Name of issuer)
Alvarado Square
Albuquerque, New Mexico 87158
(Address of issuer's principal executive office)
Table of Contents
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Page(s)
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Report of Independent Public Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000 2
Statement of Changes in Net Assets Available for Benefits for
the Year Ended December 31, 2001 and 2000 3
Notes to Financial Statements and Supplemental Schedule 4-7
Supplemental Schedule:
Schedule I: Line 4(i) - Schedule of Assets (Held at End of Year)
- December 31, 2001 9
Signature Page 10
Exhibits
99.1 Statement regarding the inability of the Plan to obtain
written consent of Arthur Andersen, LLP 11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Public Service Company of New Mexico
Master Employee Savings Plan and Trust:
We have audited the accompanying statements of net assets available for benefits
of the PUBLIC SERVICE COMPANY OF NEW MEXICO MASTER EMPLOYEE SAVINGS PLAN AND
TRUST (the "Plan") as of December 31, 2001 and 2000, and the related statement
of changes in net assets available for benefits for the year ended December 31,
2001. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the 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 audit provides 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, 2001 and 2000, and the changes in its net assets available for
benefits for the year ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Our audit was 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 basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements, taken as a whole.
Albuquerque, New Mexico
April 26, 2002
1
PUBLIC SERVICE COMPANY OF NEW MEXICO
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
Statements of Net Assets Available for Benefits
As of December 31, 2001 and 2000
2001 2000
-------------- --------------
Investments, at fair value:
Shares of registered investment companies $ 161,700,054 $ 157,119,842
PIMCO StocksPLUS Fund- Admin Class 1,390,386 1,486,718
Public Service Company of New Mexico
Common Stock Fund 6,049,127 5,297,626
Participant Loans 5,782,441 5,943,970
-------------- --------------
Total investments 174,922,008 169,848,156
-------------- --------------
Receivables:
Employer contributions 485,020 422,033
Employee contributions 335,180 358,568
-------------- --------------
Total receivables 820,200 780,601
-------------- --------------
Net Assets Available for Benefits $ 175,742,208 $ 170,628,757
============== ==============
The accompanying notes to financial statements are an integral part of this
document.
2
PUBLIC SERVICE COMPANY OF NEW MEXICO
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2001
Additions to Net Assets: 2001 2000
--------------- ---------------
Investment income-
Interest and dividend income $ 5,563,023 $ 4,408,425
--------------- ---------------
Contributions-
Participants' contributions 12,189,183 12,199,095
Employer's contributions 9,191,412 8,660,081
--------------- ---------------
Total contributions 21,380,595 20,859,176
Other additions 8,016 1,877
--------------- ---------------
Total additions 26,951,634 25,269,478
--------------- ---------------
Deductions from Net Assets:
Net depreciation in fair value of investments 14,536,412 -
Benefits paid to participants 7,230,566 7,376,391
Administrative expenses 71,205 67,988
--------------- ---------------
Total deductions 21,838,183 7,444,379
--------------- ---------------
Net increase in net assets available for benefits 5,113,451 17,825,099
Net Assets Available for Benefits, beginning of year 170,628,757 152,803,658
--------------- ---------------
Net Assets Available for Benefits, end of year $ 175,742,208 $ 170,628,757
=============== ===============
The accompanying notes to financial statements are an integral part of this
document.
3
PUBLIC SERVICE COMPANY OF NEW MEXICO
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
Notes to Financial Statements
December 31, 2001 and 2000
1. Plan Description
----------------
The following description of the Public Service Company of New Mexico (the
"Company") Master Employee Savings Plan and Trust (the "Plan") is provided for
general information purposes only. More complete information regarding the
Plan's provisions may be found in the Plan document.
a. 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.
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 3% non-matching contribution made by the Company. Should an
employee take full advantage of the matching portions by contributing the
6%, a retirement benefit of 13.5% can be accrued each year along with any
investment gain or loss.
b. Contributions and Vesting
-------------------------
Eligible employees can contribute an amount up to 17.5%, 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.
4
c. Benefits
--------
Upon termination of service for any reason, a participant may elect to
receive an amount equal to the value of the participant's vested interest
in his or her account. The form of payment is a lump-sum distribution or a
combination of a lump-sum payment and a direct rollover contribution to
another qualified plan.
d. 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.
e. Investment Options
------------------
During the plan year ending December 31, 2001, participants were able to
allocate their contributions among various investment options.
f. 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, 2001 range from 5.62% to 10.00%.
2. Summary of Significant Accounting Policies
------------------------------------------
a. Basis of Presentation
---------------------
The accompanying financial statements have been prepared using the accrual
basis of accounting.
b. Income Recognition
------------------
Interest income is recorded as earned on the accrual basis. Dividend income
is recorded on the ex-dividend date.
5
c. 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.
d. 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.
e. Administrative Expenses
-----------------------
The Company pays 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 $71,205 during plan year 2001.
f. Payment of Benefits
-------------------
Benefits are recorded when paid.
g. 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.
6
3. Investments
-----------
The fair market value of individual investments as of December 31, 2001 and
2000, that represent five percent or more of the Plan's net assets at their
respective year-ends are as follows:
2001 2000
------------- -------------
Vanguard Windsor Fund $ 25,390,532 $26,547,562
Vanguard PRIMECAP Fund 23,138,940 25,786,971
Vanguard Treasury Money Market Fund 22,740,052 17,252,426
Vanguard Wellington Fund 21,452,522 18,329,025
Vanguard 500 Index Fund 18,765,279 20,310,378
Vanguard U.S. Growth Fund 12,384,234 16,291,731
During 2001 and 2000, the Plan's investments in assets other than temporary
investments and participant loans depreciated in fair value as follows:
2001 2000
--------------- ----------------
Registered investment companies $(14,421,572) $ (11,636,687)
Company stock fund
86,207 2,164,061
Master trust (201,047) (279,753)
--------------- ----------------
$(14,536,412) $ (9,752,379)
=============== ================
The net (depreciation) appreciation in fair value of investments includes
realized gains (losses) and unrealized appreciation (depreciation).
4. Tax Status
----------
The Internal Revenue Service ("IRS") has issued a determination letter dated
October 27, 1997, verifying that the Plan and related trust are designed in
accordance with applicable sections of the IRC. The Plan has been amended since
receiving this determination letter. The Company will re-submit the Plan and
will submit any amendments thereto to the IRS in a timely manner and will make
all changes required by the IRS to maintain the Plan's qualification.
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.
7
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.
8
PUBLIC SERVICE COMPANY OF NEW MEXICO
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
Line 4(i) -- Schedule of Assets (Held at End of Year)
December 31, 2001
Identity of Party Involved Description of Investment Value
----------------------------------------------- ------------------------------ -------------
Vanguard Group:
* Vanguard Windsor Fund Registered investment company $ 25,390,532
* Vanguard PRIMECAP Fund Registered investment company 23,138,940
* Vanguard Treasury Money
Market Fund Registered investment company 22,740,052
* Vanguard Wellington Fund Registered investment company 21,452,522
* Vanguard 500 Index Fund Registered investment company 18,765,279
* Vanguard U.S. Growth Fund Registered investment company 12,384,234
* Vanguard Windsor II Fund Registered investment company 7,617,600
* Vanguard Long-Term Treasury Fund Registered investment company 6,081,558
* Vanguard International Growth Fund Registered investment company 4,745,313
* Vanguard Strategic Equity Fund Registered investment company 4,014,692
* Vanguard Short-Term Corporate Fund Registered investment company 3,155,086
* Vanguard Asset Allocation Fund Registered investment company 3,143,652
* Vanguard LifeStrategy Growth Fund Registered investment company 2,926,684
* Vanguard LifeStrategy Moderate
Growth Fund Registered investment company 2,527,715
* Vanguard Prime Money Market Fund Registered investment company 1,686,396
* Vanguard LifeStrategy Conservative
Growth Fund Registered investment company 815,586
PIMCO Funds: Total Return Fund;
Administrative Registered investment company 596,442
* Vanguard LifeStrategy Income Fund Registered investment company 517,771
* Public Service Company of New Mexico
Common Stock Fund Company stock fund 6,049,127
PIMCO StocksPLUS Fund- Admin Class Master trust 1,390,386
* Participant Loans Loans 5,782,441
----------------
Total investments $ 174,922,008
================
The accompanying notes to financial statements are an integral part of this
document.
9
SIGNATURES
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.
PUBLIC SERVICE COMPANY OF NEW MEXICO
MASTER EMPLOYEE SAVINGS PLAN AND TRUST
(Name of Plan)
Date: July 1, 2002 /s/Ramon M. Gonzales
-----------------------------------------
Ramon M. Gonzales
Chairperson, MESP Committee
10