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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
AMENDMENT NO. 2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 COMMISSION FILE NUMBER 1 - 6986
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Exact name of Registrant as specified in its charter)
NEW MEXICO 85-0019030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ALVARADO SQUARE 87158
ALBUQUERQUE, NEW MEXICO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (505) 241-2700
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $5.00 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF CLASS)
1965 SERIES, 4.58% CUMULATIVE PREFERRED STOCK
($100 STATED VALUE AND WITHOUT SINKING FUND)
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 and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in any amendment to this Form 10-K/A. __
The total number of shares of the Company's Common Stock outstanding as
of January 31, 2001 was 39,117,799. On such date, the aggregate market value of
the voting stock held by non-affiliates of the Company, as computed by reference
to the New York Stock Exchange composite transaction closing price of $24.70 per
share reported by The Wall Street Journal, was $966,209,635.
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
This amendment is being filed to revise the table "Aggregated Option
Exercises In 2000 And 2000 Year-End Option Values" on page E-5.
PART III
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
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LONG-TERM
COMPENSATION
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ANNUAL COMPENSATION AWARDS
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SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(a) OPTIONS(#) COMPENSATION
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J. E. Sterba 2000 $317,114 (b) $241,200 (c) -- 325,000 $127,464 (d)
Chairman, President 1999(e) -- -- -- -- --
and Chief Executive 1998 256,849 (f) 117,161 (g) -- -0- (h) 6,525 (i)
Officer
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B. F. Montoya 2000 $377,881 (b) $150,000(j) -- 100,000 $129,961 (k)
Chairman and Chief 1999 415,376 100,000(l) -- 45,000 19,153 (i)
Executive Officer 1998 389,423 25,000(l) -- -0- (h) 22,327 (i)
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R. J. Flynn 2000 $234,808 $182,820(c) -- 65,000 $9,691 (i)
Executive Vice President 1999 193,110 64,400(g) -- 16,000 5,555 (i)
of Electric and Gas 1998 166,320 49,223(g) -- -0- (h) 1,842 (i)
Services
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M. H. Maerki 2000 $217,393 $111,452(c) -- 49,000 $6,652 (i)
Senior Vice President and 1999 188,732 55,200(g) -- 16,000 5,281 (i)
Chief Financial Officer 1998 190,432 (f) 49,927(g) -- -0- (h) 3,024 (i)
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P. T. Ortiz 2000 $197,121 $78,982(c) -- 47,000 $10,651 (i)
Senior Vice President, 1999 170,670 39,900(g) -- 16,000 3,446 (i)
General Counsel and 75,000(m) --
Secretary 1998 155,699 41,588(g) -- -0- (h) 982 (i)
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W. J. Real 2000 $219,233 $182,820(c) -- 67,000 $7,217 (i)
Executive Vice President 1999 173,139 45,600(g) -- 16,000 3,752 (i)
of Power Production and 1998 145,335 18,685(g) -- -0- (h) 301 (i)
Marketing
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(a) Amounts are less than the established reporting thresholds.
(b) Salary for a partial year of service; Mr. Montoya retired October 13, 2000
and Mr. Sterba was hired March 1, 2000.
(c) Bonus paid in 2001 for 2000 performance according to an Officer Incentive
Plan that was created to replace executive officer participation in the
broad-based employee annual incentive program, Results Pay. The officer
plan ties a portion of officer compensation to company-wide earnings per
share, positive corporate total shareholder return in excess of the
Philadelphia Utility Index, and individual performance.
(d) Relocation expense reimbursements plus amounts pursuant to a plan that
provides executives with contribution benefits for earning more than IRS
limits imposed for qualified plans.
(e) Mr. Sterba was not employed by the Company during 1999.
(f) Amounts include sales of accrued vacation hours during 1998 and also
reflect increases in base salaries.
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(g) Incentives paid in 2000 and/or 1999 for prior year achievements under the
broad-based employee annual incentive program, Results Pay. In addition,
these amounts include any lump sum bonus granted for individual
performance.
(h) Due to Performance Stock Plan amendments approved in 1998 that changed the
timing of the grants, no grants were awarded with a 1998 effective date.
(i) Amounts are pursuant to a plan that provides executives with contribution
benefits for earning more than IRS limits imposed for qualified plans.
(j) Bonus paid in April 2001 for previous performance.
(k) Taxable gifts, unused vacation and flexible holiday pay upon retirement,
plus amounts pursuant to a plan that provides executives with contribution
benefits for earning more than IRS limits imposed for qualified plans.
(l) Bonus paid in February 2000 for 1999 performance. Bonus paid in June 1998
was for previous performance.
(m) Bonus paid in March 2000 for previous performance.
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OPTION GRANTS IN 2000
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Under the Company's Performance Stock Plan ("PSP"), non-qualified stock
option grants were awarded to all executive officers, including Mr. Sterba, as
well as other key employees. Annual grants for 2000 were approved and awarded in
February 2000. Due to the December 31, 2000 expiration of the PSP and a delay
in the effective date of the Omnibus Performance Equity Plan, a final grant
was approved under the PSP and awarded in December 2000.
OPTION GRANTS IN FISCAL YEAR (2000)
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Individual Grants(1)
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Number of Percent of
Securities Total Options
Underlying Granted to Exercise or Grant Date
Options Employees in Base Price Expiration Present
NAME Granted(#) Fiscal Year ($/Share) Date Value ($) (2)
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R. J. Flynn 30,000 1.4% $15.8125 02/07/2010 $112,200(2)(a)
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35,000 1.7% $24.3125 12/10/2010 $415,450(2)(b)
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M. H. Maerki 20,000 1.0% $15.8125 02/07/2010 $74,800(2)(a)
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29,000 1.4% $24.3125 12/10/2010 $344,230(2)(b)
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B. F. Montoya(3) 100,000 4.8% $15.8125 02/07/2010 $374,000(2)(a)
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P. T. Ortiz 20,000 1.0% $15.8125 02/07/2010 $74,800(2)(a)
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27,000 1.3% $24.3125 12/10/2010 $320,490(2)(b)
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W. J. Real 30,000 1.4% $15.8125 02/07/2010 $112,200(2)(a)
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37,000 1.8% $24.3125 12/10/2010 $439,190(2)(b)
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J. E. Sterba 100,000 4.8% $15.1250 03/06/2010 $351,000(2)(c)
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100,000 4.8% $16.1875 06/06/2010 $438,000(2)(d)
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125,000 6.0% $24.3125 12/10/2010 $1,483,750(2)(b)
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(1) The options shown in this table were granted in 2000 under the Company's
Third Restated and Amended Public Service Company of New Mexico Performance
Stock Plan.
(2) The grant date valuation was calculated using the Black-Scholes option
pricing model:
a. Assuming stock price volatility of 27.799%, a risk-free rate
of return of 6.636% and an annual dividend yield of 5.06%. The
weighted average grant date option fair value is $3.74.
b. Assuming stock price volatility of 58.168%, a risk-free rate
of return of 5.36% and an annual dividend yield of 3.29%. The
weighted average grant date option fair value is $11.87.
c. Assuming stock price volatility of 29.393%, a risk-free rate
of return of 6.409% and an annual dividend yield of 5.29%. The
weighted average grant date option fair value is $3.51.
d. Assuming stock price volatility of 33.948%, a risk-free rate
of return of 6.12% and an annual dividend yield of 4.94%. The
weighted average grant date option fair value is $4.38.
(3) Mr. Montoya retired from the Company effective October 13, 2000; however,
he will continue to serve as a member of the Board of Directors.
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AGGREGATED OPTION EXERCISES IN 2000
AND 2000 YEAR-END OPTION VALUES
------------------------------- -------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2000 DECEMBER 31, 2000(a)
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SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED(d) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
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R. J. Flynn - - 19,733 81,000 $111,638 $566,500
M. H. Maerki - - 33,223 65,000 $235,578 $441,500
B. F. Montoya(b) 166,896(c) $1,282,364(c)- 165,902 -0- $1,584,381 -0-
P. T. Ortiz - - 68,672 63,000 $736,941 $436,500
W. J. Real - - 30,035 83,000 $209,184 $571,500
J. E. Sterba - -0- 325,000 -0- $2,543,750
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(a) Value equals the year-end stock price ($26.8125) minus the exercise price,
times the number of shares underlying the option. "In-the-Money" means that
the year-end stock price was greater than the exercise price of the option.
(b) Mr. Montoya retired effective October 13, 2000.
(c) Of these amounts 91,332 shares and $760,989 in value were realized after
Mr. Montoya's retirement date of October 13, 2000.
(d) Value of shares exercised is the market value of the shares on the exercise
date minus the exercise price.
RETIREMENT PLAN AND RELATED MATTERS
In December 1996, the Board of Directors approved changes to the
Company defined benefit plan ("Retirement Plan") and implementation of matching
and non-matching contributions to the 401(k) defined contribution plan effective
January 1, 1998. The Company contributions to the 401(k) plan consist of a three
percent non-matching contribution, and a 75 percent match on the first six
percent contributed by the employee on a before-tax basis.
Through December 31, 1997, the Retirement Plan covered employees who
had at least one year of service and had attained the age of 21. Vesting
occurred after five years of service. Directors who were not employees did not
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participate in the Retirement Plan. The Company made no contribution in 2000
to the Retirement Plan for plan year 1999, as the Retirement Plan was
adequately funded and frozen effective December 31, 1997.
Salaries used in Retirement Plan benefit calculations were frozen as of
December 31, 1997. Additional credited service can be accrued under the
Retirement Plan up to a limit determined by age and years of service. The
Company made contributions in 1998 to the Retirement Plan for plan year 1997 in
the amount of $185,000. The amount of any contribution with respect to any one
person cannot be determined. The contribution amount is actuarially determined
based upon the number of Plan participants, the participants' age, salary, and
years of service.
The following table illustrates the annual benefits that would be
provided under the Retirement Plan to employees who retire at the indicated
compensation and year of service levels and who elect to receive the benefits,
which are calculated on a straight-life annuity basis, over their remaining
lives. Vesting of accrued benefits would also occur in the event of a change in
control of the Company. Benefits shown are maximum annual benefits payable at
age 65 to participants who retire at age 65. The table is based on the
Retirement Plan. The amounts shown in the table are not subject to any deduction
for Social Security benefits or other offset amounts.
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PENSION PLAN TABLE
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AVERAGE OF
HIGHEST ANNUAL
BASE SALARY CREDITED YEARS OF SERVICE
FOR 3
CONSECUTIVE -----------------------------------------------------------------------------------------------------
YEARS(a) 5(b) 10 15 20 25 30 32 1/2(c)
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$100,000 $10,000 $20,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 65,000
$150,000 15,000 30,000 45,000 60,000 75,000 90,000 97,500
$200,000 20,000 40,000 60,000 80,000 100,000 120,000 130,000
$250,000 25,000 50,000 75,000 100,000 125,000 150,000 162,500
$300,000 30,000 60,000 90,000 120,000 150,000 180,000 195,000
$350.000 35,000 70,000 105,000 140,000 175,000 210,000 227,500
$400,000 40,000 80,000 120,000 160,000 200,000 240,000 260,000
$450,000 45,000 90,000 135,000 180,000 225,000 270,000 292,500
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(a) For these purposes, compensation consists of base salaries and includes any
amount voluntarily deferred under the Company's Master Employee Savings
Plan. Generally, compensation for these purposes does not include bonuses,
payments for accrued vacation, or overtime pay.
(b) Although years of service begin accumulating from the date of employment,
vesting occurs after five years of service.
(c) The maximum number of years generally taken into account for purposes of
calculating benefits under the non-contributory defined benefit plan. Under
limited circumstances, an employee working beyond age 62 could earn an
additional 3% retirement benefit.
Credited years of service, which can be used to calculate benefits as
shown in the above table, have been accumulated by executive officers under the
Retirement Plan, the Accelerated Management Performance Plan discussed below and
the supplemental employee retirement arrangements discussed below. Credited
years of service computed as of December 31, 2000, are as follows: Mr. Montoya,
11 years; Mr. Sterba, 23.9 years; Mr. Flynn, 6 years; Mr. Maerki, 28.5 years;
Mr. Ortiz, 10.25 years; and Mr. Real, 22.33 years. The executive officers'
remuneration that would be used to calculate benefits is determined by reference
to the Retirement Plan and the
E-6
supplemental employee retirement arrangements discussed below. As of December
31, 2000, the remuneration used to calculate benefits was as follows: Mr.
Montoya, $373,336; Mr. Sterba, $167,412; Mr. Flynn, $161,163; Mr. Maerki,
$170,900; Mr. Ortiz, $138,332; and Mr. Real, $135,000. The remunerator used by
the plan was frozen as of December 31, 1997.
Under Section 401(a)(17) of the Code there is a limitation on the
amount of compensation that can be considered in determining retirement benefits
under qualified retirement plans. In June 1998, the Board of Directors approved
a plan to give executives with earnings in excess of the Code Section 401(a)(17)
limitation ($170,000 for 2000) an opportunity to more fully participate in the
Company's 401(k) plan and enable them to receive the 3% company contribution and
a 75 cent on the dollar match for the first 6% contributed by the employee for
eligible earnings in excess of the compensation limitation. The plan also
permits executives to contribute amounts in excess of the Code Section 402(g)
limitations on elective deferrals. Nine executive officers participated in the
executive savings plan in 2000.
In January 1981, the Board of Directors approved a non-qualified
executive benefit program for a group of management employees. The Accelerated
Management Performance Plan, or AMPP, was intended to attract, motivate and
retain key management employees. Mr. Maerki and certain other key management
employees are eligible to participate in one or more of the plans in the
program. Under the program, as originally adopted, key management employees had
the opportunity to earn additional credit for years of service toward
retirement. The AMPP, as amended and restated, phased out the accumulation of
additional credits by January 1, 1990. In addition, the amended and restated
plan includes a provision that allows key management employees who have not
attained the maximum credits for years of service to receive a reduced benefit
from the plan upon accepting early retirement. Monthly benefits received
pursuant to the AMPP are offset by monthly benefits received pursuant to the
Retirement Plan.
As approved by the Board of Directors in 1989, a supplemental employee
retirement agreement was entered into with Mr. Maerki. Under the agreement, Mr.
Maerki's retirement benefits will be computed as if he had been an employee of
the Company since February 15, 1974.
As approved by the Board of Directors in 2000, supplemental employee
retirement agreements were entered into with Mr. Sterba and Mr. Ortiz. Under the
terms of the agreement with Mr. Sterba, he will earn additional years of
credited service so that, if he remains employed by the Company until February
28, 2005, he will be credited with 30 years of service. Mr. Sterba's agreement
also provides that, until February 28, 2005, his eligibility for retiree medical
benefits will be determined as if he attained 20 years of credited service with
the Company at age 45. Under the terms of the agreement with Mr. Ortiz, he will
earn additional years of credited service so that, if he remains employed by the
Company until January 1, 2010, he will be credited with 30 years of service.
This agreement also provides that, until Mr. Ortiz reaches the age of 55, his
eligibility for retiree medical benefits will be determined as if he had
attained 20 years of credited service with the Company at age 45.
Under the terms of employment agreements with Mr. Montoya, he is
receiving supplemental retirement benefits computed as if he had been an
employee of the Company since August 1, 1990.
E-7
The Board of Directors has approved the establishment of an irrevocable
grantor trust, under provisions of the Internal Revenue Code, generally in
connection with the AMPP and the supplemental retirement arrangements with Mr.
Montoya, Mr. Sterba, Mr. Ortiz, Mr. Maerki, and certain former executive
officers. The Company may, but is not obligated to, provide funds to the trust,
which was established with an independent trustee, to aid in meeting its
obligations under those arrangements. Funds in the amount of $12.7 million
have been provided to the trust since 1989. Distributions have been made from
the trust since 1989. No additional funds have been provided to the trust. In
connection with amendments to the Executive Retention Plan discussed below, the
executive savings program and supplemental retirement arrangements would be
required to be funded through the trust upon a change in control of the Company.
DIRECTOR COMPENSATION
Of the Company's current Board members, only one, Mr. Sterba, is a
salaried employee. Mr. Sterba receives no compensation for serving on the Board
or its committees. Board members who are not salaried employees of the Company
receive compensation for Board service, which currently includes:
ANNUAL RETAINER: $20,000
ATTENDANCE FEES: $750 per Board meeting
$500 for each Board committee meeting
COMMITTEE CHAIRS: $200 for each Board committee meeting
(in addition to attendance fees)
Under the Company's Director Retainer Plan, approved by shareholders in
1996, directors may choose to receive their annual retainer in the form of cash,
restricted stock or stock options. The restrictions on the restricted stock
generally lapse one-third each year following the year of the grant. The options
generally vest (become exercisable) on the date of the next annual meeting and
allow the director to purchase 2,000 shares of common stock. The exercise price
of the option is equal to the fair market value of the common stock on the date
of grant less the annual retainer divided by 2,000, subject to a minimum
exercise price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
The Company Board of Directors adopted the Executive Retention Plan, or
the Retention Plan, effective January 1, 1992. The Retention Plan covers
executive officers and other key employees designated by the Board. The
Retention Plan provides certain severance benefits should the employee be
terminated from the Company as a result of a change in control of the Company,
and the employee is not immediately re-employed by the successor company, if
that termination is (a) for reasons other than cause, or (b) by the employee due
to constructive termination. The severance benefits include: (i) lump sum
severance equal to 2.5 times current base compensation for executive officers;
(ii) reimbursement of reasonable legal fees and expenses incurred as a result of
termination of employment; (iii) certain insurance benefits that are
substantially similar to those received by the employee immediately prior to
termination of employment; (iv) certain other amounts; and (v) if an employee
E-8
receives any payment due to a change in control that is subject to the excise
tax provided in Section 4999 of the Code, then the Company will reimburse the
employee in an amount equal to that which places the employee in the same
after-tax position as if no excise tax had been imposed. The Retention Plan
was effective for an initial term through December 31, 1992, and is to
continue in effect until terminated by the Board. The Retention Plan is also
subject to automatic extension, or revival if it has been terminated, for
certain events relating to potential changes in control.
The Company also has a non-union severance pay plan that covers
non-union employees, including executives, who are terminated due to the
elimination of their positions. Executives are eligible, upon signing a
release agreement, for a lump sum payment equal to one year of base salary and
reimbursement for placement assistance expenses incurred during the year after
being terminated up to 5% of base salary. Executives are also eligible for
regular severance pay in the amount of two months of base salary plus one
additional week of base salary for each year of service, continuation of
certain insurances, and health care benefits for up to 12 months. Severance
benefits shall not exceed the equivalent of twice the participant's annual
compensation. If an employee is to receive benefits under the Retention Plan,
severance benefits are not available to that employee under the non-union
severance pay plan.
Certain other plans in which the named executive officers
participate contain provisions that are triggered by a change in control of
the Company. These include the Performance Stock Plan, under which immediate
vesting of stock options occurs upon a change in control, and the PNM
Resources, Inc. Omnibus Performance Equity Plan, which provides for immediate
vesting upon eligible termination due to a change in control.
The terms of the change in control provisions are similar among the
plans but do have some variations. The Board of Directors is considering whether
a uniform definition of "change in control" should be adopted to apply to all
plans.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PUBLIC SERVICE COMPANY OF NEW MEXICO
(Registrant)
Date: May 4, 2001 By /s/ John R. Loyack
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John R. Loyack
VICE PRESIDENT, CORPORATE CONTROLLER
AND CHIEF ACCOUNTING OFFICER
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