2018 Annual Report
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Table of Contents CMS ENERGY & C ONSUME RS ENERGY ANNUAL REPORT 2018 Table of Contents Table of Contents Dear Shareowners: I’m proud to report we delivered another year of strong financial performance in 2018, marking 16 years of meeting our adjusted earnings guidance. As we reflect on a successful year of world class performance delivering hometown service, I’m proud to share our top achievements with you, as measured by our triple bottom line of People, Planet and Profit. PEOPLE – Serving our customers, communities and co-workers. Highlights include: • Recognized as a “Customer Champion” for our service to business customers by Market Strategies International – an annual honor awarded to utilities that exhibit exceptional performance on Brand Trust, Service Satisfaction, and Product Experience • Among the best (Midwest) performers in JD Power Customer Satisfaction for both electric and gas residential surveys • Named the best company in Michigan to work for by Forbes® Magazine • Named the #1 Michigan Company for Diversity by Forbes® Magazine two years in a row (2018 & 2019) • Achieved a 100% rating in the Corporate Equality Index with Human Rights Campaign Foundation® • Received the 2018 Association for Talent Development “Best Award” for enterprise-wide talent development – the only Michigan-based company to do so • Received the Michigan Veterans Affairs Agency’s Rising Star Award, recognizing us as a leader with regard to recruiting, retaining, and supporting our veterans, active guard, and reserve • Enhanced Infrastructure Replacement Program raised over $17,000 and delivered more than 600 turkey dinners around the state during Thanksgiving • Delivered 50,000 “Green Glove Dryers” to schools in 30 counties across Michigan, keeping children’s hands warm • Contributed, in conjunction with our charitable foundation and employees, more than $18.5 million to nonprofit organizations in the communities we serve PLANET – Going above and beyond environmental regulations to leave our planet better than we found it. Highlights include: • Announced Clean Energy Goal and filed Integrated Resource Plan – by 2040: o Reduce carbon emissions by 90% o Eliminate coal to generate electricity, while committing to care for our coal generation co- workers during the transition o Produce more than 40% of energy from renewable sources • Announced five-year goals: o Save 1 billion gallons of water o Reduce waste to landfills by 35% o Protect, enhance, or restore 5,000 acres of land in Michigan . Progress toward these goals in 2018 included: • Reducing our water usage by 180 million gallons • Reducing our waste to landfills by 12% • Protecting, enhancing, or restoring over 750 acres of land • Fully subscribed customer programs: o Energy Efficiency o Demand Response o Large Customer Renewable Pilot i Table of Contents • Announced electric vehicle plan, piloting smart charging technology, and developing a $10 million effort over three years to encourage development of charging stations across Michigan • Received the Best Communication/Education Program award from the Michigan Governor’s Energy Excellence Awards for our Nonprofit Energy Efficiency program • Received 2018 ENERGY STAR® Partner of the Year Sustained Excellence award by the U.S. Environmental Protection Agency • Ranked #2 in the US for Environmental, Social and Governance, and Socially Responsible Investing metrics by Institutional Investor Magazine PROFIT – Delivering consistent, industry-leading financial performance. Highlights include: • Reported net income of $657 million, or $2.32 per share, compared with $460 million, or $1.64 per share, the previous year • Adjusted net income of $659 million, or $2.33 per share – achieving annual adjusted earnings per share growth of 7%, again • In January 2019, increased our common stock dividend by 7% to $1.53 per share on an annualized basis – the 13th common stock dividend increase in as many years • Delivered operating cash flow of $1,703 million • Secured 101 megawatts of new load in 2018 in our service territory, projected to add over 5,500 jobs and over $2 billion of investment in Michigan I am proud of our co-workers who exemplify our purpose – CMS Energy: World Class Performance Delivering Hometown Service. This will continue to guide us on a path of success. I look forward to the coming year, and I thank you for your continued support. Sincerely, Patti Poppe President and CEO March 21, 2019 This letter includes non-GAAP measures. Reconciliations to the most directly comparable GAAP measures are found immediately following this letter and on our website at cmsenergy.com. ii Table of Contents CMS ENERGY CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income (Unaudited) In Millions, Except Per Share Amounts Twelve Months Ended 12/31/18 12/31/17 Net Income (Loss) Available to Common Stockholders $ 657 $ 460 Reconciling items: Discontinued operations (income) loss (*) * Other exclusions from adjusted earnings 9 4 Tax impact (*) (2) Gain on assets previously sold (4) - Tax impact 1 - Tax reform (4) 148 Adjusted net income – non-GAAP $ 659 $ 610 Average Common Shares Outstanding Basic 282.2 280.0 Diluted 282.9 280.8 Basic Earnings (Loss) Per Average Common Share Reported net income (loss) per share $ 2.33 $ 1.64 Reconciling items: Discontinued operations (income) loss (*) * Other exclusions from adjusted earnings 0.03 0.01 Tax impact (*) (*) Gain on assets previously sold (0.01) - Tax impact * - Tax reform (0.02) 0.52 Adjusted net income per share – non-GAAP $ 2.33 $ 2.17 Diluted Earnings (Loss) Per Average Common Share Reported net income (loss) per share $ 2.32 $ 1.64 Reconciling items: Discontinued operations (income) loss (*) * Other exclusions from adjusted earnings 0.03 0.01 Tax impact (*) (*) Gain on assets previously sold (0.01) - Tax impact * - Tax reform (0.01) 0.52 Adjusted net income per share – non-GAAP $ 2.33 $ 2.17 * Less than $0.5 million or $0.01 per share. Management views adjusted (non-Generally Accepted Accounting Principles) earnings as a key measure of the Company's present operating financial performance and uses adjusted earnings for external communications with analysts and investors. Internally, the Company uses adjusted earnings to measure and assess performance. Adjustments could include items such as discontinued operations, asset sales, impairments, restructuring costs, regulatory items from prior years, or other items detailed in these summary financial statements. Adjusted earnings should be considered supplemental information to assist in understanding our business results, rather than as a substitute for reported earnings. iii Table of Contents (This page intentionally left blank) Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_____to_____ 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) One Energy Plaza, Jackson, Michigan 49201 (517) 788-0550 1-5611 CONSUMERS ENERGY COMPANY 38-0442310 (A Michigan Corporation) One Energy Plaza, Jackson, Michigan 49201 (517) 788-0550 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Registrant Title of Class on Which Registered CMS Energy Corporation Common Stock, $0.01 par value New York Stock Exchange Consumers Energy Company Cumulative Preferred Stock, $100 par value: $4.50 Series New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. CMS Energy Corporation: Yes No Consumers Energy Company: Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. CMS Energy Corporation: Yes No Consumers Energy Company: Yes No 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. CMS Energy Corporation: Yes No Consumers Energy Company: Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). CMS Energy Corporation: Yes No Consumers Energy Company: Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. CMS Energy Corporation: Consumers Energy Company: Large accelerated filer Large accelerated filer Non Accelerated filer Non Accelerated filer Accelerated filer Accelerated filer Smaller reporting company Smaller reporting company Emerging growth company Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. CMS Energy Corporation: Consumers Energy Company: Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).