Business Context and Reporting Period
This Form 8-K, dated February 29, 2012, is filed by PNM Resources, Inc. (PNMR), Public Service Company of New Mexico, and Texas-New Mexico Power Company. The filing announces the results of operations for the three months and the full year ended December 31, 2011, via a press release incorporated by reference as Exhibit 99.1.
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. It references a press release containing these figures but does not reproduce the data within the body of this 8-K.
The Company utilizes non-GAAP financial measures, specifically "ongoing earnings" and "ongoing diluted earnings per share," to evaluate operations. These measures exclude:
- Net unrealized mark-to-market gains and losses on economic hedges.
- Net changes in unrealized impairments on assets held in trusts for nuclear decommissioning.
- Certain non-recurring or infrequent items.
Material Changes and Unusual Items
Optim Energy, LLC Investment:
- 2010 Impairment: The Company previously determined its entire investment in Optim Energy was impaired as of December 31, 2010, reducing the carrying value to zero.
- 2011 Accounting: No losses were recorded in 2011 under GAAP as there was no contractual requirement to provide additional resources.
- Ownership Reduction: On September 23, 2011, the Company reduced its ownership in Optim Energy from 50% to 1%.
- Non-GAAP Treatment: The Company included its share of Optim Energy ongoing losses in non-GAAP ongoing earnings through August 31, 2011.
- Exit: On January 4, 2012, the Company's remaining 1% interest was acquired by the other owner.
Guidance, Outlook, and Risks
Guidance Methodology: The Company provides guidance based on "ongoing earnings" rather than GAAP net earnings. Management states it is generally unable to estimate the impact of reconciling items (such as mark-to-market adjustments or nuclear decommissioning trust changes) on forecasted GAAP earnings. Consequently, a corresponding GAAP equivalent for earnings guidance is not provided.
Limitations: The information in this report is furnished pursuant to Item 2.02 and is not deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934. It is not subject to the liability of that section and is not incorporated by reference in filings under the Securities Act of 1933.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release dated February 29, 2012) for specific GAAP and non-GAAP financial figures for the three months and year ended December 31, 2011.
- Verify the reconciliation between reported GAAP net earnings and the non-GAAP "ongoing earnings" metric.
- Confirm the final status of the Optim Energy investment following the January 4, 2012 acquisition of the remaining interest.
- Assess the impact of nuclear decommissioning trust impairments and economic hedge mark-to-market adjustments on future earnings volatility.