Business Context and Reporting Period
This Form 8-K, filed on October 29, 2010, reports the unaudited results of operations for PNM Resources, Inc. and its subsidiaries (Public Service Company of New Mexico and Texas-New Mexico Power Company) for the three and nine months ended September 30, 2010. The filing incorporates a press release and preliminary financial statements 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. These figures are contained within the incorporated press release (Exhibit 99.1) and are not explicitly stated in the body of this 8-K document.
The Company utilizes several non-GAAP financial measures to evaluate performance, including:
- Ongoing earnings and ongoing diluted earnings per share.
- Cash earnings.
- Earnings before interest, taxes, depreciation, and amortization (EBITDA).
These measures exclude net unrealized mark-to-market gains/losses on economic hedges, changes in unrealized impairments on nuclear decommissioning trusts, and certain non-recurring items.
Material Changes and Discontinued Operations
The Company notes the sale of its natural gas operations to New Mexico Gas Company, completed on January 30, 2009. These operations are classified as discontinued operations under GAAP. Management included these discontinued operations in "ongoing earnings" prior to closing to reflect obligations to regulated customers, although GAAP does not record depreciation on such assets.
Guidance, Outlook, and Risks
Management provides guidance based on "ongoing earnings," "ongoing EBITDA," and "cash earnings." The filing explicitly states that:
- Ongoing earnings guidance is not a GAAP measure and does not represent an expectation of GAAP net earnings.
- Management is generally unable to estimate the impact of reconciling items between ongoing earnings guidance and forecasted GAAP earnings.
- Consequently, a corresponding GAAP equivalent for earnings guidance is not provided.
Reconciling items may include revenues and expenses from transactions outside the normal course of business, as well as mark-to-market adjustments and nuclear decommissioning trust changes.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP and non-GAAP financial figures for the three and nine months ended September 30, 2010.
- Verify the reconciliation between reported GAAP earnings and the non-GAAP "ongoing earnings" metrics.
- Assess the impact of the discontinued natural gas operations on current period results versus prior periods.
- Confirm the specific amounts excluded from ongoing earnings due to mark-to-market hedging and nuclear decommissioning trust impairments.