Business Context and Reporting Period
This Form 8-K, filed on August 5, 2011, reports the unaudited results of operations for PNM Resources, Inc. (the "Company") and its subsidiaries, Public Service Company of New Mexico and Texas-New Mexico Power Company. The report covers the three-month and six-month periods ended June 30, 2011.
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 press release and financial statements furnished as Exhibit 99.1, which are incorporated by reference but not detailed in the body of this 8-K.
The Company utilizes several non-GAAP financial measures to evaluate performance, including:
- Ongoing earnings and ongoing earnings per diluted share
- Cash earnings
- Ongoing EBITDA and EBITDA
These measures exclude net unrealized mark-to-market gains/losses on economic hedges, net changes in unrealized impairments on nuclear decommissioning trusts, and certain non-recurring items.
Material Changes and Unusual Items
A significant item noted is the Company's investment in Optim Energy. An impairment analysis performed as of December 31, 2010, resulted in the entire investment being written down to zero. Consequently, no losses associated with this investment were recorded in 2011 under GAAP, as there is no contractual requirement to provide additional resources. However, the Company includes its share of Optim Energy's ongoing losses in its non-GAAP "ongoing earnings" to reflect continued business involvement.
Guidance, Outlook, and Risks
Management provides guidance based on non-GAAP "ongoing earnings," "ongoing EBITDA," and "cash earnings." The filing explicitly states that management is generally unable to reconcile these non-GAAP forecasts to a GAAP equivalent due to the difficulty in estimating the impact of reconciling items such as mark-to-market adjustments and nuclear decommissioning trust changes. The Company cautions that these non-GAAP measures should not be viewed as a substitute for GAAP measures.
Investor Verification Checklist
- Review Exhibit 99.1 for the specific unaudited financial statements (Balance Sheets, Statements of Earnings, and Cash Flows) for the periods ended June 30, 2011.
- Verify the reconciliation between GAAP net earnings and the non-GAAP "ongoing earnings" figures to understand the impact of excluded items.
- Confirm the status of the Optim Energy investment and the rationale for including its ongoing losses in non-GAAP metrics despite the full GAAP impairment.
- Assess the magnitude of mark-to-market gains/losses on economic hedges and nuclear decommissioning trust impairments affecting the difference between GAAP and non-GAAP results.