Business Context and Reporting Period
This Form 8-K, dated May 6, 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, for the three months ended March 31, 2011. The filing incorporates by reference a press release (Exhibit 99.1) containing detailed financial statements.
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) but 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 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 assets, and certain non-recurring items.
Material Changes and Unusual Items
Optim Energy Investment Impairment: The Company previously performed an impairment analysis of its investment in Optim Energy as of December 31, 2010, concluding the entire investment was impaired. The carrying value was reduced to zero at that date. Consequently, no losses associated with this investment were recorded in GAAP results for 2011, as there is no contractual requirement to provide additional financial resources. However, the Company includes its share of Optim Energy's ongoing losses in its non-GAAP "ongoing earnings" to reflect continued involvement in the business.
Guidance, Outlook, and Management Commentary
Management provides guidance based on non-GAAP measures (ongoing earnings, ongoing EBITDA, and cash earnings) to indicate expectations of ongoing financial performance. The Company explicitly states that:
- Ongoing earnings guidance is not a substitute for GAAP net earnings.
- Management is generally unable to estimate the impact of reconciling items between ongoing earnings guidance and forecasted GAAP earnings.
- Therefore, a corresponding GAAP equivalent for earnings guidance is not provided.
Reconciling items may include non-recurring transactions, mark-to-market adjustments on hedges, and changes in nuclear decommissioning trust impairments.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP and non-GAAP financial figures for the quarter ended March 31, 2011.
- Verify the reconciliation between GAAP net earnings and non-GAAP ongoing earnings to understand the magnitude of excluded items.
- Assess the impact of the Optim Energy investment on non-GAAP ongoing earnings versus GAAP results.
- Confirm the Company's ability to provide GAAP equivalents for future guidance, noting the current limitation stated in the filing.