Business Context and Reporting Period
This Form 8-K, dated May 7, 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 months ended March 31, 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 referenced Exhibit 99.1 (Press Release and Unaudited Condensed Consolidated Financial Statements) but are not detailed in the body of this 8-K report.
The Company utilizes several non-GAAP financial measures to evaluate performance, including:
- Ongoing earnings (loss) and ongoing earnings per diluted share.
- Cash earnings.
- Earnings before interest, taxes, depreciation, and amortization (EBITDA) and ongoing EBITDA.
These measures exclude non-recurring items, net unrealized mark-to-market gains/losses on economic hedges, impairments of intangible assets, unrealized impairments on nuclear decommissioning trusts, and speculative trading results.
Material Changes and Discontinued Operations
The Company notes the successful sale of its natural gas operations to New Mexico Gas Company, Inc. on January 30, 2009. These operations are classified as discontinued operations under GAAP. However, management included these discontinued operations in "ongoing earnings" prior to the closing date to reflect obligations to regulated customers. Under GAAP, depreciation is not recorded on assets in discontinued operations, but the Company reflected this depreciation in its ongoing earnings calculation.
Guidance, Outlook, and Risks
Management provides guidance based on "ongoing earnings," "ongoing EBITDA," and "cash earnings" rather than GAAP net earnings. The filing explicitly states that management is generally unable to estimate the impact of reconciling items between ongoing earnings guidance and forecasted GAAP earnings. Consequently, the Company does not provide a corresponding GAAP equivalent for its earnings guidance.
Reconciling items may include:
- Cumulative effects of changes in accounting principles or estimates.
- Revenues and expenses from transactions outside normal business operations.
- Net unrealized mark-to-market gains and losses on economic hedges.
The filing includes a limitation stating that the information is furnished pursuant to Item 2.02 and is not deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor is it incorporated by reference in filings under the Securities Act of 1933.
Investor Verification Checklist
- Review Exhibit 99.1 for specific numerical values regarding revenue, net earnings, and cash flows for the quarter ended March 31, 2010.
- Verify the reconciliation between the reported non-GAAP "ongoing earnings" and GAAP net earnings, noting that management states a GAAP equivalent for guidance is not provided.
- Confirm the treatment of discontinued gas operations and how depreciation on those assets was handled in the ongoing earnings metric versus GAAP reporting.
- Assess the impact of unrealized mark-to-market gains and losses on economic hedges, which are excluded from the Company's primary performance metrics.