Business Context and Reporting Period
This Form 8-K, dated February 23, 2010, is filed by PNM Resources, Inc. (the "Company"), along with its subsidiaries Public Service Company of New Mexico and Texas-New Mexico Power Company. The filing announces the issuance of a press release containing unaudited results of operations for the three and twelve months ended December 31, 2009.
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 furnished as Exhibit 99.1, which is incorporated by reference but not detailed in the body of this 8-K.
The Company utilizes several non-GAAP financial measures to evaluate operations, 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
A significant structural change occurred on January 30, 2009, when the Company completed the sale of its natural gas operations to New Mexico Gas Company, Inc. These operations are classified as discontinued operations under GAAP. Management included these discontinued operations in "ongoing earnings" prior to the closing date to reflect obligations to regulated customers, although GAAP does not record depreciation on assets in discontinued operations.
Guidance, Outlook, and Risks
The Company provides guidance based on "ongoing earnings," "ongoing EBITDA," and "cash earnings." Management 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, the Company cannot provide a corresponding GAAP equivalent for its earnings guidance.
Reconciling items may include cumulative effects of accounting changes, non-recurring transactions, and mark-to-market adjustments on hedges. The filing includes a limitation stating that the information is furnished, not "filed," under Section 18 of the Securities Exchange Act of 1934.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP and non-GAAP financial figures for the periods ended December 31, 2009.
- 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 and future financial statements.
- Confirm the Company's ability to provide GAAP equivalents for future guidance, noting the current limitation.