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EX-31.6 - EXHIBIT 31.6 - PNM RESOURCES INCpnm3312017ex316.htm
EX-32.3 - EXHIBIT 32.3 - PNM RESOURCES INCpnm3312017ex323.htm
EX-32.2 - EXHIBIT 32.2 - PNM RESOURCES INCpnm3312017ex322.htm
EX-32.1 - EXHIBIT 32.1 - PNM RESOURCES INCpnm3312017ex321.htm
EX-31.5 - EXHIBIT 31.5 - PNM RESOURCES INCpnm3312017ex315.htm
EX-31.4 - EXHIBIT 31.4 - PNM RESOURCES INCpnm3312017ex314.htm
EX-31.3 - EXHIBIT 31.3 - PNM RESOURCES INCpnm3312017ex313.htm
EX-31.2 - EXHIBIT 31.2 - PNM RESOURCES INCpnm3312017ex312.htm
EX-31.1 - EXHIBIT 31.1 - PNM RESOURCES INCpnm3312017ex311.htm
EX-12.3 - EXHIBIT 12.3 - PNM RESOURCES INCpnm3312017ex123.htm
EX-12.2 - EXHIBIT 12.2 - PNM RESOURCES INCpnm3312017ex122.htm
EX-12.1 - EXHIBIT 12.1 - PNM RESOURCES INCpnm3312017ex121.htm
EX-10.2 - EXHIBIT 10.2 - PNM RESOURCES INCpnm3312017ex102.htm
EX-10.1 - EXHIBIT 10.1 - PNM RESOURCES INCpnm3312017ex101.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 [X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

Commission File
 
Name of Registrants, State of Incorporation,
 
I.R.S. Employer
 Number
 
 Address and Telephone Number
 
 Identification No.
001-32462
 
PNM Resources, Inc.
 
85-0468296
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
001-06986
 
Public Service Company of New Mexico
 
85-0019030
 
 
(A New Mexico Corporation)
 
 
 
 
414 Silver Ave. SW
 
 
 
 
Albuquerque, New Mexico 87102-3289
 
 
 
 
(505) 241-2700
 
 
 
 
 
 
 
002-97230
 
Texas-New Mexico Power Company
 
75-0204070
 
 
(A Texas Corporation)
 
 
 
 
577 N. Garden Ridge Blvd.
 
 
 
 
Lewisville, Texas 75067
 
 
 
 
(972) 420-4189
 
 

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
PNM Resources, Inc. (“PNMR”)
YES
ü
NO
 
 
Public Service Company of New Mexico (“PNM”)
YES
ü
NO
 
 
Texas-New Mexico Power Company (“TNMP”)
YES
 
NO
ü

(NOTE: As a voluntary filer, not subject to the filing requirements, TNMP filed all reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.)

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 
PNMR
YES
ü
NO
 
 
PNM
YES
ü
NO
 
 
TNMP
YES
ü
NO
 





Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated
filer
 
Accelerated
filer
 
Non-accelerated
filer (Do not check if a smaller reporting company)
 
Smaller reporting company
 
Emerging growth company
PNMR
 
ü
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
PNM
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
 
 
 
TNMP
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
 
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether any of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES     NO ü

As of April 24, 2017, 79,653,624 shares of common stock, no par value per share, of PNMR were outstanding.

The total number of shares of common stock of PNM outstanding as of April 24, 2017 was 39,117,799 all held by PNMR (and none held by non-affiliates).

The total number of shares of common stock of TNMP outstanding as of April 24, 2017 was 6,358 all held indirectly by PNMR (and none held by non-affiliates).

PNM AND TNMP MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (H) (1) (a) AND (b) OF FORM 10-Q AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT PURSUANT TO GENERAL INSTRUCTION (H) (2).

This combined Form 10-Q is separately filed by PNMR, PNM, and TNMP.  Information contained herein relating to any individual registrant is filed by such registrant on its own behalf.  Each registrant makes no representation as to information relating to the other registrants.  When this Form 10-Q is incorporated by reference into any filing with the SEC made by PNMR, PNM, or TNMP, as a registrant, the portions of this Form 10-Q that relate to each other registrant are not incorporated by reference therein.



2


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES

INDEX

 
Page No.
 
 
 
 
 
 


3


GLOSSARY

Definitions:
  
 
2014 IRP
 
PNM’s 2014 IRP
2017 IRP
 
PNM’s 2017 IRP
ABCWUA
 
Albuquerque Bernalillo County Water Utility Authority
Afton
  
Afton Generating Station
AFUDC
 
Allowance for Funds Used During Construction
AMI
 
Advanced Metering Infrastructure
AMS
 
Advanced Meter System
AOCI
  
Accumulated Other Comprehensive Income
APS
  
Arizona Public Service Company, the operator and a co-owner of PVNGS and Four Corners
ASU
 
Accounting Standards Update
BACT
  
Best Available Control Technology
BART
  
Best Available Retrofit Technology
BDT
 
Balanced Draft Technology
BHP
  
BHP Billiton, Ltd
Board
  
Board of Directors of PNMR
BTMU
 
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
BTMU Term Loan Agreement
 
NM Capital’s $125.0 Million Unsecured Term Loan
BTU
  
British Thermal Unit
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CCN
 
Certificate of Convenience and Necessity
CIAC
 
Contributions in Aid of Construction
CO2
  
Carbon Dioxide
CSA
 
Coal Supply Agreement
CTC
  
Competition Transition Charge
DC Circuit
 
United States Court of Appeals for the District of Columbia Circuit
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
EGU
 
Electric Generating Unit
EIS
 
Environmental Impact Study
EPA
  
United States Environmental Protection Agency
ERCOT
  
Electric Reliability Council of Texas
ESA
 
Endangered Species Act
Exchange Act
 
Securities Exchange Act of 1934
FASB
  
Financial Accounting Standards Board
FERC
  
Federal Energy Regulatory Commission
FIP
  
Federal Implementation Plan
Four Corners
  
Four Corners Power Plant
FPPAC
  
Fuel and Purchased Power Adjustment Clause
FTY
 
Future Test Year
GAAP
  
Generally Accepted Accounting Principles in the United States of America
GHG
  
Greenhouse Gas Emissions
GWh
  
Gigawatt hours

4


IRP
 
Integrated Resource Plan
ISFSI
 
Independent Spent Fuel Storage Installation
KW
  
Kilowatt
KWh
  
Kilowatt Hour
La Luz
  
La Luz Generating Station
LIBOR
  
London Interbank Offered Rate
Lightning Dock Geothermal
 
Lightning Dock geothermal power facility, also known as the Dale Burgett Geothermal Plant
Lordsburg
  
Lordsburg Generating Station
Luna
  
Luna Energy Facility
MD&A
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
MMBTU
  
Million BTUs
Moody’s
  
Moody’s Investor Services, Inc.
MW
  
Megawatt
MWh
  
Megawatt Hour
NAAQS
 
National Ambient Air Quality Standards
Navajo Acts
  
Navajo Nation Air Pollution Prevention and Control Act, Navajo Nation Safe Drinking Water Act, and Navajo Nation Pesticide Act
NDT
  
Nuclear Decommissioning Trusts for PVNGS
NEC
 
Navopache Electric Cooperative, Inc.
NEE
 
New Energy Economy
NEPA
 
National Environmental Policy Act
NERC
  
North American Electric Reliability Corporation
New Mexico Wind
 
New Mexico Wind Energy Center
NM 2015 Rate Case
 
Request for a General Increase in Electric Rates Filed by PNM on August 27, 2015
NM 2016 Rate case
 
Request for a General Increase in Electric Rates Filed by PNM on December 7, 2016
NM Capital
 
NM Capital Utility Corporation, an unregulated wholly-owned subsidiary of PNMR
NM Supreme Court
 
New Mexico Supreme Court
NMED
  
New Mexico Environment Department
NMIEC
  
New Mexico Industrial Energy Consumers Inc.
NMMMD
 
The Mining and Minerals Division of the New Mexico Energy, Minerals and Natural Resources Department
NMPRC
  
New Mexico Public Regulation Commission
NOx
  
Nitrogen Oxides
NOPR
 
Notice of Proposed Rulemaking
NPDES
 
National Pollutant Discharge Elimination System
NRC
  
United States Nuclear Regulatory Commission
NSPS
  
New Source Performance Standards
NSR
  
New Source Review
NTEC
 
Navajo Transitional Energy Company, LLC, an entity owned by the Navajo Nation
OCI
  
Other Comprehensive Income
OPEB
  
Other Post Employment Benefits
OSM
 
United States Office of Surface Mining Reclamation and Enforcement
PCRBs
  
Pollution Control Revenue Bonds
PNM
  
Public Service Company of New Mexico and Subsidiaries, a wholly-owned subsidiary of PNMR
PNM 2016 Term Loan Agreement
 
PNM’s $175.0 Million Unsecured Term Loan

5


PNM New Mexico Credit Facility
 
PNM’s $50.0 Million Unsecured Revolving Credit Facility
PNM Revolving Credit Facility
 
PNM’s $400.0 Million Unsecured Revolving Credit Facility
PNMR
  
PNM Resources, Inc. and Subsidiaries
PNMR 2015 Term
   Loan Agreement
 
PNMR’s $150.0 Million Three-Year Unsecured Term Loan
PNMR 2016 One-Year Term Loan
 
PNMR’s $100.0 Million One-Year Unsecured Term Loan
PNMR 2016 Two-Year Term Loan
 
PNMR’s $100.0 Million Two-Year Unsecured Term Loan
PNMR Development
 
PNMR Development and Management Company, an unregulated wholly-owned subsidiary of PNMR
PNMR Revolving Credit Facility
 
PNMR’s $300.0 Million Unsecured Revolving Credit Facility
PNMR Term Loan Agreement
  
PNMR’s $150.0 Million One-Year Unsecured Term Loan
PPA
  
Power Purchase Agreement
PSA
 
Power Sales Agreement
PSD
  
Prevention of Significant Deterioration
PUCT
  
Public Utility Commission of Texas
PV
  
Photovoltaic
PVNGS
  
Palo Verde Nuclear Generating Station
RA
 
San Juan Project Restructuring Agreement
RCRA
  
Resource Conservation and Recovery Act
RCT
  
Reasonable Cost Threshold
REA
 
New Mexico’s Renewable Energy Act of 2004
REC
  
Renewable Energy Certificates
Red Mesa Wind
 
Red Mesa Wind Energy Center
REP
  
Retail Electricity Provider
Rio Bravo
 
Rio Bravo Generating Station
RMC
  
Risk Management Committee
ROE
 
Return on Equity
RPS
  
Renewable Energy Portfolio Standard
S&P
  
Standard and Poor’s Ratings Services
SCR
 
Selective Catalytic Reduction
SEC
  
United States Securities and Exchange Commission
SIP
  
State Implementation Plan
SJCC
  
San Juan Coal Company
SJGS
  
San Juan Generating Station
SNCR
 
Selective Non-Catalytic Reduction
SO2
  
Sulfur Dioxide
TCEQ
  
Texas Commission on Environmental Quality
TECA
  
Texas Electric Choice Act
Tenth Circuit
 
United States Court of Appeals for the Tenth Circuit
TNMP
  
Texas-New Mexico Power Company and Subsidiaries, a wholly-owned subsidiary of TNP
TNMP Revolving Credit Facility
  
TNMP’s $75.0 Million Secured Revolving Credit Facility
TNP
  
TNP Enterprises, Inc. and Subsidiaries, a wholly-owned subsidiary of PNMR

6


Tri-State
  
Tri-State Generation and Transmission Association, Inc.
Tucson
  
Tucson Electric Power Company
UG-CSA
 
Underground Coal Sales Agreement
US Supreme Court
 
Supreme Court of the United States
Valencia
 
Valencia Energy Facility
VaR
 
Value at Risk
VIE
 
Variable Interest Entity
WEG
 
WildEarth Guardians
Westmoreland
 
Westmoreland Coal Company
Westmoreland Loan
 
NM Capital’s $125.0 million loan to WSJ
WSJ
 
Westmoreland San Juan, LLC, an indirect wholly-owned subsidiary of Westmoreland

7


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
330,178

 
$
310,961

Operating Expenses:

 

Cost of energy
102,804

 
92,369

Administrative and general
47,532

 
47,109

Energy production costs
31,787

 
42,686

Regulatory disallowances and restructuring costs

 
774

Depreciation and amortization
56,383

 
49,829

Transmission and distribution costs
16,477

 
16,594

Taxes other than income taxes
19,235

 
20,092

Total operating expenses
274,218

 
269,453

Operating income
55,960

 
41,508

Other Income and Deductions:
 
 
 
Interest income
4,881

 
3,622

Gains on available-for-sale securities
6,661

 
6,218

Other income
4,902

 
4,264

Other (deductions)
(3,483
)
 
(2,999
)
Net other income and deductions
12,961

 
11,105

Interest Charges
31,700

 
31,491

Earnings before Income Taxes
37,221

 
21,122

Income Taxes
10,775

 
7,157

Net Earnings
26,446

 
13,965

(Earnings) Attributable to Valencia Non-controlling Interest
(3,452
)
 
(3,287
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Net Earnings Attributable to PNMR
$
22,862

 
$
10,546

Net Earnings Attributable to PNMR per Common Share:
 
 
 
Basic
$
0.29

 
$
0.13

Diluted
$
0.29

 
$
0.13

Dividends Declared per Common Share
$
0.2425

 
$
0.2200


The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.



8


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Net Earnings
$
26,446

 
$
13,965

Other Comprehensive Income (Loss):
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(3,030) and $(2,130)
4,736

 
3,328

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $1,078 and $4,374
(1,685
)
 
(6,836
)
Pension Liability Adjustment:
 
 
 
Reclassification adjustment for amortization of experience (gains) losses recognized as net periodic benefit cost, net of income tax expense (benefit) of $(631) and $(537)
987

 
839

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Change in fair market value, net of income tax (expense) benefit of $72 and $503
(113
)
 
(786
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(44) and $(57)
68

 
89

Total Other Comprehensive Income (Loss)
3,993

 
(3,366
)
Comprehensive Income
30,439

 
10,599

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,452
)
 
(3,287
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Comprehensive Income Attributable to PNMR
$
26,855

 
$
7,180


The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.


9


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
26,446

 
$
13,965

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
65,888

 
58,563

Deferred income tax expense
10,787

 
7,187

Net unrealized (gains) on commodity derivatives
(1,345
)
 
(1,435
)
Realized (gains) on available-for-sale securities
(6,661
)
 
(6,218
)
Stock based compensation expense
2,687

 
2,653

Regulatory disallowances and restructuring costs

 
774

Other, net
(928
)
 
(612
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
20,553

 
36,215

Materials, supplies, and fuel stock
1,836

 
(1,716
)
Other current assets
11,441

 
(18,720
)
Other assets
2,753

 
277

Accounts payable
(3,852
)
 
2,004

Accrued interest and taxes
12,542

 
18,276

Other current liabilities
(10,009
)
 
(16,583
)
Other liabilities
(534
)
 
(4,032
)
Net cash flows from operating activities
131,604

 
90,598

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(114,830
)
 
(278,764
)
Proceeds from sales of available-for-sale securities
266,388

 
124,900

Purchases of available-for-sale securities
(267,891
)
 
(126,101
)
Return of principal on PVNGS lessor notes

 
8,547

Investment in Westmoreland Loan

 
(122,250
)
Principal repayments on Westmoreland Loan
9,590

 

Other, net
128

 
150

Net cash flows from investing activities
(106,615
)
 
(393,518
)

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.

10


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings, net
16,000

 
107,400

Long-term borrowings

 
182,500

Repayment of long-term debt
(9,444
)
 

Proceeds from stock option exercise
1,112

 
3,275

Awards of common stock
(11,032
)
 
(10,020
)
Dividends paid
(19,448
)
 
(17,656
)
Valencia’s transactions with its owner
(4,028
)
 
(3,999
)
Other, net
(388
)
 
(761
)
Net cash flows from financing activities
(27,228
)
 
260,739

 
 
 
 
Change in Cash and Cash Equivalents
(2,239
)
 
(42,181
)
Cash and Cash Equivalents at Beginning of Period
4,522

 
46,051

Cash and Cash Equivalents at End of Period
$
2,283

 
$
3,870

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
14,951

 
$
11,403

Income taxes paid (refunded), net
$
(125
)
 
$

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
10,367

 
$
20,149


The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.


11


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
2,283

 
$
4,522

Accounts receivable, net of allowance for uncollectible accounts of $1,212 and $1,209
82,234

 
87,012

Unbilled revenues
41,808

 
58,284

Other receivables
27,098

 
28,245

Current portion of Westmoreland Loan
29,664

 
38,360

Materials, supplies, and fuel stock
66,140

 
73,027

Regulatory assets
910

 
3,855

Commodity derivative instruments
4,586

 
5,224

Income taxes receivable
5,953

 
6,066

Other current assets
66,093

 
73,444

Total current assets
326,769

 
378,039

Other Property and Investments:
 
 
 
Long-term portion of Westmoreland Loan
55,746

 
56,640

Available-for-sale securities
286,099

 
272,977

Other investments
419

 
547

Non-utility property
3,404

 
3,404

Total other property and investments
345,668

 
333,568

Utility Plant:
 
 
 
Plant in service, held for future use, and to be abandoned
7,009,698

 
6,944,534

Less accumulated depreciation and amortization
2,373,542

 
2,334,938

 
4,636,156

 
4,609,596

Construction work in progress
232,056

 
208,206

Nuclear fuel, net of accumulated amortization of $50,378 and $43,905
87,379

 
86,913

Net utility plant
4,955,591

 
4,904,715

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
496,012

 
501,223

Goodwill
278,297

 
278,297

Other deferred charges
75,342

 
75,238

Total deferred charges and other assets
849,651

 
854,758

 
$
6,477,679

 
$
6,471,080


The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.


12


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
303,100

 
$
287,100

Current installments of long-term debt
414,856

 
273,348

Accounts payable
67,439

 
86,705

Customer deposits
11,207

 
11,374

Accrued interest and taxes
74,299

 
61,871

Regulatory liabilities
8,140

 
3,609

Commodity derivative instruments
360

 
2,339

Dividends declared
19,448

 
19,448

Other current liabilities
63,287

 
59,314

Total current liabilities
962,136

 
805,108

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
1,969,304

 
2,119,364

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
948,177

 
940,650

Regulatory liabilities
453,580

 
455,649

Asset retirement obligations
129,730

 
127,519

Accrued pension liability and postretirement benefit cost
121,632

 
125,844

Other deferred credits
126,607

 
140,545

Total deferred credits and other liabilities
1,779,726

 
1,790,207

Total liabilities
4,711,166

 
4,714,679

Commitments and Contingencies (See Note 11)


 


Cumulative Preferred Stock of Subsidiary
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNMR common stockholders’ equity:
 
 
 
Common stock (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)
1,156,428

 
1,163,661

Accumulated other comprehensive income (loss), net of income taxes
(88,458
)
 
(92,451
)
Retained earnings
618,670

 
604,742

Total PNMR common stockholders’ equity
1,686,640

 
1,675,952

Non-controlling interest in Valencia
68,344

 
68,920

Total equity
1,754,984

 
1,744,872

 
$
6,477,679

 
$
6,471,080

 
 
 
 

The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.


13


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

 
Attributable to PNMR
 
Non-
controlling
Interest
in Valencia
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
Total PNMR Common Stockholders’ Equity
 
 
Total
Equity
 
(In thousands)
Balance at December 31, 2016, as originally reported
$
1,163,661

 
$
(92,451
)
 
$
604,742

 
$
1,675,952

 
$
68,920

 
$
1,744,872

Cumulative effect adjustment (Note 8)

 

 
10,382

 
10,382

 

 
10,382

Balance at January 1, 2017, as adjusted
1,163,661

 
(92,451
)
 
615,124

 
1,686,334

 
68,920

 
1,755,254

Net earnings before subsidiary preferred stock dividends

 

 
22,994

 
22,994

 
3,452

 
26,446

Total other comprehensive income

 
3,993

 

 
3,993

 

 
3,993

Subsidiary preferred stock dividends

 

 
(132
)
 
(132
)
 

 
(132
)
Dividends declared on common stock

 

 
(19,316
)
 
(19,316
)
 

 
(19,316
)
Proceeds from stock option exercise
1,112

 

 

 
1,112

 

 
1,112

Awards of common stock
(11,032
)
 

 

 
(11,032
)
 

 
(11,032
)
Stock based compensation expense
2,687

 

 

 
2,687

 

 
2,687

Valencia’s transactions with its owner

 

 

 

 
(4,028
)
 
(4,028
)
Balance at March 31, 2017
$
1,156,428

 
$
(88,458
)
 
$
618,670

 
$
1,686,640

 
$
68,344

 
$
1,754,984



The accompanying notes, as they relate to PNMR, are an integral part of these condensed consolidated financial statements.



14



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Electric Operating Revenues
$
251,558

 
$
235,606

Operating Expenses:
 
 
 
Cost of energy
81,317

 
72,444

Administrative and general
43,047

 
42,028

Energy production costs
31,787

 
42,686

Regulatory disallowances and restructuring costs

 
774

Depreciation and amortization
36,016

 
31,864

Transmission and distribution costs
9,919

 
10,316

Taxes other than income taxes
11,141

 
12,197

Total operating expenses
213,227

 
212,309

Operating income
38,331

 
23,297

Other Income and Deductions:
 
 
 
Interest income
2,816

 
1,522

Gains on available-for-sale securities
6,661

 
6,218

Other income
3,843

 
3,387

Other (deductions)
(2,821
)
 
(1,662
)
Net other income and deductions
10,499

 
9,465

Interest Charges
21,012

 
21,591

Earnings before Income Taxes
27,818

 
11,171

Income Taxes
7,708

 
3,610

Net Earnings
20,110

 
7,561

(Earnings) Attributable to Valencia Non-controlling Interest
(3,452
)
 
(3,287
)
Net Earnings Attributable to PNM
16,658

 
4,274

Preferred Stock Dividends Requirements
(132
)
 
(132
)
Net Earnings Available for PNM Common Stock
$
16,526

 
$
4,142


The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.


15


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Net Earnings
$
20,110

 
$
7,561

Other Comprehensive Income (Loss):
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(3,030) and $(2,130)
4,736

 
3,328

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $1,078 and $4,374
(1,685
)
 
(6,836
)
Pension Liability Adjustment:
 
 
 
Reclassification adjustment for amortization of experience (gains) losses recognized as net periodic benefit cost, net of income tax expense (benefit) of $(631) and $(537)
987

 
839

Total Other Comprehensive Income (Loss)
4,038

 
(2,669
)
Comprehensive Income
24,148

 
4,892

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,452
)
 
(3,287
)
Comprehensive Income Attributable to PNM
$
20,696

 
$
1,605


The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.


16


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
20,110

 
$
7,561

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
44,691

 
40,225

Deferred income tax expense
7,878

 
3,727

Net unrealized (gains) on commodity derivatives
(1,345
)
 
(1,435
)
Realized (gains) on available-for-sale securities
(6,661
)
 
(6,218
)
Regulatory disallowances and restructuring costs

 
774

Other, net
(759
)
 
(611
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
17,414

 
33,417

Materials, supplies, and fuel stock
2,083

 
(5,060
)
Other current assets
12,399

 
(13,527
)
Other assets
4,399

 
3,311

Accounts payable
(2,509
)
 
5,130

Accrued interest and taxes
16,954

 
20,221

Other current liabilities
2,946

 
(9,335
)
Other liabilities
(1,325
)
 
(4,505
)
Net cash flows from operating activities
116,275

 
73,675

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(65,781
)
 
(238,734
)
Proceeds from sales of available-for-sale securities
266,388

 
124,900

Purchases of available-for-sale securities
(267,891
)
 
(126,101
)
Return of principal on PVNGS lessor notes

 
8,547

Other, net
128

 
150

Net cash flows from investing activities
(67,156
)
 
(231,238
)

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.


17


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings, net
(44,800
)
 
118,800

Dividends paid
(132
)
 
(132
)
Valencia’s transactions with its owner
(4,028
)
 
(3,999
)
Other, net
(389
)
 
(53
)
Net cash flows from financing activities
(49,349
)
 
114,616

 
 
 
 
Change in Cash and Cash Equivalents
(230
)
 
(42,947
)
Cash and Cash Equivalents at Beginning of Period
324

 
43,138

Cash and Cash Equivalents at End of Period
$
94

 
$
191

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
9,330

 
$
8,561

Income taxes paid (refunded), net
$

 
$

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
3,449

 
$
16,747


The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.


18


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
94

 
$
324

Accounts receivable, net of allowance for uncollectible accounts of $1,212 and $1,209
61,279

 
65,003

Unbilled revenues
33,897

 
48,289

Other receivables
23,486

 
25,514

Affiliate receivables
9,247

 
8,886

Materials, supplies, and fuel stock
62,318

 
64,401

Regulatory assets

 
3,442

Commodity derivative instruments
4,586

 
5,224

Income taxes receivable
25,977

 
25,807

Other current assets
60,425

 
67,355

Total current assets
281,309

 
314,245

Other Property and Investments:
 
 
 
Available-for-sale securities
286,099

 
272,977

Other investments
188

 
316

Non-utility property
96

 
96

Total other property and investments
286,383

 
273,389

Utility Plant:
 
 
 
Plant in service, held for future use, and to be abandoned
5,383,068

 
5,359,211

Less accumulated depreciation and amortization
1,832,695

 
1,809,528

 
3,550,373

 
3,549,683

Construction work in progress
184,129

 
158,122

Nuclear fuel, net of accumulated amortization of $50,378 and $43,905
87,379

 
86,913

Net utility plant
3,821,881

 
3,794,718

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
360,363

 
365,413

Goodwill
51,632

 
51,632

Other deferred charges
68,633

 
68,149

Total deferred charges and other assets
480,628

 
485,194

 
$
4,870,201

 
$
4,867,546

 
 
 
 

The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.


19


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
16,200

 
$
61,000

Current installments of long-term debt
231,936

 
231,880

Accounts payable
49,613

 
55,566

Affiliate payables
33,967

 
23,183

Customer deposits
11,207

 
11,374

Accrued interest and taxes
51,942

 
34,819

Regulatory liabilities
8,140

 
3,517

Commodity derivative instruments
360

 
2,339

Dividends declared
132

 
132

Other current liabilities
47,659

 
33,551

Total current liabilities
451,156

 
457,361

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
1,400,036

 
1,399,489

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
755,872

 
748,666

Regulatory liabilities
421,177

 
423,701

Asset retirement obligations
128,794

 
126,601

Accrued pension liability and postretirement benefit cost
111,196

 
114,427

Other deferred credits
103,661

 
118,980

Total deferred credits and liabilities
1,520,700

 
1,532,375

Total liabilities
3,371,892

 
3,389,225

Commitments and Contingencies (See Note 11)


 


Cumulative Preferred Stock
 
 
 
without mandatory redemption requirements ($100 stated value; 10,000,000 shares authorized; issued and outstanding 115,293 shares)
11,529

 
11,529

Equity:
 
 
 
PNM common stockholder’s equity:
 
 
 
Common stock (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,264,918

 
1,264,918

Accumulated other comprehensive income (loss), net of income taxes
(88,390
)
 
(92,428
)
Retained earnings
241,908

 
225,382

Total PNM common stockholder’s equity
1,418,436

 
1,397,872

Non-controlling interest in Valencia
68,344

 
68,920

Total equity
1,486,780

 
1,466,792

 
$
4,870,201

 
$
4,867,546


The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

20


PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
 
Attributable to PNM
 
 
 
 
 
 
 
 
 
Total PNM
Common
Stockholder’s
Equity
 
Non-
controlling
 Interest in Valencia
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
AOCI
 
Retained
Earnings
 
 
 
Total
Equity
 
 
 
 
 
 
 
(In thousands)
Balance at December 31, 2016
$
1,264,918

 
$
(92,428
)
 
$
225,382

 
$
1,397,872

 
$
68,920

 
$
1,466,792

Net earnings

 

 
16,658

 
16,658

 
3,452

 
20,110

Total other comprehensive income

 
4,038

 

 
4,038

 

 
4,038

Dividends declared on preferred stock

 

 
(132
)
 
(132
)
 

 
(132
)
Valencia’s transactions with its owner

 

 

 

 
(4,028
)
 
(4,028
)
Balance at March 31, 2017
$
1,264,918

 
$
(88,390
)
 
$
241,908

 
$
1,418,436

 
$
68,344

 
$
1,486,780



The accompanying notes, as they relate to PNM, are an integral part of these condensed consolidated financial statements.

21



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Electric Operating Revenues
$
78,620

 
$
75,355

Operating Expenses:
 
 
 
Cost of energy
21,487

 
19,925

Administrative and general
10,403

 
9,590

Depreciation and amortization
15,371

 
14,508

Transmission and distribution costs
6,558

 
6,278

Taxes other than income taxes
6,836

 
6,500

Total operating expenses
60,655

 
56,801

Operating income
17,965

 
18,554

Other Income and Deductions:
 
 
 
Other income
822

 
593

Other (deductions)
(90
)
 
15

Net other income and deductions
732

 
608

Interest Charges
7,404

 
7,369

Earnings before Income Taxes
11,293

 
11,793

Income Taxes
3,689

 
4,337

Net Earnings
$
7,604

 
$
7,456


The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.



22


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
7,604

 
$
7,456

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
15,921

 
14,936

Deferred income tax expense
2,746

 
194

Allowance for equity funds used during construction and other, net
(168
)
 

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
3,138

 
2,798

Materials and supplies
(247
)
 
3,344

Other current assets
(838
)
 
(1,842
)
Other assets
(2,042
)
 
(2,694
)
Accounts payable
(788
)
 
(3,788
)
Accrued interest and taxes
(3,991
)
 
939

Other current liabilities
134

 
163

Other liabilities
361

 
81

Net cash flows from operating activities
21,830

 
21,587

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(36,345
)
 
(32,947
)
Net cash flows from investing activities
(36,345
)
 
(32,947
)
Cash Flow From Financing Activities:
 
 
 
Revolving credit facilities borrowings (repayments), net
22,000

 
(44,000
)
Short-term borrowings (repayments) – affiliate, net
1,700

 
(3,900
)
Long-term borrowings

 
60,000

Dividends paid
(9,855
)
 

Other, net

 
(740
)
Net cash flows from financing activities
13,845

 
11,360

 
 
 
 
Change in Cash and Cash Equivalents
(670
)
 

Cash and Cash Equivalents at Beginning of Period
671

 
1
Cash and Cash Equivalents at End of Period
$
1

 
$
1

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
2,584

 
$
1,719

Income taxes paid (refunded), net
$

 
$

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
2,235

 
$
2,047


The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.



23


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1

 
$
671

Accounts receivable
20,955

 
22,009

Unbilled revenues
7,911

 
9,995

Other receivables
2,831

 
2,090

Materials and supplies
3,822

 
8,626

Regulatory assets
910

 
413

Other current assets
630

 
1,031

Total current assets
37,060

 
44,835

Other Property and Investments:
 
 
 
Other investments
231

 
231

Non-utility property
2,240

 
2,240

Total other property and investments
2,471

 
2,471

Utility Plant:
 
 
 
Plant in service and plant held for future use
1,389,854

 
1,380,584

Less accumulated depreciation and amortization
439,781

 
429,397

 
950,073

 
951,187

Construction work in progress
38,832

 
16,978

Net utility plant
988,905

 
968,165

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
135,649

 
135,810

Goodwill
226,665

 
226,665

Other deferred charges
5,305

 
5,277

Total deferred charges and other assets
367,619

 
367,752

 
$
1,396,055

 
$
1,383,223


The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.

24


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2017
 
December 31,
2016
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
22,000

 
$

Short-term debt – affiliate
6,300

 
4,600

Accounts payable
8,634

 
16,709

Affiliate payables
2,854

 
3,793

Accrued interest and taxes
41,590

 
45,581

Regulatory liabilities

 
92

Other current liabilities
3,300

 
2,134

Total current liabilities
84,678

 
72,909

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
420,950

 
420,875

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
248,585

 
245,785

Regulatory liabilities
32,403

 
31,948

Asset retirement obligations
769

 
754

Accrued pension liability and postretirement benefit cost
10,436

 
11,417

Other deferred credits
7,250

 
6,300

Total deferred credits and other liabilities
299,443

 
296,204

Total liabilities
805,071

 
789,988

Commitments and Contingencies (See Note 11)


 


Common Stockholder’s Equity:
 
 
 
Common stock ($10 par value; 12,000,000 shares authorized; issued and outstanding 6,358 shares)
64

 
64

Paid-in-capital
454,166

 
454,166

Retained earnings
136,754

 
139,005

Total common stockholder’s equity
590,984

 
593,235

 
$
1,396,055

 
$
1,383,223


The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.


25


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDER’S EQUITY
(Unaudited)
 
Common Stock
 
Paid-in Capital
 
Retained Earnings
 
Total Common Stockholder’s Equity
 
(In thousands)
Balance at December 31, 2016
$
64

 
$
454,166

 
$
139,005

 
$
593,235

Net earnings

 

 
7,604

 
7,604

Dividends declared on common stock

 

 
(9,855
)
 
(9,855
)
Balance at March 31, 2017
$
64

 
$
454,166

 
$
136,754

 
$
590,984


The accompanying notes, as they relate to TNMP, are an integral part of these condensed consolidated financial statements.



26


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



(1)
Significant Accounting Policies and Responsibility for Financial Statements

Financial Statement Preparation

In the opinion of management, the accompanying unaudited interim Condensed Consolidated Financial Statements reflect all normal and recurring accruals and adjustments that are necessary to present fairly the consolidated financial position at March 31, 2017 and December 31, 2016 and the consolidated results of operations, comprehensive income, and cash flows for the three months ended March 31, 2017 and 2016. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could ultimately differ from those estimated. Weather causes the Company’s results of operations to be seasonal in nature and the results of operations presented in the accompanying Condensed Consolidated Financial Statements are not necessarily representative of operations for an entire year.

The Notes to Condensed Consolidated Financial Statements include disclosures for PNMR, PNM, and TNMP. This report uses the term “Company” when discussing matters of common applicability to PNMR, PNM, and TNMP. Discussions regarding only PNMR, PNM, or TNMP are so indicated. Certain amounts in the 2016 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2017 financial statement presentation.

These Condensed Consolidated Financial Statements are unaudited. Certain information and note disclosures normally included in the annual Consolidated Financial Statements have been condensed or omitted, as permitted under the applicable rules and regulations. Readers of these financial statements should refer to PNMR’s, PNM’s, and TNMP’s audited Consolidated Financial Statements and Notes thereto that are included in their respective 2016 Annual Reports on Form 10-K.

GAAP defines subsequent events as events or transactions that occur after the balance sheet date, but before financial statements are issued or are available to be issued. Based on their nature, magnitude, and timing, certain subsequent events may be required to be reflected at the balance sheet date and/or required to be disclosed in the financial statements. The Company has evaluated subsequent events as required by GAAP.

Principles of Consolidation
The Condensed Consolidated Financial Statements of each of PNMR, PNM, and TNMP include their accounts and those of subsidiaries in which that entity owns a majority voting interest. PNM also consolidates Valencia (Note 5) and, through January 15, 2016, the PVNGS Capital Trust. PNM owns undivided interests in several jointly-owned power plants and records its pro-rata share of the assets, liabilities, and expenses for those plants. The agreements for the jointly-owned plants provide that if an owner were to default on its payment obligations, the non-defaulting owners would be responsible for their proportionate share of the obligations of the defaulting owner. In exchange, the non-defaulting owners would be entitled to their proportionate share of the generating capacity of the defaulting owner. There have been no such payment defaults under any of the agreements for the jointly-owned plants.

PNMR shared services’ administrative and general expenses, which represent costs that are primarily driven by corporate level activities, are charged to the business segments. These services are billed at cost. Other significant intercompany transactions between PNMR, PNM, and TNMP include interest and income tax sharing payments, as well as equity transactions. All intercompany transactions and balances have been eliminated. See Note 14.


27


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


New Accounting Pronouncements

Information concerning recently issued accounting pronouncements that have not been adopted by the Company is presented below.

Accounting Standards Update 2014-09 Revenue from Contracts with Customers (Topic 606)

In May 2014, the FASB issued ASU No. 2014-09. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. When it becomes effective, the new standard will replace most existing revenue recognition guidance in GAAP. Since the issuance of ASU No. 2014-09, the FASB issued a one-year deferral in the effective date and has issued additional ASUs that clarify implementation guidance regarding principal versus agent considerations, licensing, and identifying performance obligations, as well as adding certain additional practical expedients. The new standard can be applied retrospectively to each prior period presented or on a modified retrospective basis with a cumulative effect adjustment to retained earnings on the date of adoption. The Company has not made a final decision on the transition method, but currently anticipates using the modified retrospective method. The Company will adopt the standard on January 1, 2018, its required effective date.
The Company has completed its initial assessment and made significant progress toward completing the evaluation of its revenues for potential changes to the amounts and timing of revenue recognition under the new guidance. The Company, along with others in the utility industry, is continuing to monitor the activities of the FASB and other non-authoritative groups regarding industry specific issues for further clarification. These industry specific issues include the impacts of the new guidance on its accounting for CIAC, collectability, and the presentation of revenues associated with “alternative revenue programs,” which primarily result from its approved rate rider programs. The Company is working towards completing its evaluation and drafting its revenue recognition disclosures under the new standard. The Company has not finalized conclusions and has not yet completely determined the effect of the standard on its financial reporting, but does not anticipate significant changes in revenue recognition associated with retail electric service rates or expect difficulty in completing this project by the required January 1, 2018 implementation date.

Accounting Standards Update 2016-01 Financial Instruments (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU No. 2016-01, which makes targeted improvements to GAAP regarding financial instruments. The new standard eliminates the requirement to classify investments in equity securities with readily determinable fair values into trading or available-for-sale categories and will require those equity securities to be measured at fair value with changes in fair value recognized in net income rather than in OCI. Also, the new standard will revise certain presentation and disclosure requirements. Under the new standard, accounting for investments in debt securities remains essentially unchanged. PNM currently classifies the investments held in the NDT and coal mine reclamation trusts as available for sale securities. Unrealized losses on these securities are recorded immediately through earnings and unrealized gains are recorded in AOCI until the securities are sold. The Company will adopt the new standard on January 1, 2018, its required effective date. At that time any unrealized gains, net of income taxes, recorded in AOCI related to equity securities will be reclassified to retained earnings as a cumulative effect adjustment and, thereafter, changes in the value of equity securities will be recorded in the Consolidated Statements of Earnings. The amount of the cumulative adjustment upon adoption will depend on the amounts recorded in AOCI at that time, but PNM had unrealized gains on equity securities, net of income taxes, recorded in AOCI of $6.8 million at March 31, 2017.

Accounting Standards Update 2016-02 Leases (Topic 842)

In February 2016, the FASB issued ASU No. 2016-02, which will change how lessees account for leases. The ASU will require that a liability be recorded on the balance sheet for all leases based on the present value of future lease obligations. A corresponding right-of-use asset will also be recorded. Amortization of the lease obligation and the right-of-use asset for certain leases, primarily those classified as operating leases, will be on a straight-line basis, which is not expected to have a significant impact on the statements of earnings or cash flows, whereas other leases will be required to be accounted for as financing

28


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


arrangements similar to the accounting treatment for capital leases under current GAAP. Also, the new standard will revise certain disclosure requirements. Although early adoption of the standard is permitted, the Company does not currently plan to adopt this standard prior to January 1, 2019, its required effective date. At adoption of the ASU, leases will be recognized and measured as of the earliest period presented using a modified retrospective approach.

As discussed in Note 7 of the Notes to Consolidated Financial Statements in the 2016 Annual Reports on Form 10-K, the Company has operating leases of office buildings, vehicles, equipment, and certain rights-of-way. PNM also has operating lease interests in PVNGS Units 1 and 2 that will expire in January 2023 and 2024. The Company, along with others in the utility industry, is continuing to monitor the activities of the FASB and other non-authoritative groups regarding industry specific issues for further clarification. The Company has formed a project team, conducted outreach activities across its lines of business, and made significant progress in identifying arrangements, in addition to its existing operating lease arrangements, that may be classified as leases under the ASU. It is likely the arrangements currently classified as leases will continue to be recognized as leases under the new ASU. It is possible that other contractual arrangements not previously meeting the lease definition may contain elements that qualify as leases under ASU 2016-02 and that previously identified operating leases may be classified as financing leases under the new standard. The Company is in the process of analyzing each of the identified contractual arrangement to determine if it contains lease elements under the new standard and to quantify the potential impacts of identified lease arrangements. The Company anticipates this process will continue through the remainder of 2017 and possibly into 2018. Upon completion of that process, the Company will provide additional information about the expected financial impact of this ASU.

Accounting Standards Update 2016-13 Financial Instruments Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13. The ASU changes the way entities recognize impairment of many financial assets, including accounts receivable and investments in debt securities, by requiring immediate recognition of estimated credit losses expected to occur over their remaining lives. The new standard is effective for the Company beginning on January 1, 2020. Early adoption is permitted beginning on January 1, 2019. The Company is in the process of analyzing the impacts of this new standard.

Accounting Standards Update 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU No. 2016-15.  The ASU eliminates diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. Although early adoption is permitted, the Company does not currently plan to adopt this standard prior to January 1, 2018, its required effective date.   The Company is in the process of analyzing the impacts of this new standard, but does not anticipate it will have a significant impact on the Company’s financial statements.

Accounting Standards Update 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash

In November 2016, the FASB issued ASU 2016-18. The ASU requires that the statements of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents during the period. Under the new standard, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Statements of Cash Flows. Although early adoption is permitted, the Company does not currently plan to adopt this standard prior to January 1, 2018, its required effective date. The new standard requires the use of a retrospective transition method for each period presented after adoption. The Company is in the process of analyzing the impacts of this new standard.

Accounting Standards Update 2017-04 Intangibles Goodwill and Other (Topic 350)

In January 2017, the FASB issued ASU 2017-04 to simplify the annual goodwill impairment assessment process. Currently, the first step of the quantitative impairment test requires an entity to compare the fair value of the reporting unit with its carrying value, including goodwill. If as a result of this analysis, the entity concludes there is an indication of impairment in a reporting

29


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


unit having goodwill, the entity is required to perform the second step of the impairment analysis, determining the amount of goodwill impairment to be recorded. The amount is calculated by comparing the implied fair value of the goodwill to its carrying amount. This exercise requires the entity to allocate the fair value determined in step one to the individual assets and liabilities of the reporting unit. Any remaining fair value would be the implied fair value of goodwill on the testing date. To the extent the recorded amount of goodwill of a reporting unit exceeds the implied fair value determined in step two, an impairment loss would be reflected in results of operations. ASU 2017-04 eliminates the second step of the impairment analysis. Accordingly, if the first step of a quantitative goodwill impairment analysis performed after adoption of this ASU indicates that the fair value of a reporting unit is less than its carrying value, the goodwill of that reporting unit would be impaired to the extent of that difference. The Company must adopt this ASU in 2020, but early adoption is permitted. The Company currently anticipates adopting this ASU in 2020. However, if there is an indication of potential impairment of goodwill as a result of an annual impairment assessment prior to 2020, the Company will evaluate the impact of ASU 2017-04 and could elect to early adopt this ASU.

Accounting Standards Update 2017-07 Compensation Retirement Benefits (Topic 715)

In March 2017, the FASB issued ASU 2017-07 to improve the presentation of net periodic pension and other postretirement benefit costs. Currently, the Company presents all of its net periodic benefit costs as administrative and general expenses on its Condensed Consolidated Statements of Earnings, net of amounts capitalized to construction and other accounts. The amendments in this ASU require the service cost component of net benefit costs be presented in the same line item or items as compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of operating income with disclosures identifying where the other components of net benefit cost have been presented. The ASU also limits capitalization to only the service cost component of benefit costs. PNMR and its subsidiaries maintain qualified defined benefit pension and OPEB plans. Currently, net periodic benefit cost for the Company’s defined benefit pension plans do not include a service cost component and there is only a minor amount of service cost for the OPEB plans. Additional information about the Company’s plans is discussed in Note 12 of the Notes to Consolidated Financial Statements in the 2016 Annual Reports on Form 10-K and in Note 10. The ASU requires retrospective presentation of the service cost component and the other components of net benefit cost in the income statement and prospective application regarding the capitalization of only the service cost component of net benefit cost. The Company must adopt this ASU beginning January 1, 2018. The Company is in the process of analyzing the impacts of this new standard, including the treatment of benefit costs by the NMPRC, PUCT, and FERC in the regulatory process.

Accounting Standards Update 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Topic 310-20) Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU No. 2017-08. The ASU amends the amortization period for certain purchased callable debt securities held at a premium. Under current GAAP, some entities amortize the premium as an adjustment of yield over the contractual life of the security. The update requires premiums to be amortized over the period to the earliest call date. The new standard is effective for the Company beginning on January 1, 2019. Early adoption is permitted including adoption in an interim period. The Company is in the process of analyzing the impacts of this new standard.


30


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(2)
Earnings Per Share

In accordance with GAAP, dual presentation of basic and diluted earnings per share is presented in the Condensed Consolidated Statements of Earnings of PNMR. Information regarding the computation of earnings per share is as follows:
 
Three Months Ended
 
March 31,
 
2017
 
2016
 
(In thousands, except per share amounts)
Net Earnings Attributable to PNMR
$
22,862

 
$
10,546

Average Number of Common Shares:
 
 
 
Outstanding during period
79,654

 
79,654

    Vested awards of restricted stock
112

 
104

Average Shares – Basic
79,766

 
79,758

Dilutive Effect of Common Stock Equivalents:
 
 
 
Stock options and restricted stock
346

 
406

Average Shares – Diluted
80,112

 
80,164

Net Earnings Per Share of Common Stock:
 
 
 
Basic
$
0.29

 
$
0.13

Diluted
$
0.29

 
$
0.13


(3)
Segment Information

The following segment presentation is based on the methodology that management uses for making operating decisions and assessing performance of its various business activities. A reconciliation of the segment presentation to the GAAP financial statements is provided.

PNM
PNM includes the retail electric utility operations of PNM that are subject to traditional rate regulation by the NMPRC. PNM provides integrated electricity services that include the generation, transmission, and distribution of electricity for retail electric customers in New Mexico. PNM also includes the generation and sale of electricity into the wholesale market, as well as providing transmission services to third parties. The sale of electricity includes the asset optimization of PNM’s jurisdictional capacity, as well as the capacity excluded from retail rates. FERC has jurisdiction over wholesale power and transmission rates.

TNMP
TNMP is an electric utility providing services in Texas under the TECA. TNMP’s operations are subject to traditional rate regulation by the PUCT. TNMP provides transmission and distribution services at regulated rates to various REPs that, in turn, provide retail electric service to consumers within TNMP’s service area.

Corporate and Other

The Corporate and Other segment includes PNMR holding company activities, primarily related to corporate level debt and PNMR Services Company. The activities of PNMR Development and NM Capital are also included in Corporate and Other.

The following tables present summarized financial information for PNMR by segment. PNM and TNMP each operate in only one segment. Therefore, tabular segment information is not presented for PNM and TNMP.


31


PNM RESOURCES, INC. AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


PNMR SEGMENT INFORMATION
 
PNM
 
TNMP
 
Corporate
and Other
 
Consolidated
 
(In thousands)
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
Electric operating revenues
$
251,558

 
$
78,620

 
$

 
$
330,178

Cost of energy
81,317

 
21,487

 

 
102,804

Utility margin
170,241

 
57,133

 

 
227,374

Other operating expenses
95,894

 
23,797

 
(4,660
)
 
115,031

Depreciation and amortization
36,016

 
15,371

 
4,996

 
56,383

Operating income (loss)
38,331