10-Q
Table of Contents

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 September 30, 2015

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
 




Table of Contents

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

 
 
Large accelerated
filer
 
Accelerated
filer
 
Non-accelerated
filer
 
Smaller Reporting Company
 
PNMR
 
ü
 
 
 
   
 
 
 
   
 
 
 
   
 
 
PNM
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 
 
TNMP
 
   
 
 
 
   
 
 
 
ü
 
 
 
   
 


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 October 23, 2015, 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 October 23, 2015 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 October 23, 2015 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

Table of Contents

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

INDEX

 
Page No.
 
 
 
 
 
 


3

Table of Contents

GLOSSARY

Definitions:
  
 
ABCWUA
 
Albuquerque-Bernalillo County Water Utility Authority
Afton
  
Afton Generating Station
AFUDC
 
Allowance for Funds Used During Construction
ALJ
  
Administrative Law Judge
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, the parent of SJCC
Board
  
Board of Directors of PNMR
BTU
  
British Thermal Unit
CAA
 
Clean Air Act
CCB
  
Coal Combustion Byproducts
CCN
 
Certificate of Convenience and Necessity
CO2
  
Carbon Dioxide
COFA
 
Capacity Option and Funding Agreement
CSA
 
Coal Supply Agreement
CTC
  
Competition Transition Charge
D.C. Circuit
 
United States Court of Appeals for the District of Columbia Circuit
Delta
  
Delta-Person Generating Station, now known as Rio Bravo
DOE
  
United States Department of Energy
DOI
  
United States Department of Interior
EGU
 
Electric Generating Unit
EIB
  
New Mexico Environmental Improvement Board
EIP
  
Eastern Interconnection Project
EIS
 
Environmental Impact Statement
EPA
  
United States Environmental Protection Agency
EPE
 
El Paso Electric
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
Gallup
  
City of Gallup, New Mexico
GHG
  
Greenhouse Gas Emissions
GWh
  
Gigawatt hours
IBEW
  
International Brotherhood of Electrical Workers
IRP
 
Integrated Resource Plan
IRS
 
Internal Revenue Service

4

Table of Contents

ISFSI
 
Independent Spent Fuel Storage Installation
KW
  
Kilowatt
KWh
  
Kilowatt Hour
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
NMAG
 
New Mexico Attorney General
NMED
  
New Mexico Environment Department
NMIEC
 
New Mexico Industrial Energy Consumers Inc.
NMPRC
  
New Mexico Public Regulation Commission
NMSC
 
New Mexico Supreme Court
NOx
  
Nitrogen Oxides
NOPR
 
Notice of Proposed Rulemaking
NRC
  
United States Nuclear Regulatory Commission
NSPS
  
New Source Performance Standards
NSR
  
New Source Review
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
PNM 2013 Term Loan Agreement
 
PNM’s $75.0 Million Unsecured Term Loan
PNM 2014 Term Loan Agreement
 
PNM’s $175.0 Million Unsecured Term Loan
PNM Multi-draw Term Loan
 
PNM’s $125.0 Million Unsecured Multi-draw Term Loan Facility
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 Unsecured Term Loan
PNMR Development
 
PNMR Development and Management Company, an unregulated wholly-owned subsidiary of PNMR

5

Table of Contents

PNMR Revolving Credit Facility
 
PNMR’s $300.0 Million Unsecured Revolving Credit Facility
PNMR Term Loan Agreement
  
PNMR’s $100.0 Million 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, formerly known as Delta
RMC
  
Risk Management Committee
ROE
 
Return on Equity
RPS
  
Renewable Energy Portfolio Standard
RSIP
  
Revised State Implementation Plan
S&P
  
Standard and Poor’s Ratings Services
SCE
 
Southern California Edison Company
SCPPA
 
Southern California Public Power Authority
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
SJPPA
 
San Juan Project Participation Agreement
SNCR
 
Selective Non-Catalytic Reduction
SO2
  
Sulfur Dioxide
SPS
  
Southwestern Public Service Company
TECA
  
Texas Electric Choice Act
Tenth Circuit
 
United States Court of Appeals for the Tenth Circuit
TNMP
  
Texas-New Mexico Power Company and Subsidiaries
TNMP 2011 Term Loan Agreement
 
TNMP’s $50.0 Million Secured Term Loan
TNMP Revolving Credit Facility
  
TNMP’s $75.0 Million Secured Revolving Credit Facility
TNP
 
TNP Enterprises, Inc. and Subsidiaries
Tucson
 
Tucson Electric Power Company
UG-CSA
 
Underground Coal Sales Agreement
Valencia
  
Valencia Energy Facility
VaR
  
Value at Risk
WACC
 
Weighted Average Cost of Capital
WEG
 
WildEarth Guardians

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Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
417,433

 
$
413,951

 
$
1,103,187

 
$
1,089,008

Operating Expenses:

 
 
 

 

Cost of energy
124,255

 
132,499

 
353,939

 
354,532

Administrative and general
46,375

 
42,190

 
130,161

 
131,283

Energy production costs
42,168

 
43,287

 
129,627

 
136,422

Regulatory disallowances

 

 
1,744

 

Depreciation and amortization
47,503

 
44,295

 
139,013

 
128,424

Transmission and distribution costs
16,768

 
16,884

 
50,123

 
49,857

Taxes other than income taxes
18,859

 
17,997

 
55,093

 
51,641

Total operating expenses
295,928

 
297,152

 
859,700

 
852,159

Operating income
121,505

 
116,799

 
243,487

 
236,849

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
1,151

 
2,084

 
4,842

 
6,241

Gains on available-for-sale securities
2,536

 
962

 
12,116

 
8,234

Other income
6,165

 
2,895

 
16,844

 
7,648

Other (deductions)
(3,222
)
 
(2,084
)
 
(10,591
)
 
(7,185
)
Net other income and deductions
6,630

 
3,857

 
23,211

 
14,938

Interest Charges
27,528

 
30,115

 
86,714

 
89,621

Earnings before Income Taxes
100,607

 
90,541

 
179,984

 
162,166

Income Taxes
35,752

 
31,055

 
61,621

 
53,368

Net Earnings
64,855

 
59,486

 
118,363

 
108,798

(Earnings) Attributable to Valencia Non-controlling Interest
(3,678
)
 
(3,701
)
 
(10,909
)
 
(11,140
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Attributable to PNMR
$
61,045

 
$
55,653

 
$
107,058

 
$
97,262

Net Earnings Attributable to PNMR per Common Share:
 
 
 
 
 
 
 
Basic
$
0.77

 
$
0.70

 
$
1.34

 
$
1.22

Diluted
$
0.76

 
$
0.69

 
$
1.34

 
$
1.21

Dividends Declared per Common Share
$
0.200

 
$
0.185

 
$
0.600

 
$
0.555


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



7

Table of Contents

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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Net Earnings
$
64,855

 
$
59,486

 
$
118,363

 
$
108,798

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Unrealized Gain on Available-for-Sale Securities:
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during the period, net of income tax (expense) benefit of $1,200, $(137), $(1,213) and $(3,946)
(1,862
)
 
210

 
1,882

 
6,256

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $3,925, $1,059, $8,838 and $4,547
(6,090
)
 
(1,628
)
 
(13,714
)
 
(6,997
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience (gain) loss recognized as net periodic benefit cost, net of income tax expense (benefit) of $(583), $(508), $(1,749) and $(1,524)
905

 
780

 
2,715

 
2,340

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $276, $0, $276 and $53
(428
)
 

 
(428
)
 
(100
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $0, $3, $0 and $(58)

 
(6
)
 

 
109

Total Other Comprehensive Income (Loss)
(7,475
)
 
(644
)
 
(9,545
)
 
1,608

Comprehensive Income
57,380

 
58,842

 
108,818

 
110,406

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,678
)
 
(3,701
)
 
(10,909
)
 
(11,140
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
 
(396
)
 
(396
)
Comprehensive Income Attributable to PNMR
$
53,570

 
$
55,009

 
$
97,513

 
$
98,870


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


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Table of Contents


PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
118,363

 
$
108,798

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
165,563

 
157,687

Deferred income tax expense
62,511

 
55,553

Net unrealized (gains) losses on commodity derivatives
1,251

 
(67
)
Realized (gains) on available-for-sale securities
(12,116
)
 
(8,234
)
Stock based compensation expense
3,748

 
4,680

Regulatory disallowances
1,744

 

Other, net
(4,301
)
 
(642
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(23,783
)
 
(22,158
)
Materials, supplies, and fuel stock
(3,629
)
 
5,494

Other current assets
37,756

 
(19,816
)
Other assets
12,350

 
30,502

Accounts payable
1,275

 
79

Accrued interest and taxes
28,233

 
32,488

Other current liabilities
(12,731
)
 
(21,197
)
Other liabilities
(40,662
)
 
3,074

Net cash flows from operating activities
335,572

 
326,241

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(411,606
)
 
(293,361
)
Proceeds from sales of available-for-sale securities
166,097

 
82,222

Purchases of available-for-sale securities
(166,268
)
 
(81,644
)
Return of principal on PVNGS lessor notes
21,694

 
20,758

Purchase of Rio Bravo

 
(36,235
)
Other, net
2,891

 
(3,433
)
Net cash flows from investing activities
(387,192
)
 
(311,693
)

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

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Table of Contents


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

 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(3,000
)
 
(49,200
)
Long-term borrowings
463,605

 
255,000

Repayment of long-term debt
(333,066
)
 
(125,000
)
Proceeds from stock option exercise
7,394

 
5,495

Awards of common stock
(18,955
)
 
(15,573
)
Dividends paid
(48,188
)
 
(44,600
)
Valencia’s transactions with its owner
(12,107
)
 
(12,749
)
Other, net
(5,402
)
 
(2,030
)
Net cash flows from financing activities
50,281

 
11,343

 
 
 
 
Change in Cash and Cash Equivalents
(1,339
)
 
25,891

Cash and Cash Equivalents at Beginning of Period
28,274

 
2,533

Cash and Cash Equivalents at End of Period
$
26,935

 
$
28,424

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
63,046

 
$
60,075

Income taxes paid (refunded), net
$
(1,636
)
 
$
(2,529
)
 
 
 
 
Supplemental schedule of noncash investing and financing activities:
 
 
 
Changes in accrued plant additions
$
(8,748
)
 
$
(6,674
)

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


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Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
26,935

 
$
28,274

Accounts receivable, net of allowance for uncollectible accounts of $1,363 and $1,466
110,562

 
87,038

Unbilled revenues
61,739

 
63,719

Other receivables
22,234

 
39,857

Materials, supplies, and fuel stock
67,256

 
63,628

Regulatory assets
4,957

 
47,855

Commodity derivative instruments
6,144

 
11,232

Income taxes receivable
5,614

 
6,360

Current portion of accumulated deferred income taxes
26,383

 
26,383

Other current assets
76,161

 
58,471

Total current assets
407,985

 
432,817

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes

 
9,538

Available-for-sale securities
242,795

 
250,145

Other investments
490

 
1,762

Non-utility property
3,404

 
3,406

Total other property and investments
246,689

 
264,851

Utility Plant:
 
 
 
Plant in service and plant held for future use
6,147,782

 
5,941,581

Less accumulated depreciation and amortization
2,043,482

 
1,939,760

 
4,104,300

 
4,001,821

Construction work in progress
366,980

 
190,389

Nuclear fuel, net of accumulated amortization of $51,719 and $44,507
79,954

 
77,796

Net utility plant
4,551,234

 
4,270,006

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
464,766

 
491,007

Goodwill
278,297

 
278,297

Commodity derivative instruments
3,369

 

Other deferred charges
100,512

 
92,347

Total deferred charges and other assets
846,944

 
861,651

 
$
6,052,852

 
$
5,829,325


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


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Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
102,600

 
$
105,600

Current installments of long-term debt
125,000

 
333,066

Accounts payable
120,052

 
110,029

Customer deposits
12,502

 
12,555

Accrued interest and taxes
81,932

 
53,863

Regulatory liabilities
2,205

 
1,703

Commodity derivative instruments
984

 
1,209

Dividends declared
16,063

 
16,063

Other current liabilities
57,249

 
70,194

Total current liabilities
518,587

 
704,282

Long-term Debt
1,980,381

 
1,642,024

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
949,642

 
891,111

Regulatory liabilities
472,035

 
466,143

Asset retirement obligations
111,595

 
104,170

Accrued pension liability and postretirement benefit cost
66,346

 
110,738

Commodity derivative instruments

 
477

Other deferred credits
107,072

 
103,759

Total deferred credits and other liabilities
1,706,690

 
1,676,398

Total liabilities
4,205,658

 
4,022,704

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 outstanding (no par value; 120,000,000 shares authorized; issued and outstanding 79,653,624 shares)
1,165,895

 
1,173,845

Accumulated other comprehensive income (loss), net of income taxes
(71,300
)
 
(61,755
)
Retained earnings
668,722

 
609,456

Total PNMR common stockholders’ equity
1,763,317

 
1,721,546

Non-controlling interest in Valencia
72,348

 
73,546

Total equity
1,835,665

 
1,795,092

 
$
6,052,852

 
$
5,829,325

 
 
 
 

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


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Table of Contents

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 Stockholder’s Equity
 
 
Total
Equity
 
(In thousands)
Balance at December 31, 2014
$
1,173,845

 
$
(61,755
)
 
$
609,456

 
$
1,721,546

 
$
73,546

 
$
1,795,092

Proceeds from stock option exercise
7,394

 

 

 
7,394

 

 
7,394

Awards of common stock
(18,955
)
 

 

 
(18,955
)
 

 
(18,955
)
Excess tax (shortfall) from stock-based payment arrangements
(137
)
 

 

 
(137
)
 

 
(137
)
Stock based compensation expense
3,748

 

 

 
3,748

 

 
3,748

Valencia’s transactions with its owner

 

 

 

 
(12,107
)
 
(12,107
)
Net earnings before subsidiary preferred stock dividends

 

 
107,454

 
107,454

 
10,909

 
118,363

Subsidiary preferred stock dividends

 

 
(396
)
 
(396
)
 

 
(396
)
Total other comprehensive income (loss)

 
(9,545
)
 

 
(9,545
)
 

 
(9,545
)
Dividends declared on common stock

 

 
(47,792
)
 
(47,792
)
 

 
(47,792
)
Balance at September 30, 2015
$
1,165,895

 
$
(71,300
)
 
$
668,722

 
$
1,763,317

 
$
72,348

 
$
1,835,665



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



13

Table of Contents


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 September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Electric Operating Revenues
$
333,437

 
$
334,993

 
$
870,826

 
$
873,434

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
105,708

 
115,097

 
299,302

 
304,365

Administrative and general
41,927

 
37,519

 
118,450

 
116,731

Energy production costs
42,168

 
43,287

 
129,627

 
136,422

Regulatory disallowances

 

 
1,744

 

Depreciation and amortization
29,042

 
27,524

 
86,446

 
81,629

Transmission and distribution costs
10,478

 
10,693

 
31,519

 
32,202

Taxes other than income taxes
10,404

 
10,258

 
31,194

 
30,359

Total operating expenses
239,727

 
244,378

 
698,282

 
701,708

Operating income
93,710

 
90,615

 
172,544

 
171,726

Other Income and Deductions:
 
 
 
 
 
 
 
Interest income
1,152

 
2,102

 
4,869

 
6,295

Gains on available-for-sale securities
2,536

 
962

 
12,116

 
8,234

Other income
5,369

 
1,804

 
13,661

 
5,359

Other (deductions)
(2,616
)
 
(1,197
)
 
(7,230
)
 
(4,844
)
Net other income and deductions
6,441

 
3,671

 
23,416

 
15,044

Interest Charges
19,837

 
20,092

 
59,477

 
59,927

Earnings before Income Taxes
80,314

 
74,194

 
136,483

 
126,843

Income Taxes
27,258

 
25,142

 
44,560

 
42,331

Net Earnings
53,056

 
49,052

 
91,923

 
84,512

(Earnings) Attributable to Valencia Non-controlling Interest
(3,678
)
 
(3,701
)
 
(10,909
)
 
(11,140
)
Net Earnings Attributable to PNM
49,378

 
45,351

 
81,014

 
73,372

Preferred Stock Dividends Requirements
(132
)
 
(132
)
 
(396
)
 
(396
)
Net Earnings Available for PNM Common Stock
$
49,246

 
$
45,219

 
$
80,618

 
$
72,976


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


14

Table of Contents

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 September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Net Earnings
$
53,056

 
$
49,052

 
$
91,923

 
$
84,512

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Unrealized Gain on Available-for-Sale Securities:
 
 
 
 
 
 
 
Unrealized holding gains (losses) arising during the period, net of income tax (expense) benefit of $1,200, $(137), $(1,213) and $(3,946)
(1,862
)
 
210

 
1,882

 
6,256

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $3,925, $1,059, $8,838 and $4,547
(6,090
)
 
(1,628
)
 
(13,714
)
 
(6,997
)
Pension Liability Adjustment:
 
 
 
 
 
 
 
Reclassification adjustment for amortization of experience (gain) loss recognized as net periodic benefit cost, net of income tax expense (benefit) of $(583), $(508), $(1,749) and $(1,524)
905

 
780

 
2,715

 
2,340

Total Other Comprehensive Income (Loss)
(7,047
)
 
(638
)
 
(9,117
)
 
1,599

Comprehensive Income
46,009

 
48,414

 
82,806

 
86,111

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,678
)
 
(3,701
)
 
(10,909
)
 
(11,140
)
Comprehensive Income Attributable to PNM
$
42,331

 
$
44,713

 
$
71,897

 
$
74,971


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


15

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
91,923

 
$
84,512

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
111,371

 
108,069

Deferred income tax expense
46,268

 
45,313

Net unrealized (gains) losses on commodity derivatives
1,251

 
(67
)
Realized (gains) on available-for-sale securities
(12,116
)
 
(8,234
)
Regulatory disallowances
1,744

 

Other, net
(5,288
)
 
(355
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(16,220
)
 
(16,782
)
Materials, supplies, and fuel stock
(3,328
)
 
5,697

Other current assets
36,707

 
(20,806
)
Other assets
12,126

 
29,796

Accounts payable
(794
)
 
10,100

Accrued interest and taxes
22,856

 
19,984

Other current liabilities
(12,099
)
 
(21,586
)
Other liabilities
(34,224
)
 
2,841

Net cash flows from operating activities
240,177

 
238,482

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(301,410
)
 
(199,771
)
Proceeds from sales of available-for-sale securities
166,097

 
82,222

Purchases of available-for-sale securities
(166,268
)
 
(81,644
)
Return of principal on PVNGS lessor notes
21,694

 
20,758

Purchase of Rio Bravo

 
(36,235
)
Other, net
3,051

 
(3,404
)
Net cash flows from investing activities
(276,836
)
 
(218,074
)

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


16

Table of Contents



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

 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Short-term borrowings (repayments), net

 
(49,200
)
Short-term borrowings (repayments), affiliate, net

 
(26,000
)
Long-term borrowings
313,605

 
175,000

Repayment of long-term debt
(214,300
)
 
(75,000
)
Valencia’s transactions with its owner
(12,107
)
 
(12,749
)
Dividends paid
(46,548
)
 
(30,659
)
Other, net
(4,934
)
 
(1,196
)
Net cash flows from financing activities
35,716

 
(19,804
)
 
 
 
 
Change in Cash and Cash Equivalents
(943
)
 
604

Cash and Cash Equivalents at Beginning of Period
25,480

 
21

Cash and Cash Equivalents at End of Period
$
24,537

 
$
625

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
42,680

 
$
41,606

Income taxes paid (refunded), net
$
(1,450
)
 
$
(215
)
 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
Changes in accrued plant additions
$
(9,933
)
 
$
(10,586
)

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


17

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
24,537

 
$
25,480

Accounts receivable, net of allowance for uncollectible accounts of $1,363 and $1,466
83,401

 
67,622

Unbilled revenues
52,342

 
54,140

Other receivables
19,036

 
37,622

Affiliate receivables
8,859

 
8,853

Materials, supplies, and fuel stock
64,186

 
60,859

Regulatory assets
3,064

 
43,980

Commodity derivative instruments
6,144

 
11,232

Income taxes receivable
6,363

 
6,105

Current portion of accumulated deferred income taxes
12,418

 
12,418

Other current assets
70,796

 
53,095

Total current assets
351,146

 
381,406

Other Property and Investments:
 
 
 
Investment in PVNGS lessor notes

 
9,538

Available-for-sale securities
242,795

 
250,145

Other investments
252

 
397

Non-utility property
96

 
96

Total other property and investments
243,143

 
260,176

Utility Plant:
 
 
 
Plant in service and plant held for future use
4,728,597

 
4,581,066

Less accumulated depreciation and amortization
1,556,065

 
1,486,406

 
3,172,532

 
3,094,660

Construction work in progress
307,676

 
169,673

Nuclear fuel, net of accumulated amortization of $51,719 and $44,507
79,954

 
77,796

Net utility plant
3,560,162

 
3,342,129

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
337,712

 
357,045

Goodwill
51,632

 
51,632

Commodity derivative instruments
3,369

 

Other deferred charges
90,389

 
81,264

Total deferred charges and other assets
483,102

 
489,941

 
$
4,637,553

 
$
4,473,652

 
 
 
 

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


18

Table of Contents



PUBLIC SERVICE COMPANY OF NEW MEXICO AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Current installments of long-term debt
$
125,000

 
$
214,300

Accounts payable
95,194

 
86,055

Affiliate payables
17,070

 
18,232

Customer deposits
12,502

 
12,555

Accrued interest and taxes
52,994

 
29,298

Regulatory liabilities
2,205

 
1,703

Commodity derivative instruments
984

 
1,209

Dividends declared
132

 
132

Other current liabilities
40,798

 
52,053

Total current liabilities
346,879

 
415,537

Long-term Debt
1,464,991

 
1,276,357

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
758,182

 
715,814

Regulatory liabilities
435,473

 
425,481

Asset retirement obligations
110,545

 
103,182

Accrued pension liability and postretirement benefit cost
59,367

 
102,850

Commodity derivative instruments

 
477

Other deferred credits
90,034

 
86,023

Total deferred credits and liabilities
1,453,601

 
1,433,827

Total liabilities
3,265,471

 
3,125,721

Commitments and Contingencies (See Note 11)


 


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

 
11,529

Equity:
 
 
 
PNM common stockholder’s equity:
 
 
 
Common stock outstanding (no par value; 40,000,000 shares authorized; issued and outstanding 39,117,799 shares)
1,061,776

 
1,061,776

Accumulated other comprehensive income (loss), net of income taxes
(70,872
)
 
(61,755
)
Retained earnings
297,301

 
262,835

Total PNM common stockholder’s equity
1,288,205

 
1,262,856

Non-controlling interest in Valencia
72,348

 
73,546

Total equity
1,360,553

 
1,336,402

 
$
4,637,553

 
$
4,473,652


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

19

Table of Contents

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, 2014
$
1,061,776

 
$
(61,755
)
 
$
262,835

 
$
1,262,856

 
$
73,546

 
$
1,336,402

Valencia’s transactions with its owner

 

 

 

 
(12,107
)
 
(12,107
)
Net earnings

 

 
81,014

 
81,014

 
10,909

 
91,923

Total other comprehensive income (loss)

 
(9,117
)
 

 
(9,117
)
 

 
(9,117
)
Dividends declared on preferred stock

 

 
(396
)
 
(396
)
 

 
(396
)
Dividends declared on common stock

 

 
(46,152
)
 
(46,152
)
 

 
(46,152
)
Balance at September 30, 2015
$
1,061,776

 
$
(70,872
)
 
$
297,301

 
$
1,288,205

 
$
72,348

 
$
1,360,553



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

20

Table of Contents


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Electric Operating Revenues
$
83,996

 
$
78,958

 
$
232,361

 
$
215,574

Operating Expenses:
 
 
 
 
 
 
 
Cost of energy
18,547

 
17,402

 
54,637

 
50,167

Administrative and general
9,071

 
9,230

 
26,946

 
27,839

Depreciation and amortization
15,016

 
13,432

 
42,065

 
37,276

Transmission and distribution costs
6,290

 
6,191

 
18,604

 
17,655

Taxes other than income taxes
7,405

 
6,830

 
19,782

 
18,238

Total operating expenses
56,329

 
53,085

 
162,034

 
151,175

Operating income
27,667

 
25,873

 
70,327

 
64,399

Other Income and Deductions:
 
 
 
 
 
 
 
Other income
774

 
1,072

 
3,106

 
2,078

Other (deductions)
(102
)
 
(279
)
 
(349
)
 
(583
)
Net other income and deductions
672

 
793

 
2,757

 
1,495

Interest Charges
6,855

 
6,870

 
20,636

 
20,122

Earnings before Income Taxes
21,484

 
19,796

 
52,448

 
45,772

Income Taxes
7,795

 
7,441

 
19,200

 
17,081

Net Earnings
$
13,689

 
$
12,355

 
$
33,248

 
$
28,691


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



21

Table of Contents

TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Net Earnings
$
13,689

 
$
12,355

 
$
33,248

 
$
28,691

Other Comprehensive Income:
 
 
 
 
 
 
 
Fair Value Adjustment for Cash Flow Hedges:
 
 
 
 
 
 
 
Change in fair market value, net of income tax (expense) benefit of $0, $0, $0 and $53

 

 

 
(100
)
Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $0, $3, $0 and $(58)

 
(6
)
 

 
109

Total Other Comprehensive Income (Loss)

 
(6
)
 

 
9

Comprehensive Income
$
13,689

 
$
12,349

 
$
33,248

 
$
28,700


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

22

Table of Contents


TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
 
2015
 
2014
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
33,248

 
$
28,691

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
43,272

 
39,577

Deferred income tax expense
3,575

 
4,256

Other, net
(125
)
 
(169
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
(7,563
)
 
(5,376
)
Materials and supplies
(301
)
 
(203
)
Other current assets
2,712

 
1,761

Other assets
(272
)
 
(58
)
Accounts payable
(210
)
 
(1,302
)
Accrued interest and taxes
19,757

 
19,054

Other current liabilities
1,033

 
(1,217
)
Other liabilities
(5,870
)
 
1,397

Net cash flows from operating activities
89,256

 
86,411

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(90,497
)
 
(88,940
)
Net cash flows from investing activities
(90,497
)
 
(88,940
)
Cash Flow From Financing Activities:
 
 
 
Short-term borrowings (repayments), net
(5,000
)
 

Short-term borrowings (repayments) – affiliate, net
25,800

 
(10,300
)
Long-term borrowings

 
80,000

Repayment of long-term debt

 
(50,000
)
Dividends paid
(19,559
)
 
(16,336
)
Other, net

 
(835
)
Net cash flows from financing activities
1,241

 
2,529

 
 
 
 
Change in Cash and Cash Equivalents

 

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
1

 
$
1

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
13,308

 
$
11,778

Income taxes paid (refunded), net
$
545

 
$
(299
)
 
 
 
 
Supplemental schedule of noncash investing and financing activities:
 
 
 
Changes in accrued plant additions
$
(216
)
 
$
1,658


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



23

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1

 
$
1

Accounts receivable
27,161

 
19,416

Unbilled revenues
9,397

 
9,579

Other receivables
1,009

 
2,063

Materials and supplies
3,070

 
2,769

Regulatory assets
1,893

 
3,875

Current portion of accumulated deferred income taxes
6,398

 
6,398

Other current assets
1,256

 
938

Total current assets
50,185

 
45,039

Other Property and Investments:
 
 
 
Other investments
238

 
242

Non-utility property
2,240

 
2,240

Total other property and investments
2,478

 
2,482

Utility Plant:
 
 
 
Plant in service and plant held for future use
1,235,573

 
1,182,112

Less accumulated depreciation and amortization
399,479

 
375,407

 
836,094

 
806,705

Construction work in progress
42,535

 
16,538

Net utility plant
878,629

 
823,243

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
127,054

 
133,962

Goodwill
226,665

 
226,665

Other deferred charges
8,186

 
8,850

Total deferred charges and other assets
361,905

 
369,477

 
$
1,293,197

 
$
1,240,241


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

24

Table of Contents



TEXAS-NEW MEXICO POWER COMPANY AND SUBSIDIARIES
A WHOLLY OWNED SUBSIDIARY OF PNM RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
September 30,
2015
 
December 31,
2014
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY