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 March 31, 2016

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 April 22, 2016, 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 22, 2016 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 22, 2016 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.



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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:
  
 
Afton
  
Afton Generating Station
AFUDC
 
Allowance for Funds Used During Construction
ALJ
  
Administrative Law Judge
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
CO2
  
Carbon Dioxide
CSA
 
Coal Supply Agreement
CTC
  
Competition Transition Charge
DC 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
EIP
  
Eastern Interconnection Project
EIS
 
Environmental Impact Study
EPA
  
United States Environmental Protection Agency
ESA
 
Endangered Species Act
Exchange Act
 
Securities Exchange Act of 1934
Farmington
 
The City of Farmington, New Mexico
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
IRP
 
Integrated Resource Plan

4

Table of Contents

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 Capital
 
NM Capital Utility Corporation, an unregulated wholly-owned subsidiary of PNMR
NM Supreme Court
 
New Mexico Supreme Court
NMED
  
New Mexico Environment 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
OCI
  
Other Comprehensive Income
OPEB
  
Other Post Employment Benefits
OSM
 
United States Office of Surface Mining Reclamation and Enforcement
PNM
  
Public Service Company of New Mexico and Subsidiaries, a wholly-owned subsidiary of PNMR
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 Three-Year 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 $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, formerly known as Delta
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
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 2015 Bond Purchase Agreement
 
TNMP’s $60.0 Million First Mortgage Bonds
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
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
WACC
 
Weighted Average Cost of Capital
WEG
 
WildEarth Guardians
Westmoreland
 
Westmoreland Coal Company
Westmoreland Loan
 
$125.0 Million of funding provided by NM Capital to WSJ
WSJ
 
Westmoreland San Juan, LLC, an indirect subsidiary of Westmoreland

6

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 March 31,
 
2016
 
2015
 
(In thousands, except per share amounts)
Electric Operating Revenues 
$
310,961

 
$
332,868

Operating Expenses:

 
 
Cost of energy
92,369

 
115,645

Administrative and general
47,109

 
43,859

Energy production costs
42,686

 
42,669

Regulatory disallowances and restructuring costs
774

 
215

Depreciation and amortization
49,829

 
45,461

Transmission and distribution costs
16,594

 
16,487

Taxes other than income taxes
20,092

 
18,963

Total operating expenses
269,453

 
283,299

Operating income
41,508

 
49,569

Other Income and Deductions:
 
 
 
Interest income
3,622

 
1,750

Gains on available-for-sale securities
6,218

 
4,024

Other income
4,264

 
4,961

Other (deductions)
(2,999
)
 
(3,662
)
Net other income and deductions
11,105

 
7,073

Interest Charges
31,491

 
30,273

Earnings before Income Taxes
21,122

 
26,369

Income Taxes
7,157

 
8,517

Net Earnings
13,965

 
17,852

(Earnings) Attributable to Valencia Non-controlling Interest
(3,287
)
 
(3,380
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Net Earnings Attributable to PNMR
$
10,546

 
$
14,340

Net Earnings Attributable to PNMR per Common Share:
 
 
 
Basic
$
0.13

 
$
0.18

Diluted
$
0.13

 
$
0.18

Dividends Declared per Common Share
$
0.22

 
$
0.20


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 March 31,
 
2016
 
2015
 
(In thousands)
Net Earnings
$
13,965

 
$
17,852

Other Comprehensive Income (Loss):
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(2,130) and $(2,679)
3,328

 
4,157

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $4,374 and $1,635
(6,836
)
 
(2,537
)
Pension Liability Adjustment:
 
 
 
Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(537) and $(583)
839

 
905

Fair Value Adjustment for Cash Flow Hedges:
 
 
 
Change in fair market value, net of income tax (expense) benefit of $503 and $0
(786
)
 

Reclassification adjustment for (gains) losses included in net earnings, net of income tax expense (benefit) of $(57) and $0
89

 

Total Other Comprehensive Income (Loss)
(3,366
)
 
2,525

Comprehensive Income
10,599

 
20,377

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,287
)
 
(3,380
)
Preferred Stock Dividend Requirements of Subsidiary
(132
)
 
(132
)
Comprehensive Income Attributable to PNMR
$
7,180

 
$
16,865


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)
 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
13,965

 
$
17,852

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
58,563

 
55,062

Deferred income tax expense
7,187

 
8,326

Net unrealized (gains) losses on commodity derivatives
(1,435
)
 
1,720

Realized (gains) on available-for-sale securities
(6,218
)
 
(4,024
)
Stock based compensation expense
2,653

 
2,214

Regulatory disallowances and restructuring costs
774

 
215

Other, net
(612
)
 
148

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
36,215

 
12,170

Materials, supplies, and fuel stock
(1,716
)
 
(2,657
)
Other current assets
(18,720
)
 
3,817

Other assets
277

 
4,220

Accounts payable
2,004

 
(2,639
)
Accrued interest and taxes
18,276

 
24,811

Other current liabilities
(16,583
)
 
(21,223
)
Other liabilities
(4,032
)
 
(33,278
)
Net cash flows from operating activities
90,598

 
66,734

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Additions to utility and non-utility plant
(278,764
)
 
(100,214
)
Proceeds from sales of available-for-sale securities
124,900

 
31,852

Purchases of available-for-sale securities
(126,101
)
 
(32,661
)
Return of principal on PVNGS lessor notes
8,547

 
14,188

Westmoreland Loan
(122,250
)
 

Other, net
150

 
144

Net cash flows from investing activities
(393,518
)
 
(86,691
)

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

9

Table of Contents


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

 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings (repayments), net
$
107,400

 
$
(5,600
)
Long-term borrowings
182,500

 
150,000

Proceeds from stock option exercise
3,275

 
6,847

Awards of common stock
(10,020
)
 
(17,140
)
Dividends paid
(17,656
)
 
(16,063
)
Valencia’s transactions with its owner
(3,999
)
 
(4,160
)
Other, net
(761
)
 
194

Net cash flows from financing activities
260,739

 
114,078

 
 
 
 
Change in Cash and Cash Equivalents
(42,181
)
 
94,121

Cash and Cash Equivalents at Beginning of Period
46,051

 
28,274

Cash and Cash Equivalents at End of Period
$
3,870

 
$
122,395

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
11,403

 
$
6,191

Income taxes paid (refunded), net
$

 
$
(1,450
)
 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
20,149

 
$
(5,186
)

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)
 
March 31,
2016
 
December 31,
2015
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
3,870

 
$
46,051

Accounts receivable, net of allowance for uncollectible accounts of $1,284 and $1,397
72,206

 
98,699

Unbilled revenues
41,872

 
52,012

Other receivables
22,343

 
28,590

Current portion of Westmoreland Loan
37,527

 

Materials, supplies, and fuel stock
69,103

 
67,386

Regulatory assets
2,872

 
1,070

Commodity derivative instruments
4,356

 
3,813

Income taxes receivable
5,876

 
5,845

Other current assets
96,936

 
82,104

Total current assets
356,961

 
385,570

Other Property and Investments:
 
 
 
Long-term portion of Westmoreland Loan
85,169

 

Available-for-sale securities
260,628

 
259,042

Other investments
456

 
604

Non-utility property
3,404

 
3,404

Total other property and investments
349,657

 
263,050

Utility Plant:
 
 
 
Plant in service, held for future use, and to be abandoned
6,676,612

 
6,307,261

Less accumulated depreciation and amortization
2,246,332

 
2,058,772

 
4,430,280

 
4,248,489

Construction work in progress
233,109

 
204,766

Nuclear fuel, net of accumulated amortization of $51,000 and $44,455
83,302

 
82,117

Net utility plant
4,746,691

 
4,535,372

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
467,343

 
470,664

Goodwill
278,297

 
278,297

Commodity derivative instruments
1,986

 
2,622

Other deferred charges
72,877

 
73,753

Total deferred charges and other assets
820,503

 
825,336

 
$
6,273,812

 
$
6,009,328


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


11

Table of Contents



PNM RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
March 31,
2016
 
December 31,
2015
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
358,000

 
$
250,600

Current installments of long-term debt
166,086

 
124,979

Accounts payable
82,276

 
100,419

Customer deposits
12,205

 
12,216

Accrued interest and taxes
76,612

 
58,306

Regulatory liabilities
18,818

 
15,591

Commodity derivative instruments
548

 
1,859

Dividends declared
17,656

 
17,656

Other current liabilities
39,364

 
59,494

Total current liabilities
771,565

 
641,120

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
2,108,395

 
1,966,969

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
889,595

 
877,393

Regulatory liabilities
464,716

 
467,413

Asset retirement obligations
114,446

 
111,895

Accrued pension liability and postretirement benefit cost
68,762

 
73,097

Other deferred credits
133,747

 
133,692

Total deferred credits and other liabilities
1,671,266

 
1,663,490

Total liabilities
4,551,226

 
4,271,579

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)
1,162,358

 
1,166,465

Accumulated other comprehensive income (loss), net of income taxes
(74,798
)
 
(71,432
)
Retained earnings
552,802

 
559,780

Total PNMR common stockholders’ equity
1,640,362

 
1,654,813

Non-controlling interest in Valencia
70,695

 
71,407

Total equity
1,711,057

 
1,726,220

 
$
6,273,812

 
$
6,009,328

 
 
 
 

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 Stockholders’ Equity
 
 
Total
Equity
 
(In thousands)
Balance at December 31, 2015
$
1,166,465

 
$
(71,432
)
 
$
559,780

 
$
1,654,813

 
$
71,407

 
$
1,726,220

Proceeds from stock option exercise
3,275

 

 

 
3,275

 

 
3,275

Awards of common stock
(10,020
)
 

 

 
(10,020
)
 

 
(10,020
)
Excess tax (shortfall) from stock-based payment arrangements
(15
)
 

 

 
(15
)
 

 
(15
)
Stock based compensation expense
2,653

 

 

 
2,653

 

 
2,653

Valencia’s transactions with its owner

 

 

 

 
(3,999
)
 
(3,999
)
Net earnings before subsidiary preferred stock dividends

 

 
10,678

 
10,678

 
3,287

 
13,965

Subsidiary preferred stock dividends

 

 
(132
)
 
(132
)
 

 
(132
)
Total other comprehensive income (loss)

 
(3,366
)
 

 
(3,366
)
 

 
(3,366
)
Dividends declared on common stock

 

 
(17,524
)
 
(17,524
)
 

 
(17,524
)
Balance at March 31, 2016
$
1,162,358

 
$
(74,798
)
 
$
552,802

 
$
1,640,362

 
$
70,695

 
$
1,711,057



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



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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 March 31,
 
2016
 
2015
 
(In thousands)
Electric Operating Revenues
$
235,606

 
$
261,940

Operating Expenses:
 
 
 
Cost of energy
72,444

 
97,866

Administrative and general
42,028

 
39,567

Energy production costs
42,686

 
42,669

Regulatory disallowances and restructuring costs
774

 
215

Depreciation and amortization
31,864

 
28,403

Transmission and distribution costs
10,316

 
10,769

Taxes other than income taxes
12,197

 
10,796

Total operating expenses
212,309

 
230,285

Operating income
23,297

 
31,655

Other Income and Deductions:
 
 
 
Interest income
1,522

 
1,771

Gains on available-for-sale securities
6,218

 
4,024

Other income
3,387

 
3,392

Other (deductions)
(1,662
)
 
(1,606
)
Net other income and deductions
9,465

 
7,581

Interest Charges
21,591

 
19,959

Earnings before Income Taxes
11,171

 
19,277

Income Taxes
3,610

 
5,775

Net Earnings
7,561

 
13,502

(Earnings) Attributable to Valencia Non-controlling Interest
(3,287
)
 
(3,380
)
Net Earnings Attributable to PNM
4,274

 
10,122

Preferred Stock Dividends Requirements
(132
)
 
(132
)
Net Earnings Available for PNM Common Stock
$
4,142

 
$
9,990


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 March 31,
 
2016
 
2015
 
(In thousands)
Net Earnings
$
7,561

 
$
13,502

Other Comprehensive Income (Loss):
 
 
 
Unrealized Gains on Available-for-Sale Securities:
 
 
 
Unrealized holding gains arising during the period, net of income tax (expense) of $(2,130) and $(2,679)
3,328

 
4,157

Reclassification adjustment for (gains) included in net earnings, net of income tax expense of $4,374 and $1,635
(6,836
)
 
(2,537
)
Pension Liability Adjustment:
 
 
 
Reclassification adjustment for amortization of experience losses recognized as net periodic benefit cost, net of income tax (benefit) of $(537) and $(583)
839

 
905

Total Other Comprehensive Income (Loss)
(2,669
)
 
2,525

Comprehensive Income
4,892

 
16,027

Comprehensive (Income) Attributable to Valencia Non-controlling Interest
(3,287
)
 
(3,380
)
Comprehensive Income Attributable to PNM
$
1,605

 
$
12,647


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)
 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
7,561

 
$
13,502

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
40,225

 
37,470

Deferred income tax expense
3,727

 
5,908

Net unrealized (gains) losses on commodity derivatives
(1,435
)
 
1,720

Realized (gains) on available-for-sale securities
(6,218
)
 
(4,024
)
Regulatory disallowances and restructuring costs
774

 
215

Other, net
(611
)
 
(974
)
Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
33,417

 
12,385

Materials, supplies, and fuel stock
(5,060
)
 
(2,558
)
Other current assets
(13,527
)
 
5,110

Other assets
3,311

 
4,479

Accounts payable
5,130

 
4,622

Accrued interest and taxes
20,221

 
22,832

Other current liabilities
(9,335
)
 
(18,836
)
Other liabilities
(4,505
)
 
(30,178
)
Net cash flows from operating activities
73,675

 
51,673

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(238,734
)
 
(81,988
)
Proceeds from sales of available-for-sale securities
124,900

 
31,852

Purchases of available-for-sale securities
(126,101
)
 
(32,661
)
Return of principal on PVNGS lessor notes
8,547

 
14,188

Other, net
150

 
144

Net cash flows from investing activities
(231,238
)
 
(68,465
)

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)

 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands)
Cash Flows From Financing Activities:
 
 
 
Revolving credit facilities borrowings, net
118,800

 

Valencia’s transactions with its owner
(3,999
)
 
(4,160
)
Dividends paid
(132
)
 
(132
)
Other, net
(53
)
 
(144
)
Net cash flows from financing activities
114,616

 
(4,436
)
 
 
 
 
Change in Cash and Cash Equivalents
(42,947
)
 
(21,228
)
Cash and Cash Equivalents at Beginning of Period
43,138

 
25,480

Cash and Cash Equivalents at End of Period
$
191

 
$
4,252

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
8,561

 
$
4,287

Income taxes paid (refunded), net
$

 
$
(1,450
)
 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
16,747

 
$
(7,421
)

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)
 
March 31,
2016
 
December 31,
2015
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
191

 
$
43,138

Accounts receivable, net of allowance for uncollectible accounts of $1,284 and $1,397
53,278

 
78,291

Unbilled revenues
33,819

 
42,641

Other receivables
19,701

 
24,725

Affiliate receivables
8,819

 
15,105

Materials, supplies, and fuel stock
65,538

 
60,477

Commodity derivative instruments
4,356

 
3,813

Income taxes receivable
14,694

 
14,577

Other current assets
91,541

 
74,990

Total current assets
291,937

 
357,757

Other Property and Investments:
 
 
 
Available-for-sale securities
260,628

 
259,042

Other investments
218

 
366

Non-utility property
96

 
96

Total other property and investments
260,942

 
259,504

Utility Plant:
 
 
 
Plant in service, held for future use, and to be abandoned
5,185,298

 
4,833,303

Less accumulated depreciation and amortization
1,744,062

 
1,569,549

 
3,441,236

 
3,263,754

Construction work in progress
183,184

 
172,238

Nuclear fuel, net of accumulated amortization of $51,000 and $44,455
83,302

 
82,117

Net utility plant
3,707,722

 
3,518,109

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
338,801

 
342,910

Goodwill
51,632

 
51,632

Commodity derivative instruments
1,986

 
2,622

Other deferred charges
66,326

 
66,810

Total deferred charges and other assets
458,745

 
463,974

 
$
4,719,346

 
$
4,599,344

 
 
 
 

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)
 
March 31,
2016
 
December 31,
2015
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
118,800

 
$

Current installments of long-term debt
124,990

 
124,979

Accounts payable
60,769

 
72,386

Affiliate payables
16,267

 
14,318

Customer deposits
12,205

 
12,216

Accrued interest and taxes
53,527

 
33,189

Regulatory liabilities
18,818

 
15,591

Commodity derivative instruments
548

 
1,859

Dividends declared
132

 
132

Other current liabilities
27,740

 
42,251

Total current liabilities
433,796

 
316,921

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
1,456,141

 
1,455,698

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
705,515

 
696,384

Regulatory liabilities
430,961

 
434,863

Asset retirement obligations
113,582

 
111,049

Accrued pension liability and postretirement benefit cost
62,253

 
66,285

Other deferred credits
115,468

 
117,275

Total deferred credits and liabilities
1,427,779

 
1,425,856

Total liabilities
3,317,716

 
3,198,475

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)
1,236,776

 
1,236,776

Accumulated other comprehensive income (loss), net of income taxes
(74,145
)
 
(71,476
)
Retained earnings
156,775

 
152,633

Total PNM common stockholder’s equity
1,319,406

 
1,317,933

Non-controlling interest in Valencia
70,695

 
71,407

Total equity
1,390,101

 
1,389,340

 
$
4,719,346

 
$
4,599,344


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, 2015
$
1,236,776

 
$
(71,476
)
 
$
152,633

 
$
1,317,933

 
$
71,407

 
$
1,389,340

Valencia’s transactions with its owner

 

 

 

 
(3,999
)
 
(3,999
)
Net earnings

 

 
4,274

 
4,274

 
3,287

 
7,561

Total other comprehensive income (loss)

 
(2,669
)
 

 
(2,669
)
 

 
(2,669
)
Dividends declared on preferred stock

 

 
(132
)
 
(132
)
 

 
(132
)
Balance at March 31, 2016
$
1,236,776

 
$
(74,145
)
 
$
156,775

 
$
1,319,406

 
$
70,695

 
$
1,390,101



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 March 31,
 
2016
 
2015
 
(In thousands)
Electric Operating Revenues
$
75,355

 
$
70,928

Operating Expenses:
 
 
 
Cost of energy
19,925

 
17,779

Administrative and general
9,590

 
9,833

Depreciation and amortization
14,508

 
13,458

Transmission and distribution costs
6,278

 
5,718

Taxes other than income taxes
6,500

 
6,209

Total operating expenses
56,801

 
52,997

Operating income
18,554

 
17,931

Other Income and Deductions:
 
 
 
Other income
593

 
1,540

Other (deductions)
15

 
(249
)
Net other income and deductions
608

 
1,291

Interest Charges
7,369

 
6,925

Earnings before Income Taxes
11,793

 
12,297

Income Taxes
4,337

 
4,603

Net Earnings
$
7,456

 
$
7,694


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 CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
 
2016
 
2015
 
(In thousands)
Cash Flows From Operating Activities:
 
 
 
Net earnings
$
7,456

 
$
7,694

Adjustments to reconcile net earnings to net cash flows from operating activities:
 
 
 
Depreciation and amortization
14,936

 
13,831

Deferred income tax expense
194

 
4,170

Changes in certain assets and liabilities:
 
 
 
Accounts receivable and unbilled revenues
2,798

 
(215
)
Materials and supplies
3,344

 
(99
)
Other current assets
(1,842
)
 
981

Other assets
(2,694
)
 
(139
)
Accounts payable
(3,788
)
 
(7,640
)
Accrued interest and taxes
939

 
(2,006
)
Other current liabilities
163

 
368

Other liabilities
81

 
(3,631
)
Net cash flows from operating activities
21,587

 
13,314

Cash Flows From Investing Activities:
 
 
 
Utility plant additions
(32,947
)
 
(13,763
)
Net cash flows from investing activities
(32,947
)
 
(13,763
)
Cash Flow From Financing Activities:
 
 
 
Revolving credit facilities borrowings (repayments), net
(44,000
)
 
(5,000
)
Short-term borrowings (repayments) – affiliate, net
(3,900
)
 
5,800

Long-term borrowings
60,000

 

Other, net
(740
)
 

Net cash flows from financing activities
11,360

 
800

 
 
 
 
Change in Cash and Cash Equivalents

 
351

Cash and Cash Equivalents at Beginning of Period
1

 
1
Cash and Cash Equivalents at End of Period
$
1

 
$
352

 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
Interest paid, net of amounts capitalized
$
1,719

 
$
1,664

Income taxes paid (refunded), net
$

 
$

 
 
 
 
Supplemental schedule of noncash investing activities:
 
 
 
(Increase) decrease in accrued plant additions
$
2,047

 
$
2,537


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 BALANCE SHEETS
(Unaudited)
 
March 31,
2016
 
December 31,
2015
 
(In thousands)
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
1

 
$
1

Accounts receivable
18,928

 
20,408

Unbilled revenues
8,053

 
9,371

Other receivables
920

 
811

Materials and supplies
3,565

 
6,909

Regulatory assets
2,872

 
1,070

Other current assets
986

 
1,053

Total current assets
35,325

 
39,623

Other Property and Investments:
 
 
 
Other investments
238

 
238

Non-utility property
2,240

 
2,240

Total other property and investments
2,478

 
2,478

Utility Plant:
 
 
 
Plant in service and plant held for future use
1,298,266

 
1,285,727

Less accumulated depreciation and amortization
416,002

 
406,516

 
882,264

 
879,211

Construction work in progress
32,498

 
16,561

Net utility plant
914,762

 
895,772

Deferred Charges and Other Assets:
 
 
 
Regulatory assets
128,542

 
127,754

Goodwill
226,665

 
226,665

Other deferred charges
4,630

 
4,847

Total deferred charges and other assets
359,837

 
359,266

 
$
1,312,402

 
$
1,297,139


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)
 
March 31,
2016
 
December 31,
2015
 
(In thousands, except share information)
LIABILITIES AND STOCKHOLDER’S EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term debt
$
15,000

 
$
59,000

Short-term debt – affiliate
7,900

 
11,800

Accounts payable
10,170

 
16,006

Affiliate payables
2,785

 
3,681

Accrued interest and taxes
33,830

 
32,891

Other current liabilities
3,100

 
2,044

Total current liabilities
72,785

 
125,422

Long-term Debt, net of Unamortized Premiums, Discounts, and Debt Issuance Costs
420,690

 
361,411

Deferred Credits and Other Liabilities:
 
 
 
Accumulated deferred income taxes
233,044

 
232,791

Regulatory liabilities
33,755

 
32,550

Asset retirement obligations
709

 
695

Accrued pension liability and postretirement benefit cost
6,509

 
6,812

Other deferred credits
4,074

 
4,078

Total deferred credits and other liabilities
278,091

 
276,926

Total liabilities
771,566

 
763,759

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
404,166

 
404,166

Retained earnings
136,606

 
129,150

Total common stockholder’s equity
540,836

 
533,380

 
$
1,312,402

 
$
1,297,139


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 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, 2015
$
64

 
$
404,166

 
$
129,150

 
$
533,380

Net earnings

 

 
7,456

 
7,456

Balance at March 31, 2016
$
64

 
$
404,166

 
$
136,606

 
$
540,836


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



25

Table of Contents

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, 2016 and December 31, 2015, the consolidated results of operations, comprehensive income, and cash flows for the three months ended March 31, 2016 and 2015. 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 2015 Condensed Consolidated Financial Statements and Notes thereto have been reclassified to conform to the 2016 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 2015 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.

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)


26

Table of Contents

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)


On May 28, 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. The new standard will replace most existing revenue recognition guidance in GAAP when it becomes effective. On August 12, 2015, the FASB issued a one-year deferral in the effective date. On March 17, 2016, the FASB issued an additional ASU that clarifies the implementation guidance in ASU No. 2014-09 regarding principal versus agent considerations. On April 14, 2016, the FASB issued an additional ASU that clarifies the implementation guidance in ASU No. 2014-09 regarding licensing and identifying performance obligations. The Company must adopt ASU 2014-09 beginning on January 1, 2018. Early adoption would be permitted beginning January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method although it is unlikely the Company would elect to early adopt the new standard. The Company is analyzing the impacts this new standard will have on its consolidated financial statements and related disclosures, but has not determined the effect of the standard on its financial reporting.

Accounting Standards Update 2014-15 Presentation of Financial Statements Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

On August 27, 2014, the FASB issued ASU No. 2014-15, which requires management to evaluate whether there is substantial doubt about a company’s ability to continue as a going concern in connection with the preparation of financial statements for each annual and interim reporting period. Disclosure requirements associated with management’s evaluation are also outlined in the new guidance. The new standard is effective for the Company for reporting periods ending after December 15, 2016, with early adoption permitted. The Company is analyzing the impacts of this new standard.

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

On January 5, 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 now requires those equity securities to be measured at fair value with changes in fair value recognized in net income rather than in OCI. The new standard also revises certain presentation and disclosure requirements. Under the new standard, accounting for investments in debt securities remains essentially unchanged. The new standard will be effective for the Company beginning on January 1, 2018. Early adoption of the standard is permitted. The Company is in the process of analyzing the impacts of this new standard.

Accounting Standards Update 2016-02 Leases (Topic 842)

On February 25, 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 currently 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 arrangements similar to the accounting treatment for capital leases under current GAAP. The new standard also revises certain disclosure requirements. The new standard will be effective for the Company beginning on January 1, 2019. Early adoption of the standard is permitted. At adoption of the ASU, leases will be recognized and measured as of the earliest period presented using a modified retrospective approach. The Company is in the process of analyzing the impacts of this new standard.

Accounting Standards Update 2016-09 - Compensation - Stock Compensation (Topic 718)

On March 30, 2016, the FASB issued ASU No. 2016-09. The ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new standard is effective for the Company for reporting periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. The Company is in the process of analyzing the impacts of this new standard.


27

Table of Contents

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,
 
2016
 
2015
 
(In thousands, except per share amounts)
Net Earnings Attributable to PNMR
$
10,546

 
$
14,340

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

 
79,654

    Vested awards of restricted stock
104

 
112

Average Shares – Basic
79,758

 
79,766

Dilutive Effect of Common Stock Equivalents:
 
 
 
Stock options and restricted stock
406

 
387

Average Shares – Diluted
80,164

 
80,153

Net Earnings Per Share of Common Stock:
 
 
 
Basic
$
0.13

 
$
0.18

Diluted
$
0.13

 
$
0.18



(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 provides generation service to firm-requirements wholesale customers and sells electricity into the wholesale market, as well as providing transmission services to third parties. The sale of electricity into the wholesale market includes the optimization of PNM’s jurisdictional capacity, as well as the capacity from PVNGS Unit 3, which currently is not included in retail rates. FERC has jurisdiction over wholesale and transmission rates.

TNMP
TNMP is an electric utility providing regulated transmission and distribution services in Texas under the TECA. TNMP’s operations are subject to traditional rate regulation by the PUCT.

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.


28

Table of Contents

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, 2016
 
Electric operating revenues
$
235,606

 
$
75,355

 
$

 
$
310,961

Cost of energy
72,444

 
19,925

 

 
92,369

Utility margin
163,162

 
55,430

 

 
218,592

Other operating expenses
108,001

 
22,368

 
(3,114
)
 
127,255

Depreciation and amortization
31,864

 
14,508

 
3,457

 
49,829

Operating income
23,297

 
18,554

 
(343
)
 
41,508

Interest income
1,522

 

 
2,100

 
3,622

Other income (deductions)
7,943

 
608

 
(1,068
)
 
7,483

Net interest charges
(21,591
)
 
(7,369
)
 
(2,531
)
 
(31,491
)
Segment earnings (loss) before income taxes
11,171

 
11,793

 
(1,842
)
 
21,122

Income taxes
3,610

 
4,337

 
(790
)
 
7,157

Segment earnings (loss)
7,561

 
7,456

 
(1,052
)
 
13,965

Valencia non-controlling interest
(3,287
)
 

 

 
(3,287
)
Subsidiary preferred stock dividends
(132
)
 

 

 
(132
)
Segment earnings (loss) attributable to PNMR
$
4,142

 
$
7,456

 
$
(1,052
)
 
$
10,546

 
 
 
 
 
 
 
 
At March 31, 2016:
 
 
 
 
 
 
 
Total Assets
$
4,719,346

 
$
1,312,402

 
$
242,064

 
$
6,273,812

Goodwill
$
51,632

 
$
226,665

 
$

 
$
278,297

 
PNM
 
TNMP
 
Corporate
and Other
 
Consolidated
 
(In thousands)
Three Months Ended March 31, 2015
 
 
 
 
 
 
 
Electric operating revenues
$
261,940

 
$
70,928

 
$

 
$
332,868

Cost of energy
97,866

 
17,779

 

 
115,645

Utility margin
164,074

 
53,149

 

 
217,223

Other operating expenses
104,016

 
21,760

 
(3,583
)
 
122,193

Depreciation and amortization
28,403

 
13,458

 
3,600

 
45,461

Operating income
31,655

 
17,931

 
(17
)
 
49,569

Interest income
1,771

 

 
(21
)
 
1,750

Other income (deductions)
5,810

 
1,291

 
(1,778
)
 
5,323

Net interest charges
(19,959
)
 
(6,925
)
 
(3,389
)
 
(30,273
)
Segment earnings (loss) before income taxes
19,277

 
12,297

 
(5,205
)
 
26,369

Income taxes (benefit)
5,775

 
4,603

 
(1,861
)
 
8,517