PNM Resources Reports Fourth Quarter and Year-End Results

PNM Resources (In millions, except EPS)

Q4 2017

Q4 2016

YE 2017

YE 2016

GAAP net earnings (loss) attributable to PNM Resources

($54.3)

$24.8

$79.9

$116.8

GAAP diluted EPS

($0.68)

$0.31

$1.00

$1.46

Ongoing net earnings

$19.4

$27.4

$155.3

$132.4

Ongoing diluted EPS

$0.24

$0.34

$1.94

$1.65

PNM (In millions, except EPS)

Q4 2017

Q4 2016

YE 2017

YE 2016

GAAP net earnings (loss) attributable to PNM Resources

($32.2)

$16.0

$71.9

$76.9

GAAP diluted EPS

($0.40)

$0.20

$0.90

$0.96

Ongoing net earnings

$12.8

$18.4

$118.4

$91.4

Ongoing diluted EPS

$0.16

$0.23

$1.48

$1.14

TNMP (In millions, except EPS)

Q4 2017

Q4 2016

YE 2017

YE 2016

GAAP net earnings  attributable to PNM Resources

$1.0

$9.9

$35.6

$41.7

GAAP diluted EPS

$0.01

$0.12

$0.44

$0.52

Ongoing net earnings

$8.9

$10.0

$43.4

$42.5

Ongoing diluted EPS

$0.11

$0.12

$0.54

$0.53

                  Corporate and Other (In millions, except EPS)

Q4 2017

Q4 2016

YE 2017

YE 2016

GAAP net earnings (loss) attributable to PNM Resources

($23.2)

($1.0)

($27.6)

($1.7)

GAAP diluted EPS

($0.29)

($0.01)

($0.34)

($0.02)

Ongoing net earnings (loss)

($2.2)

($1.0)

($6.5)

($1.4)

Ongoing diluted EPS

($0.03)

($0.01)

($0.08)

($0.02)

CONTACTS:

Analysts

Media

Jimmie Blotter

Pahl Shipley

(505) 241-2227

(505) 241-2782

PNM Resources, Inc. and Subsidiaries

Schedule 1

Reconciliation of GAAP to Ongoing Earnings

(Preliminary and Unaudited)   

PNM

TNMP

Corporate and Other

Consolidated

(in thousands)

Quarter Ended December 31, 2017

GAAP Net Earnings (Loss) Attributable to PNMR:

$

(32,154)

$

1,024

$

(23,152)

$

(54,282)

Adjusting items before income tax effects

  Mark-to-market impact of economic hedges^4a

2,017

—

—

2,017

  Net change in unrealized impairments of available-for-sale securities^4b

(2,124)

—

—

(2,124)

  Regulatory disallowances and restructuring costs^{3, 4c}

27,036

—

—

27,036

  Pension expense related to previously disposed of gas distribution business^4d

961

—

—

961

  Total adjustments before income tax effects

27,890

—

—

27,890

Income (taxes) on above adjustments¹

(10,822)

—

—

(10,822)

Change in federal corporate income tax rate²

29,606

7,865

19,990

57,461

Other income tax impairments and valuation allowances

2,732

—

1,100

3,832

New Mexico corporate income tax rate change

(1,201)

—

(163)

(1,364)

Recovery of prior tax impairments in New Mexico general rate review

(3,297)

—

—

(3,297)

  Total income tax impacts^4e

17,018

7,865

20,927

45,810

  Adjusting items, net of income taxes

44,908

7,865

20,927

73,700

Ongoing Earnings (Loss)

$

12,754

$

8,889

$

(2,225)

$

19,418

Year Ended December 31, 2017

GAAP Net Earnings (Loss) Attributable to PNMR:

$

71,868

$

35,559

$

(27,553)

$

79,874

Adjusting items before income tax effects

  Mark-to-market impact of economic hedges^4a

2,875

—

—

2,875

  Net change in unrealized impairments of available-for-sale securities^4b

(3,258)

—

—

(3,258)

  Regulatory disallowances and restructuring costs^{3, 4c}

27,036

—

—

27,036

  Pension expense related to previously disposed of gas distribution business^4d

3,846

—

—

3,846

  Total adjustments before income tax effects

30,499

—

—

30,499

Income (taxes) on above adjustments¹

(11,833)

—

—

(11,833)

Change in federal corporate income tax rate²

29,606

7,865

19,990

57,461

Other income tax impairments and valuation allowances

2,732

—

1,100

3,832

New Mexico corporate income tax rate change

(1,179)

—

(80)

(1,259)

Recovery of prior tax impairments in New Mexico general rate review

(3,297)

—

—

(3,297)

  Total income tax impacts^4e

16,029

7,865

21,010

44,904

  Adjusting items, net of income taxes

46,528

7,865

21,010

75,403

Ongoing Earnings (Loss)

$

118,396

$

43,424

$

(6,543)

$

155,277

² Federal tax reform, which was enacted in December 2017, reduced the federal corporate income tax rate from 35% to 21%; GAAP required that accumulated deferred income tax assets and liabilities be re-measured to reflect the new rate; the re-measurement reductions in net deferred income tax liabilities related to regulated activities were recorded as increases in regulatory liabilities; the re-measurement reductions in net deferred income tax assets related to non-regulated activities were recorded as increases in income tax expense and are reflected as adjustments above

³ Regulatory disallowances and restructuring costs are primarily related to the January 2018 order in PNM's general rate review granting a debt-only return on $148.1 million of investments in the Four Corners Power Plant

⁴ The pre-tax impacts (in thousands) of adjusting items are reflected on the GAAP Consolidated Statement of Earnings as follows:

^a Reductions in "Electric Operating Revenues" and "Cost of energy" of $2,224 and $207 in the three months ended December 31, 2017 and increases in "Electric Operating Revenues and "Cost of energy" of $6,594 and $9,469 in the year ended December 31, 2017

^b Increases in "Gains on available-for-sale securities"

^c Increases in "Regulatory disallowances and restructuring costs"

^d Increases in "Administrative and general"

^e Income tax impacts reflected in "Income Taxes"

PNM Resources, Inc. and Subsidiaries

Schedule 2

Reconciliation of GAAP to Ongoing Earnings

(Preliminary and Unaudited)

PNM

TNMP

Corporate
and Other

Consolidated

(in thousands)

Quarter Ended December 31, 2016

GAAP Net Earnings (Loss) Attributable to PNMR:

$

15,982

$

9,855

$

(1,028)

$

24,809

Adjusting items before income tax effects

  Mark-to-market impact of economic hedges^3a

(616)

—

—

(616)

  Net change in unrealized impairments of available-for-sale securities^3b

2,190

—

—

2,190

  Regulatory disallowances and restructuring costs^3c

(2,214)

—

—

(2,214)

  Pension expense related to previously disposed of gas distribution business^3d

925

—

—

925

  Process improvement initiatives^3e

3,743

237

—

3,980

  Total adjustments before income tax effects

4,028

237

—

4,265

Income (taxes) on above adjustments^{1, 3f}

(1,572)

(82)

—

(1,654)

  Adjusting items, net of income taxes

2,456

155

—

2,611

Ongoing Earnings (Loss)

$

18,438

$

10,010

$

(1,028)

$

27,420

Year Ended December 31, 2016

GAAP Net Earnings (Loss) Attributable to PNMR:

$

76,891

$

41,672

$

(1,714)

$

116,849

Adjusting items before income tax effects

  Mark-to-market impact of economic hedges^3a

1,577

—

—

1,577

  Net change in unrealized impairments of available-for-sale securities^3b

1,169

—

—

1,169

  Regulatory disallowances and restructuring costs^{2, 3c}

15,010

—

586

15,596

  Pension expense related to previously disposed of gas distribution business^3d

3,702

—

—

3,702

  Process improvement initiatives^3e

3,743

237

—

3,980

  Building consolidation^3d

737

996

—

1,733

  Total adjustments before income tax effects

25,938

1,233

586

27,757

Income (taxes) on above adjustments¹

(10,122)

(431)

(229)

(10,782)

New Mexico corporate income tax rate change

804

—

(92)

712

Recovery of prior tax impairments in New Mexico general rate review

(2,145)

—

—

(2,145)

  Total income tax impacts^3f

(11,463)

(431)

(321)

(12,215)

  Adjusting items, net of income tax

14,475

802

265

15,542

Ongoing Earnings (Loss)

$

91,366

$

42,474

$

(1,449)

$

132,391

¹ 2016 income taxes calculated using rates of 35.00% for TNMP and 39.02% for other segments.

² Regulatory disallowances and restructuring costs are primarily related to the September 2016 order in PNM's general rate review

³ The pre-tax impacts (in thousands) of adjusting items are reflected on the GAAP Consolidated Statement of Earnings as follows:

^a Increases in "Electric Operating Revenues" and "Cost of energy" of $5,247 and $4,631 in the three months ended December 31, 2016 and $3,182 and $4,759 in the year ended December 31, 2016

^b Reductions in "Gains on available-for-sale securities"

^c Reduction in "Regulatory disallowances and restructuring costs" (PNM) in the three months ended December 31, 2016 and increases in "Regulatory disallowances and restructuring costs" (PNM) and "Other (deductions)" (Corporate and Other) in the year ended December 31, 2016

^d Increases in "Administrative and general"

^e Increases in "Administrative and general" and "Taxes other than income taxes" of $3,960 ($3,723 PNM and $237 TNMP) and $20 (PNM) in the three months and year ended December 31, 2016

^f Income tax impacts reflected in "Income Taxes"

PNM Resources, Inc. and Subsidiaries

Schedule 3

Reconciliation of GAAP to Ongoing Earnings Per Diluted Share

(Preliminary and Unaudited)

PNM

TNMP

Corporate
and Other

Consolidated

(per diluted share)

Quarter Ended December 31, 2017

GAAP Net Earnings (Loss) Attributable to PNMR:

$

(0.40)

$

0.01

$

(0.29)

$

(0.68)

Adjusting items, net of income tax effects

  Mark-to-market impact of economic hedges

0.02

—

—

0.02

  Net change in unrealized impairments of available-for-sale securities

(0.02)

—

—

(0.02)

  Regulatory disallowances and restructuring costs

0.21

—

—

0.21

  Pension expense related to previously disposed of gas distribution business

0.01

—

—

0.01

  Change in federal corporate income tax rate

0.37

0.10

0.25

0.72

  Other income tax impairments and valuation allowances

0.03

—

0.01

0.04

  New Mexico corporate income tax rate change

(0.02)

—

—

(0.02)

  Recovery of prior year impairments in New Mexico general rate review

(0.04)

—

—

(0.04)

  Total Adjustments

0.56

0.10

0.26

0.92

Ongoing Earnings (Loss)

$

0.16

$

0.11

$

(0.03)

$

0.24

Average Diluted Shares Outstanding:  80,169,385

Year Ended December 31, 2017

GAAP Net Earnings (Loss) Attributable to PNMR:

$

0.90

$

0.44

$

(0.34)

$

1.00

Adjusting items, net of income tax effects

  Mark-to-market impact of economic hedges

0.02

—

—

0.02

  Net change in unrealized impairments of available-for-sale securities

(0.02)

—

—

(0.02)

  Regulatory disallowances and restructuring costs

0.21

—

—

0.21

  Pension expense related to previously disposed of gas distribution business

0.03

—

—

0.03

  Change in federal corporate income tax rate

0.37

0.10

0.25

0.72

  Other income tax impairments and valuation allowances

0.03

—

0.01

0.04

  New Mexico corporate income tax rate change

(0.02)

—

—

(0.02)

  Recovery of prior year impairments in New Mexico general rate review

(0.04)

—

—

(0.04)

  Total Adjustments

0.58

0.10

0.26

0.94

Ongoing Earnings (Loss)

$

1.48

$

0.54

$

(0.08)

$

1.94

  Average Diluted Shares Outstanding:  80,141,447

PNM Resources, Inc. and Subsidiaries

Schedule 4

Reconciliation of GAAP to Ongoing Earnings Per Diluted Share

(Preliminary and Unaudited)

PNM

TNMP

Corporate
and Other

Consolidated

(per diluted share)

Quarter Ended December 31, 2016

GAAP Net Earnings (Loss) Attributable to PNMR:

$

0.20

$

0.12

$

(0.01)

$

0.31

Adjusting items, net of income tax effects

  Mark-to-market impact of economic hedges

(0.01)

—

—

(0.01)

  Net change in unrealized impairments of available-for-sale securities

0.02

—

—

0.02

  Regulatory disallowances and restructuring costs

(0.02)

—

—

(0.02)

  Pension expense related to previously disposed of gas distribution business

0.01

—

—

0.01

  Process improvement initiatives

0.03

—

—

0.03

  Total Adjustments

0.03

—

—

0.03

Ongoing Earnings (Loss)

$

0.23

$

0.12

$

(0.01)

$

0.34

  Average Basic and Diluted Shares Outstanding:  80,137,352

Year Ended December 31, 2016

GAAP Net Earnings (Loss) Attributable to PNMR:

$

0.96

$

0.52

$

(0.02)

$

1.46

Adjusting items, net of income tax effects

  Mark-to-market impact of economic hedges

0.01

—

—

0.01

  Net change in unrealized impairments of available-for-sale securities

0.01

—

—

0.01

  Regulatory disallowances and restructuring costs¹

0.09

—

—

0.09

  Pension expense related to previously disposed of gas distribution business

0.03

—

—

0.03

  Process improvement initiatives

0.03

—

—

0.03

  Building consolidation

—

0.01

—

0.01

  New Mexico corporate income tax rate change

0.01

—

—

0.01

  Total Adjustments

0.18

0.01

—

0.19

Ongoing Earnings (Loss)

$

1.14

$

0.53

$

(0.02)

$

1.65

  Average Diluted Shares Outstanding:  80,131,541

¹ Includes earnings per share impact of "Recovery of prior tax impairments in New Mexico general rate review"

PNM Resources, Inc. and Subsidiaries

Schedule 5

Consolidated Statements of Earnings

(Preliminary and Unaudited)

Year Ended December 31,

2017

2016

2015

(In thousands, except per share amounts)

Electric Operating Revenues

$

1,445,003

$

1,362,951

$

1,439,082

Operating Expenses:

  Cost of energy

407,479

380,596

464,649

  Administrative and general

186,345

191,514

179,100

  Energy production costs

137,450

146,187

176,752

  Regulatory disallowances and restructuring costs

27,036

15,011

167,471

  Depreciation and amortization

231,942

209,110

185,919

  Transmission and distribution costs

71,576

66,227

69,157

  Taxes other than income taxes

76,690

76,321

71,684

  Total operating expenses

1,138,518

1,084,966

1,314,732

  Operating income

306,485

277,985

124,350

Other Income and Deductions:

  Interest income

15,916

22,293

6,498

  Gains on available-for-sale securities

27,161

19,517

16,060

  Other income

19,515

17,796

26,833

  Other (deductions)

(15,693)

(13,784)

(12,728)

  Net other income and deductions

46,899

45,822

36,663

Interest Charges

127,625

128,633

114,860

Earnings before Income Taxes

225,759

195,174

46,153

Income Taxes

130,340

63,278

15,075

Net Earnings

95,419

131,896

31,078

(Earnings) Attributable to Valencia Non-controlling Interest

(15,017)

(14,519)

(14,910)

Preferred Stock Dividend Requirements of Subsidiary

(528)

(528)

(528)

Net Earnings Attributable to PNMR

$

79,874

$

116,849

$

15,640

Net Earnings Attributable to PNMR per Common Share:

  Basic

$

1.00

$

1.47

$

0.20

  Diluted

$

1.00

$

1.46

$

0.20