EXHIBIT 99.1
PNM RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial Statements are derived from and should be read in conjunction with the historical Consolidated Financial Statements and related notes of PNM Resources, Inc. ("PNMR").
On April 18, 2006, PNMR, through its wholly owned subsidiary Altura Energy, LLC, purchased the Twin Oaks business (collectively, “Altura”), which included the 305-megawatt coal-fired Twin Oaks power plant located 150 miles south of Dallas, Texas. The results of Twin Oaks operations have been included in the Consolidated Financial Statements of PNMR from that date. PNMR borrowed $480 million to finance this purchase under a bridge loan arrangement. Through December 31, 2006, PNMR repaid $230.5 million of the bridge loan and the remainder was repaid on April 17, 2007, at which time PNMR borrowed $250.5 million under its revolving credit facility.
In January 2007, PNMR and ECJV Holdings, LLC (“ECJV”), a wholly owned subsidiary of Cascade Investment, L.L.C., created a joint venture called EnergyCo, LLC (“EnergyCo”) to serve expanding U.S. energy markets throughout the Southwest, Texas and the West. PNMR and ECJV each have a 50% ownership interest in EnergyCo, a limited liability company.
On June 1, 2007, PNMR contributed its ownership of Altura to EnergyCo at fair value of $553.8 million, ECJV made a cash contribution to EnergyCo equal to 50% of the fair value amount, and EnergyCo distributed that cash to PNMR. PNMR accounted for this transaction by (1) removing the assets and liabilities transferred to EnergyCo from its consolidated financial statements; (2) recording an additional investment in EnergyCo for an amount equal to 50% of the net carrying value of the Altura assets and liabilities transferred, reflecting that 50% of the items transferred are in effect still owned by PNMR; and (3) reflecting in results of operations the difference between the cash received and 50% of the net carrying value of the items transferred that in effect were sold to ECJV.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet presents the historical financial position of PNMR as if PNMR's transfer of Altura to EnergyCo was consummated on March 31, 2007. It also gives effect to the repayment of debt with the cash received from EnergyCo and the removal of unamortized costs associated with the issuance of the bridge loan.
The Unaudited Pro Forma Condensed Consolidated Statements of Earnings for the three months ended March 31, 2007 and the year ended December 31, 2006, reflect:
| · | the transfer of Altura to EnergyCo and the receipt of cash from EnergyCo as if that transaction had occurred on April 18, 2006; |
| · | the reduction in interest expense due to the pro forma use of the cash received from EnergyCo to reduce the amount outstanding on the bridge loan and other short term debt. |
The Unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared based upon currently available information and assumptions that are deemed appropriate by PNMR's management. The pro forma information is for informational purposes only and is not intended to be indicative of the actual consolidated financial position or consolidated results of operations that would have been reported had the transactions occurred on the dates indicated, nor does the information represent a forecast of the consolidated financial position at any future date or the financial results of PNMR for any future period.
1
PNM RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2007
(Unaudited)
Pro Forma Adjustments | |||||||||||||||||||
PNMR | Contribution | ||||||||||||||||||
Historical | of Altura | Other | Pro Forma | ||||||||||||||||
| (In thousands) | |||||||||||||||||||
ASSETS | |||||||||||||||||||
Utility Plant: | |||||||||||||||||||
| Electric plant in service | $ | 4,278,802 | $ | (594,836 | ) | a | $ | - | $ | 3,683,966 | |||||||||
| Gas plant in service | 732,152 | 732,152 | |||||||||||||||||
| Common plant in service and plant held for future use | 159,925 | 159,925 | |||||||||||||||||
| 5,170,879 | (594,836 | ) | - | 4,576,043 | |||||||||||||||
| Less accumulated depreciation and amortization | 1,668,056 | (17,663 | ) | a | 1,650,393 | ||||||||||||||
| 3,502,823 | (577,173 | ) | - | 2,925,650 | |||||||||||||||
| Construction work in progress | 262,850 | (1,206 | ) | a | 261,644 | ||||||||||||||
| Nuclear fuel, net of accumulated amortization | 32,610 | 32,610 | |||||||||||||||||
| Net utility plant | 3,798,283 | (578,379 | ) | - | 3,219,904 | ||||||||||||||
Other Property and Investments: | |||||||||||||||||||
| Investment in PVNGS lessor notes | 245,356 | 245,356 | |||||||||||||||||
| Investment in EnergyCo | 1,838 | 275,325 | c | 277,163 | |||||||||||||||
| Other investments | 177,759 | 177,759 | |||||||||||||||||
| Non-utility property, net of accumulated depreciation | 7,307 | 7,307 | |||||||||||||||||
| Total other property and investments | 432,260 | 275,325 | - | 707,585 | |||||||||||||||
Current Assets: | |||||||||||||||||||
| Cash and cash equivalents | 44,986 | 276,041 | d | (276,041 | ) | e | 44,986 | ||||||||||||
| Special deposits | 818 | 818 | |||||||||||||||||
| Accounts receivable, net of allowance for uncollectible accounts | 199,719 | (5,329 | ) | a | 194,390 | ||||||||||||||
| Unbilled revenues | 82,482 | 82,482 | |||||||||||||||||
| Other receivables | 73,396 | 73,396 | |||||||||||||||||
| Inventories | 69,712 | (9,819 | ) | a | 59,893 | ||||||||||||||
| Regulatory assets | 2,833 | 2,833 | |||||||||||||||||
| Derivative instruments | 54,290 | (5,493 | ) | a | 48,797 | ||||||||||||||
| Income taxes receivable | 61,526 | 61,526 | |||||||||||||||||
| Other current assets | 62,820 | (211 | ) | a | (450 | ) | f | 62,159 | |||||||||||
| Total current assets | 652,582 | 255,189 | (276,491 | ) | 631,280 | ||||||||||||||
Deferred Charges: | |||||||||||||||||||
| Regulatory assets | 547,084 | 547,084 | |||||||||||||||||
| Pension asset | 9,508 | 9,508 | |||||||||||||||||
| Goodwill | 494,513 | 494,513 | |||||||||||||||||
| Other intangible assets, net of accumulated amortization | 101,874 | (25,000 | ) | a | 76,874 | ||||||||||||||
| Derivative instruments | 22,897 | 22,897 | |||||||||||||||||
| Other deferred charges | 73,401 | (25,019 | ) | a | 48,382 | ||||||||||||||
| Total deferred charges | 1,249,277 | (50,019 | ) | - | 1,199,258 | ||||||||||||||
| $ | 6,132,402 | $ | (97,884 | ) | $ | (276,491 | ) | $ | 5,758,027 | ||||||||||
The accompanying notes are an integral part of these pro forma financial statements.
2
PNM RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2007
(Unaudited)
Pro Forma Adjustments | ||||||||||||||||||||
| PNMR | Contribution | |||||||||||||||||||
Historical | of Altura | Other | Pro Forma | |||||||||||||||||
(In thousands) | ||||||||||||||||||||
CAPITALIZATION AND LIABILITIES | ||||||||||||||||||||
Capitalization: | ||||||||||||||||||||
| Common stockholders' equity: | ||||||||||||||||||||
| Common stock outstanding | $ | 1,039,908 | $ | - | $ | - | 1,039,908 | |||||||||||||
| Accumulated other comprehensive income, net of income tax | 13,855 | (100 | ) | b | 13,755 | |||||||||||||||
| Retained earnings | 637,907 | 537 | b | (272 | ) | f | 638,172 | |||||||||||||
| Total common stockholders' equity | 1,691,670 | 437 | (272 | ) | 1,691,835 | |||||||||||||||
| Cumulative preferred stock of subsidiary without mandatory | ||||||||||||||||||||
| redemption requirements | 11,529 | 11,529 | ||||||||||||||||||
| Long-term debt | 1,766,994 | 1,766,994 | ||||||||||||||||||
| Total capitalization | 3,470,193 | 437 | (272 | ) | 3,470,358 | |||||||||||||||
Current Liabilities: | ||||||||||||||||||||
| Short-term debt | 739,345 | (275,708 | ) | e | 463,637 | |||||||||||||||
| Accounts payable | 190,070 | (4,397 | ) | a | 185,673 | |||||||||||||||
| Accrued interest and taxes | 55,269 | (2,863 | ) | a | (178 | ) | f | 51,895 | ||||||||||||
| (333 | ) | e | ||||||||||||||||||
| Regulatory liabilities | 16,131 | 16,131 | ||||||||||||||||||
| Derivative instruments | 49,698 | 49,698 | ||||||||||||||||||
| Other current liabilities | 222,209 | (64,832 | ) | a | 157,377 | |||||||||||||||
| Total current liabilities | 1,272,722 | (72,092 | ) | (276,219 | ) | 924,411 | ||||||||||||||
Long-Term Liabilities: | ||||||||||||||||||||
| Accumulated deferred income taxes | 582,501 | 279 | b | 582,780 | ||||||||||||||||
| Accumulated deferred investment tax credits | 29,383 | 29,383 | ||||||||||||||||||
| Regulatory liabilities | 400,101 | 400,101 | ||||||||||||||||||
| Asset retirement obligations | 62,602 | (88 | ) | a | 62,514 | |||||||||||||||
| Accrued pension liability and postretirement benefit cost | 132,461 | 132,461 | ||||||||||||||||||
| Derivative instruments | 21,075 | (5,162 | ) | a | 15,913 | |||||||||||||||
| Other deferred credits | 161,364 | (21,258 | ) | a | 140,106 | |||||||||||||||
| Total long-term liabilties | 1,389,487 | (26,229 | ) | - | 1,363,258 | |||||||||||||||
Commitments and Contingencies | ||||||||||||||||||||
| $ | 6,132,402 | $ | (97,884 | ) | $ | (276,491 | ) | $ | 5,758,027 | |||||||||||
The accompanying notes are an integral part of these pro forma financial statements.
3
PNM RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2007
(Unaudited)
Pro Forma Adjustments | |||||||||||||||||||||
PNMR | Altura | ||||||||||||||||||||
Historical | Historical | Other | Pro Forma | ||||||||||||||||||
| (In thousands, except per share information) | |||||||||||||||||||||
Operating Revenues: | |||||||||||||||||||||
| Electric | $ | 436,807 | $ | (36,803 | ) | a | $ | 46 | g | $ | 400,050 | ||||||||||
| Gas | 216,484 | 216,484 | |||||||||||||||||||
| Other | 210 | 210 | |||||||||||||||||||
| Total operating revenues | 653,501 | (36,803 | ) | 46 | 616,744 | ||||||||||||||||
Operating Expenses: | |||||||||||||||||||||
| Cost of energy sold | 378,520 | (12,166 | ) | a | 46 | g | 366,400 | ||||||||||||||
| Administrative and general | 71,206 | (2,319 | ) | a | 68,887 | ||||||||||||||||
| Energy production costs | 47,500 | (6,989 | ) | a | 40,511 | ||||||||||||||||
| Depreciation and amortization | 40,442 | (4,609 | ) | a | 35,833 | ||||||||||||||||
| Transmission and distribution costs | 22,567 | 22,567 | |||||||||||||||||||
| Taxes other than income taxes | 18,620 | (2,951 | ) | a | 15,669 | ||||||||||||||||
| Income taxes | 13,969 | (3,011 | ) | a | 2,257 | i | 13,215 | ||||||||||||||
| Total operating expenses | 592,824 | (32,045 | ) | 2,303 | 563,082 | ||||||||||||||||
| Operating income | 60,677 | (4,758 | ) | (2,257 | ) | 53,662 | |||||||||||||||
Other Income and Deductions: | |||||||||||||||||||||
| Interest income | 10,788 | (117 | ) | a | 10,671 | ||||||||||||||||
| Gains on investment securities | 70 | 70 | |||||||||||||||||||
| Other income | 2,012 | 2,012 | |||||||||||||||||||
| Equity in net earnings (loss) of EnergyCo | (662 | ) | 3,861 | h | 3,199 | ||||||||||||||||
| Other deductions | (987 | ) | (987 | ) | |||||||||||||||||
| Other income taxes | (3,950 | ) | 46 | a | (1,529 | ) | h | (5,433 | ) | ||||||||||||
| Net other income and deductions | 7,271 | (71 | ) | 2,332 | 9,532 | ||||||||||||||||
| Earnings before interest charges | 67,948 | (4,829 | ) | 75 | 63,194 | ||||||||||||||||
Interest Charges : | |||||||||||||||||||||
| Interest on long-term debt | 24,009 | 24,009 | |||||||||||||||||||
| Other interest charges | 13,838 | (164 | ) | a | (5,702 | ) | i | 7,972 | |||||||||||||
| Total interest charges | 37,847 | (164 | ) | (5,702 | ) | 31,981 | |||||||||||||||
Preferred Stock Dividend Requirements of Subsidiary | 132 | 132 | |||||||||||||||||||
Net Earnings | $ | 29,969 | $ | (4,665 | ) | $ | 5,777 | $ | 31,081 | ||||||||||||
Net Earnings per Common Share: | |||||||||||||||||||||
| Basic | $ | 0.39 | $ | 0.41 | |||||||||||||||||
| Diluted | $ | 0.38 | $ | 0.40 | |||||||||||||||||
Dividends Declared per Common Share | $ | 0.23 | $ | 0.23 | |||||||||||||||||
Number of shares used in calculating earnings per share: | |||||||||||||||||||||
| Basic | 76,659 | 76,659 | |||||||||||||||||||
| Diluted | 78,099 | 78,099 | |||||||||||||||||||
The accompanying notes are an integral part of these pro forma financial statements.
4
PNM RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2006
(Unaudited)
Pro Forma Adjustments | |||||||||||||||||||||
PNMR | Altura | ||||||||||||||||||||
Historical | Historical | Other | Pro Forma | ||||||||||||||||||
(In thousands, except per share information) | |||||||||||||||||||||
Operating Revenues: | |||||||||||||||||||||
| Electric | $ | 1,962,073 | $ | (125,131 | ) | a | $ | 140 | g | 1,837,082 | |||||||||||
| Gas | 508,410 | 508,410 | |||||||||||||||||||
| Other | 1,186 | 1,186 | |||||||||||||||||||
| Total operating revenues | 2,471,669 | (125,131 | ) | 140 | 2,346,678 | ||||||||||||||||
Operating Expenses: | |||||||||||||||||||||
| Cost of energy sold | 1,445,790 | (38,860 | ) | a | 140 | g | 1,407,070 | ||||||||||||||
| Administrative and general | 276,023 | (3,114 | ) | a | 272,909 | ||||||||||||||||
| Energy production costs | 164,169 | (6,917 | ) | a | 157,252 | ||||||||||||||||
| Depreciation and amortization | 152,271 | (13,060 | ) | a | 139,211 | ||||||||||||||||
| Transmission and distribution costs | 81,809 | - | 81,809 | ||||||||||||||||||
| Taxes, other than income taxes | 71,902 | (2,951 | ) | a | 68,951 | ||||||||||||||||
| Income taxes | 46,198 | (23,707 | ) | a | 4,735 | i | 27,226 | ||||||||||||||
| Total operating expenses | 2,238,162 | (88,609 | ) | 4,875 | 2,154,428 | ||||||||||||||||
| Operating income | 233,507 | (36,522 | ) | (4,735 | ) | 192,250 | |||||||||||||||
Other Income and Deductions: | |||||||||||||||||||||
| Interest income | 39,682 | (250 | ) | a | 39,432 | ||||||||||||||||
| Gains on investment securities | 5,979 | 5,979 | |||||||||||||||||||
| Other income | 6,636 | 6,636 | |||||||||||||||||||
| Equity in net earnings of EnergyCo | 30,074 | h | 30,074 | ||||||||||||||||||
| Carrying charges on regulatory assets | 6,993 | 6,993 | |||||||||||||||||||
| Other deductions | (6,861 | ) | (14 | ) | a | (6,875 | ) | ||||||||||||||
| Other income taxes | (17,772 | ) | 105 | a | (11,906 | ) | h | (29,573 | ) | ||||||||||||
| Net other income and deductions | 34,657 | (159 | ) | 18,168 | 52,666 | ||||||||||||||||
| Earnings before interest charges | 268,164 | (36,681 | ) | 13,433 | 244,916 | ||||||||||||||||
Interest Charges : | |||||||||||||||||||||
| Interest on long-term debt | 95,301 | 95,301 | |||||||||||||||||||
| Other interest charges | 50,221 | (345 | ) | a | (11,960 | ) | i | 37,916 | |||||||||||||
| Total interest charges | 145,522 | (345 | ) | (11,960 | ) | 133,217 | |||||||||||||||
Preferred Stock Dividend Requirements of Subsidiary | 528 | 528 | |||||||||||||||||||
Net Earnings | $ | 122,114 | $ | (36,336 | ) | $ | 25,393 | $ | 111,171 | ||||||||||||
Net Earnings per Common Share: | |||||||||||||||||||||
Basic | $ | 1.75 | $ | 1.59 | |||||||||||||||||
Diluted | $ | 1.73 | $ | 1.57 | |||||||||||||||||
Dividends Declared per Common Share | $ | 0.88 | $ | 0.88 | |||||||||||||||||
Number of shares used in calculating earnings per share: | |||||||||||||||||||||
| Basic | 69,829 | 69,829 | |||||||||||||||||||
| Diluted | 70,636 | 70,636 | |||||||||||||||||||
The accompanying notes are an integral part of these pro forma financial statements.
5
PNM RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
(1) | PNMR Basis of Presentation |
Historical financial information for PNM Resources, Inc. ("PNMR”) as of and for the three months ended March 31, 2007, and the year ended December 31, 2006, has been derived from PNMR's historical financial statements.
(2) | Twin Oaks Acquisition and Basis of Presentation |
On April 18, 2006, PNMR, through its wholly owned subsidiary Altura Energy, LLC, purchased the Twin Oaks business, which included the 305-megawatt coal-fired Twin Oaks power plant located 150 miles south of Dallas, Texas (collectively, “Altura”). The results of Twin Oaks operations have been included in PNMR’s Consolidated Financial Statements and in the PNMR historical information included in the pro forma financial statements from that date. PNMR borrowed $480 million to finance this purchase under a bridge loan arrangement. Through December 31, 2006, PNMR repaid $230.5 million of the bridge loan and the remainder was repaid on April 17, 2007, at which time PNMR borrowed $250.5 million under its revolving credit facility. Interest expense, including amortization of debt costs, is recorded in the PNMR historical amounts, but not in the Altura historical amounts.
Historical financial information for Altura as of and for the three months ended March 31, 2007, and the year ended December 31, 2006, has been derived from Altura’s historical financial information from the date of acquisition included within the PNMR Consolidated Financial Statements.
(3) | Transfer of Altura to EnergyCo |
In January 2007, PNMR and ECJV Holdings, LLC (“ECJV”), a wholly owned subsidiary of Cascade Investment, L.L.C., created a joint venture called EnergyCo, LLC (“EnergyCo”) to serve expanding U.S. energy markets throughout the Southwest, Texas and the West. PNMR and ECJV each have a 50% ownership interest in EnergyCo, a limited liability company. PNMR accounts for its investment in EnergyCo using the equity method of accounting. PNMR records as income its percentage share of earnings or loss and distributions of EnergyCo and carries its investment at cost, adjusted for its share of undistributed earnings or losses.
On June 1, 2007, PNMR contributed its ownership of Altura to EnergyCo at fair value of $553.8 million, ECJV made a cash contribution to EnergyCo equal to 50% of the fair value amount, and EnergyCo distributed that cash to PNMR. PNMR accounted for this transaction by (1) removing the assets and liabilities transferred to EnergyCo from its consolidated financial statements; (2) recording an additional investment in EnergyCo for an amount equal to 50% of the net carrying value of the Altura assets and liabilities transferred, reflecting that 50% of the items transferred are in effect still owned by PNMR; and (3) reflecting in results of operations the difference between the cash received and 50% of the net carrying value of the items transferred that in effect were sold to ECJV.
(4) | Pro Forma Adjustments |
Following are brief descriptions of the pro forma adjustments to the Condensed Consolidated Balance Sheet and Condensed Consolidated Statements of Earnings to reflect PNMR’s transfer of Altura to EnergyCo, the receipt of cash from EnergyCo, and the use of the cash received to reduce debt of PNMR. The Pro Forma Condensed Consolidated Balance Sheet reflects these as if they had occurred on March 31, 2007 and the Pro Forma Condensed Consolidated Statements of Earnings reflect them as if they had occurred at April 18, 2006, the date PNMR purchased Twin Oaks and the date from which it is included in the PNMR historical amounts.
| a. | Removal of Altura historical amounts (applicable to assets, liabilities, and operations transferred to EnergyCo) that are included in PNMR historical amounts. |
6
PNM RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
| b. | Difference between cash received and 50% of the net assets transferred and related deferred income taxes. |
| c. | Increase in PNMR’s investment in EnergyCo equal to 50% of net assets transferred. |
| d. | Cash received by PNMR from EnergyCo amounting to $276.9 million. For pro forma purposes such amount was reduced by approximately $0.9 million related to an adjustment for changes in working capital from the date used in the determination of the fair value of Altura and March 31, 2007. |
| e. | Use of cash to repay PNMR’s short-term debt, including accrued interest. |
| f. | Removal of remaining unamortized debt costs related to bridge loan and related income taxes. |
| g. | Reversal of elimination, reflected in the PNMR historical amounts, of intercompany sales between PNMR and Altura. |
| h. | Reflects 50% of Altura’s pre tax earnings as equity in earnings of EnergyCo, and related income taxes. |
| i. | Reflects the pro forma reduction in interest expense, including amortization of debt costs, related to the bridge loan and other short-term debt upon the application of the cash received from EnergyCo to reduce debt. |
7