SEC Company Response from TXNM ENERGY INC (TXNM) (CIK 0001108426) (TXNM) — Oct 6, 2022
TXNM ENERGY INC (TXNM) (CIK 0001108426)
Date: Oct. 6, 2022 · CIK: 0001108426 · Accession: 0001108426-22-000059
AI Filing Summary & Sentiment
File numbers found in text: 001-32462
Referenced dates: June 27, 2022
Letter
Via EDGAR Division of Corporation Finance Office of Energy & Transportation United States Securities and Exchange Commission Re: PNM Resources, Inc. Form 10-K for the Fiscal Year Ended December 31, 2021 Filed March 1, 2022 File No. 001-32462
Dear Mr. Wojciechowski:
Please allow this letter to serve as PNM Resources, Inc.’s response to the comment of the Staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the “Commission”) contained in its letter, dated June 27, 2022 (the “Commission Comment Letter”) in connection with the Company’s Form 10-K for the fiscal year ended December 31, 2021, filed with the Commission on March 1, 2022. When used in this letter, references to the “Company,” “we,” “us,” and “our” refer to PNM Resources, Inc. We have used other acronyms in this letter in the same context as defined in the documents referred to in your comments.
The Company’s response to the Commission Comment Letter is set forth below. For ease of reference, the Staff’s comment is printed in italics and followed by the Company’s response.
Form 10-K for the Fiscal Year Ended December 31, 2021
Management’s Discussion and Analysis, page A-27 Segment Information, page A-39
1.We note that you present Utility Margin as a non-GAAP measure of the PNM, TNMP and Corporate segments in your tabulations of operating results on pages A-39, A-42 and A-44, and that you define the measure as electric operating revenues less “cost of energy,” which primarily consists of fuel and purchase power costs for PNM, and costs charges by third-party transmission providers for TNMP. We also see that you utilize these non-GAAP measures within MD&A in your analyses of operating results.
Based on your disclosures, it appears that cost of energy excludes amounts that would be attributable to a GAAP measure of cost of revenue, as would be reflected in a GAAP measure of gross margin. We believe that you should identify gross margin as the most directly comparable GAAP measure in providing the disclosures required by Item 10(e)(1)(i)(A) and Item 10(e)(1)(i)(B) of Regulation S-K.
Response:
The Company respectfully acknowledges the Staff’s comment. In consideration of the presentation of the non-GAAP measures of cost of energy as a component of utility margin used in the evaluation of operating performance of the PNM and TNMP segments, we intend to modify the current presentation to include a reconciliation of utility margin to the GAAP measure of gross margin, which we understand to be the most closely comparable GAAP measure. Gross margin and utility margin are not applicable to the Corporate and Other business segment, which we intend to clarify in the Segment Information Note on page B-35.
The Company has provided examples of these reconciliations and associated disclosures, which the Company plans to incorporate in future filings beginning with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022.
Management’s Discussion and Analysis, pages A-39 and A-42
PNM
Non-GAAP Financial Measures
PNM defines utility margin as electric operating revenues less cost of energy, which consists primarily of fuel and purchase power costs. PNM believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all fuel and purchase power costs are offset in revenues as those costs are passed through to customers under PNM’s FPPAC. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. PNM does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
Year Ended December 31,
2021 2020
(In millions)
Gross margin 466.1 441.9
Energy production costs 143.9 138.0
Transmission and distribution costs 49.8 49.5
Depreciation and amortization 170.4 165.3
Utility margin 830.2 794.7
[Continue with PNM Results of Operations disclosures]
TNMP
Non-GAAP Financial Measures
TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers. TNMP believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since all third-party transmission costs are passed on to consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. TNMP does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
Year Ended December 31,
2021 2020
(In millions)
Gross margin 182.9 164.9
Transmission and distribution costs 31.5 28.4
Depreciation and amortization 90.4 87.8
Utility margin 304.8 281.1
[Continue with TNMP Results of Operations disclosures]
Segment Information, page B-35
(2) Segment Information
[Begin with usual disclosures and tables in Segment Note]
Non-GAAP Financial Measures
The Company defines utility margin as electric operating revenues less cost of energy. Cost of energy consists primarily of fuel and purchase power costs for PNM and costs charged by third-party transmission providers for TNMP. The Company believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all such costs are offset in revenues as fuel and purchase power costs are passed through to customers under PNM’s FPPAC and third-party transmission costs are passed on to consumers through TNMP’s transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. PNM and TNMP do not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
PNM TNMP Corporate and Other PNMR Consolidated
(In thousands)
Gross margin 466,092 182,857 — 648,949
Energy production costs 143,931 — — 143,931
Transmission and distribution costs 49,846 31,489 — 81,335
Depreciation and amortization 170,365 90,440 — 260,805 1
Utility margin 830,234 304,786 — 1,135,020
PNM TNMP Corporate and Other PNMR Consolidated
(In thousands)
Gross margin 441,831 164,896 — 606,727
Energy production costs 137,977 — — 137,977
Transmission and distribution costs 49,534 28,409 — 77,943
Depreciation and amortization 165,325 87,799 — 253,124 1
Utility margin 794,667 281,104 — 1,075,771
PNM TNMP Corporate and Other PNMR Consolidated
(In thousands)
Gross margin 430,214 157,543 — 587,757
Energy production costs 142,545 — — 142,545
Transmission and distribution costs 42,970 26,892 — 69,862
Depreciation and amortization 160,368 84,259 — 244,627 1
Utility margin 776,097 268,694 — 1,044,791
1 Corporate and Other depreciation and amortization represents corporate level activities that are billed at cost and reflected as general and administrative expenses at PNM and TNMP and therefore are not a component of gross margin or utility margin. See Note 1.
We believe that this response provides you all the information you need. If you have further questions, you can contact me or Leonard Sanchez, Associate General Counsel, at (505) 241-4941.
Sincerely,
/s/ Henry E. Monroy
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Document
October 6, 2022
Via EDGAR
Mr. Mark Wojciechowski
Staff Accountant
Division of Corporation Finance
Office of Energy & Transportation
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: PNM Resources, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2021
Filed March 1, 2022
File No. 001-32462
Dear Mr. Wojciechowski:
Please allow this letter to serve as PNM Resources, Inc.’s response to the comment of the Staff (the “Staff”) of the Division of Corporation Finance of the U.S. Securities and Exchange Commission (the “Commission”) contained in its letter, dated June 27, 2022 (the “Commission Comment Letter”) in connection with the Company’s Form 10-K for the fiscal year ended December 31, 2021, filed with the Commission on March 1, 2022. When used in this letter, references to the “Company,” “we,” “us,” and “our” refer to PNM Resources, Inc. We have used other acronyms in this letter in the same context as defined in the documents referred to in your comments.
The Company’s response to the Commission Comment Letter is set forth below. For ease of reference, the Staff’s comment is printed in italics and followed by the Company’s response.
Form 10-K for the Fiscal Year Ended December 31, 2021
Management’s Discussion and Analysis, page A-27 Segment Information, page A-39
1.We note that you present Utility Margin as a non-GAAP measure of the PNM, TNMP and Corporate segments in your tabulations of operating results on pages A-39, A-42 and A-44, and that you define the measure as electric operating revenues less “cost of energy,” which primarily consists of fuel and purchase power costs for PNM, and costs charges by third-party transmission providers for TNMP. We also see that you utilize these non-GAAP measures within MD&A in your analyses of operating results.
Based on your disclosures, it appears that cost of energy excludes amounts that would be attributable to a GAAP measure of cost of revenue, as would be reflected in a GAAP measure of gross margin. We believe that you should identify gross margin as the most directly comparable GAAP measure in providing the disclosures required by Item 10(e)(1)(i)(A) and Item 10(e)(1)(i)(B) of Regulation S-K.
Response:
The Company respectfully acknowledges the Staff’s comment. In consideration of the presentation of the non-GAAP measures of cost of energy as a component of utility margin used in the evaluation of operating performance of the PNM and TNMP segments, we intend to modify the current presentation to include a reconciliation of utility margin to the GAAP measure of gross margin, which we understand to be the most closely comparable GAAP measure. Gross margin and utility margin are not applicable to the Corporate and Other business segment, which we intend to clarify in the Segment Information Note on page B-35.
The Company has provided examples of these reconciliations and associated disclosures, which the Company plans to incorporate in future filings beginning with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2022.
Management’s Discussion and Analysis, pages A-39 and A-42
PNM
Non-GAAP Financial Measures
PNM defines utility margin as electric operating revenues less cost of energy, which consists primarily of fuel and purchase power costs. PNM believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all fuel and purchase power costs are offset in revenues as those costs are passed through to customers under PNM’s FPPAC. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. PNM does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
Year Ended December 31,
2021 2020
(In millions)
Gross margin 466.1 441.9
Energy production costs 143.9 138.0
Transmission and distribution costs 49.8 49.5
Depreciation and amortization 170.4 165.3
Utility margin 830.2 794.7
[Continue with PNM Results of Operations disclosures]
TNMP
Non-GAAP Financial Measures
TNMP defines utility margin as electric operating revenues less cost of energy, which consists of costs charged by third-party transmission providers. TNMP believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since all third-party transmission costs are passed on to consumers through a transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. TNMP does not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
Year Ended December 31,
2021 2020
(In millions)
Gross margin 182.9 164.9
Transmission and distribution costs 31.5 28.4
Depreciation and amortization 90.4 87.8
Utility margin 304.8 281.1
[Continue with TNMP Results of Operations disclosures]
Segment Information, page B-35
(2) Segment Information
[Begin with usual disclosures and tables in Segment Note]
Non-GAAP Financial Measures
The Company defines utility margin as electric operating revenues less cost of energy. Cost of energy consists primarily of fuel and purchase power costs for PNM and costs charged by third-party transmission providers for TNMP. The Company believes that utility margin provides a more meaningful basis for evaluating operations than electric operating revenues since substantially all such costs are offset in revenues as fuel and purchase power costs are passed through to customers under PNM’s FPPAC and third-party transmission costs are passed on to consumers through TNMP’s transmission cost recovery factor. Utility margin is not a financial measure required to be presented and is considered a non-GAAP measure. PNM and TNMP do not intend for utility margin to represent any financial measure as defined by GAAP however, the calculation of utility margin, as presented, most closely compares to gross margin as defined by GAAP. Reconciliations between utility margin and gross margin are presented below.
PNM TNMP Corporate and Other PNMR Consolidated
(In thousands)
2021
Gross margin 466,092 182,857 — 648,949
Energy production costs 143,931 — — 143,931
Transmission and distribution costs 49,846 31,489 — 81,335
Depreciation and amortization 170,365 90,440 — 260,805 1
Utility margin 830,234 304,786 — 1,135,020
PNM TNMP Corporate and Other PNMR Consolidated
(In thousands)
2020
Gross margin 441,831 164,896 — 606,727
Energy production costs 137,977 — — 137,977
Transmission and distribution costs 49,534 28,409 — 77,943
Depreciation and amortization 165,325 87,799 — 253,124 1
Utility margin 794,667 281,104 — 1,075,771
PNM TNMP Corporate and Other PNMR Consolidated
(In thousands)
2019
Gross margin 430,214 157,543 — 587,757
Energy production costs 142,545 — — 142,545
Transmission and distribution costs 42,970 26,892 — 69,862
Depreciation and amortization 160,368 84,259 — 244,627 1
Utility margin 776,097 268,694 — 1,044,791
1 Corporate and Other depreciation and amortization represents corporate level activities that are billed at cost and reflected as general and administrative expenses at PNM and TNMP and therefore are not a component of gross margin or utility margin. See Note 1.
We believe that this response provides you all the information you need. If you have further questions, you can contact me or Leonard Sanchez, Associate General Counsel, at (505) 241-4941.
Sincerely,
/s/ Henry E. Monroy
Henry E. Monroy
Vice President, Corporate Controller – PNMR, TNMP
Vice President, Regulatory and Corporate Controller – PNM
cc: Lilly Dang, Staff Accountant
Lisa Eden, Chief Financial Officer, PNMR, PNM, TNMP