TECO Energy Inc. (
Q3 2010 Earnings Call Transcript
October 28, 2010 9:00 am ET
Mark Kane – Director, IR
Sandy Callahan – CFO, VP of Finance & Accounting, and Chief Accounting Officer
John Ramil – President and CEO
Daniel Eggers – Credit Suisse
Scott Senchak – Decade Capital
Emily Christy – RBC Capital Markets
Previous Statements by TE
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Good morning. My name is Darleen and I will be your conference operator today. At this time, I would like to welcome everyone to the TECO Energy third quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remark, there will be a question-and-answer session. (Operator Instructions) Thank you. I would now like to turn the call over to the Director of Investor Relations, Mr. Mark Kane. Sir, you may begin your conference.
Thank you, Darleen. Good morning, everyone and thank you for joining us for TECO Energy's Third Quarter Results Conference Call and webcast this morning. Our earnings along with unaudited financial statements were released and filed with the SEC earlier this morning. This presentation is being webcast and our earnings release, financial statements and the slides for this presentation are available on our website at tecoenergy.com. The presentation will be available through the website approximately two hours after the end of the presentation and will be available for 30 days.
In the course of our remarks today, we will be making forward-looking statements regarding our financial outlook and plans for the remainder of 2010 and preliminary 2011 information. There are a number of factors that could cause our actual results to differ materially from those that we'll discuss as our outlook and expectations today. For a more complete discussion of these factors, we refer you to the discussion of the risk factors in our annual report on Form 10-K for the period ended December 31, 2009 and as updated in our subsequent filings with the SEC.
Also today, we'll be using non-GAAP measures in the course of the presentation. There are reconciliations to the nearest GAAP measures contained in the appendix in today's presentation. On the call today, Sandy Callahan, our Chief Financial Officer, will cover the third quarter results, discuss what we're seeing in the local and Florida economies, update drivers for the remainder of 2010 and provide some preliminary business drivers for 2011.
Also with us today to assist in answering your question is TECO Energy CEO, John Ramil. Now I'll turn it over to Sandy.
Thank you, Mark. Good morning, everyone and thank you for joining us on a busy day. I know there is a crush of utility earnings reports ahead of the EI. Mark covered the agenda for today, so I will move right into it.
In the third quarter, our GAAP net income was $51 million or $0.24 a share compared with $64.8 million or $0.30 a share in 2009. Net income this quarter included $23.1 million of net charges and gains, including a $24.9 million tax charge on undistributed earnings as a result of the sale of DECA II and a $1.8 million benefit from the recovery of fees from the previously sold McAdams Power Station.
In the third quarter of 2009, net income included $20.6 million of charges for restructuring and a write-off of project development costs at Tampa Electric. Excluding these charges and gains, non-GAAP results were $74.1 million or $0.35 a share this quarter, compared to $85.6 million or $0.40 in 2009. And remember that non-GAAP results this quarter were negatively impacted by $14.7 million or $0.07 a share as a result of Tampa Electric's recognition of the $24 million one-time reduction in base revenue under the Florida Public Service Commission approved regulatory stipulation.
Our year-to-date net income was $182.3 million or $0.85 per share compared to $160.4 million or $0.75 per share last year. In addition to the third quarter items, net income in 2010 included the early debt retirement charges and the final item from the restructuring that was recorded in the first quarter.
In 2009, net income included a gain on the sale of our interest in Navega and a loss on auction rate securities in addition to the third quarter item. So excluding these charges and gains, non-GAAP results were $226.6 million or $1.06 on a per share basis compared to $176.1 million or $0.82 in 2009.
I will briefly highlight the quarter's drivers that were covered in detail in our earnings release today. Tampa Electric reported third quarter results below last year's non-GAAP results, reflecting the effect of the one-time base revenue reduction of $24 million recorded in the quarter. Results reflect favorable summer weather and continued customer growth. Tampa Electric also had the effect of the higher base rates related to the step increase effective January 1 of this year and slightly higher non-fuel O&M expense.
We estimate that hot summer weather added $6 million to $8 million to base revenues in the third quarter and that the new base rates effective January 1 added $7 million to $9 million. Retail sales increased 3.6% in the quarter. This reflects hotter than normal summer weather with total degree days 6% above normal and 4% above 2009 third quarter.
We also experienced 0.8% customer growth quarter-over-quarter, which is stronger than we expected. Peoples Gas reported lower results for the quarter although customer numbers and therm sales both grew.