TECO Energy's CEO Discusses Q2 2011 Results - Earnings Call Transcript

TECO Energy (TE)

Q2 2011 Earnings Call

August 04, 2011 9:00 am ET

Executives

Sandra Callahan - Chief Financial Officer, Chief Accounting Officer and Senior Vice President of Finance & Accounting

Mark Kane -

John Ramil - Chief Executive Officer, President, Director and Member of Finance Committee

Analysts

Dan Eggers - Crédit Suisse AG

Paul Ridzon - KeyBanc Capital Markets Inc.

Greg Gordon - ISI Group Inc.

Ali Agha - SunTrust Robinson Humphrey, Inc.

Maurice May - Ticonderoga Securities LLC

Chris Shelton -

James von Riesemann - UBS Investment Bank

Unknown Analyst -

Presentation

Operator

Good morning. My name is Wendy, and I'll be your conference operator today. At this time, I would like to welcome everyone to the TECO Energy's Second Quarter Results and 2011 Outlook Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Mark Kane, Director of Investor Relations. Sir, you may begin your conference.

Mark Kane

Thank you, Wendy. Good morning, everyone, and thank you for joining us for TECO Energy Second Quarter Results Conference Call and Webcast. We know we're competing against several other companies at this time slot, so thank you for joining us.

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 slides for this presentation are available on our website at tecoenergy.com. Presentation will be available for replay through the website approximately 2 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 2010 and beyond. There are a number of factors that could cause our actual results to differ materially from those that we'll discuss as our results 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, 2010. Also today, we'll be using non-GAAP measures in the course of the presentation. There are reconciliations to the nearest GAAP measure contained in the appendix today -- to today's presentation.

On our call today, Sandy Callahan, our Chief Financial Officer, will cover second quarter results and update our outlook for the remainder of the year. Also with us today, to participate in answering your questions is John Ramil, our President and Chief Executive Officer. Now I'll turn it over to Sandy.

Sandra Callahan

Thank you, Mark. Good morning, everyone, and thank you for joining us. I know it's a crowded day for utility earnings calls, and so I will keep my formal remarks brief and focused, and we'll allow plenty of time for Q&A. I'll cover second quarter results, provide an update on the economy, and our service area, and then comment on our outlook for the remainder of this year.

In the first quarter, GAAP net income was $77.5 million or $0.36 a share, compared to $75.5 million or $0.35 in 2010. The non-GAAP comparison for 2010, is $79.6 million or $0.37, which excludes a $4.1 million charge for debt retirement premiums. On a year-to-date basis, GAAP net income in 2011 was $129.2 million or $0.60 per share, compared to $131.3 million or $0.61 in 2010. And the 2010 non-GAAP results for the 6 months, were $152.5 million or $0.71 a share, excluding charges of $21.1 million, which again, were primarily for debt retirement premiums.

You'll recall that in the 2010 year-to-date period, Tampa Electric had the benefit of very favorable weather, but didn't reach the regulatory agreement that resulted in a $24 million pretax refund until the third quarter. We covered the result's drivers for the quarter and year-to-date periods extensively in our earnings release, so I won't go through all the details again. I do want to point out though, that we were pleased to see our seventh consecutive quarter of customer growth at the Florida utilities. And the customer growth we saw at Peoples Gas was particularly encouraging, as we typically see a drop-off in growth there in the second quarter as when our residents depart.

For the unregulated companies, TECO Coal sales volumes were below last year at 2.1 million tons and the average selling price for the quarter rose to more than $89 a ton. As we expected, as the new 2011 contract prices became fully effective. The all-in cost of production of this quarter was above guidance at $79 a ton. Production costs reflects the same factors that we've been discussing, competition for contract miners, the productivity impact of increased MSHA activities, the selling price effect on royalty and severance fees and the cost of moving coal, an overburden further due to surface mining permit delays.

In addition, though, in the second quarter, we saw the higher oil prices affecting cost components that we can't hedge, such as lubricants, explosive, tires and conveyor belts. We also lost production at several mines due to violent spring storms causing power outages at some deep mine and flooding at some surface mines. And production costs included the cost associated with some expanded reserve exploration activity on properties that we control as we seek to grow the proportion of specialty coals in our reserve base.

And to complete the summary of second quarter drivers, the impact of the sale of DECA II last year on TECO Guatemala result, was largely offset by the lower interest expense at TECO Energy parent, because of the debt that we retired in December with those sale proceeds.

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