Integrys Energy Group's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Integrys Energy Group, Inc. (TEG)

Q1 2012 Earnings Call

May 3, 2012 9:00 a.m. ET

Executives

Steven Eschbach - Vice President, Investor Relations

Charles Schrock - Chairman, President and Chief Executive Officer

Joseph O'Leary - Senior Vice President and Chief Financial Officer

Daniel Verbanac - President, Integrys Energy Services, Inc.

Mark Radtke - Executive Vice President and Chief Strategy Officer

Analysts

Ashar Khan - Visium Asset Management

Ali Agha - SunTrust Robinson Humphrey

Steven Gambuzza - Millennium Partners

John Ali - Decade Capital

Maury May - Power Insights

Presentation

Operator

Welcome to the First Quarter 2012 Earnings Conference Call for Integrys Energy Group, Incorporated. All lines will remain in listen-only until the question-and-answer session. At that time, instructions will be given should you wish to participate. At the request of Integrys Energy Group, today’s call will be recorded for instant replay.

I would now like to introduce today’s host, Mr. Steve Eschbach, Vice President of Investor Relations at Integrys Energy Group. Sir, you may now begin.

Steven Eschbach

Thank you very much and good morning everyone. Welcome to the Integrys Energy Group’s first quarter 2012 earnings conference call. Delivering formal remarks with me today are Charlie Schrock, our Chairman, President and Chief Executive Officer; and Joe O’Leary, our Senior Vice President and Chief Financial Officer. Other executives including Mark Radtke, Executive Vice President and Chief Strategy Officer of Integrys Energy Group; and Dan Verbanac, President of Integrys Energy Services are available for the question-and-answer session at the conclusion of our formal remarks.

Larry Borgard, our President and Chief Operating Officer, Utilities, is unable to make to today’s call due to an American Gas Association event. As many of you know Larry is the 2012 Chairman of AGA. The slide supporting today’s presentation and an associated data package are located on our website at www.integrysgroup.com. Select Investors, select presentations and then today’s presentation. Before we begin, I will advice everyone that this call is being recorded and will be available for audio replay through August 7, 2012.

I need to direct you to slide three of our presentation and to point out that this presentation contains forward-looking statements within the definition of the United States Securities and Exchange Commission Safe Harbor rules, including projected results for Integrys Energy Group and its subsidiaries. Forward-looking statements contain factors that are beyond our ability to control and in many cases we cannot predict what factors would cause actual results to differ materially from those indicated by forward-looking statements. Except as maybe required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statement contained in this presentation whether as a result of new information, future events or otherwise.

This slide is a condensed summary on forward-looking statements and you are encouraged to read and understand the more specific language that is contained in our filings with the Securities and Exchange Commission, including our quarterly report on form 10-Q we filed last evening the forward-looking statements section of yesterday’s news release and slide 41 in the appendix.

Slide four today indicates that presentation includes non-GAAP financial information related to diluted earnings per share adjusted and adjusted earnings or loss. We believe that these are useful financial measures for providing investors with additional insight into our operating performance because they eliminate the effects of certain items that are not comparable from one period to the next. Please review the text of this slide for more information regarding these non-GAAP financial measures.

I will now turn this call over to Charlie Schrock. Charlie?

Charles Schrock

Thanks, Steve. Good morning, everyone, and thanks for joining us on the call today. I’ll begin by providing a high-level overview of our first quarter 2012 financial results and operational highlights. Joe O’Leary will then discuss our financial results in more detail and provide a summary of our financial outlook for 2012, and as usual we will conclude with a question-and-answer session.

Turning to slide five. In the first quarter of 2012 we posted diluted earnings per share adjusted on a consolidated basis of $1.55, down $0.02 per share versus the same period a year ago. Of course, the big question is the impact that we saw from weather, namely, the very warm winter that we experienced. The good news is that with the various decoupling mechanisms we have in place for certain of our regulated utilities, the weather impact is much less than it might have been. But there was still an $8 million after-tax impact for our regulated utilities or $0.10 per share as shown on the slide.

There is also a $2 million after-tax impact due to weather for Integrys Energy Services. Consequently, given the warmer winter weather in the first quarter of 2012 and depending on the Illinois retail electric aggregation results that are still unfolding for Integrys Energy Services, we expect that we may be towards the lower end of our 2012 guidance for diluted earnings per share adjusted of $3.35 to $3.55.

Slide six provides a brief operational update on our regulated utilities. While the warmer winter weather had an adverse impact on our quarterly earnings, it was beneficial for our Accelerated Main Replacement Program in Chicago. During the first quarter of 2012, we were able to install a little over 25 miles of new pipe. We estimate that we will be able to install close to 200 miles of new pipe during 2012 compared with the 154 miles we installed in 2011. As we mentioned previously, we expect recovery of this investment through traditional ratemaking as part of our 2012 rate order and the 2013 Peoples Gas rate case which will be filed in August.

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