UNS Energy Reports Second Quarter 2012 Earnings, Maintains 2012 Earnings Guidance Range

UNS Energy Corporation (NYSE: UNS) today reported second quarter 2012 net income of $26.3 million, or $0.64 per share of common stock on a fully-diluted basis, compared with net income of $28.6 million, or $0.71 per diluted share in the same period last year. TEP reported net income of $21.9 million for the second quarter of 2012, 13 percent below net income of $25.2 million in the second quarter of 2011.

“Through the first half of the year, our financial results are tracking closely with our forecast,” said Paul Bonavia, UNS Energy’s Chairman and Chief Executive Officer. “We knew that 2012 would be a challenging year as TEP’s current electric rates are based on costs and infrastructure investments from 2006. Despite this challenge, our operating performance is strong. We remain committed to containing costs while serving our customers safely and reliably.”

TEP is in the final year of a base rate freeze that was approved in November 2008 by the Arizona Corporation Commission (ACC) as part of a settlement agreement. The settlement precluded TEP from filing a rate case application for new rates prior to June 30, 2012. On July 2, 2012, TEP submitted a rate application with the ACC requesting an increase in non-fuel base rates of $127.8 million or 15 percent over adjusted test year 2011 revenues. TEP requested that new rates be in place no later than August 1, 2013. This is consistent with the agreement among the parties to the 2008 settlement to use best efforts to implement new rates no later than 13 months from the date TEP files a rate application.

“The rate proposal filed by TEP earlier this month is designed to align customer rates with our current cost structure. Our application also contains proposals to reform rates in order to balance the ACC’s renewable energy and energy efficiency requirements with TEP’s opportunity to earn a fair return on investment,” Bonavia said.

Tucson Electric Power

Retail kWh Sales and Revenues

TEP’s retail kWh sales increased by 4.6 percent in the second quarter, due in part to a 45.1 percent increase in cooling degree days compared with the second quarter of 2011. The increase in retail sales volumes led to a $7.3 million, or 5.3 percent, increase in TEP’s retail margin revenues compared with the second quarter of 2011.

Long-Term Wholesale Revenues

As expected, TEP did not record any margin in the second quarter of 2012 on long-term wholesale kWh sales, compared with $4.0 million in the second quarter of 2011. The decrease reflects a pricing change that occurred in June 2011 related to TEP’s largest wholesale sales contract.

Other Operating Expenses

TEP’s base O&M expense was $3.0 million higher than the second quarter of 2011 due in part to planned generating plant maintenance outages. Base O&M excludes costs directly offset by customer surcharges and third-party reimbursements. In the second quarter of 2012, depreciation and amortization expense increased by $3.4 million as a result of additional plant-in-service compared with the same period last year.

Year-to-Date Results

In the first six months of 2012, TEP reported net income of $20.4 million compared with net income of $29.9 million in the same period last year. That decrease was due to the anticipated decline in long-term wholesale margin revenues and higher depreciation expense. Those factors were partially offset by an increase in retail margin revenues.

UNS Gas

UNS Gas reported net income of less than $0.1 million in the second quarter of 2012 compared with net income of $0.4 million in the second quarter of 2011.

UNS Electric

UNS Electric reported net income of $4.5 million in the second quarter of 2012 compared with $3.9 million in the second quarter of 2011. The increase resulted from higher kWh sales to residential and commercial customers. Cooling degree days in UNS Electric’s service territory were 29.8% higher than the second quarter of 2011.

Seasonality of Earnings

The net income and results of operations of TEP as well as of UNS Gas and UNS Electric – operating subsidiaries of UniSource Energy Services (UES) – are seasonal in nature. TEP and UNS Electric typically record the majority of their net income during the second and third quarters when hot weather contributes to higher energy consumption. TEP’s retail rates, which include higher charges for higher levels of energy use, also shift a larger share of the company’s earnings into those periods.

Energy demand from UNS Gas customers typically peaks during the winter. Accordingly, UNS Gas typically records the majority of its net income during the first and fourth quarters.
 
Net Income and Earnings Per Share Summary
 
  2nd Quarter   YTD June 30,
Net Income   2012   2011   2012   2011
-Millions- -Millions-
Tucson Electric Power $ 21.9   $ 25.2 $ 20.4   $ 29.9
UNS Gas - 0.4 5.4 6.5
UNS Electric 4.5 3.9 7.3 7.5
Other (1)     (0.1 )     (0.9 )     (0.4 )     (1.8 )
Net Income   $ 26.3     $ 28.6     $ 32.7     $ 42.1  
 
Avg. Basic Shares Outstanding (Millions) 40.5 37.0 39.3 36.9
Avg. Diluted Shares Outstanding (Millions) 41.6 41.6 41.6 41.5
 
2nd Quarter YTD June 30,
Earnings Per UNS Energy Share   2012   2011   2012   2011
Tucson Electric Power $ 0.54 $ 0.68 $ 0.52 $ 0.81
UNS Gas - 0.01 0.14 0.18
UNS Electric 0.11 0.11 0.18 0.20
Other (1)     -       (0.03 )     (0.01 )     (0.05 )
Net Income Per Basic Share   $ 0.65     $ 0.77     $ 0.83     $ 1.14  
Net Income Per Diluted Share   $ 0.64     $ 0.71     $ 0.81    

$

1.07
 
 

(1) Includes UNS Energy on a stand-alone basis and results from Millennium Energy Holdings, Inc.  and UniSource Energy Development, wholly-owned subsidiaries of UNS Energy.

UNS Energy believes the presentation of TEP, UNS Gas and UNS Electric net income or loss on a per basic UNS Energy share basis (which are non-GAAP financial measures) provides useful information to investors by disclosing the results of operations of its business segments on a basis consistent with UNS Energy's reported earnings or losses.

Conference Call and Webcast

The company will host a conference call on Monday, July 30 at 11:00 a.m. ET to discuss the financial results and outlook. To participate in the call, please dial in 5 to 10 minutes prior to the start time.

Dial-in number: (877) 582-0446

Reference code: 13237677

The conference call also can be heard live online at uns.com. The webcast will be available for replay for seven days.

Replay number: (855) 859-2056

Reference code: 13237677

In conjunction with this earnings announcement, UNS Energy has provided detailed information on its performance during the second quarter of 2012. These materials have been filed with the Securities and Exchange Commission and are also available at uns.com.

UNS Energy is a Tucson, Arizona-based company with consolidated assets of approximately $4 billion. UNS Energy's primary subsidiaries include Tucson Electric Power, which serves more than 404,000 customers in southern Arizona, and UniSource Energy Services, provider of natural gas and electric service for about 240,000 customers in northern and southern Arizona. Visit uns.com for more information about UNS Energy and its subsidiaries.

This release contains forward-looking information that involves risks and uncertainties, including factors that could affect UNS Energy's ability to reach the 2012 earnings guidance. These risks and uncertainties include, but are not limited to: state and federal regulatory and legislative decisions and actions; regional economic and market conditions, which could affect customer growth and energy usage; weather variations affecting energy usage; the cost of debt and equity capital and access to capital markets; the performance of the stock market and changing interest rate environment, which affect the value of the company’s pension and other postretirement benefit plan assets and the related contribution requirements and expense; unexpected increases in O&M expense; resolution of pending litigation matters; changes in accounting standards; changes in critical accounting estimates; changes to long-term contracts; the cost of fuel and power supplies; performance of TEP's generating plants; and other factors listed in UNS Energy's Form 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from outcomes currently expected by UNS Energy.
 

UNS ENERGY 2012 RESULTS
 
Condensed Consolidated Statements of Income   Three Months Ended  
(in Thousands of Dollars, Except Per Share Amounts) June 30, Increase / (Decrease)
(UNAUDITED)   2012   2011   Amount   Percent
   
Operating Revenues
Electric Retail Sales $ 292,071 $ 275,616 $ 16,455 6.0
Electric Wholesale Sales 28,684 38,744 (10,060 ) (26.0 )
Gas Revenue 20,006 25,020 (5,014 ) (20.0 )
Other Revenues     26,410       30,293       (3,883 )   (12.8 )
Total Operating Revenues     367,171       369,673       (2,502 )   (0.7 )
 
Operating Expenses
Fuel 82,325 81,949 376 0.5
Purchased Energy 51,376 66,336 (14,960 ) (22.6 )
Transmission 3,412 3,464 (52 ) (1.5 )
Increase (Decrease) to Reflect PPFAC/PGA Recovery Treatment     14,215       3,790       10,425     N/M  
Total Fuel and Purchased Energy 151,328 155,539 (4,211 ) (2.7 )
Other Operations and Maintenance 90,926 90,052 874 1.0
Depreciation 35,190 33,310 1,880 5.6
Amortization 9,112 7,253 1,859 25.6
Taxes Other Than Income Taxes     12,556       12,229       327     2.7  
Total Operating Expenses     299,112       298,383       729     0.2  
Operating Income     68,059       71,290       (3,231 )   (4.5 )
 
Other Income (Deductions)
Interest Income 383 826 (443 ) (53.6 )
Other Income 1,333 2,646 (1,313 ) (49.6 )
Other Expense     (828 )     (813 )     (15 )   (1.8 )
Total Other Income (Deductions)     888       2,659       (1,771 )   (66.6 )
 
Interest Expense
Long-Term Debt 17,602 18,203 (601 ) (3.3 )
Capital Leases 8,301 9,931 (1,630 ) (16.4 )
Other Interest Expense, Net of Interest Capitalized     (340 )     (109 )     (231 )   N/M  
Total Interest Expense     25,563       28,025       (2,462 )   (8.8 )
 
Income Before Income Taxes 43,384 45,924 (2,540 ) (5.5 )
Income Tax Expense     17,111       17,320       (209 )   (1.2 )
 
Net Income   $ 26,273     $ 28,604     $ (2,331 )   (8.1 )
 
Weighted-Average Shares of Common Stock Outstanding (000)     40,471       36,950       3,521     9.5  
 
Basic Earnings per Share   $ 0.65     $ 0.77     $ (0.12 )   (15.6 )
 
Diluted Earnings per Share   $ 0.64     $ 0.71     $ (0.07 )   (9.9 )
 
Dividends Declared per Share   $ 0.43     $ 0.42     $ 0.01     2.4  
 
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current period's presentation.
       
UNS ENERGY 2012 RESULTS
 
Condensed Consolidated Statements of Income Six Months Ended
(in Thousands of Dollars, Except Per Share Amounts) June 30, Increase / (Decrease)
(UNAUDITED)   2012   2011   Amount   Percent
 
Operating Revenues
Electric Retail Sales $ 497,502 $ 492,831 $ 4,671 0.9
Electric Wholesale Sales 65,787 79,658 (13,871 ) (17.4 )
Gas Revenue 70,215 82,210 (11,995 ) (14.6 )
Other Revenues     52,540       59,740       (7,200 )   (12.1 )
Total Operating Revenues     686,044       714,439       (28,395 )   (4.0 )
 
Operating Expenses
Fuel 153,060 153,141 (81 ) (0.1 )
Purchased Energy 114,653 144,610 (29,957 ) (20.7 )
Transmission 6,238 5,966 272 4.6
Decrease to Reflect PPFAC/PGA Recovery Treatment     11,654       (1,599 )     13,253     N/M  
Total Fuel and Purchased Energy 285,605 302,118 (16,513 ) (5.5 )
Other Operations and Maintenance 185,241 191,107 (5,866 ) (3.1 )
Depreciation 70,174 66,100 4,074 6.2
Amortization 17,776 14,631 3,145 21.5
Taxes Other Than Income Taxes     24,794       24,374       420     1.7  
Total Operating Expenses     583,590       598,330       (14,740 )   (2.5 )
Operating Income     102,454       116,109       (13,655 )   (11.8 )
 
Other Income (Deductions)
Interest Income 641 1,820 (1,179 ) (64.8 )
Other Income 4,079 5,477 (1,398 ) (25.5 )
Other Expense     (937 )     (1,417 )     480     33.9  
Total Other Income (Deductions)     3,783       5,880       (2,097 )   (35.7 )
 
Interest Expense
Long-Term Debt 36,737 36,296 441 1.2
Capital Leases 16,598 19,860 (3,262 ) (16.4 )
Other Interest Expense, Net of Interest Capitalized     (166 )     (1,030 )     864     83.9  
Total Interest Expense     53,169       55,126       (1,957 )   (3.6 )
 
Income Before Income Taxes 53,068 66,863 (13,795 ) (20.6 )
Income Tax Expense     20,319       24,787       (4,468 )   (18.0 )
 
Net Income   $ 32,749     $ 42,076     $ (9,327 )   (22.2 )
 
Weighted-Average Shares of Common Stock Outstanding (000)     39,251       36,869       2,382     6.5  
 
Basic Earnings Per Share   $ 0.83     $ 1.14     $ (0.31 )   (27.2 )
 
Diluted Earnings Per Share   $ 0.81     $ 1.07     $ (0.26 )   (24.3 )
 
Dividends Declared Per Share   $ 0.86     $ 0.84     $ 0.02     2.4  
 
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current period's presentation.
 
TUCSON ELECTRIC POWER COMPANY 2012 RESULTS
 
Condensed Consolidated Statements of Income   Three Months Ended  
(in Thousands of Dollars) June 30, Increase / (Decrease)
(UNAUDITED)   2012   2011   Amount   Percent
   
Operating Revenues
Electric Retail Sales $ 247,770 $ 231,652 $ 16,118 7.0
Electric Wholesale Sales 22,274 31,759 (9,485 ) (29.9 )
Other Revenues     29,375       31,822       (2,447 )   (7.7 )
Total Operating Revenues     299,419       295,233       4,186     1.4  
 
Operating Expenses
Fuel 79,554 80,217 (663 ) (0.8 )
Purchased Power 20,862 26,445 (5,583 ) (21.1 )
Transmission 1,401 1,232 169 13.7
Increase (Decrease) to Reflect PPFAC Recovery Treatment     12,811       2,675       10,136     N/M  
Total Fuel and Purchased Energy 114,628 110,569 4,059 3.7
Other Operations and Maintenance 78,683 78,094 589 0.8
Depreciation 27,545 25,850 1,695 6.6
Amortization 10,028 8,180 1,848 22.6
Taxes Other Than Income Taxes     10,324       10,043       281     2.8  
Total Operating Expenses     241,208       232,736       8,472     3.6  
Operating Income     58,211       62,497       (4,286 )   (6.9 )
 
Other Income (Deductions)
Interest Income 43 582 (539 ) (92.6 )
Other Income 1,209 1,719 (510 ) (29.7 )
Other Expense     (1,984 )     (2,490 )     506     20.3  
Total Other Income (Deductions)     (732 )     (189 )     (543 )   N/M  
 
Interest Expense
Long-Term Debt 13,378 12,157 1,221 10.0
Capital Leases 8,301 9,930 (1,629 ) (16.4 )
Other Interest Expense, Net of Interest Capitalized     (352 )     (91 )     (261 )   N/M  
Total Interest Expense     21,327       21,996       (669 )   (3.0 )
 
Income Before Income Taxes 36,152 40,312 (4,160 ) (10.3 )
Income Tax Expense     14,242       15,154       (912 )   (6.0 )
 
Net Income   $ 21,910     $ 25,158     $ (3,248 )   (12.9 )
 
Three Months Ended
Tucson Electric Power June 30, Increase / (Decrease)
Electric MWh Sales:     2012       2011     Amount   Percent
Retail Sales 2,439,980 2,331,563 108,417 4.6
Long-Term Wholesale Sales     156,400       208,046       (51,646 )   (24.8 )
 
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current period's presentation.
 
TUCSON ELECTRIC POWER COMPANY 2012 RESULTS
       
Condensed Consolidated Statements of Income Six Months Ended
(in Thousands of Dollars) June 30, Increase / (Decrease)
(UNAUDITED)   2012   2011   Amount   Percent
 
Operating Revenues
Electric Retail Sales $ 414,101 $ 405,354 $ 8,747 2.2
Electric Wholesale Sales 52,040 67,015 (14,975 ) (22.3 )
Other Revenues     57,256       62,452       (5,196 )   (8.3 )
Total Operating Revenues     523,397       534,821       (11,424 )   (2.1 )
 
Operating Expenses
Fuel 149,528 150,587 (1,059 ) (0.7 )
Purchased Power 34,488 43,680 (9,192 ) (21.0 )
Transmission 2,363 1,927 436 22.6
Decrease to Reflect PPFAC Recovery Treatment     5,125       (6,262 )     11,387     N/M  
Total Fuel and Purchased Energy 191,504 189,932 1,572 0.8
Other Operations and Maintenance 161,149 166,587 (5,438 ) (3.3 )
Depreciation 55,012 51,583 3,429 6.6
Amortization 19,620 16,484 3,136 19.0
Taxes Other Than Income Taxes     20,009       19,947       62     0.3  
Total Operating Expenses     447,294       444,533       2,761     0.6  
Operating Income     76,103       90,288       (14,185 )   (15.7 )
 
Other Income (Deductions)
Interest Income 69 1,317 (1,248 ) (94.8 )
Other Income 3,327 4,367 (1,040 ) (23.8 )
Other Expense     (3,128 )     (4,996 )     1,868     37.4  
Total Other Income (Deductions)     268       688       (420 )   (61.0 )
 
Interest Expense
Long-Term Debt 27,294 24,412 2,882 11.8
Capital Leases 16,598 19,859 (3,261 ) (16.4 )
Other Interest Expense, Net of Interest Capitalized     (243 )     (837 )     594     71.0  
Total Interest Expense     43,649       43,434       215     0.5  
 
Income Before Income Taxes 32,722 47,542 (14,820 ) (31.2 )
Income Tax Expense     12,273       17,681       (5,408 )   (30.6 )
 
Net Income   $ 20,449     $ 29,861     $ (9,412 )   (31.5 )
 
Six Months Ended
Tucson Electric Power June 30, Increase / (Decrease)
Electric MWh Sales:     2012       2011     Amount   Percent
Retail Sales 4,358,023 4,286,300 71,723 1.7
Long-Term Wholesale Sales     326,857       438,384       (111,527 )   (25.4 )
 
N/M - Not Meaningful
Reclassifications have been made to prior periods to conform to the current period's presentation.

Copyright Business Wire 2010

More from Press Releases

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

Meet the Real Money Pros: Market Strategies for 2012

Meet the Real Money Pros: Market Strategies for 2012