TECO Energy (TE) Q2 2012 Earnings Call August 02, 2012 9:00 am ET Executives Mark M. Kane - Director of Investor Relations Sandra W. Callahan - Chief Financial Officer, Senior Vice President of Finance & Accounting and Chief Accounting Officer John B. Ramil - Chief Executive Officer, President, Director and Member of Finance Committee Analysts Dan Eggers - Crédit Suisse AG, Research Division John Kiani - Deutsche Bank AG, Research Division Ali Agha - SunTrust Robinson Humphrey, Inc., Research Division Andrew Bischof - Morningstar Inc., Research Division Steven I. Fleishman - BofA Merrill Lynch, Research Division Presentation Operator
There is additional helpful information related to the state and local economies contained in the appendix to today's presentation.Today, Sandy Callahan, TECO Energy's Chief Financial Officer, will cover our results and our outlook. Also with us today to participate in answering your questions is John Ramil, our Chief Executive Officer. Now I'll turn it over to Sandy. Sandra W. Callahan Thank you, Mark. Good morning, everyone, and thank you for joining us and another busy day for utility earnings reports. I understand that there are at least 10 companies releasing today, so I'll keep my remarks brief. I'll cover second quarter results, local and state economic indicators and our advised guidance for this year. In the second quarter, net income was $73.1 million or $0.34 a share, compared with $77.5 million or $0.36 in 2011. On a year-to-date basis, net income in 2012 was $123.6 million or $0.58 a share compared with $129.2 million or $0.60 last year. The most significant factor impacting the year-over-year comparisons, in both the quarter and 6 months, were the effect of milder weather on electric sales. Tampa Electric reported lower net income in the 2012 quarter, despite having had the strongest customer growth we've seen since late 2007. Since it began to turn at the end of 2009, customer growth has been on a solid trend up. And for the second quarter this year, reached 1.3%. Retail net energy for load in the second quarter was 2.3% lower than last year. Total degree days were 6% below last year, primarily due to a wet and mild month of June, including the effects of Tropical Storm Debby the last week of the month. This negatively impacted sales to residential customers, although commercial and industrial sales were up. Tampa Electric also had higher depreciation expense due to normal additions to facilities and higher operations and maintenance expense.
Peoples Gas reported higher results than last year and customer growth had reached 1.2% in the second quarter. Weather isn't a factor in the second quarter gas consumption. And we saw a firm sales increase in every retail segment, residential, commercial and industrial, as the Florida economy continues to improve. Peoples also benefited from lower O&M expense in the quarter compared with last year.For the unregulated companies, TECO Coal's results for the quarter reflected higher margin, but lower sales volume from last year. The average selling price for the quarter rose to $94 per ton due to met coal prices locked in when the market was strong and higher average steam coal prices following the expiration of a below-market contract at the end of last year. The second quarter price was below the $96 average price expected for the full year, as the sales mix this quarter was more heavily weighted to steam coal due to the timing of metallurgical coal shipments which will occur in the second half of the year. The all-in cost of production was $84 per ton, just below the middle of the cost guidance range, after experiencing higher first quarter cost associated with idling some facilities in that quarter. TECO Coal has been successful with its cost control action to offset the effects of spreading fixed costs over fewer tons. Second quarter net income at TECO Guatemala was higher than 2011, reflecting higher contract and spot sales volume and lower operating expenses. Other positive impacts, although smaller, include higher earnings from the TECO's gas pipeline that serves Jacksonville Electric and lower parent interest. We are revising our earnings per share guidance for the year to a range between $1.20 and $1.30, excluding any non-GAAP charges or gains that might occur. This revision is due to the effects of the mild year-to-date weather on Tampa Electric, and the expectation that the unsold tons included in our original projections at TECO Coal will not be sold this year. This range allows for some variation in weather and customer usage of the utility and per cost and the timing of contracted shipments at TECO Coal. Read the rest of this transcript for free on seekingalpha.com