Integrys Energy Group's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Integrys Energy Group, Inc (TEG)

Q2 2012 Earnings Call

August 09, 2012 09:00 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

Paul Patterson – Glenrock Associates

Ali Agha – SunTrust Robinson Humphrey

Ashar Khan – Visium Asset Management

Michael Jin – Epoch Investment Partners

Steven Gambuzza – Millennium Partners

Presentation

Operator

Welcome to the Second 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 second 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 Larry Borgard, our President and Chief Operating Officer, Utilities; 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.

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 November 2, 2012.

I need to direct you to slide three of our presentation and to point out that the presentation contains forward-looking statements within the definition of the United States Securities and Exchange Commission’s 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 statements contained in this presentation whether as a result of new information, future events or otherwise.

This slide is a condensed commentary on the 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 the quarterly report on form 10-Q we filed and the forward-looking statement section of yesterday’s news release and slide 46 in the appendix.

Slide four indicates that today’s presentation includes non-GAAP financial information related to diluted earnings per share adjusted and adjusted earnings and/or loss. We believe that these are useful financial measures for providing investors with additional insight into our operating performance because they eliminate the effect 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

Thank you, Steve. Good morning, everyone, and thanks for joining us on the call today. I am going to begin with our high-level overview of our second quarter 2012 financial results and operational highlights. Joe will then discuss our financial results in more detail and provide a summary of our financial outlook for the remainder of 2012, and as usual we will conclude with a question-and-answer session.

Before I begin, there are two key messages I would like you to keep in mind. First, as seen from our earnings release, we saw a decline in earnings from the quarter and first half of the year compared to 2011. The reason for this on the utility side is weather, and the reason on retail marketing side is the effects of competitive pressures.

My second key message is that the fundamentals of our businesses are strong. We are continuing to execute on our plan to provide value primarily from our utilities with the complimentary earnings provided by our non-utility operations.

So please turn to slide five. In the second quarter of 2012 we posted diluted earnings per share adjusted on a consolidated basis of $0.26, down $0.12 per share versus the same quarter a year ago. The primary driver of the quarter-over-quarter decline was unseasonably warm weather impacting our regulated natural gas utilities. Warmer than normal weather had a $12 million or $0.15 negative impact on our consolidated financial results for the quarter.

For the first half of 2012, the 20% to 25% warmer than normal weather had an approximate $27 million or $0.34 negative impact on our consolidated financial results compared to normal weather. With this adverse weather impact on our natural gas utility segment, along with increased competitive pressure on our non-regulated energy services business unit, after the revision of our 2012 guidance range for diluted earnings per share adjusted to between $3 and $3.15. And Joe will have more to say on this in Joe’s formal remarks.

Despite the reduced guidance range our primary businesses, the regulated utilities are executing according to plan and our non-regulated business unit is establishing a strong foundation for future growth. And the next couple of slides will illustrate this.

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