UNS Energy Reports Second Quarter 2013 Earnings

UNS Energy Corporation (NYSE: UNS) today reported second quarter 2013 net income of $34.6 million, or $0.83 per diluted share of common stock, compared with net income of $26.3 million, or $0.64 per diluted share in the same period last year.

"Our second quarter results mark the end of a four and a half year base rate freeze at TEP. The rate freeze, coupled with little to no economic growth, created significant challenges during this period," said Paul Bonavia, UNS Energy's Chairman and Chief Executive Officer. "Our employees responded by consistently controlling costs while improving safety and reliability."

In June, the Arizona Corporation Commission (ACC) approved new rates for TEP that became effective on July 1. The new rates include TEP's first base rate increase since 2008.

"TEP's new retail rates promote rate stability and strengthen TEP's financial position, bolstering our ability to make long-term investments that are in the best interests of our customers," Bonavia said.

Tucson Electric Power

Retail kWh Sales and Revenues

TEP’s retail kWh sales decreased by 1.3 percent in the second quarter, due in part to fewer cooling degree days during the months of April and May compared with last year. The decrease in retail sales volumes led to a $1.1 million, or 0.8 percent, decrease in TEP’s retail margin revenues compared with the second quarter of 2012.

Other Expenses

TEP’s Base operations and maintenance (O&M) expense was $61.2 million in the second quarter of 2013 compared with $59.5 million in the second quarter of 2012. The increase was due in part to unplanned generating plant maintenance. Base O&M excludes costs directly offset by customer surcharges and third-party reimbursements.

TEP's total interest expense declined by $1.4 million in the second quarter of 2013 primarily due to the expected decline in the balance of capital lease obligations compared with the second quarter of 2012.

Other Items

TEP's second quarter 2013 results of operations include the following items:
  • a $10.8 million tax benefit related to a regulatory asset recorded in June 2013 to recover previously recorded income tax expense through future rates as a result of the 2013 TEP Rate Order; and
  • a one-time increase to fuel expense of $3 million related to a credit to customers agreed to in TEP's rate case.

UNS Gas

UNS Gas reported net income of $0.3 million in the second quarter of 2013 compared with no net income or loss in the same period last year.

UNS Electric

UNS Electric reported net income of $3.8 million in the second quarter of 2013 compared with $4.5 million in the second quarter of 2012. The decrease in net income was due in part to the loss of an industrial customer.

Year-to-Date Results

In the first six months of 2013, TEP reported net income of $32.3 million compared with net income of $20.4 million in the same period last year. The increase is related to: cold weather during first quarter weather relative to last year; an increase in long-term wholesale margin revenues due to higher market prices for wholesale power; and the anticipated reduction in capital lease interest expense; partially offset by higher Base O&M related in part to unplanned maintenance on TEP's generating facilities; and an increase in depreciation and amortization expense reflecting TEP's ongoing utility investments. Results in the first six months of 2013 include the credit to fuel expense and the reduction to income tax expense described above.

UNS Gas

UNS Gas reported net income of $7.6 million in the first six months of 2013 compared with net income of $5.4 million in the same period last year. A cold winter and a Base Rate increase effective in May 2012 contributed to the year-over-year increase.

UNS Electric

UNS Electric reported net income of $6.1 million in the first six months of 2013 compared with $7.3 million in the first six months of 2012. The decrease in net income was due in part to the loss of an industrial customer.

Net Income and Earnings Per Share Summary
                             
2nd Quarter YTD June 30,
Net Income (Loss) 2013 2012 2013 2012
Millions of Dollars Millions of Dollars
Tucson Electric Power

$

30.8

$

21.9

$

32.3

$

20.4
UNS Gas 0.3 7.6 5.4
UNS Electric 3.8 4.5 6.1 7.3
Other(1)   (0.3 )   (0.1 )       (0.4 )
Net Income (Loss)

$

34.6
 

$

26.3
 

$

46.0
 

$

32.7
 
Avg. Basic Shares Outstanding (millions) 41.6 40.5 41.6 39.3
Avg. Diluted Shares Outstanding (millions) 41.9 41.6 41.9 41.6
   
 
2nd Quarter YTD June 30,
Earnings (Loss) Per UNS Energy Share 2013 2012 2013 2012
Tucson Electric Power

$

0.74

$

0.54

$

0.78

$

0.52
UNS Gas 0.01 0.18 0.14
UNS Electric 0.09 0.11 0.15 0.19
Other(1)   (0.01 )           (0.02 )
Net Income per Basic Share

$

0.83
 

$

0.65
 

$

1.11
 

$

0.83
 
Net Income per Diluted Share

$

0.83
 

$

0.64
 

$

1.10
 

$

0.81
 
     

(1)
  Includes UNS Energy on a stand-alone basis and results from Millennium Energy Holdings, Inc. and UNS 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.

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.

Conference Call and Webcast

The company will host a conference call on Tuesday, July 30, 2013 at 12 p.m. EDT to discuss the financial results and outlook. To participate in the call, please dial in 5 to 10 minutes prior to the start time. A reference code is not necessary to access the live call.

Dial-in number: (800) 695-3244

The conference call can also be heard live online at uns.com.

A telephone replay will be available for seven days.

Replay number: (800) 633-8284Reference code: 21668731

In conjunction with this earnings announcement, UNS Energy has provided information on its performance during the second quarter of 2013. These materials have been filed with the Securities and Exchange Commission and are also available at uns.com. UNS Energy and TEP are providing the address of such website solely for the information of investors and do not intend the address to be an active link. Information contained at such website is not part of the report filed with the SEC by UNS Energy and TEP.

UNS Energy Corporation is a Tucson, Arizona-based company with consolidated assets of approximately $4 billion. UNS Energy's primary subsidiaries include Tucson Electric Power, which serves approximately 408,000 customers in southern Arizona; and UniSource Energy Services, provider of natural gas and electric service for approximately 242,000 customers in northern and southern Arizona. For more information about UNS Energy and its subsidiaries, visit uns.com.

This release contains forward-looking information that involves risks and uncertainties. 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 retiree 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 Corporation

Comparative Condensed Consolidated Statements of Income
 
Three Months Ended
(in thousands of dollars, except per share amounts) June 30, Increase / (Decrease)
(UNAUDITED) 2013     2012 Amount Percent
Operating Revenues
Electric Retail Sales $ 285,419 $ 292,071 $ (6,652 ) (2.3 )
Electric Wholesale Sales 30,654 25,511 5,143 20.2
Gas Retail Sales 20,013 20,006 7

N/M
Other Revenues 29,131   26,410   2,721   10.3  
Total Operating Revenues 365,217   363,998   1,219   0.3  
Operating Expenses
Fuel 86,459 82,325 4,134 5.0
Purchased Energy 57,796 48,203 9,593 19.9
Transmission 4,521 3,412 1,109 32.5
Increase to Reflect PPFAC/PGA Recovery Treatment 2,074   14,215   (12,141 ) (85.4 )
Total Fuel and Purchased Energy 150,850 148,155 2,695 1.8
Operations and Maintenance 95,143 90,926 4,217 4.6
Depreciation 36,671 35,190 1,481 4.2
Amortization 8,119 9,112 (993 ) (10.9 )
Taxes Other Than Income Taxes 13,631   12,556   1,075   8.6  
Total Operating Expenses 304,414   295,939   8,475   2.9  
Operating Income 60,803   68,059   (7,256 ) (10.7 )
Other Income (Deductions)
Interest Income 19 383 (364 ) (95.0 )
Other Income 1,734 1,333 401 30.1
Other Expense (713 ) (828 ) 115   (13.9 )
Total Other Income (Deductions) 1,040   888   152   17.1  
Interest Expense
Long-Term Debt 17,700 17,602 98 0.6
Capital Leases 6,249 8,301 (2,052 ) (24.7 )
Other Interest Expense, Net of Interest Capitalized (399 ) (340 ) (59 ) N/M
Total Interest Expense 23,550   25,563   (2,013 ) (7.9 )
Income Before Income Taxes 38,293 43,384 (5,091 ) (11.7 )
Income Tax Expense 3,675   17,111   (13,436 ) (78.5 )
Net Income 34,618   26,273   8,345   31.8  
Weighted-Average Shares of Common Stock Outstanding (000) 41,598   40,471   1,127   2.8  
Basic Earnings per Share $ 0.83   $ 0.65   $ 0.18   27.7  
Diluted Earnings per Share $ 0.83   $ 0.64   $ 0.19   29.7  
Dividends Declared per Share $ 0.435   $ 0.43   $ 0.005   1.2  
 
N/M—Not Meaningful
Reclassifications have been made to prior periods to conform to the current period’s presentation.
 
 
               

UNS Energy Corporation

Comparative Condensed Consolidated Statements of Income
 
Six Months Ended
(in thousands of dollars, except per share amounts) June 30, Increase / (Decrease)
(UNAUDITED) 2013     2012 Amount Percent
Operating Revenues
Electric Retail Sales $ 506,279 $ 497,502 $ 8,777 1.8
Electric Wholesale Sales 65,052 59,127 5,925 10.0
Gas Retail Sales 71,002 70,215 787 1.1
Other Revenues 55,025   52,540   2,485   4.7  
Total Operating Revenues 697,358   679,384   17,974   2.6  
Operating Expenses
Fuel 168,148 153,060 15,088 9.9
Purchased Energy 121,955 107,993 13,962 12.9
Transmission 7,707 6,238 1,469 23.5
Increase (Decrease) to Reflect PPFAC/PGA Recovery Treatment (3,294 ) 11,654   (14,948 )

N/M
Total Fuel and Purchased Energy 294,516 278,945 15,571 5.6
Operations and Maintenance 185,043 185,241 (198 ) (0.1 )
Depreciation 72,970 70,174 2,796 4.0
Amortization 16,408 17,776 (1,368 ) (7.7 )
Taxes Other Than Income Taxes 27,723   24,794   2,929   11.8  
Total Operating Expenses 596,660   576,930   19,730   3.4  
Operating Income 100,698   102,454   (1,756 ) (1.7 )
Other Income (Deductions)
Interest Income 28 641 (613 ) (95.6 )
Other Income 3,502 3,038 464 15.3
Other Expense (247 ) 104   (351 )

N/M
Total Other Income (Deductions) 3,283   3,783   (500 ) (13.2 )
Interest Expense
Long-Term Debt 35,954 36,737 (783 ) (2.1 )
Capital Leases 12,498 16,598 (4,100 ) (24.7 )
Other Interest Expense, Net of Interest Capitalized (1,467 ) (166 ) (1,301 ) N/M
Total Interest Expense 46,985   53,169   (6,184 ) (11.6 )
Income Before Income Taxes 56,996 53,068 3,928 7.4
Income Tax Expense 11,033   20,319   (9,286 ) (45.7 )
Net Income 45,963   32,749   13,214   40.3  
Weighted-Average Shares of Common Stock Outstanding (000) 41,569   39,251   2,318   5.9  
Basic Earnings per Share $ 1.11   $ 0.83   $ 0.28   33.7  
Diluted Earnings per Share $ 1.10   $ 0.81   $ 0.29   35.8  
Dividends Declared per Share $ 0.870   $ 0.86   $ 0.010   1.2  
 
N/M—Not Meaningful
Reclassifications have been made to prior periods to conform to the current period’s presentation.
 
 
               

TUCSON ELECTRIC POWER COMPANY

Comparative Condensed Consolidated Statements of Income
 
Three Months Ended
(in thousands of dollars) June 30, Increase / (Decrease)
(UNAUDITED) 2013     2012 Amount Percent
Operating Revenues
Electric Retail Sales $ 243,635 $ 247,770 $ (4,135 ) (1.7 )
Electric Wholesale Sales 29,542 22,274 7,268 32.6
Other Revenues 31,086   29,375   1,711   5.8  
Total Operating Revenues 304,263   299,419   4,844   1.6  
Operating Expenses
Fuel 84,553 79,554 4,999 6.3
Purchased Power 28,410 20,862 7,548 36.2
Transmission 1,730 1,401 329 23.5
Increase to Reflect PPFAC Recovery Treatment 5,274   12,811   (7,537 ) (58.8 )
Total Fuel and Purchased Energy 119,967 114,628 5,339 4.7
Other Operations and Maintenance 82,011 78,683 3,328 4.2
Depreciation 28,861 27,545 1,316 4.8
Amortization 9,052 10,028 (976 ) (9.7 )
Taxes Other Than Income Taxes 10,939   10,324   615   6.0  
Total Operating Expenses 250,830   241,208   9,622   4.0  
Operating Income 53,433   58,211   (4,778 ) (8.2 )
Other Income (Deductions)
Interest Income 12 43 (31 ) (72.1 )
Other Income 1,270 1,209 61 5.0
Other Expense (2,378 ) (1,984 ) (394 ) 19.9  
Total Other Income (Deductions) (1,096 ) (732 ) (364 ) 49.7  
Interest Expense
Long-Term Debt 13,991 13,378 613 4.6
Capital Leases 6,249 8,301 (2,052 ) (24.7 )
Other Interest Expense, Net of Interest Capitalized (342 ) (352 ) 10   N/M
Total Interest Expense 19,898   21,327   (1,429 ) (6.7 )
Income Before Income Taxes 32,439 36,152 (3,713 )

(10.3

)
Income Tax Expense 1,652   14,242   (12,590 )

(88.4

)
Net Income 30,787   21,910   8,877  

40.5
 
 
N/M—Not Meaningful
Reclassifications have been made to prior periods to conform to the current period’s presentation.
 
 
               

TUCSON ELECTRIC POWER COMPANY

Comparative Condensed Consolidated Statements of Income
 
Six Months Ended
(in thousands of dollars) June 30, Increase / (Decrease)
(UNAUDITED) 2013     2012 Amount Percent
Operating Revenues
Electric Retail Sales $ 428,515 $ 414,101 $ 14,414 3.5
Electric Wholesale Sales 63,940 52,040 11,900 22.9
Other Revenues 59,559   57,256   2,303   4.0  
Total Operating Revenues 552,014   523,397   28,617   5.5  
Operating Expenses
Fuel 165,351 149,528 15,823 10.6
Purchased Power 47,338 34,488 12,850 37.3
Transmission 2,595 2,363 232 9.8
Increase to Reflect PPFAC Recovery Treatment 2,914   5,125   (2,211 ) (43.1 )
Total Fuel and Purchased Energy 218,198 191,504 26,694 13.9
Other Operations and Maintenance 159,835 161,149 (1,314 ) (0.8 )
Depreciation 57,418 55,012 2,406 4.4
Amortization 18,275 19,620 (1,345 ) (6.9 )
Taxes Other Than Income Taxes 22,108   20,009   2,099   10.5  
Total Operating Expenses 475,834   447,294   28,540   6.4  
Operating Income 76,180   76,103   77   0.1  
Other Income (Deductions)
Interest Income 8 69 (61 ) (88.4 )
Other Income 2,438 2,286 152 6.6
Other Expense (3,584 ) (2,087 ) (1,497 ) 71.7  
Total Other Income (Deductions) (1,138 ) 268   (1,406 )

N/M
Interest Expense
Long-Term Debt 28,564 27,294 1,270 4.7
Capital Leases 12,498 16,598 (4,100 ) (24.7 )
Other Interest Expense, Net of Interest Capitalized (1,195 ) (243 ) (952 ) N/M
Total Interest Expense 39,867   43,649   (3,782 ) (8.7 )
Income Before Income Taxes 35,175 32,722 2,453

7.5
Income Tax Expense 2,909   12,273   (9,364 )

(76.3

)
Net Income 32,266   20,449   11,817  

57.8
 
 
N/M—Not Meaningful
Reclassifications have been made to prior periods to conform to the current period’s presentation.

Copyright Business Wire 2010

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