- The Company reported consolidated earnings for the first quarter ended March 31, 2016, inclusive of merger costs related to the previously announced Agreement and Plan of Merger among the Company, Liberty Utilities (Central) Co. and Liberty Sub Corp. (the "merger-related costs") of $14.0 million, or $0.32 per share compared to same quarter 2015 earnings of $14.6 million, or $0.34 per share. Earnings for the twelve months ended March 31, 2016, including merger-related costs, were $56.0 million, or $1.28 per share, compared to earnings of $60.8 million, or $1.40 per share for the same 2015 twelve month period.
- Excluding merger-related costs, which amounted to $4.2 million and $4.5 million, respectively, or $0.06 per share, for the first quarter 2016 and twelve month period ended March 31, 2016, consolidated earnings, after adjusting for taxes, would have been $16.6 million, or $0.38 per share, and $58.8 million or $1.34 per share, for the respective quarter and twelve month periods.
- Earnings for both the first quarter of 2016 and twelve month period ended March 31, 2016 were lower primarily as a result of the merger-related costs mentioned above and due to milder weather, which reduced electric sales 7.5% and 2.7% for the respective periods. These negative impacts were partially offset by the July 2015 Missouri electric rates increase.
First Quarter 2016 ResultsElectric segment gross margin (electric revenue less cost of fuel and purchased power) increased $2.8 million, or 3.1%, during the first quarter 2016 compared to the first quarter 2015. Quarter over quarter electric segment gross margin impacts include:
- Increased customer rates of $7.7 million, net of a $1.9 million decrease in Missouri base fuel recovery, increased revenues by an estimated $5.8 million,
- Improved customer counts added an estimated $0.7 million to revenues, and
- Weather and other volumetric factors decreased revenues by an estimated $10.5 million.
- Depreciation and amortization expense increases of approximately $0.4 million,
- Interest expense increases of approximately $0.6 million, and
- Merger-related costs of approximately $4.2 million.
- Increased customer rates of $17.8 million, net of a decrease in Missouri base fuel recovery of $5.2 million, increased revenues an estimated $12.6 million,
- Improved customer counts added an estimated $2.5 million to revenues, and
- Weather and other volumetric factors decreased revenues an estimated $15.0 million.
Gas segment gross margin of $21.4 million was approximately $2.2 million, or 9.7%, below the twelve month period ended March 31, 2015 due to a 16.8% decline in sales driven by milder weather. Total Gas segment degree days were 20.8% lower for the twelve months ended March 31, 2016 than the comparable prior year period.Consolidated earnings for the twelve month period ended March 31, 2016 were negatively impacted by the following:
- Operating and maintenance expense increases of approximately $3.6 million,
- Depreciation and amortization expense increases of approximately $5.6 million,
- Other taxes increase of approximately $1.2 million,
- Interest expense increase of approximately $3.2 million,
- Changes in AFUDC, which decreased earnings by approximately $0.6 million, and
- Merger-related costs of approximately $4.5 million.
|(dollars in millions, except Per Share data)|
|Three Months Ended March 31,||Twelve Months Ended March 31,|
|Operating and Maintenance Expenses||39.1||39.6||(0.5||)||164.8||161.2||3.6|
|Depreciation and Amortization||20.4||20.0||0.4||80.9||75.3||5.6|
|Interest Expense and Other, net||9.2||10.1||(0.9||)||38.6||34.4||4.2|
|Earnings Per Share (Basic)||$||0.32||$||0.34||($0.02||)||$||1.28||$||1.40||($0.12||)|
|Reconciliation of Net Income/Earnings Per Share|
|Net Income (GAAP)||$||14.0||$||14.6||($0.6||)||$||56.0||$||60.8||($4.8||)|
|Merger-related costs (adjusted for taxes)||2.6||0.0||2.6||2.8||0.0||2.8|
|Net Income (excl. merger-related costs)||$||16.6||$||14.6||$||2.0||$||58.8||$||60.8||($2.0||)|
|Earnings Per Share (Basic)||$||0.38||$||0.34||$||0.04||$||1.34||$||1.40||($0.06||)|
|* Slight differences from actual results may occur due to rounding to millions.|
|Three Months Ended March 31,||Twelve Months Ended March 31,|
|2016||2015||% Change*||2016||2015||% Change*|
|Electric On-System kWh Sales ( in millions):|
|Total On-System Electric Sales||1,229||1,329||-7.5||%||4,840||4,973||-2.7||%|
|Retail Gas Sales ( billion cubic feet):|
|Total Retail Gas Sales||1.61||1.85||-12.9||%||3.09||3.72||-16.8||%|
|Reconciliation of Earnings Per Share|
|Quarter Ended||Twelve Months Ended|
|Basic Earnings Per Share - March 31, 2015||$||0.34||$||1.40|
|Total Gross Margin||0.03||0.18|
|Maintenance and repairs||0.00||(0.02||)|
|Depreciation and amortization||(0.01||)||(0.08||)|
|Change in effective income tax rates||0.00||(0.01||)|
|Other income and deductions||0.00||(0.01||)|
|Dilutive effect of additional shares issued||0.00||(0.01||)|
|Basic Earnings Per Share - March 31, 2016||$||0.32||$||1.28|
The reconciliation of basic earnings per share (EPS) presented above compares the quarter and twelve months ended March 31, 2016 versus March 31, 2015 and is a non-GAAP presentation. The economic substance behind this non-GAAP EPS measure is to present the after tax impact of significant items and components of the statement of income on a per share basis before the impact of additional stock issuances. The Company believes this presentation is useful to investors because the statement of income does not readily show the EPS impact of the various components, including the effect of new stock issuances. This could limit the readers' understanding of the reasons for the EPS change from previous years. This information is useful to management, and the Company believes useful to investors, to better understand the reasons for the fluctuation in EPS between the prior and current years on a per share basis. The presentation of net income and EPS excluding merger-related costs throughout this press release is also a non-GAAP presentation. The Company believes this presentation is useful to investors because merger-related costs are not reflective of the underlying ongoing operations of the Company and has included the analysis as a complement to the financial information provided in accordance with GAAP.In addition, although a non-GAAP presentation, the Company believes the presentation of gross margin (reflected in the table above and elsewhere in this press release) is useful to investors and others in understanding and analyzing changes in operating performance from one period to the next, and has included the analysis as a complement to the financial information provided in accordance with GAAP. This reconciliation and margin information may not be comparable to other companies or more useful than the GAAP presentation included in the statements of income. The presentation does not purport to be an alternative to EPS determined in accordance with GAAP as a measure of operating performance or any other measure of financial performance presented in accordance with GAAP. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. The dilutive effect of additional shares issued in this table reflects the impact of all shares issued in the respective periods presented. Earnings Guidance The revised guidance range of $1.26 to $1.44 per share communicated on February 26, 2016 remains unchanged. This 2016 guidance range reflects approximately 50% of the expected merger-related costs of $15 to $17 million will be payable in 2016, assuming a 2017 closing date. It also assumes 30-year average weather, overall system energy growth of less than 1%, an October 1, 2016 effective date for our pending Missouri rate case at the filed amount of $33.4 million, and increased operating costs, driven by costs related to our Riverton combined cycle project.
Other factors that may impact earnings include variations in customer growth and usage projections, unanticipated or unplanned events that may impact operating and maintenance costs and the impact of actual rate case results differing from our assumptions. The effects of assumptions and other factors evaluated for the purpose of providing guidance are not necessarily independent of one another, and the combination of effects can cause individual impacts smaller or larger than the indicated guidance range.Earnings Conference Call Brad Beecher, President and CEO, will host a conference call Friday, April 29, 2016, at 1:00 p.m. Eastern Time to discuss earnings for the first quarter and twelve months ended March 31, 2016. To phone in to the conference call, parties in the United States should dial 1-855-209-8213, or in Canada, 1-855-669-9657, any time after 12:45 p.m. Eastern Time. The webcast presentation and accompanying presentation slides can also be accessed from Empire's website at www.empiredistrict.com. The webcast presentation will be available for replay for one year from today's date. Forward-looking and other material information may be discussed during the conference call. Based in Joplin, Missouri, The Empire District Electric Company (NYSE:EDE) is an investor-owned, regulated utility providing electric, natural gas (through its wholly owned subsidiary, The Empire District Gas Company) and water service, with approximately 218,000 customers in Missouri, Kansas, Oklahoma, and Arkansas. A subsidiary of the Company also provides fiber optic services. Certain matters discussed in this press release are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements address future plans, objectives, expectations, earnings, and events or conditions concerning various matters. Actual results in each case could differ materially from those currently anticipated in such statements, by reason of the factors noted in the Company's filings with the SEC, including the most recent Form 10-K. Additional Information and Where to Find It The proposed merger transaction will be submitted to shareholders of Empire for their consideration. In connection with the transaction, Empire will file a proxy statement and other materials with the U.S. Securities and Exchange Commission (the SEC). This communication is not a substitute for the proxy statement or any other document that Empire may send to its shareholders in connection with the proposed transaction. EMPIRE SHAREHOLDERS ARE ADVISED TO READ THE PROXY STATEMENT FOR THE PROPOSED TRANSACTION WHEN IT IS FILED, AND ANY AMENDMENT OR SUPPLEMENT THERETO THAT MAY BE FILED, WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT EMPIRE AND THE TRANSACTION. All such documents, when filed, are available free of charge at the SEC's website at www.sec.gov , at Empire's website at www.empiredistrict.com or by sending a written request to Corporate Secretary, The Empire District Electric Company, 602 S. Joplin Avenue, Joplin, Missouri 64801. Participants in the Solicitation Empire and its directors and executive officers are deemed to be participants in any solicitation of Empire shareholders in connection with the proposed transaction. Information about Empire directors and executive officers is available in Empire's definitive proxy statement, filed on March 16, 2016, in connection with its 2016 annual meeting of shareholders, and in Empire's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.