Eversource Energy Reports Third Quarter 2016 Results

Eversource Energy (NYSE: ES) today reported earnings of $265.3 million, or $0.83 per share, in the third quarter of 2016, compared with earnings of $235.9 million, or $0.74 per share, in the third quarter of 2015. In the first nine months of 2016, Eversource Energy earned $713.1 million, or $2.24 per share, compared with earnings of $696.7 million, or $2.19 per share, in the first nine months of 2015.

"We look forward to completing a successful 2016," said Jim Judge, Eversource president and chief executive officer. "Our earnings are on track to achieve our full-year guidance of $2.90-$3.05 per share and we continue to be confident in our long-term earnings and dividend growth rate of 5-7 percent. Additionally, our service reliability levels, despite the challenge of a hot summer and increased storm activity, continue to place us in the upper tier of utilities."

Electric Transmission

Eversource Energy's transmission segment earned $88.4 million in the third quarter of 2016 and $266.6 million in the first nine months of 2016, compared with earnings of $78 million in the third quarter of 2015 and $225 million in the first nine months of 2015. The improved results for both periods were primarily due to an increased level of investment in Eversource Energy's transmission system, as well as the absence in 2016 of a $12.4 million first-quarter 2015 charge related to an order issued by the Federal Energy Regulatory Commission concerning the return on equity allowed New England transmission owners.

Electric Distribution and Generation

Eversource Energy's electric distribution and generation segment earned $170.1 million in the third quarter of 2016 and $381.3 million in the first nine months of 2016, compared with earnings of $167.3 million in the third quarter of 2015 and $418.7 million in the first nine months of 2015. Improved third quarter results primarily reflect higher retail revenues, which were partially offset by higher depreciation and property taxes resulting from increased investment in Eversource's electric distribution systems. The lower year-to-date results primarily reflect the absence in 2016 of the benefits associated with resolving several regulatory issues at NSTAR Electric in the first quarter of 2015.

The third quarter earnings of Eversource Energy's electric utility subsidiaries are noted below in millions, net of preferred dividends:

               
          2016         2015
CL&P         $85.2         $78.8
NSTAR Electric         $116.7         $118.1
PSNH         $38.5         $32.5
WMECO         $16.0         $15.0

Earnings of Eversource Energy's electric utility subsidiaries for the first nine months are noted below in millions, net of preferred dividends:
               
          2016         2015
CL&P         $252.4         $224.0
NSTAR Electric         $238.4         $282.7
PSNH         $105.8         $92.5
WMECO         $46.1         $42.4

Natural Gas Distribution

Eversource Energy's natural gas distribution segment had a loss of $7 million in the third quarter of 2016 and earnings of $51.9 million in the first nine months of 2016, compared with a loss of $3.5 million in the third quarter of 2015 and earnings of $57.5 million in the first nine months of 2015. Lower third quarter results were due primarily to a higher effective tax rate in 2016. Lower nine-month results in 2016 were due primarily to the impact on firm sales of a much milder winter in 2016.

Parent and other companies

Eversource Energy parent and other companies earned $13.8 million in the third quarter of 2016 and $13.3 million in the first nine months of 2016, compared with a net loss of $5.9 million in the third quarter of 2015 and a net loss $4.5 million in the first nine months of 2015. Improved third quarter and year-to-date results were due primarily to a lower effective tax rate and the absence in 2016 of integration costs. Those impacts were partially offset by higher interest costs.

The following table reconciles 2016 and 2015 third quarter and first nine months earnings per share:
                     
                  Third Quarter         Nine Months
  2015     Reported EPS         $0.74           $2.19  
        Higher transmission earnings in 2016         $0.04           $0.14  
        Higher retail electric revenues and generation

results in 2016
       

$0.03
         

$0.02
 
        Lower firm natural gas sales in 2016         ---           ($0.03 )
        Lower non-tracked O&M in 2016         $0.02           $0.02  
        Higher property tax, depreciation, and

amortization expense in 2016
       

($0.02

)
       

($0.05

)
        Higher interest expense         ($0.01 )         ($0.03 )
        Lower effective tax rate         $0.02           ---  
        Other         $0.01           ($0.02 )
  2016     Reported EPS         $0.83           $2.24  
 

Financial results for the third quarter and first nine months of 2016 and 2015 are noted below:

Three months ended:

  (in millions, except EPS)      

September 30, 2016
     

September 30, 2015
     

 

Increase/ (Decrease)
     

2016 EPS 1
  Electric Distribution/Generation       $170.1         $167.3         $2.8         $0.53  
  Natural Gas Distribution       ($7.0 )       ($3.5 )       ($3.5 )       ($0.02 )
  Electric Transmission       $88.4         $78.0         $10.4         $0.28  
  Eversource Parent and Other Companies       $13.8         ($5.9 )       $19.7         $0.04  
  Reported Earnings/EPS       $265.3         $235.9         $29.4         $0.83  
                         

Nine months ended:
  (in millions, except EPS)      

September 30, 2016
     

September 30, 2015
     

Increase/ (Decrease)
     

2016 EPS 1

Electric Distribution/Generation
     

$381.3
     

$418.7
       

($37.4

)
     

$1.20
Natural Gas Distribution       $51.9       $57.5         ($5.6 )       $0.16
Electric Transmission       $266.6       $225.0         $41.6         $0.84

Eversource Parent and Other Companies
     

$13.3
     

($4.5

)
     

$17.8
       

$0.04

Reported Earnings/EPS
     

$713.1
     

$696.7
       

$16.4
       

$2.24

Retail sales data:
                           
 

Three months ended:
     

September 30, 2016
     

September 30, 2015
     

% Change
 
  Electric Distribution (Gwh)                        
  Traditional       8,131       8,136       (0.01 %)
  Decoupled       7,213       7,070       2.0 %
  Total Electric Distribution       15,344       15,206       0.9 %
                           
  Natural Gas Distribution (mmcf)                        
  Traditional       5,270       5,449       (3.3 %)
  Decoupled and Special Contracts       5,653       5,688       (0.6 %)
  Total Natural Gas Distribution       10,923       11,137       (1.9 %)
                         

Nine months ended:
     

September 30, 2016
     

September 30, 2015
     

% Change
 
Electric Distribution (Gwh)                        
Traditional       21,731       22,309       (2.6 %)
Decoupled       19,235       19,865       (3.2 %)
Total Electric Distribution       40,966       42,174       (2.9 %)
                         
Natural Gas Distribution (mmcf)                        
Traditional       31,570       36,355       (13.2 %)
Decoupled and Special Contracts       36,537       42,134       (13.3 %)
Total Natural Gas Distribution       68,107       78,489       (13.2 %)

Eversource Energy has approximately 317 million common shares outstanding. It operates New England's largest energy delivery system, serving approximately 3.6 million customers in Connecticut, Massachusetts and New Hampshire.
 

Note: Eversource Energy will webcast a conference call with senior management on November 2, 2016, beginning at 9 a.m. Eastern Time. The webcast and associated slides can be accessed through Eversource's website at www.eversource.com .

1 All per share amounts in this news release are reported on a diluted basis. The only common equity securities that are publicly traded are common shares of Eversource Energy. The earnings and EPS of each business do not represent a direct legal interest in the assets and liabilities allocated to such business, but rather represent a direct interest in Eversource Energy's assets and liabilities as a whole. EPS by business is a non-GAAP (not determined using generally accepted accounting principles) measure that is calculated by dividing the net income or loss attributable to controlling interests of each business by the weighted average diluted Eversource parent common shares outstanding for the period. Management uses this non-GAAP financial measure to evaluate earnings results, provide details of earnings results by business, and more fully compare and explain our third quarter and year-to-date 2016 and 2015 results. Management believes that this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of Eversource Energy's businesses. Non-GAAP financial measures should not be considered as alternatives to Eversource consolidated net income attributable to controlling interests or EPS determined in accordance with GAAP as indicators of Eversource Energy's operating performance.

This news release includes statements concerning Eversource Energy's expectations, beliefs, plans, objectives, goals, strategies, assumptions of future events, future financial performance or growth and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, readers can identify these forward-looking statements through the use of words or phrases such as "estimate, "expect," "anticipate," "intend," "plan," "project," "believe," "forecast," "should," "could" and other similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results or outcomes to differ materially from those included in the forward-looking statements. Factors that may cause actual results to differ materially from those included in the forward-looking statements include, but are not limited to, cyber breaches, acts of war or terrorism, or grid disturbances; actions or inaction of local, state and federal regulatory, public policy and taxing bodies; changes in business conditions, which could include disruptive technology related to Eversource's current or future business model; changes in economic conditions, including impact on interest rates, tax policies, and customer demand and payment ability; fluctuations in weather patterns; changes in laws, regulations or regulatory policy; changes in levels or timing of capital expenditures; disruptions in the capital markets or other events that make Eversource's access to necessary capital more difficult or costly; developments in legal or public policy doctrines; technological developments; changes in accounting standards and financial reporting regulations; actions of rating agencies; and other presently unknown or unforeseen factors.

Other risk factors are detailed in Eversource's reports filed with the Securities and Exchange Commission (SEC) and updated as necessary, and are available on the SEC's website at www.sec.gov . All such factors are difficult to predict and contain uncertainties that may materially affect Eversource Energy's actual results. You should not place undue reliance on the forward-looking statements; each speaks only as of the date on which such statement is made, and Eversource Energy undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.
       

EVERSOURCE ENERGY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
 
(Thousands of Dollars)     September 30, 2016     December 31, 2015
 

ASSETS
Current Assets:
Cash and Cash Equivalents $ 40,056 $ 23,947
Receivables, Net 963,279 775,480
Unbilled Revenues 187,749 202,647
Taxes Receivable 4,527 305,359
Fuel, Materials, Supplies and Inventory 311,051 336,476
Regulatory Assets 752,378 845,843
Prepayments and Other Current Assets 155,612   129,034  
Total Current Assets 2,414,652   2,618,786  
 
Property, Plant and Equipment, Net 20,807,943   19,892,441  
 
Deferred Debits and Other Assets:
Regulatory Assets 3,469,879 3,737,960
Goodwill 3,519,401 3,519,401
Marketable Securities 525,809 516,478
Other Long-Term Assets 344,653   295,243  
Total Deferred Debits and Other Assets 7,859,742   8,069,082  
 
Total Assets $ 31,082,337   $ 30,580,309  
 

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes Payable $ 734,500 $ 1,160,953
Long-Term Debt - Current Portion 373,883 228,883
Accounts Payable 679,505 813,646
Obligations to Third Party Suppliers 166,845 128,564
Regulatory Liabilities 160,442 107,759
Other Current Liabilities 526,853   549,985  
Total Current Liabilities 2,642,028   2,989,790  
 
Deferred Credits and Other Liabilities:
Accumulated Deferred Income Taxes 5,442,856 5,147,678
Regulatory Liabilities 550,162 513,595
Derivative Liabilities 427,382 337,102
Accrued Pension, SERP and PBOP 1,116,240 1,407,288
Other Long-Term Liabilities 875,589   871,499  
Total Deferred Credits and Other Liabilities 8,412,229   8,277,162  
 
Capitalization:
Long-Term Debt 9,235,128   8,805,574  
 
Noncontrolling Interest - Preferred Stock of Subsidiaries 155,568   155,568  
 
Equity:
Common Shareholders' Equity:
Common Shares 1,669,392 1,669,313
Capital Surplus, Paid In 6,256,580 6,262,368
Retained Earnings 3,087,006 2,797,355
Accumulated Other Comprehensive Loss (65,617 ) (66,844 )
Treasury Stock (309,977 ) (309,977 )
Common Shareholders' Equity 10,637,384   10,352,215  
Total Capitalization 20,028,080   19,313,357  
 
Total Liabilities and Capitalization $ 31,082,337   $ 30,580,309  
 

The data contained in this report is preliminary and is unaudited. This report is being submitted for the sole purpose of providing information to present shareholders about Eversource Energy and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities.
       

EVERSOURCE ENERGY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
 
For the Three Months Ended September 30, For the Nine Months Ended September 30,
(Thousands of Dollars, Except Share Information)     2016     2015     2016     2015
       
Operating Revenues $ 2,039,706   $ 1,933,105   $ 5,862,525   $ 6,263,597
 
Operating Expenses:
Purchased Power, Fuel and Transmission 665,810 702,640 2,001,929 2,549,807
Operations and Maintenance 324,734 327,283 965,584 977,306
Depreciation 181,288 167,884 531,781 495,389
Amortization of Regulatory Assets/(Liabilities), Net 43,942 (16,851 ) 56,223 42,587
Energy Efficiency Programs 149,121 132,107 405,962 380,559
Taxes Other Than Income Taxes 164,942   150,804   479,219   439,221
Total Operating Expenses 1,529,837   1,463,867   4,440,698   4,884,869
Operating Income 509,869 469,238 1,421,827 1,378,728
Interest Expense 99,865 92,534 298,568 279,635
Other Income, Net 13,641   5,241   23,689   23,866
Income Before Income Tax Expense 423,645 381,945 1,146,948 1,122,959
Income Tax Expense 156,446   144,146   428,186   420,640
Net Income 267,199 237,799 718,762 702,319
Net Income Attributable to Noncontrolling Interests 1,880   1,879   5,639   5,639
Net Income Attributable to Common Shareholders $ 265,319   $ 235,920   $ 713,123   $ 696,680
 
Basic Earnings Per Common Share $ 0.83   $ 0.74   $ 2.24   $ 2.20
 
Diluted Earnings Per Common Share $ 0.83   $ 0.74   $ 2.24   $ 2.19
 
Dividends Declared Per Common Share $ 0.45   $ 0.42   $ 1.34   $ 1.25
 
Weighted Average Common Shares Outstanding:
Basic 317,787,836   317,452,212   317,696,823   317,296,107
Diluted 318,577,079   318,405,269   318,511,609   318,396,042
   

EVERSOURCE ENERGY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
 
For the Nine Months Ended September 30,
(Thousands of Dollars)     2016     2015
   
Operating Activities:
Net Income $ 718,762 $ 702,319
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:
Depreciation 531,781 495,389
Deferred Income Taxes 301,413 153,353
Pension, SERP and PBOP Expense 31,627 71,802
Pension and PBOP Contributions (121,854 ) (162,880 )
Regulatory Overrecoveries, Net 152,808 31,874
Amortization of Regulatory Assets, Net 56,223 42,587
Other (27,671 ) (39,822 )
Changes in Current Assets and Liabilities:
Receivables and Unbilled Revenues, Net (191,454 ) (148,442 )
Fuel, Materials, Supplies and Inventory 25,425 47,380
Taxes Receivable/Accrued, Net 347,898 383,047
Accounts Payable (121,513 ) (233,660 )
Other Current Assets and Liabilities, Net (53,077 ) 8,370  
Net Cash Flows Provided by Operating Activities 1,650,368   1,351,317  
 
Investing Activities:
Investments in Property, Plant and Equipment (1,359,171 ) (1,177,285 )
Proceeds from Sales of Marketable Securities 444,209 556,582
Purchases of Marketable Securities (437,197 ) (535,044 )
Other Investing Activities (9,463 ) (2,769 )
Net Cash Flows Used in Investing Activities (1,361,622 ) (1,158,516 )
 
Financing Activities:
Cash Dividends on Common Shares (423,471 ) (397,363 )
Cash Dividends on Preferred Stock (5,639 ) (5,639 )
Decrease in Notes Payable (426,453 ) (387,575 )
Issuance of Long-Term Debt 800,000 825,000
Retirements of Long-Term Debt (200,000 ) (216,700 )
Other Financing Activities (17,074 ) (13,446 )
Net Cash Flows Used in Financing Activities (272,637 ) (195,723 )
Net Increase/(Decrease) in Cash and Cash Equivalents 16,109 (2,922 )
Cash and Cash Equivalents - Beginning of Period 23,947   38,703  
Cash and Cash Equivalents - End of Period $ 40,056   $ 35,781  
 

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