BERLIN, Conn., Aug. 1 /PRNewswire-FirstCall/ -- Northeast Utilities today reported earnings for the second quarter of 2008 of $57.8 million, or $0.37 per share, compared with earnings of $48.5 million, or $0.31 per share, in the second quarter of 2007.
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NU earned $116.2 million, or $0.75 per share, in the first half of 2008, compared with earnings of $123.6 million, or $0.80 per share, in the first half of 2007. Results in 2008 include a previously disclosed first quarter charge of $29.8 million, or $0.19 per share, associated with a litigation settlement. Excluding that charge, NU earned $146.0 million, or $0.94 per share(1), in the first half of 2008.
Charles W. Shivery, NU chairman, president, and chief executive officer, attributed the improved results primarily to growth in the company's transmission segment where the company is investing heavily to meet the current and future energy needs of its customers and the New England region.
"The investments we have made over the past several years are providing a more reliable and efficient system of delivering energy to our customers, and at the same time benefiting investors through increased earnings and cash flow," Shivery said. "Our new undersea cables between Norwalk, Connecticut and Long Island entered service on July 29. As a result, Connecticut and New York customers already are benefiting from a new reliable, environmentally sound connection between two power pools that is so important on the hot, humid days we've been having this summer. We look forward to completing our final two major transmission projects in southwest Connecticut by early 2009 and continuing to invest time and resources in a portfolio of solutions to address the future energy needs of the region's customers, including access to renewable resources."
2008 Earnings Guidance
NU today raised its consolidated 2008 earnings guidance to between $1.60 per share and $1.75 per share, including the litigation settlement charge noted above, and between $1.80 per share and $1.95 per share(1), excluding it. NU's previous consolidated earnings range excluding the charge was between $1.65 per share and $1.90 per share(1).
Transmission segment earnings guidance was raised to between $0.85 per share and $0.90 per share(1) from between $0.75 per share and $0.85 per share(1), primarily due to the company's continued success in managing transmission projects and to the effects of a March 2008 Federal Energy Regulatory Commission decision involving equity returns allowed New England transmission owners. Distribution and generation segment guidance was narrowed to between $1.05 per share and $1.10 per share(1) from between $1.05 per share and $1.15 per share(1), in part due to sales running below earlier projections. Additionally, NU now estimates that its competitive businesses will earn between $0.00 per share and $0.05 per share(1) in 2008, rather than the previous breakeven projection. Operating results in those businesses to date have been better than previously projected.
NU parent and other is projected to lose approximately $0.30 per share(1), including the litigation settlement charge, and $0.10 per share(1), excluding it. Previously, NU had projected losses of between $0.30 per share and $0.35 per share(1), including the charge, and between $0.10 per share and $0.15 per share, excluding it. Shivery said parent interest costs are now projected to be lower than previously anticipated.
The following table reconciles the company's current and former 2008 earnings guidance:
Previous 2008 Current 2008 EPS Guidance EPS Guidance Distribution/Generation $1.05 - $1.15 $1.05 - $1.10 Transmission $0.75 - $0.85 $0.85 - $0.90 Competitive Breakeven $0.00 - $0.05 Parent and other affiliates, ex. Litigation Charge ($0.15) - ($0.10) ($0.10) Consolidated, ex. Litigation Charge $1.65 - $1.90 $1.80 - $1.95 Litigation Charge ($0.19) ($0.19) Consolidated $1.45 - $1.70 $1.60 - $1.75 Transmission
NU's transmission segment earned $35.2 million, or $0.23 per share(1), in the second quarter of 2008 and $67.7 million, or $0.43 per share(1), in the first half of 2008, compared with $21.1 million, or $0.14 per share(1), in the second quarter of 2007 and $37.0 million, or $0.25 per share(1), in the first half of 2007. Shivery noted that transmission segment earnings have risen as a result of NU's increased investment in its transmission system to meet customer reliability needs, particularly in southwest Connecticut. In addition to the Connecticut-Long Island cables entering service earlier this week, Shivery provided the following update on NU's two other major projects in that area:
-- The Connecticut Light and Power Company's (CL&P) share of a 69-mile 345-kV transmission line between Norwalk and Middletown, Connecticut is approximately 95 percent complete and expected to be in service early in 2009. CL&P had originally expected the project to be in service by the end of 2009. Primarily because of the earlier completion date, CL&P's share of the project is now expected to cost approximately $1.0 billion, $50 million below the previous $1.05 billion estimate.
-- CL&P's nine-mile, $223 million, 115-kV Glenbrook Cables underground transmission project between Norwalk and Stamford, Connecticut is approximately 93 percent complete and expected to be in service by the end of 2008.
NU's capital expenditures totaled $658.4 million in the first six months of 2008, including transmission expenditures of $426.3 million.
Distribution and Generation
NU's distribution and generation segment earned $25.6 million, or $0.16 per share(1), in the second quarter of 2008 and $79.4 million, or $0.51 per share(1), in the first half of 2008, compared with $23.4 million, or $0.15 per share(1), in the second quarter of 2007 and $71.6 million, or $0.45 per share(1), in the first half of 2007.
CL&P's distribution segment earned $14.8 million in the second quarter of 2008 and $33.7 million in the first half of 2008, compared with $7.0 million in the second quarter of 2007 and $27.6 million in the first half of 2007. Improved second quarter and first half 2008 results were due to a $77.8 million annualized rate increase effective February 1, 2008, offset by higher storm-related operation expenses, higher amortization and interest expenses, and a 4 percent decline in year-to-date retail kilowatt-hour sales.
Public Service Company of New Hampshire's (PSNH) distribution and generation segment earned $10.1 million in the second quarter of 2008 and $21.6 million in the first half of 2008, compared with $12.6 million in the second quarter of 2007 and $20.7 million in the first half of 2007. The benefits of distribution rate increases effective July 1, 2007 and January 1, 2008 were largely offset by higher operation, interest and depreciation expenses, and the absence of a $2.7 million one-time after-tax benefit PSNH recorded in the second quarter of 2007 when it reflected recovery of certain 2006 transmission expenses.
Western Massachusetts Electric Company's (WMECO) distribution segment earned $1.7 million in the second quarter of 2008 and $6.5 million in the first half of 2008, compared with $3.5 million in the second quarter of 2007 and $9.4 million in the first half of 2007. Lower results were due to higher operating expenses, a $1 million after-tax regulatory disallowance, and a 2.9 percent decline in year-to-date retail kilowatt-hour sales.
NU's overall kilowatt-hour sales were down 4.5 percent in the second quarter of 2008, compared with the second quarter of 2007, and down 3.1 percent during the first half of the year, compared with the same period of 2007. On a weather-adjusted basis, electric sales were down 4.1 percent in the second quarter and down 2.6 percent through the first six months of 2008. Shivery said that while commercial sales are off only 0.6 percent this year, the more significant 3.5 percent reduction in residential sales appears to reflect a combination of consumer reaction to tightening household budgets, the effects of the company's successful energy conservation programs, and milder weather in the second quarter and first half of 2008, compared with 2007.
Yankee Gas Services Company lost $1.0 million in the second quarter of 2008 and earned $17.6 million in the first half of 2008, compared with a profit of $0.3 million in the second quarter of 2007 and a profit of $13.9 million in the first half of 2007. The improved year-to-date results were largely due to a distribution rate increase that was effective July 1, 2007, which was partially offset by a second-quarter, $3.5 million after-tax charge resulting from a June 2008 regulatory decision requiring Yankee Gas to refund previous gas cost recoveries.
Also today, NU updated its estimate of the cost of installing a wet scrubber at PSNH's coal-fired, two-unit base load Merrimack plant in Bow, New Hampshire. PSNH now estimates that the total project cost will be approximately $457 million, compared with its previous estimate of $250 million. PSNH said the revised estimate includes increases in the prices for materials, construction services, and engineering services required to design and build the scrubber and associated plant. The project is expected to reduce the two units' mercury emissions by approximately 85 percent and its sulfur dioxide emissions by more than 90 percent. Under a New Hampshire statute passed in 2006, the scrubber must be operational by July 2013.
Competitive businesses
NU Enterprises, Inc. (NUEI), the holding company for NU's competitive businesses, earned $2.2 million in the second quarter of 2008 and $4.1 million in the first half of 2008, compared with earnings of $2.5 million in the second quarter of 2007 and $7.4 million in the first half of 2007. Shivery said NUEI's 2008 profits reflect effective management of its remaining wholesale power arrangements as that business continues to wind down.
Parent and other affiliates
NU parent and other affiliates lost $5.2 million in the second quarter of 2008 and $35.0 million in the first half of 2008, compared with earnings of $1.5 million in the second quarter of 2007 and $7.6 million in the first half of 2007. The decline in 2008 results primarily reflect the first quarter litigation charge and a reduction in NU parent's interest income as its cash continues to be invested as equity in operating company infrastructure investments.
The following table reconciles 2008 and 2007 second quarter and first half results:
Second First Six Quarter Months 2007 Reported EPS $0.31 $0.80 Improved transmission earnings in 2008 $0.09 $0.18 Improved distribution and generation earnings in 2008 $0.01 $0.06 Lower competitive business earnings --- ($0.02) Lower parent results, excluding litigation settlement charge ($0.04) ($0.08) Reported EPS before litigation charge $0.37 $0.94 Litigation settlement charge in 2008 --- ($0.19) 2008 Reported EPS $0.37 $0.75
Financial results for the second quarter and first half of 2008 and 2007 are noted below.
Three months ended: June 30, June 30, Increase (in millions) 2008 2007 (Decrease) 2008 EPS(1) CL&P Distribution $14.8 $7.0 $7.8 $0.10 PSNH Distribution/ Generation $10.1 $12.6 ($2.5) $0.06 WMECO Distribution $1.7 $3.5 ($1.8) $0.01 Yankee Gas ($1.0) $0.3 ($1.3) ($0.01) Total-Distribution/ Generation $25.6 $23.4 $2.2 $0.16 CL&P Transmission $30.0 $17.4 $12.6 $0.19 PSNH Transmission $3.6 $2.6 $1.0 $0.03 WMECO Transmission $1.6 $1.1 $0.5 $0.01 Total-Transmission $35.2 $21.1 $14.1 $0.23 Total-Regulated Businesses $60.8 $44.5 $16.3 $0.39 NU Parent and Other Affiliates ($5.2) $1.5 ($6.7) ($0.03) Total-Regulated and Parent $55.6 $46.0 $9.6 $0.36 Total-Competitive $2.2 $2.5 ($0.3) $0.01 Reported Earnings $57.8 $48.5 $9.3 $0.37 Six months ended: June 30, June 30, Increase (in millions) 2008 2007 (Decrease) 2008 EPS(1) CL&P Distribution $33.7 $27.6 $6.1 $0.22 PSNH Distribution/ Generation $21.6 $20.7 $0.9 $0.14 WMECO Distribution $6.5 $9.4 ($2.9) $0.04 Yankee Gas $17.6 $13.9 $3.7 $0.11 Total-Distribution/ Generation $79.4 $71.6 $7.8 $0.51 CL&P Transmission $55.8 $30.4 $25.4 $0.36 PSNH Transmission $8.8 $4.5 $4.3 $0.05 WMECO Transmission $3.1 $2.1 $1.0 $0.02 Total-Transmission $67.7 $37.0 $30.7 $0.43 Total-Regulated Businesses $147.1 $108.6 $38.5 $0.94 NU Parent and Other Affiliates, ex. litigation charge ($5.2) $7.6 ($12.8) ($0.03) Total-Competitive $4.1 $7.4 ($3.3) $0.03 Total-ex litigation charge $146.0 $123.6 $22.4 $0.94 Litigation charge ($29.8) --- ($29.8) ($0.19) Reported Earnings $116.2 $123.6 ($7.4) $0.75 Retail sales data: June 30, June 30, % Change % Change Gwh for 3 months ended 2008 2007 Actual Weather Norm. CL&P 5,314 5,644 (5.8%) (5.5%) PSNH 1,908 1,927 (1.0%) (0.4%) WMECO 915 951 (3.8%) (3.5%) Total NU 8,133 8,518 (4.5%) (4.1%) Yankee Gas firm volumes in mmcf for 3 mos. ended 7,217 7,045 2.4% 7.4% Retail sales data: June 30, June 30, % Change % Change Gwh for 6 months ended 2008 2007 Actual Weather Norm. CL&P 11,286 11,758 (4.0%) (3.5%) PSNH 3,963 3,984 (0.5%) (0.1%) WMECO 1,919 1,977 (2.9%) (2.5%) Total NU 17,160 17,711 (3.1%) (2.6%) Yankee Gas firm volumes in mmcf for 6 mos. ended 22,319 22,918 (2.6%) 1.2%
NU has approximately 155 million common shares outstanding. It operates New England's largest energy delivery system, serving more than 2 million customers in Connecticut, New Hampshire and Massachusetts.
This news release includes statements concerning NU's expectations, plans, objectives, future financial performance 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 by words such as "estimate", "expect", "anticipate", "intend", "plan", "believe", "forecast", "should", "could", and 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, actions or inactions by local, state and federal regulatory bodies; competition and industry restructuring; changes in economic conditions; changes in weather patterns; changes in laws, regulations or regulatory policy; changes in levels or timing of capital expenditures; developments in legal or public policy doctrines; technological developments; changes in accounting standards and financial reporting regulations; fluctuations in the value of our remaining competitive electricity positions; actions of rating agencies; subsequent recognition, derecognition and measurement of tax positions; and other presently unknown or unforeseen factors. Other risk factors are detailed from time to time in our reports to the Securities and Exchange Commission. Any forward looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update the information contained in any forward-looking statements to reflect developments or circumstances occurring after the statement is made.
(1) All per share amounts in this news release are reported on a fully diluted basis. The only common equity securities that are publicly traded are common shares of NU. The EPS of each segment does not represent a direct legal interest in the assets and liabilities allocated to any one segment but rather represents a direct interest in NU's assets and liabilities as a whole. EPS by segment is a non-GAAP (not determined using generally accepted accounting principles) measure that is calculated by dividing the net income or loss of each segment by the average fully diluted NU common shares outstanding for the period. Management uses this measure to provide segmented earnings guidance and believes that this measurement is useful to investors to evaluate the actual financial performance and contribution of NU's business segments. This release also references our 2008 earnings and EPS and 2008 guidance excluding a significant charge associated with a litigation settlement payment made to Consolidated Edison, Inc. Due to the nature and significance of the litigation charge, management believes that this non-GAAP presentation is more representative of our performance and provides additional and useful information to investors in analyzing historical and future performance. These non-GAAP measures should not be considered as an alternative to NU consolidated net income and EPS determined in accordance with GAAP as an indicator of NU's operating performance.
Note: NU will webcast an investor call Monday, August 4 at 10 a.m. Eastern Daylight Time. The call can be accessed through NU's website at http://www.nu.com/. Slides associated with the webcast will be posted earlier Monday in the Investors section of NU's website under Presentations and Webcasts.
NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 (Thousands of Dollars, except share information) Operating Revenues $1,325,345 $1,391,772 $2,845,312 $3,095,290 Operating Expenses: Operation - Fuel, purchased and net interchange power 661,699 804,802 1,485,016 1,875,288 Other 237,203 245,879 523,084 483,112 Maintenance 70,896 59,842 127,605 105,827 Depreciation 68,321 63,420 136,075 126,889 Amortization of regulatory assets/ (liabilities), net 41,945 (3,453) 70,800 2,770 Amortization of rate reduction bonds 47,884 47,114 101,234 98,913 Taxes other than income taxes 59,278 57,360 131,107 129,950 Total operating expenses 1,187,226 1,274,964 2,574,921 2,822,749 Operating Income 138,119 116,808 270,391 272,541 Interest Expense: Interest on long-term debt 46,449 40,234 89,222 76,447 Interest on rate reduction bonds 12,987 15,839 26,703 32,189 Other interest 6,624 3,504 12,776 10,223 Interest expense, net 66,060 59,577 128,701 118,859 Other Income, Net 10,370 11,873 23,928 25,942 Income from Continuing Operations Before Income Tax Expense 82,429 69,104 165,618 179,624 Income Tax Expense 23,192 21,703 46,598 54,426 Income from Continuing Operations Before Preferred Dividends of Subsidiary 59,237 47,401 119,020 125,198 Preferred Dividends of Subsidiary 1,389 1,389 2,779 2,779 Income from Continuing Operations 57,848 46,012 116,241 122,419 Discontinued Operations: Income from Discontinued Operations - 564 - 248 Gains fro Sale/Disposition of Discontinued Operations - 3,925 - 2,017 Income Tax Expense - 1,948 - 1,037 Income from Discontinued Operations - 2,541 - 1,228 Net Income $57,848 $48,553 $116,241 $123,647 Basic and Fully Diluted Earnings Per Common Share: Income from Continuing Operations $0.37 $0.30 $0.75 $0.79 Income from Discontinued Operations - 0.01 - 0.01 Basic and Fully Diluted Earnings Per Common Share $0.37 $0.31 $0.75 $0.80 Basic Common Shares Outstanding (weighted average) 155,476,492 154,729,676 155,381,302 154,539,678 Fully Diluted Common Shares Outstanding (weighted average) 155,895,348 155,213,094 155,808,481 155,102,672 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 Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities. NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2008 2007 (Thousands of Dollars) ASSETS Current Assets: Cash and cash equivalents $12,128 $15,104 Investments in securitizable assets - 308,182 Receivables, less provision for uncollectible accounts of $41,863 in 2008 and $25,529 in 2007 584,494 401,283 Unbilled revenues 195,414 101,860 Taxes receivable 75,574 13,850 Fuel, materials and supplies 228,767 210,850 Marketable securities - current 82,488 70,816 Derivative assets - current 177,793 105,517 Prepayments and other 37,028 58,794 1,393,686 1,286,256 Property, Plant and Equipment: Electric utility 8,027,373 7,594,606 Gas utility 1,003,459 977,290 Other 287,391 310,535 9,318,223 8,882,431 Less: Accumulated depreciation: $2,559,324 for electric and gas utility and $158,305 for other in 2008; $2,483,570 for electric and gas utility and $178,193 for other in 2007 2,717,629 2,661,763 6,600,594 6,220,668 Construction work in progress 1,121,154 1,009,277 7,721,748 7,229,945 Deferred Debits and Other Assets: Regulatory assets 2,449,551 2,057,083 Goodwill 287,591 287,591 Prepaid pension 219,431 202,512 Marketable securities - long-term 38,625 53,281 Derivative assets - long-term 446,631 298,001 Other 151,989 167,153 3,593,818 3,065,621 Total Assets $12,709,252 $11,581,822 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 Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities. NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2008 2007 (Thousands of Dollars) LIABILITIES AND CAPITALIZATION Current Liabilities: Notes payable to banks $87,000 $79,000 Long-term debt - current portion 54,286 154,286 Accounts payable 568,774 598,546 Accrued interest 61,786 56,592 Derivative liabilities - current 35,898 71,601 Other 304,795 246,125 1,112,539 1,206,150 Rate Reduction Bonds 802,259 917,436 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 1,109,783 1,067,490 Accumulated deferred investment tax credits 27,108 28,845 Deferred contractual obligations 205,935 222,908 Regulatory liabilities 897,282 851,780 Derivative liabilities - long-term 811,147 208,461 Accrued postretirement benefits 170,641 181,507 Other 426,614 383,611 3,648,510 2,944,602 Capitalization: Long-Term Debt 4,090,288 3,483,599 Preferred Stock of Subsidiary - Non-Redeemable 116,200 116,200 Common Shareholders' Equity: Common shares, $5 par value - authorized 225,000,000 shares; 176,160,857 shares issued and 155,523,764 shares outstanding in 2008 and 175,924,694 shares issued and 155,079,770 shares outstanding in 2007 880,804 879,623 Capital surplus, paid in 1,469,588 1,465,946 Deferred contribution plan - employee stock ownership plan (21,481) (26,352) Retained earnings 967,329 946,792 Accumulated other comprehensive income 4,819 9,359 Treasury stock, 19,708,136 shares in 2008 and 19,705,545 shares in 2007 (361,603) (361,533) Common Shareholders' Equity 2,939,456 2,913,835 Total Capitalization 7,145,944 6,513,634 Total Liabilities and Capitalization $12,709,252 $11,581,822 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 Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities. NORTHEAST UTILITIES AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2008 2007 (Thousands of Dollars) Operating Activities: Net income $116,241 $123,647 Adjustments to reconcile to net cash flows provided by/(used in) operating activities: Bad debt expense 13,163 12,917 Depreciation 136,075 126,889 Deferred income taxes 52,995 (10,158) Pension expense, net of capitalized portion 4,011 10,388 (Deferral)/amortization of recoverable energy costs (6,046) 6,248 Amortization of rate reduction bonds 101,234 98,913 Amortization of regulatory assets, net 70,800 2,770 Regulatory (refunds and underrecoveries)/ overrecoveries (128,830) 64,174 Derivative assets and liabilities (25,216) (36,830) Deferred contractual obligations (16,973) (23,489) Other non-cash adjustments (7,165) (2,989) Other sources of cash 274 - Other uses of cash (15,552) (35,019) Changes in current assets and liabilities: Receivables and unbilled revenues, net 35,760 56,248 Fuel, materials and supplies (17,946) (12,135) Investments in securitizable assets (25,787) 17,674 Other current assets 6,426 7,177 Accounts payable (20,648) (67,312) Counterparty deposits and margin special deposits 59,110 18,926 Taxes receivable/accrued (31,412) (372,867) Other current liabilities (21,489) (22,672) Net cash flows provided by/(used in) operating activities 279,025 (37,500) Investing Activities: Investments in property and plant (625,133) (491,137) Proceeds from sales of investment securities 128,778 101,113 Purchases of investment securities (130,105) (103,902) Rate reduction bond escrow and other deposits 9,010 8,567 Other investing activities 2,385 42 Net cash flows used in investing activities (615,065) (485,317) Financing Activities: Issuance of common shares 4,562 8,520 Issuance of long-term debt 660,000 345,000 Retirements of rate reduction bonds (115,177) (109,755) Increase in short-term debt 8,000 - Retirements of long-term debt (154,286) (4,877) Cash dividends on common shares (62,574) (58,502) Other financing activities (7,461) (657) Net cash flows provided by financing activities 333,064 179,729 Net decrease in cash and cash equivalents (2,976) (343,088) Cash and cash equivalents - beginning of period 15,104 481,911 Cash and cash equivalents - end of period $12,128 $138,823 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 Northeast Utilities and Subsidiaries and is not a representation, prospectus, or intended for use in connection with any purchase or sale of securities.
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