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TECO Energy Reports First-Quarter Results

TAMPA, Fla., May 05, 2016 (BUSINESS WIRE) -- TECO Energy, Inc. TE, -0.07% today reported first-quarter non-GAAP results from continuing operations, which exclude $0.1 million of Emera transaction costs, of $73.8 million, or $0.31 on a per-share basis, compared with $64.5 million, or $0.28 on a per-share basis, in 2015.

First-quarter 2016 net income was $73.8 million, or $0.31 per share, compared with $58.0 million, or $0.25 per share, in the first quarter of 2015. Net income from continuing operations was $73.7 million, or $0.31 per share, in the 2016 first quarter, compared with $63.8 million, or $0.27 per share, for the same period in 2015. The first quarter losses in discontinued operations of $5.8 million in 2015 reflected the operating results and charges associated with TECO Coal, which was sold in 2015.

TECO Energy President and Chief Executive Officer John Ramil said, “Our operating companies performed well in the first quarter, delivering good results, despite the impact on energy sales of an El Niño winter weather pattern. The Florida operations continue to benefit from the state’s growing economy, with the number of electric and gas customers up 1.7% and 2.4%, respectively. Our New Mexico Gas operations delivered improved results from better winter weather and a continued focus on cost control. At the same time, we are making good progress to obtain the various approvals needed to close our transaction with Emera, with only the approval by the New Mexico Public Regulation Commission remaining.”

Non-GAAP Results

Non-GAAP results in the first quarter and 12-months-ended periods of 2016 and 2015 exclude costs related to the pending acquisition by Emera, and costs associated with the integration and acquisition of New Mexico Gas Co. (NMGC). The table below compares the TECO Energy GAAP net income with the non-GAAP measures used in this release.

Non-GAAP results exclude charges and gains contained in the Results Reconciliation table later in this release. See the Non-GAAP Presentation section and Results Reconciliation table later in this release for reconciliation to GAAP results and a discussion regarding this presentation of non-GAAP results and management’s use of this information.

All amounts included in the non-GAAP discussion below are after tax, unless otherwise noted.

3 months

ended Mar. 31

12 months

ended Mar. 31

(millions)

2016

2015

2016

2015

Net income $ 73.8 $58.0 $189.3 $138.2
Discontinued operations 0.1 (5.8) (61.8) (83.6)
Net income from continuing operations 73.7 63.8 251.1 221.8
Charges 0.1 0.7 14.4 21.9
Non-GAAP Results from continuing
operations $73.8 $64.5 $265.5 $243.7

Segment Reporting

The table below includes TECO Energy segment information on a GAAP basis, which includes all charges and gains for the periods shown.

Segment Information

(millions)

3 months

ended Mar. 31

12 months

ended Mar. 31

Net Income Summary

2016

2015

2016

2015

Tampa Electric $ 50.2 $ 48.2 $243.0 $227.5
Peoples Gas System 13.1 14.6 33.8

35.9

New Mexico Gas Co. [(1)] 15.2 13.9 25.4 24.5
Other - net (4.8) (12.9) (51.1) (66.1)
Net income from continuing operations 73.7 63.8 251.1 221.8
Discontinued operations [(2)] 0.1 (5.8) (61.8) (83.6)
Total net income $ 73.8 $ 58.0 $189.3 $138.2

1. The 12-months-ended 2015 period reflects results after the Sept. 2, 2014, closing of the NMGC acquisition.

2. Discontinued operations for all periods shown include the operating results at TECO Coal, impairment charges and costs associated with the sale of TECO Coal.

All amounts included in the operating company discussions below are after tax, unless otherwise noted.

Tampa Electric

Tampa Electric’s net income for the first quarter of 2016 was $50.2 million, compared with $48.2 million for the same period in 2015. Results for the quarter reflected a 1.7% higher average number of customers, and higher energy sales primarily due to the higher number of customers. Results reflected operations and maintenance expense slightly higher than 2015, and higher depreciation and interest expenses. First-quarter net income in 2016 included $5.6 million of Allowance for Funds Used During Construction (AFUDC) equity, which represents allowed equity cost capitalized to construction costs, compared with $3.8 million in the 2015 quarter.

Total degree days in Tampa Electric's service area in the first quarter of 2016 were 3% above normal, but 4% below the 2015 period, when degree days were 6% above normal. Total net energy for load increased 1.7% in the first quarter of 2016, compared with the same period in 2015. In the 2016 period, pretax base revenues were $6.2 million higher than in 2015, driven by customer growth and higher energy sales. The quarter included more than $1 million of higher pretax base revenue from higher base rates, as a result of the 2013 rate case settlement.

While net energy for load is a calendar measurement of retail energy sales rather than a billing-cycle measurement, the quarterly energy sales shown on the operating statistical summary that accompanies this earnings release reflect the energy sales based on billing cycles, which can vary period to period. Retail energy sales to residential and commercial customers increased primarily from weather and customer growth. Sales to non-phosphate industrial customers increased due to the strength of the Tampa area economy. Sales to lower-margin industrial-phosphate customers decreased as self-generation by those customers increased.

Operations and maintenance expense, excluding all Florida Public Service Commission (FPSC)-approved cost-recovery clauses, was slightly higher than in the 2015 quarter, reflecting higher costs to safely and reliably operate and maintain the generating, transmission and distribution systems, essentially offset by lower employee-related costs, primarily due to the lower level of short-term incentive accruals for all employees in 2016 compared to 2015. Depreciation and amortization expense increased $2.0 million in 2016, as a result of normal additions to facilities to reliably serve customers, and interest expense increased $0.7 million due to higher long-term debt balances.

Peoples Gas System (PGS) reported net income of $13.1 million for the first quarter, compared with $14.6 million in the 2015 quarter. Average customer growth was 2.4% in the quarter. Therm sales to residential customers decreased as a result of mild winter weather that was partially offset by customer growth. Sales to commercial customers increased due to customer growth from the stronger economy and increased sales of compressed natural gas to vehicle fleets. Sales to power-generation customers and off-system sales increased, reflecting higher levels of operation by gas-fired generation in the state due to lower natural gas prices. First-quarter results in 2016 reflected non-fuel operations and maintenance expense $1.0 million higher than in 2015, driven by higher operating and compliance costs, partially offset by lower employee-related costs, primarily due to the lower level of short-term incentive accruals for all employees in 2016 compared to 2015. Depreciation and amortization increased slightly due to normal additions to facilities to serve customers.

NMGC

NMGC reported first-quarter net income of $15.2 million, compared with $13.9 million in the 2015 period. Results reflected the benefit of heating degree days that were almost 3% higher than 2015, but nearly 7% below normal. Growth in the average number of customers in the 2016 quarter was 0.6%. Operating and maintenance expense was slightly lower from acquisition synergies and a focus on cost control. Results included $1.9 million of pretax rate credits to customers under the Certification of Stipulation approved by the New Mexico Public Regulation Commission (NMPRC) in 2014.

Other - net

The first quarter 2016 non-GAAP cost from continuing operations for Other – net of $4.7 million excluded $0.1 million of costs associated with the pending Emera transaction, compared with the non-GAAP cost of $12.2 million in 2015, which excluded $0.7 million of NMGC-related integration costs. First-quarter results in 2016 reflected a $5.8 million tax benefit due to an accounting rule change related to stock-based incentive compensation, and lower interest expense as a result of refinancing debt maturities. The GAAP cost from continuing operations for Other – net in the first quarter of 2016 was $4.8 million, compared with a cost of $12.9 million in 2015.

Discontinued Operations

The sale of TECO Coal closed in September 2015. The $0.1 million first quarter gain recorded in discontinued operations reflects a refund of prepaid costs recorded in the Other – net segment, compared with a $5.8 million loss in the 2015 period, which reflected TECO Coal’s operating results prior to its sale.

Emera Acquisition Progress

  • On Oct. 19, 2015, TECO Energy and Emera filed for approval of the merger with the NMPRC Docket No. 15-00327-UT. On April 11, TECO Energy and Emera announced that they had filed an unopposed stipulation with the NMPRC, reflecting a settlement reached with intervening parties in the acquisition case currently pending before the NMPRC for approval of Emera’s acquisition of TECO Energy and the indirect acquisition of NMGC. This stipulation was subject to a public hearing before the hearing examiner, which was held May 2. A final recommendation by the hearing examiner and final approval of the merger by the NMPRC are required.
  • On Dec. 3, 2015, TECO Energy shareholders approved the merger with Emera.
  • On Jan. 20, 2016, the Federal Energy Regulatory Commission (FERC) issued an order authorizing the merger, finding that it is consistent with the public interest.
  • On Feb. 8 the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) expired without comment.
  • On March 23, Emera announced that the Committee on Foreign Investment in the United States (CFIUS) had completed its review of the acquisition of TECO Energy and had determined that there are no unresolved national security concerns with respect to the acquisition.

Non-GAAP Presentation

Management believes it is helpful to present a non-GAAP measure of performance that reflects the ongoing operations of TECO Energy’s businesses and that allows investors to better understand and evaluate the business as it is expected to operate in future periods.

Management and the board of directors use non-GAAP measures as a tool for measuring the company’s performance, for making decisions that are dependent upon the profitability of the company’s various operating units, and for determining levels of incentive compensation.

The non-GAAP measures of financial...


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