GREEN BAY, Wisc., Aug. 3 /PRNewswire-FirstCall/ -- WPS Resources
Corporation (NYSE:WPS), an operator of regulated utility and
nonregulated energy related business units, today announced the
following results for the quarter and six month period ended June
30, 2006: Highlights -- WPS Resources Corporation produced income
available for common shareholders of $34.9 million, representing
earnings per diluted share of $0.83, for the quarter ended June 30,
2006, compared to earnings of $23.9 million, representing earnings
per diluted share of $0.62, for the comparable quarter in 2005.
Second quarter 2006 results included: - a $5.6 million after-tax
loss in discontinued operations, - a $5.4 million after-tax loss,
including $2.5 million in after-tax transition costs, associated
with the recently acquired retail natural gas distribution
operations in Michigan and Minnesota, - a $5.4 million after-tax
gain from the sale of the Kimball natural gas storage field, - a
$3.8 million after-tax gain from the sale of its equity interest in
Guardian Pipeline LLC, and - unfavorable weather conditions
resulted in an estimated $6 million decrease in income available to
common shareholders for the second quarter 2006, as compared to the
same period last year. -- Income available for common shareholders
generated at the company's nonregulated segment, WPS Energy
Services ("ESI"), increased approximately 272% to $13.4 million in
this year's second quarter, compared to $3.6 million in the second
quarter of 2005. The latest quarterly results included: - the
negative impact of an approximate $5 million phase-out of synfuel
tax credits related to normal production, which was more than
offset by $7.6 million of after-tax mark-to-market gains on oil
hedges utilized to mitigate the risk of ESI's exposure to the
phase-out of these credits, - a $3.1 million after-tax loss from
spot-to-forward differentials, unrealized gains on Ohio mass market
options, and other mark-to- market activities related to natural
gas operations, - a $0.9 million after-tax loss due to increased
operating costs in 2006 associated with the liquidation of an
electric supply contract in Maine during the fourth quarter of
2005, and - a gain on the sale of the Kimball natural gas storage
field (mentioned above). -- Equity earnings recognized from the
company's investment in American Transmission Company LLC ("ATC")
increased 69% to approximately $5.9 million after taxes in the
second quarter of 2006, compared to about $3.5 million after taxes
in the second quarter of 2005. WPS Resources owns approximately 33%
of ATC at June 30, 2006, up from about 26% at June 30, 2005. --
Income available for common shareholders generated by the company's
regulated electric and natural gas utility operations decreased
approximately 16% to $15.9 million in this year's second quarter,
compared to $19.0 million in the second quarter of 2005. Typical
seasonal weakness and transition expenses associated with our
recently acquired retail natural gas distribution operations in
Michigan and Minnesota, as well as unfavorable weather conditions
and customer conservation efforts due to high energy prices
negatively impacted margins at the regulated utilities. -- For the
six months ended June 30, 2006, WPS Resources reported income
available for common shareholders of $95.0 million, representing
$2.30 per diluted share, compared to $89.8 million, representing
$2.35 per diluted share, for the same period in 2005. -- WPS
Resources recently announced the following important events: - On
July 10, 2006, the merger agreement with Peoples Energy (NYSE:
NYSE:PGL) was announced. - On July 26, 2006, the company completed
the sale of the Sunbury generation facility. - On August 2, 2006,
the company and Peoples Energy filed a joint application with the
Illinois Commerce Commission seeking expedited approval of the
merger. -- WPS Resources' guidance for 2006 is being raised to
between $3.64 and $4.12 diluted earnings per share, which includes
transition costs and operating results related to the recent
acquisitions of natural gas distribution operations in Michigan and
Minnesota, asset management sales, discontinued operations, and
increased purchased power costs for WPS Energy Services' customers
in Maine. "Financial results for the second quarter of 2006
improved over the same quarter of the prior year, aided by the
continued strong performance of WPS Energy Services and by our
asset management strategies," stated Larry Weyers, WPS Resources'
Chairman, President, and CEO. "Strong results from wholesale
electric operations at ESI continued in the second quarter of 2006,
aided again by volatile energy prices. We also benefited from gains
on the sales of WPS Energy Services' natural gas storage field and
our investment in Guardian Pipeline, LLC. Both of these
transactions are consistent with our asset management strategy that
calls for the disposition of existing assets, including land,
plants, or entire business units that are no longer strategic to
ongoing operations. "Unfortunately, we also continued to experience
unfavorable weather conditions at our utility operations in the
second quarter, which reduced customer consumption, and negatively
impacted earnings from our utility operations. Furthermore, our
utility results were negatively impacted by transition costs
associated with the acquisition of retail natural gas distribution
operations in Michigan and Minnesota, as well as the timing of the
acquisition during what is typically a weak seasonal earnings
period for these assets," added Weyers. The following table depicts
income available for common shareholders and revenue for the
comparable second quarters. WPS Resources' Income Available for
Common Shareholders and Revenue for the Quarters Ended June 30,
2006 and June 30, 2005 Income (Loss) Revenue Segment 2006 2005 2006
2005 (in millions)(in millions)(in millions)(in millions) Electric
Utility $23.4 $20.9 $262.4 $240.2 Gas Utility (7.5) (1.9) 95.6 89.8
WPS Energy Services 13.4 3.6 1,134.1 995.3 Holding Company and
Other 5.6 1.3 0.3 0.3 Intersegment Eliminations - - (13.4) (11.1)
Total WPS Resources $34.9 $23.9 $1,479.0 $1,314.5 The following
tables depict the impact that weather conditions had on diluted
earnings per share. Comparison of Estimated Weather Impact on
Utility Earnings and Diluted Earnings per Share Between the
Quarters Ended June 30, 2006 and June 30, 2005 Electric Diluted Gas
Diluted Percent EPS Impact EPS Impact Change (After Tax) (After
Tax) Heating Compared with Normal - 2006 22% warmer (.02) (.04)
Heating Compared with Normal - 2005 11% warmer (.01) (.05) Cooling
Compared with Normal - 2006 5% cooler (.02) - Cooling Compared with
Normal - 2005 58% warmer .10 - Heating Compared with Prior Year 12%
warmer (.01) (.02) Cooling Compared with Prior Year 41% cooler
(.11) - Comparison of Estimated Weather Impact on Utility Earnings
and Diluted Earnings per Share Between the Six Months Ended June
30, 2006 and June 30, 2005 Electric Diluted Gas Diluted Percent EPS
Impact EPS Impact Change (After Tax) (After Tax) Heating Compared
with Normal - 2006 13% warmer (.05) (.09) Heating Compared with
Normal - 2005 2% warmer (.01) (.05) Cooling Compared with Normal -
2006 5% cooler (.02) - Cooling Compared with Normal - 2005 58%
warmer .10 - Heating Compared with Prior Year 11% warmer (.04)
(.07) Cooling Compared with Prior Year 41% cooler (.11) - Segments
WPS Resources' Electric Utility segment includes the regulated
electric utility operations of two wholly owned utility
subsidiaries, Wisconsin Public Service Corporation and Upper
Peninsula Power Company. The Gas Utility segment consists of the
natural gas utility operations of Wisconsin Public Service and
Michigan Gas Utilities Corporation, as well as certain transition
costs related to Minnesota Energy Resources Corporation. The
acquisition of Aquila's natural gas distribution operations in
Michigan was completed on April 1, 2006, and the acquisition of
Aquila's natural gas distribution operations in Minnesota was
completed on July 1, 2006. WPS Energy Services, Inc., a diversified
energy supply, generation, and services company, offers
nonregulated natural gas, electric, and alternative fuel supplies,
as well as energy management and consulting services to retail and
wholesale customers. Prior to the fourth quarter of 2005, WPS
Resources reported two nonregulated segments, WPS Energy Services
and WPS Power Development. Effective in the fourth quarter of 2005,
WPS Resources began reporting one nonregulated segment, WPS Energy
Services. Segment information related to prior periods reflects
this change. The Holding Company and Other segment includes the
operations of the WPS Resources holding company and the non-utility
activities of Wisconsin Public Service and Upper Peninsula Power.
Equity earnings from the company's investments in ATC, Wisconsin
River Power Company, and Guardian Pipeline, LLC are also included
in the Holding Company and Other Segment. WPS Resources' investment
in Guardian Pipeline, LLC was sold in the second quarter of 2006.
Discontinued Operations In July 2006, WPS Energy Services sold
Sunbury Generation, LLC to Corona Power, LLC. Sunbury Generation's
primary asset was the Sunbury generation plant, located in Shamokin
Dam, Pennsylvania. The gross proceeds received for the plant were
$34.6 million and are subject to various working capital and other
post-closing adjustments. The total estimated pre-tax gain of $19
million on this transaction will be recognized in the third
quarter. Beginning in the second quarter of 2006, WPS Energy
Services began reporting the assets and liabilities of Sunbury that
were transferred to Corona Power, LLC as held for sale and also
reported Sunbury's results of operations and cash flows as
discontinued operations. Prior periods have also been reclassified,
as applicable, to reflect this change in presentation. Second
Quarter Financial Results Electric Utility Segment Earnings
Electric utility earnings increased $2.5 million, from $20.9
million for the quarter ended June 30, 2005, to $23.4 million for
the quarter ended June 30, 2006. The increase in electric utility
earnings was driven by fuel and purchased power costs that were
less than were recovered in rates in the second quarter of 2006.
Fuel and purchased power costs are expected to be greater than what
will be recovered in the second half of the year, which should
negatively impact margins during that period. The margin increase
related to fuel and purchased power costs during the second quarter
of 2006 was partially offset by the impact of unfavorable weather
conditions. Weather was approximately 41% cooler during the cooling
season in the second quarter of 2006, compared to the same quarter
in 2005 and approximately 5% cooler than normal. The unfavorable
weather conditions drove a combined 2.5% quarter-over- quarter
decrease in sales volumes from the electric utility's higher margin
residential, and commercial and industrial customers. Neither the
lower fuel costs nor the unfavorable weather conditions were
reflected in the Public Service Commission of Wisconsin's final
order authorizing an annual retail electric rate increase of $79.9
million (10.1%), effective January 1, 2006. Natural Gas Utility
Segment Earnings The net loss from natural gas utility operations
increased $5.6 million, from $1.9 million for the quarter ended
June 30, 2005, to $7.5 million for the quarter ended June 30, 2006.
A combined net loss of $5.4 million related to the results of
natural gas operations and transition costs for natural gas
distribution operations in Michigan (acquired on April 1, 2006) and
also to transition costs for natural gas distribution operations in
Minnesota (acquired on July 1, 2006). During the second quarter of
2006, $4.1 million of external pre-tax transition costs were
incurred by these natural gas utilities, primarily for the start-up
of outsourcing activities and other legal and consulting fees. The
net loss recognized at Michigan Gas Utilities Corporation in excess
of transition charges incurred can be attributed to the seasonal
nature of natural gas utility operations, which recognize most of
the earnings in the coldest months when customers are using natural
gas to heat their homes and businesses. WPS Energy Services Segment
Earnings WPS Energy Services' earnings increased $9.8 million, from
$3.6 million for the quarter ended June 30, 2005, to $13.4 million
for the quarter ended June 30, 2006. Higher earnings were driven by
a $22.0 million pre-tax increase in margin and a $9.0 million
pre-tax gain on the sale of its Kimball natural gas storage field
in the second quarter of 2006. These items were partially offset by
a $5.4 million pre-tax increase in operating and maintenance
expenses, a $2.7 million decrease in Section 29/45K federal tax
credits recognized from the production of synthetic fuel, and a
$2.3 million pre-tax increase in miscellaneous expense. There was
also a $0.9 million after-tax increase in the loss from
discontinued operations. Detailed explanations related to the
change in WPS Energy Services' margin and more information on
Section 29/45K tax credits will be available in WPS Resources'
second quarter report on Form 10-Q that we expect to file with the
Securities and Exchange Commission later today. Holding Company and
Other Segment Earnings Holding Company and Other operations
recognized earnings of $5.6 million during the quarter ended June
30, 2006, compared to earnings of $1.3 million during the same
quarter in 2005. The increase was driven by a $3.8 million
after-tax gain recognized from the sale of WPS Resources' one-third
interest in Guardian Pipeline, LLC, and a $2.4 million increase in
after-tax equity earnings from ATC, partially offset by an increase
in interest expense. Average Shares of Common Stock The change in
diluted earnings per share was impacted by the items discussed
above as well as an increase of 3.8 million shares (9.9%) in the
weighted average number of outstanding shares of WPS Resources'
common stock for the quarter ended June 30, 2006, compared to the
same quarter in 2005. WPS Resources issued 1.9 million shares of
common stock through a public offering in November 2005 and also
issued 2.7 million shares of common stock in May 2006 in order to
settle its forward equity agreement with an affiliate of J.P.
Morgan Securities, Inc. Additional shares were also issued under
the Stock Investment Plan and certain stock-based employee benefit
plans. 2006 Earnings Forecast In 2006, the company is continuing to
manage its portfolio of businesses to achieve long-term growth in
its utility and nonregulated operations, while maintaining an
emphasis on regulated growth. The company's emphasis on regulated
growth has been demonstrated by the on-going expansion of its
generation fleet, the acquisition from Aquila of retail natural gas
distribution operations in Michigan and Minnesota, and the proposed
merger with Peoples Energy. The expansion of the utility generation
fleet is aimed at meeting the high level of reliability expected by
the company's customers and ensuring that the company continues to
meet anticipated growth in electric demand. In all of the company's
business units, financial tools commonly used in the industry are
utilized to help mitigate risk for the benefit of both customers
and shareholders. Also, the company's asset management strategy
continues to deliver shareholder return from certain asset
transactions. The company's long-term diluted earnings per share
from continuing operations growth rate target remains at 6% to 8%
on an average annualized basis, with fluctuations in any given year
that may be above or below that targeted range. The 2006 guidance
is being raised to between $3.64 and $4.12 diluted earnings per
share, as shown below, assuming normal weather for the remainder of
the year, availability of generation units, and completion of asset
management sales. Diluted earnings per share guidance reflects the
company's estimate of transition costs of about $14 million
(approximately $9 million after-tax) related to the recently
completed acquisitions of natural gas distribution operations in
Michigan and Minnesota. The guidance also includes about $6.4
million ($3.8 million after-tax) of increased purchased power costs
for WPS Energy Services relating to an $8.2 million ($4.9 million
after-tax) gain recognized in 2005 from the liquidation of a supply
contract for Maine customers. Diluted earnings per share guidance
does not reflect potential future mark-to-market gains or losses on
derivative instruments utilized to protect the anticipated value of
a portion of Section 29/45K tax credits in 2007. Low End High End
Earnings per common share (diluted) of Range of Range Income from
continuing operations $3.49 $3.90 Discontinued operations .15 .22
Income available for common shareholders $3.64 $4.12 Conference
Call An earnings conference call is scheduled for 3 p.m. central
time on Thursday, August 3. Larry L. Weyers, WPS Resources'
Chairman, President, and Chief Executive Officer, will discuss
financial results. To access the call, which is open to the public,
call 888-690-9634 (toll free) 15 minutes prior to the scheduled
start time. Callers will be required to supply EARNINGS as the
passcode and MR. LARRY WEYERS as the leader. Callers will be placed
on hold with music until the call begins. A replay of the
conference call will be available through August 17 by dialing
800-406-7489. Forward-Looking Statements This press release
contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. You can identify these
statements by the fact that they do not relate strictly to
historical or current facts and often include words such as
"anticipate," "expect," "intend" and other similar words.
Forward-looking statements are beyond the ability of WPS Resources
to control and, in many cases, WPS Resources cannot predict what
factors would cause actual results to differ materially from those
indicated by forward-looking statements. Please see WPS Resources'
periodic reports filed with the Securities and Exchange Commission
(including its 10-K and 10- Qs) for a listing of certain factors
that could cause actual results to differ materially from those
contained in forward-looking statements. WPS RESOURCES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three
Months Ended Six Months Ended June 30 June 30 (Millions, except per
share amounts) 2006 2005 2006 2005 Nonregulated revenue $1,129.5
$993.1 $2,691.5 $2,044.3 Utility revenue 349.5 321.4 788.6 732.3
Total revenues 1,479.0 1,314.5 3,480.1 2,776.6 Nonregulated cost of
fuel, natural gas, and purchased power 1,074.1 962.1 2,549.0
1,969.2 Utility cost of fuel, natural gas, and purchased power
171.4 134.7 440.5 336.3 Operating and maintenance expense 127.2
133.8 251.2 261.1 Depreciation and decommissioning expense 25.6
66.6 49.6 95.8 Taxes other than income 14.0 11.9 27.2 23.8
Operating income 66.7 5.4 162.6 90.4 Miscellaneous income 14.4 45.5
22.9 53.2 Interest expense (22.2) (15.2) (40.5) (30.0) Minority
interest 1.2 1.2 2.4 2.2 Other (expense) income (6.6) 31.5 (15.2)
25.4 Income before taxes 60.1 36.9 147.4 115.8 Provision for income
taxes 18.8 7.5 46.4 23.9 Income from continuing operations 41.3
29.4 101.0 91.9 Discontinued operations, net of tax (5.6) (4.7)
(4.4) (0.5) Net income before preferred stock dividends of
subsidiary 35.7 24.7 96.6 91.4 Preferred stock dividends of
subsidiary 0.8 0.8 1.6 1.6 Income available for common shareholders
$34.9 $23.9 $95.0 $89.8 Average shares of common stock Basic 42.2
38.0 41.2 37.9 Diluted 42.2 38.4 41.3 38.2 Earnings (loss) per
common share (basic) Income from continuing operations $0.96 $0.75
$2.41 $2.38 Discontinued operations, net of tax ($0.13) ($0.12)
($0.10) ($0.01) Earnings per common share (basic) $0.83 $0.63 $2.31
$2.37 Earnings (loss) per common share (diluted) Income from
continuing operations $0.96 $0.74 $2.41 $2.36 Discontinued
operations, net of tax ($0.13) ($0.12) ($0.11) ($0.01) Earnings per
common share (diluted) $0.83 $0.62 $2.30 $2.35 Dividends per common
share declared $0.565 $0.555 $1.130 $1.110 WPS RESOURCES
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June
30 December 31 (Millions) 2006 2005 Assets Cash and cash
equivalents $17.5 $27.7 Accounts receivable - net of reserves of
$12.0 and $12.7, respectively 754.2 1,005.6 Accrued unbilled
revenues 66.0 151.3 Inventories 468.3 304.8 Current assets from
risk management activities 801.4 906.4 Assets held for sale 22.9
14.8 Deferred income taxes 5.8 7.3 Other current assets 100.6 100.4
Current assets 2,236.7 2,518.3 Property, plant, and equipment, net
of reserves of $1,283.3 and $1,107.9, respectively 2,276.5 2,048.1
Regulatory assets 293.1 272.0 Long-term assets from risk management
activities 282.6 226.5 Restricted cash for acquisition 333.3 -
Other 556.3 397.6 Total assets $5,978.5 $5,462.5 Liabilities and
Shareholders' Equity Short-term debt $1,002.8 $264.8 Current
portion of long-term debt 4.2 4.0 Accounts payable 686.4 1,078.9
Current liabilities from risk management activities 670.1 852.8
Liabilities held for sale 6.7 6.6 Other current liabilities 145.2
116.8 Current liabilities 2,515.4 2,323.9 Long-term debt 865.7
867.1 Deferred income taxes 106.0 79.6 Deferred investment tax
credits 13.8 14.5 Regulatory liabilities 343.5 373.2 Environmental
remediation liabilities 91.9 67.4 Pension and postretirement
benefit obligations 106.9 82.1 Long-term liabilities from risk
management activities 228.1 188.4 Other 116.6 111.0 Long-term
liabilities 1,872.5 1,783.3 Commitments and contingencies Preferred
stock of subsidiary with no mandatory redemption 51.1 51.1 Common
stock equity 1,539.5 1,304.2 Total liabilities and shareholders'
equity $5,978.5 $5,462.5 WPS RESOURCES CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended
June 30 (Millions) 2006 2005 Operating Activities Net income before
preferred stock dividends of subsidiary $96.6 $91.4 Adjustments to
reconcile net income to net cash provided by operating activities
Discontinued operations, net of tax 4.4 0.5 Depreciation and
decommissioning 49.6 95.8 Amortization (1.6) 21.4 Unrealized gain
on investments - (15.7) Pension and postretirement expense 25.7
25.3 Pension and postretirement funding (2.7) (3.0) Deferred income
taxes and investment tax credit 8.0 (13.1) Gain on sale of interest
in Guardian Pipeline, LLC (6.2) - Gain on sale of WPS ESI Gas
Storage, LLC (9.0) - Unrealized gains on nonregulated energy
contracts (31.0) (2.2) Gain on sale of partial interest in
synthetic fuel operation (3.7) (3.7) Equity income, net of
dividends 5.8 6.6 Deferral of Kewaunee outage costs - (55.3) Other
11.8 (16.1) Changes in working capital Receivables, net 377.3 72.9
Inventories (168.2) 13.5 Other current assets 2.8 9.1 Accounts
payable (384.2) (57.1) Other current liabilities (1.0) 27.4 Net
cash (used for) provided by operating activities (25.6) 197.7
Investing Activities Capital expenditures (154.2) (188.4) Sale of
property, plant and equipment 2.4 2.6 Sale of emission allowances -
Purchase of equity investments and other acquisitions (41.5) (30.3)
Proceeds on sale of interest in Guardian Pipeline, LLC 38.5 -
Proceeds on sale of WPS ESI Gas Storage, LLC 19.9 - Purchases of
nuclear decommissioning trust investments - (18.6) Sales of nuclear
decommissioning trust investments - 18.6 Restricted cash for
acquisition (333.3) - Acquisition of natural gas operations in
Michigan, net of liabilities assumed (317.9) - Other 0.3 (0.4) Net
cash used for investing activities (785.8) (216.5) Financing
Activities Short-term debt, net 738.0 (29.9) Repayment of long-term
debt (1.4) (1.2) Payment of dividends Preferred stock (1.6) (1.6)
Common stock (46.7) (41.6) Issuance of common stock 151.9 16.9
Other (42.8) (11.1) Net cash provided by (used for) financing
activities 797.4 (68.5) Change in cash and cash equivalents -
continuing operations (14.0) (87.3) Change in cash and cash
equivalents - discontinued operations Net cash provided by (used
for) operating activities 20.9 (39.3) Net cash (used for) provided
by investing activities (17.1) 110.6 Net cash used for financing
activities - (0.8) Change in cash and cash equivalents (10.2)
(16.8) Cash and cash equivalents at beginning of period 27.7 40.0
Cash and cash equivalents at end of period $17.5 $23.2 DATASOURCE:
WPS Resources Corporation CONTACT: Joseph P. O'Leary - SVP &
CFO, +1-920-433-1463, or Donna M. Sheedy - Manager Investor
Relations, +1-920-433-1857, both of WPS Resources Corporation
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