NU Reports Second Quarter Results

HARTFORD, Conn. & BOSTON--()--Northeast Utilities (NYSE: NU) today reported earnings of $127.4 million, or $0.40 per share, in the second quarter of 2014, compared with $171 million, or $0.54 per share, in the second quarter of 2013. Second quarter 2014 results include an after-tax charge of $32.1 million, or $0.10 per share, related to Federal Energy Regulatory Commission (FERC) orders issued in June 2014 concerning the authorized return on equity for the owners of New England’s electric transmission system. Second quarter results also include after-tax integration costs of $4.5 million in 2014 and $1.8 million in 2013. Excluding those integration costs, NU earned $131.9 million, or $0.42 per share, in the second quarter of 2014, compared with $172.8 million, or $0.55 per share, in the second quarter of 2013.

In the first half of 2014, NU earned $363.3 million, or $1.15 per share, compared with earnings of $399.1 million, or $1.26 per share, in the first half of 2013. Excluding after-tax integration costs, NU earned $373.7 million, or $1.18 per share, in the first half of 2014, compared with earnings of $402.6 million, or $1.27 per share, in the first half of 2013.

Also today, NU narrowed its 2014 earnings guidance to between $2.60 per share and $2.70 per share, including the $0.10 per share transmission reserve.

“While we have joined other New England transmission owners in asking FERC to clarify and rehear certain elements of its June 19 orders, we are encouraged that the commissioners concluded that the continued build-out of the nation’s transmission grid is critical and needs to be encouraged through supportive ratemaking,” said Thomas J. May, NU chairman, president and chief executive officer. “We continue to believe that our transmission construction program provides a wide range of benefits to New England electric customers and will be a cornerstone to achieving our long range guidance of 6-8 percent earnings per share growth.”

Electric Transmission

NU’s transmission segment earned $43.9 million in the second quarter of 2014 and $118.8 million in the first half of 2014, compared with earnings of $76.8 million in the second quarter of 2013 and $156.7 million in the first half of 2013. The lower earnings were primarily the result of the second quarter transmission reserve and a lower effective tax rate in 2013, compared with 2014.

Electric Distribution and Generation

NU’s electric distribution and generation segment earned $83.4 million in the second quarter of 2014 and $195.6 million in the first half of 2014, compared with earnings of $91.2 million in the second quarter of 2013 and $190.6 million in the first half of 2013. The results reflect a 2.9 percent reduction in second quarter retail sales in 2014, primarily due to milder temperatures in late May and June, compared with the same period of 2013. They also reflect higher levels of depreciation, property tax and interest expense, partially offset by lower operation and maintenance expense. Over the first six months of 2014, retail electric sales are up about 0.7 percent from the same period of 2013, but are essentially flat on a weather-adjusted basis.

Earnings of Electric Utility Subsidiaries (net of preferred dividends)

The Connecticut Light and Power Company earned $35.9 million in the second quarter of 2014 and $113.9 million in the first half of 2014, compared with earnings of $66.5 million in the second quarter of 2013 and $150.1 million in the first half of 2013. Lower second quarter results were due primarily to lower transmission earnings resulting from the reserve, a 2.8 percent reduction in retail sales, and higher depreciation, property tax and interest expense.

NSTAR Electric Company earned $59.6 million in the second quarter of 2014 and $117.2 million in the first half of 2014, compared with earnings of $57.4 million in the second quarter of 2013 and $105 million in the first half of 2013. Improved results were due primarily to lower operation and maintenance expense.

Public Service Company of New Hampshire earned $24.1 million in the second quarter of 2014 and $56.7 million in the first half of 2014, compared with $27.2 million in the second quarter of 2013 and $56.2 million in the first half of 2013. Lower second quarter results were due in part to the transmission reserve and lower generation earnings.

Western Massachusetts Electric Company (WMECO) earned $7 million in the second quarter of 2014 and $25.1 million in the first half of 2014, compared with earnings of $16.4 million in the second quarter of 2013 and $35 million in the first half of 2013. WMECO’s 2014 results declined primarily due to the transmission reserve.

Natural Gas Distribution

NU’s natural gas distribution segment, which includes both Yankee Gas Services Company and NSTAR Gas Company, earned $2 million in the second quarter of 2014 and $54.1 million in the first half of 2014, compared with earnings of $1.2 million in the second quarter of 2013 and $44.5 million in the first half of 2013. Improved results in 2014 primarily reflect increased sales due to this year’s colder temperatures and continued customer growth. Combined firm natural gas sales for NSTAR Gas and Yankee Gas were up 12.4 percent in the first half of 2014, compared with the first half of 2013. They rose 4.1 percent on a weather-adjusted basis.

“As a result of the foresight of public policy leaders in both Connecticut and Massachusetts, we expect strong natural gas sales growth for at least the next decade as New England homeowners and businesses continue to take advantage of the significantly lower cost and reduced environmental impact associated with natural gas,” May said.

NU parent and other businesses

Excluding integration costs, NU parent and other businesses earned $2.6 million in the second quarter of 2014 and $5.2 million in the first half of 2014, compared with earnings of $3.6 million in the second quarter of 2013 and $10.8 million in the first half of 2013. Lower results in 2014 compared to 2013 are due primarily to a higher effective tax rate.

The following table reconciles 2014 and 2013 second quarter and first six months earnings per share:

                 
          Second Quarter     First Six Months
2013   Reported EPS     $0.54     $1.26
    Lower transmission earnings in 2014     ($0.11)     ($0.13)
    Higher/lower retail electric revenues in 2014     ($0.01)     $0.02
    Higher firm natural gas sales in 2014     $0.01     $0.04
    Lower non-tracked O&M in 2014     $0.02     $0.03
    Higher property tax, depreciation     ($0.01)     ($0.02)
    Higher non-tracked interest expense     ($0.01)     ($0.03)
    Other, including higher effective tax rate     ($0.02)     ---
    Higher integration costs in 2014 vs. 2013     ($0.01)     ($0.02)
2014   Reported EPS     $0.40     $1.15
         

Financial results for the second quarter and first half of 2014 and 2013 are noted below:

Three months ended:

                       
(in millions, except EPS)     June 30, 2014     June 30, 2013    

Increase/
(Decrease)

    2014 EPS1
Electric Distribution/Generation     $83.4       $91.2       ($7.8 )     $0.26  
Natural Gas Distribution     $2.0       $1.2       $0.8       $0.01  
Electric Transmission     $43.9       $76.8       ($32.9 )     $0.14  
NU Parent and Other Companies     $2.6       $3.6       ($1.0 )     $0.01  
Earnings, ex. integration costs     $131.9       $172.8       ($40.9 )     $0.42  
Integration costs     ($4.5 )     ($1.8 )     ($2.7 )     ($0.02 )
Reported Earnings     $127.4       $171.0       ($43.6 )     $0.40  
               

Six months ended:

                       
(in millions, except EPS)     June 30, 2014     June 30, 2013    

Increase/
(Decrease)

    2014 EPS1
Electric Distribution/Generation     $195.6       $190.6       $5.0       $0.62  
Natural Gas Distribution     $54.1       $44.5       $9.6       $0.17  
Electric Transmission     $118.8       $156.7       ($37.9 )     $0.37  
NU Parent and Other Companies     $5.2       $10.8       ($5.6 )     $0.02  
Earnings, ex. integration costs     $373.7       $402.6       ($28.9 )     $1.18  
Integration impacts     ($10.4 )     ($3.5 )     ($6.9 )     ($0.03 )
Reported Earnings     $363.3       $399.1       ($35.8 )     $1.15  
               

Retail sales data:

                 

 

   

June 30, 2014

   

June 30, 2013

   

% Change
Actual

Electric Distribution                  
Gwh for three months ended     12,536     12,911     (2.9)%
Gwh for six months ended     26,884     26,707     0.7%
                   
Natural Gas Distribution                  

Firm volumes in mmcf for three months ended

   

15,895

   

15,238

   

4.3%

Firm volumes in mmcf for six months ended

   

61,445

   

54,660

   

12.4%

           

NU has approximately 316 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: NU will webcast a conference call with senior management on August 1, 2014, beginning at 9 a.m. Eastern Time. The webcast can be accessed through NU’s website at www.nu.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 NU parent. 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 NU'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 NU parent common shares outstanding for the period. In addition, second quarter and first half 2014 and 2013 earnings and EPS excluding certain integration expenses related to the April 10, 2012 closing of the merger between NU and NSTAR are non-GAAP financial measures. Management uses these non-GAAP financial measures to evaluate earnings results and to provide details of earnings results by business and to more fully compare and explain our second quarter and first half 2014 and 2013 results without including the impact of the non-recurring integration costs. Management believes that this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of NU’s businesses. Non-GAAP financial measures should not be considered as alternatives to NU consolidated net income attributable to controlling interests or EPS determined in accordance with GAAP as indicators of NU’s operating performance.

This news release includes statements concerning NU’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 and taxing bodies; changes in business and economic conditions, including their impact on interest rates, bad debt expense and demand for NU’s products and services; 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 NU’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 from time to time in NU’s reports filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is made, and NU undertakes no obligation to update the information contained in any forward-looking statements to reflect developments or circumstances occurring after the statement is made or to reflect the occurrence of unanticipated events.

 
NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
June 30, December 31,
(Thousands of Dollars) 2014   2013
 

ASSETS

 
Current Assets:

Cash and Cash Equivalents

$ 34,096 $ 43,364
Receivables, Net 807,510 765,391
Unbilled Revenues 193,983 224,982
Fuel, Materials and Supplies 281,721 303,233
Regulatory Assets 467,156 535,791
Marketable Securities 115,987 92,427
Prepayments and Other Current Assets   168,022   121,861
Total Current Assets   2,068,475   2,087,049
 
Property, Plant and Equipment, Net   17,978,692   17,576,186
 
Deferred Debits and Other Assets:
Regulatory Assets 3,339,457 3,758,694
Goodwill 3,519,401 3,519,401
Marketable Securities 513,986 488,515
Other Long-Term Assets   370,434   365,692
Total Deferred Debits and Other Assets   7,743,278   8,132,302
 
 
 
Total Assets $ 27,790,445 $ 27,795,537
 
 
 

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,
(Thousands of Dollars) 2014   2013
 

LIABILITIES AND CAPITALIZATION

 
Current Liabilities:
Notes Payable $ 905,000 $ 1,093,000
Long-Term Debt - Current Portion 395,583 533,346
Accounts Payable 561,699 742,251
Regulatory Liabilities 359,921 204,278
Other Current Liabilities   580,605   702,776
Total Current Liabilities   2,802,808   3,275,651
 
Deferred Credits and Other Liabilities:
Accumulated Deferred Income Taxes 4,270,050 4,029,026
Regulatory Liabilities 503,955 502,984
Derivative Liabilities 449,439 624,050
Accrued Pension, SERP and PBOP 825,001 896,844
Other Long-Term Liabilities   882,688   923,053
Total Deferred Credits and Other Liabilities   6,931,133   6,975,957
 
Capitalization:
Long-Term Debt   8,147,129   7,776,833
 
Noncontrolling Interest - Preferred Stock of Subsidiaries   155,568   155,568
 
Equity:
Common Shareholders' Equity:
Common Shares 1,666,637 1,665,351
Capital Surplus, Paid In 6,201,555 6,192,765
Retained Earnings 2,241,025 2,125,980
Accumulated Other Comprehensive Loss (41,507) (46,031)
Treasury Stock   (313,903)   (326,537)
Common Shareholders' Equity   9,753,807   9,611,528
Total Capitalization   18,056,504   17,543,929
 
Total Liabilities and Capitalization $ 27,790,445 $ 27,795,537
 
 
 
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 INCOME
(Unaudited)
     
 
For the Three Months Ended June 30, For the Six Months Ended June 30,
(Thousands of Dollars, Except Share Information) 2014 2013   2014   2013
 
Operating Revenues $ 1,677,614 $ 1,635,862 $ 3,968,204 $ 3,630,885
 
Operating Expenses:
Purchased Power, Fuel and Transmission 624,211 488,302 1,602,362 1,236,111
Operations and Maintenance 373,234 357,169 724,922 703,261
Depreciation 152,207 159,553 303,014 314,530
Amortization of Regulatory Assets/(Liabilities), Net (3,542) 54,574 54,356 108,623
Amortization of Rate Reduction Bonds - 8,082 - 42,581
Energy Efficiency Programs 102,711 94,142 241,536 199,913
Taxes Other Than Income Taxes   134,803   123,464   280,335   256,345
Total Operating Expenses   1,383,624   1,285,286   3,206,525   2,861,364
Operating Income 293,990 350,576 761,679 769,521
 
Interest Expense:
Interest on Long-Term Debt 87,491 85,999 174,868 171,294
Other Interest   5,004   851   7,603   (8,188)
Interest Expense 92,495 86,850 182,471 163,106
Other Income, Net   5,526   4,944   7,194   12,710
Income Before Income Tax Expense 207,021 268,670 586,402 619,125
Income Tax Expense   77,774   95,606   219,319   216,093
Net Income 129,247 173,064 367,083 403,032
Net Income Attributable to Noncontrolling Interests   1,880   2,043   3,759   3,922
Net Income Attributable to Controlling Interest $ 127,367 $ 171,021 $ 363,324 $ 399,110
 
Basic Earnings Per Common Share $ 0.40 $ 0.54 $ 1.15 $ 1.27
 
Diluted Earnings Per Common Share $ 0.40 $ 0.54 $ 1.15 $ 1.26
 
Dividends Declared Per Common Share $ 0.39 $ 0.37 $ 0.79 $ 0.74
 
Weighted Average Common Shares Outstanding:
Basic   315,950,510   315,154,130   315,742,511   315,141,956
Diluted   317,112,801   315,962,619   317,002,461   315,982,578
 
 
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)  
 
   
 
For the Six Months Ended June 30,
(Thousands of Dollars) 2014   2013
 
Operating Activities:
Net Income $ 367,083 $ 403,032
Adjustments to Reconcile Net Income to Net Cash Flows
Provided by Operating Activities:
Depreciation 303,014 314,530
Deferred Income Taxes 133,149 256,294
Pension, SERP and PBOP Expense 47,558 97,671
Pension and PBOP Contributions (40,640) (122,826)
Regulatory Over/(Under) Recoveries, Net 164,388 (4,793)
Amortization of Regulatory Assets, Net 54,356 108,623
Amortization of Rate Reduction Bonds - 42,581
Proceeds from DOE Damages Claim, Net 125,658 -
Other (9,359) 19,932
Changes in Current Assets and Liabilities:
Receivables and Unbilled Revenues, Net (57,570) (101,229)
Fuel, Materials and Supplies 26,633 10,964
Taxes Receivable/Accrued, Net (62,900) (58,350)
Accounts Payable (112,954) (127,379)
Other Current Assets and Liabilities, Net   (41,753)   (70,026)
Net Cash Flows Provided by Operating Activities   896,663   769,024
 
Investing Activities:
Investments in Property, Plant and Equipment (724,043) (700,252)
Proceeds from Sales of Marketable Securities 256,309 342,251
Purchases of Marketable Securities (257,168) (424,096)
Decrease in Special Deposits 2,894 65,121
Other Investing Activities   579   (843)
Net Cash Flows Used in Investing Activities   (721,429)   (717,819)
 
Financing Activities:
Cash Dividends on Common Shares (237,161) (232,068)
Cash Dividends on Preferred Stock (3,759) (3,922)
Decrease in Short-Term Debt (213,000) (720,500)
Issuance of Long-Term Debt 650,000 1,350,000
Retirements of Long-Term Debt (376,650) (360,635)
Retirements of Rate Reduction Bonds - (82,139)
Other Financing Activities   (3,932)   (11,634)
Net Cash Flows Used in Financing Activities   (184,502)   (60,898)
Net Decrease in Cash and Cash Equivalents (9,268) (9,693)
Cash and Cash Equivalents - Beginning of Period   43,364   45,748
Cash and Cash Equivalents - End of Period $ 34,096 $ 36,055
 
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.

Contacts

Northeast Utilities
Jeffrey R. Kotkin, 860-665-5154

Release Summary

Northeast Utilities reported earnings of $127.4 million, or $0.40 per share, in the second quarter of 2014, compared with $171 million, or $0.54 per share, in the second quarter of 2013.

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Contacts

Northeast Utilities
Jeffrey R. Kotkin, 860-665-5154