In the second quarter of 2007, compared with the same quarter in 2008, operating expenses were higher as a result of severance, relocation, and other expenses recorded related to the Peoples Energy merger. Also, Integrys Business Support LLC realized operating income of $1.2 million ($0.7 million after-tax), related to return on capital included within its service charges in 2008. Integrys Business Support is a wholly owned subsidiary of Integrys Energy Group that was formed and became operational in January 2008 to achieve a significant portion of the cost synergies anticipated from the merger of Integrys Energy Group with Peoples Energy through the consolidation and efficient delivery of various support services and to provide more consistent and transparent allocation of costs throughout Integrys Energy Group and its subsidiaries. -- In connection with the Peoples Energy merger on February 21, 2007, Integrys Energy Group announced its intent to divest of Peoples Energy Production Company, which was sold in the third quarter of 2007. During the quarter ended June 30, 2007, Peoples Energy Production recognized earnings of $24.0 million as a component of discontinued operations. EARNINGS FORECAST
Integrys Energy Group continues 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 Peoples Energy merger in 2007, ongoing expansion of its generation fleet, and the acquisition of retail natural gas distribution operations in Michigan and Minnesota during 2006. The company utilizes financial tools commonly used in the industry to help mitigate risk for the benefit of both shareholders and customers. 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 growth rate target remains at 6% to 8% on an average annualized basis (using 2008 as the basis for this growth), with fluctuations in any given year that may be above or below that target range.
The company anticipates generating earnings per diluted share in 2008 within the range of $3.33 to $3.53. For the remainder of 2008, this guidance assumes normal weather conditions, the availability of generation units, the anticipated merger impacts relating to transition costs and anticipated purchase accounting adjustments, anticipated merger synergy savings, and recently obtained rate relief for certain utilities. The diluted earnings per share guidance excludes the impact of mark-to-market volatility for all of 2008 (such mark-to-market volatility is expected to include about $20 million of mark-to-market after-tax losses for all of 2008 relating to contracts terminating in 2008 which had net mark-to-market after-tax gains recognized in 2007).
The projected guidance range for 2008 diluted earnings per share from continuing operations - adjusted is anticipated to be between $3.63 and $3.83. Diluted earnings per share from continuing operations - adjusted guidance provides investors with additional insight into the company's operating performance because it eliminates the effects of certain items that are not comparable from one period to the next. Please see the "Diluted Earnings per Share Information - Non-GAAP Financial Information" included at the end of this press release and also included with the supplemental data package the company's Web site (to be available at approximately 6:00 a.m. CDT on August 7, 2008) for a reconciliation of diluted earnings per share from continuing operations to diluted earnings per share from continuing operations - adjusted.
CONFERENCE CALL
An earnings conference call is scheduled for 8 a.m. CDT on Thursday, August 7, 2008. Executive management of Integrys Energy Group will discuss 2008 second quarter financial results and prospects for 2008. 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. STEVEN ESCHBACH 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 November 4, 2008, by dialing 800- 308-7858 (toll free).
Investors may also listen to the conference live on Integrys Energy Group's corporate Web site at http://www.integrysgroup.com/investor/presentations.aspx. An archive of the Webcast will be available on the company's Web site at http://www.integrysgroup.com/investor/presentations.aspx.
In conjunction with this conference call, Integrys Energy Group will post on its Web site PowerPoint slides that will be referred to within the prepared remarks during the call. The slides will be available at 6:00 a.m. CDT on August 7.
FORWARD-LOOKING STATEMENTS
Financial results in this news release are unaudited. This news 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," "believe," "estimate," "expect," "intend," "plan," "project," and other similar words. Although the company believes it has been prudent in its plans and assumptions, there can be no assurance that indicated results will be realized. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from those anticipated.
Forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The company recommends that you consult any further disclosures it makes on related subjects in its 10-Q, 8-K, and 10-K reports to the Securities and Exchange Commission.
The following is a cautionary list of risks and uncertainties that may affect the assumptions, which form the basis of forward-looking statements relevant to the company's business. These factors, and other factors not listed here, could cause actual results to differ materially from those contained in forward-looking statements.
-- Unexpected costs and/or unexpected liabilities related to the Peoples Energy merger; -- Integrys Energy Group may be unable to achieve the forecasted synergies in connection with the Peoples Energy merger, or it may take longer or cost more than expected to achieve these synergies; -- Resolution of pending and future rate cases and negotiations (including the recovery of deferred costs) and other regulatory decisions impacting Integrys Energy Group's regulated businesses; -- The impact of recent and future federal and state regulatory changes, including legislative and regulatory initiatives regarding deregulation and restructuring of the electric and natural gas utility industries and possible future initiatives to address concerns about global climate change, changes in environmental, tax, and other laws and regulations to which Integrys Energy Group and its subsidiaries are subject, as well as changes in the application of existing laws and regulations; -- Current and future litigation, regulatory investigations, proceedings or inquiries, including but not limited to, manufactured gas plant site cleanup and the contested case proceeding regarding the Weston 4 air permit; -- Resolution of audits or other tax disputes with the Internal Revenue Service and various state, local, and Canadian revenue agencies; -- The effects, extent, and timing of additional competition or regulation in the markets in which our subsidiaries operate; -- Available sources and costs of fuels and purchased power; -- Investment performance of employee benefit plan assets; -- Advances in technology; -- Effects of and changes in political and legal developments, as well as economic conditions and the related impact on customer demand in the United States and Canada; -- Potential business strategies, including mergers, acquisitions, and construction or disposition of assets or businesses, which cannot be assured to be completed timely or within budgets; -- The direct or indirect effects of terrorist incidents, natural disasters, or responses to such events; -- The impacts of changing financial market conditions, credit ratings, and interest rates on our financing efforts, and the risks associated with changing commodity prices (particularly natural gas and electricity); -- Weather and other natural phenomena, in particular the effect of weather on natural gas and electricity sales; -- The effect of accounting pronouncements issued periodically by standard-setting bodies; and -- Other factors discussed in the 2007 Annual Report on Form 10-K and in other reports filed by Integrys Energy Group from time to time with the Securities and Exchange Commission. About Integrys Energy Group, Inc.
Integrys Energy Group, Inc. , headquartered in Chicago, Illinois, is a holding company for energy related subsidiaries, which includes regulated utilities and nonregulated subsidiaries.
The six regulated utilities consist of: -- The Peoples Gas Light and Coke Company, a natural gas utility serving approximately 830,000 customers in the City of Chicago. -- Wisconsin Public Service Corporation, an electric and natural gas utility serving approximately 433,000 electric customers and 314,000 natural gas customers in northeastern Wisconsin and an adjacent portion of Michigan's Upper Peninsula. -- Minnesota Energy Resources Corporation, a natural gas utility serving approximately 207,000 customers throughout Minnesota. -- Michigan Gas Utilities Corporation, a natural gas utility serving approximately 165,000 customers in lower Michigan. -- North Shore Gas Company, a natural gas utility serving approximately 158,000 customers in the northern suburbs of Chicago. -- Upper Peninsula Power Company, an electric utility serving approximately 52,000 customers in Michigan's Upper Peninsula. The company's principal nonregulated subsidiary is: -- Integrys Energy Services, Inc., a diversified nonregulated energy supply and services company serving residential, commercial, industrial, and wholesale customers in developed competitive markets in the United States and Canada.
More information about Integrys Energy Group is available online at http://www.integrysgroup.com/.
-- Unaudited Financial Statements to Follow -- INTEGRYS ENERGY GROUP, INC.
