Nov. 4, 2009 (PR Newswire) -- CHICAGO, Nov. 4 /PRNewswire-FirstCall/ -- Integrys Energy Group, Inc. (NYSE: TEG) recognized net income attributed to common shareholders on a GAAP (generally accepted accounting principles) basis of $51.1 million ($0.66 diluted earnings per share) for the quarter ended September 30, 2009, compared with a net loss attributed to common shareholders on a GAAP basis of $59.1 million ($0.77 net loss per share) for the quarter ended September 30, 2008.
Third quarter 2009 net income attributed to common shareholders of $51.1 million included $26.1 million of certain after-tax items, consisting of $27.6 million of after-tax non-cash gains related to derivative and inventory accounting activities at Integrys Energy Services, Inc., partially offset by $1.5 million of after-tax expenses related to restructuring activities at Integrys Energy Services. The third quarter 2008 net loss attributed to common shareholders of $59.1 million included $79.6 million of after-tax non-cash losses related to derivative and inventory accounting activities at Integrys Energy Services. Exclusive of these certain after-tax items recognized in the third quarters of 2009 and 2008, Integrys Energy Group's earnings would have increased quarter-over-quarter to net income attributed to common shareholders of $25.0 million ($0.33 diluted earnings per share) for the quarter ended September 30, 2009, from net income attributed to common shareholders of $20.5 million ($0.27 diluted earnings per share) for the quarter ended September 30, 2008.
"Year-to-date results for our core utilities have improved year-over-year, with the impact of our recent rate cases and cost control measures enabling us to overcome a third quarter that was hampered by a difficult economic environment and unfavorable weather conditions. Our cost control measures will carry through in the fourth quarter, which is part of the reason we are able to increase our earnings guidance for full-year 2009," said Charles Schrock, President and Chief Executive Officer of Integrys Energy Group. "We are continuing to execute our process to significantly reduce the capital and collateral support requirements for Integrys Energy Services, as evidenced by the transactions we have announced since July of this year."
Highlights:
-- Higher earnings at Integrys Energy Services were primarily driven by
non-cash accounting gains largely due to the partial recovery of
non-cash accounting losses related to derivative fair value and
inventory valuation adjustments recorded in prior periods, as well as a
decrease in bad debt expense driven by write-offs in 2008 related to the
Lehman Brothers bankruptcy, an increase in realized retail natural gas
margins related to higher per-unit margins, an increase in realized
wholesale electric margins as a result of the timing of prior
transactions settling, and the recognition in discontinued operations of
a gain on the sale of Integrys Energy Services' Energy Management
Consulting Services business in the third quarter of 2009, partially
offset by restructuring expenses recorded in the third quarter of 2009.
-- The net loss at the natural gas utility segment increased 11.8%
quarter-over-quarter, primarily related to a positive adjustment allowed
by the Michigan Public Service Commission in the third quarter of 2008
for the recovery of previously expensed natural gas costs, as well as a
quarter-over-quarter decrease in natural gas sales volumes.
-- Quarter-over-quarter, net income attributed to common shareholders at
the electric utility segment decreased 25.8%, driven by energy costs
that were lower than what was recovered in rates during the third
quarter of 2008, a decrease in sales volumes, and an increase in
operating and maintenance expense, partially offset by higher margin
from wholesale customers.
Details regarding Integrys Energy Group's financial results for the quarters ended September 30 are as follows:
Integrys Energy Group's GAAP Results
(Millions, except per share amounts) 2009 2008 Change
----------------------------------- ---- ---- ------
Net income (loss) attributed to common
shareholders $51.1 ($59.1) N/A
Basic earnings per share $0.67 ($0.77) N/A
Diluted earnings per share $0.66 ($0.77) N/A
Average shares of common stock
Basic 76.8 76.7 0.1%
Diluted 76.9 76.7 0.3%
------- ---- ---- ---
Significant factors impacting the change in earnings and earnings per
share were as follows:
* Earnings at Integrys Energy Services increased $118.3 million,
to net income attributed to common shareholders of $23.8 million
for the quarter ended September 30, 2009, compared with a net
loss attributed to common shareholders of $94.5 million for the
quarter ended September 30, 2008, driven by:
- A $107.2 million after-tax increase in Integrys Energy
Services' margin quarter-over-quarter related to non-cash
activity, due to a $156.5 million after-tax increase
related to non-cash activity associated with electric
operations, partially offset by a $49.3 million after-tax
decrease related to non-cash activity associated with
natural gas operations. Further details regarding the
change in non-cash activity can be found in Integrys
Energy Group's Form 10-Q for the quarter ended
September 30, 2009, being filed with the United States
Securities and Exchange Commission today.
- A $5.0 million after-tax decrease in operating and
maintenance expense, driven by a quarter-over-quarter
decrease in bad debt expense related to write-offs
recorded in the third quarter of 2008 associated
with the bankruptcy of Lehman Brothers.
- Realized natural gas margins increased $3.4 million
after-tax, driven by higher quarter-over-quarter
per-unit retail natural gas margins related to
recently contracted sales commitments.
- Combined, realized electric margins increased $3.2 million
after-tax:
The realized wholesale electric margin increased $4.6
million after-tax. In general, realized margins are
impacted by transaction activity in prior periods.
Integrys Energy Services recognizes realized margin
when the contracts actually settle, which typically
occurs over a 12- to 24-month time period from the
time the contract was actually entered into.
Wholesale transactions were scaled back in
conjunction with the global credit crisis in
the latter half of 2008 and continue to be scaled
back with the announced Integrys Energy Services
strategy change. The scaled back transaction
activity will negatively impact realized margins in
subsequent periods.
Margins from realized retail electric operations
decreased $1.4 million after-tax, resulting from
Integrys Energy Services' adjusted product
pricing strategy, which was implemented in response
to increased business risk and a higher cost of capital.
- A $2.3 million after-tax gain included in
discontinued operations relating to Integrys
Energy Services' sale of its Energy Management
Consulting Services business.
- Partially offsetting the above increases, after-tax
restructuring expenses recorded at Integrys Energy
Services during the third quarter of 2009 were
$1.5 million.
* Net income attributed to common shareholders related to the
holding company and other segment increased $7.3 million,
from $1.6 million during the quarter ended September 30, 2008,
to $8.9 million during the quarter ended September 30, 2009,
driven by a change in the effective tax rate quarter-over-
quarter. The decrease in the effective tax rate from the third
quarter of 2008 to the third quarter of 2009 had an
approximate $7 million positive impact on earnings because
income tax expense for the holding company and other segment
for interim periods is affected by changes in the forecasted
annual effective tax rates as well as factors that impact the
allocation of consolidated income tax expense to the
segments. Earnings from Integrys Energy Group's 34% interest
in American Transmission Company LLC increased $0.5 million
($0.3 million after-tax). Integrys Energy Group recorded
$19.3 million of pre-tax equity earnings from American
Transmission Company during the quarter ended September 30,
2009, compared with $18.8 million of pre-tax equity earnings
during the same quarter in 2008.
* During the third quarter of 2009, the regulated natural gas
utility segment recognized a net loss attributed to common
shareholders of $19.9 million, compared with a net loss
attributed to common shareholders of $17.8 million during the
same quarter in 2008. The $2.1 million increase in the net
loss was driven by:
- An approximate $3 million ($1.8 million after-tax)
quarter-over-quarter decrease in margin at Michigan Gas
Utilities Corporation related to a third quarter 2008
adjustment for recovery of prior natural gas costs in a
Michigan Public Service Commission proceeding.
- An 11.9% decrease in natural gas throughput volumes
attributed primarily to the negative impact of the
general economic slowdown, which resulted in an
approximate $2 million ($1.2 million after-tax)
decrease in natural gas utility segment margin.
The impact of lower quarter-over-quarter natural
gas throughput volumes was somewhat mitigated by the
impact of decoupling mechanisms that were first effective
for The Peoples Gas Light and Coke Company and North
Shore Gas Company on March 1, 2008, and for Wisconsin
Public Service Corporation on January 1, 2009.
