NU Nu Holdings Ltd

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

   

% ChangeActual

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.

Northeast UtilitiesJeffrey R. Kotkin, 860-665-5154