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. Under decoupling, these
utilities are allowed to defer the difference between the actual
and rate case authorized delivery charge components of margin from
certain customers and adjust future rates in accordance with rules
applicable to each jurisdiction. The decoupling mechanism for
Wisconsin Public Service's natural gas utility includes an annual
$8.0 million pre-tax cap for the deferral of any excess or
shortfall from the rate-case authorized margin. Approximately $5
million of additional revenues were recognized at Wisconsin Public
Service under the decoupling mechanism due to the shortfall from
the rate-case authorized margin for the nine months ended September
30, 2009. - A partially offsetting approximate $1 million ($0.6
million after-tax) net positive quarter-over-quarter impact on
margin, primarily related to rate increases at Michigan Gas
Utilities and Minnesota Energy Resources Corporation. * During the
third quarter of 2009, the regulated electric utility segment
recognized net income attributed to common shareholders of $38.3
million, compared with net income attributed to common shareholders
of $51.6 million during the same quarter in 2008. The $13.3 million
decrease was driven by: - A $6.6 million after-tax decrease in
earnings as a result of fuel and purchased power costs at Wisconsin
Public Service that were approximately $3 million ($1.8 million
after-tax) lower than what was recovered in rates during the
quarter ended September 30, 2009, compared with fuel and purchased
power costs that were approximately $14 million ($8.4 million
after-tax) lower than what was recovered in rates during the same
quarter in 2008. On April 23, 2009, the Public Service Commission
of Wisconsin made the 2009 fuel cost recovery subject to refund,
effective April 25, 2009, as actual and projected fuel costs for
the remainder of the year are estimated to be below the 2% fuel
window. As of September 30, 2009, Wisconsin Public Service recorded
a liability of $17.1 million related to this refund. - A 3.0%
quarter-over-quarter decrease in residential sales volumes and a
4.5% quarter-over-quarter decrease in sales volumes to commercial
and industrial customers drove an approximate $7 million ($4.2
million after-tax) quarter-over-quarter decrease in electric
utility segment margin, driven by cooler weather during the third
quarter of 2009, compared with the same quarter in 2008. A
decoupling mechanism first became effective for Wisconsin Public
Service on January 1, 2009. Under decoupling, Wisconsin Public
Service is allowed to defer the difference between its actual
margin and the rate case authorized margin recognized from
residential and small commercial and industrial customers. The rate
order for the four-year pilot program for electric decoupling has
an annual $14.0 million pre-tax cap for the deferral of any excess
or shortfall from the rate-case authorized margin. This cap was
reached in the second quarter of 2009; therefore, no additional
decoupling deferral was allowed in the third quarter of 2009 for
any shortfall from authorized margin. - A $3.9 million after-tax
increase in operating and maintenance expenses, driven by a
quarter-over-quarter increase in employee benefit costs, and a
major planned outage at the Weston 3 generation plant in the third
quarter of 2009, compared with no major outages during the same
period in 2008. - A partially offsetting approximate $5 million
($3.0 million after-tax) increase in margin from an increase in
contracted sales volumes with a large existing wholesale customer
and an increase in demand charges to wholesale customers to recover
costs related to the Weston 4 generation plant. YEAR-TO-DATE
RESULTS Integrys Energy Group recognized a net loss attributed to
common shareholders on a GAAP basis of $94.4 million ($1.23 net
loss per share) for the nine months ended September 30, 2009,
compared with net income attributed to common shareholders on a
GAAP basis of $100.8 million ($1.31 diluted earnings per share) for
the nine months ended September 30, 2008. The net loss attributed
to common shareholders for the nine months ended September 30, 2009
of $94.4 million included $259.8 million of certain after-tax
items, consisting of a $248.8 million after-tax non-cash goodwill
impairment loss related to the natural gas utility segment, $2.4
million of after-tax non-cash gains related to derivative and
inventory accounting activities at Integrys Energy Services, and
$13.4 million of after-tax expenses related to restructuring
activities at Integrys Energy Services. Net income attributed to
common shareholders for the nine months ended September 30, 2008 of
$100.8 million included $49.0 million of after-tax non-cash losses
related to derivative and inventory accounting activities at
Integrys Energy Services and a $6.5 million after-tax non-cash
goodwill impairment loss related to the regulated natural gas
utility segment. Exclusive of these certain after-tax items
recognized during the nine months ended September 30, 2009, and
2008, Integrys Energy Group's earnings would have increased
period-over-period to net income attributed to common shareholders
of $165.4 million ($2.15 diluted earnings per share) for the nine
months ended September 30, 2009, from net income attributed to
common shareholders of $156.3 million ($2.03 diluted earnings per
share) for the nine months ended September 30, 2008. EARNINGS
FORECAST Given the previously announced strategic shift to focus on
our core utility businesses, we have excluded any guidance related
to Integrys Energy Services from the ranges below. The projected
guidance range for 2009 diluted earnings per share - adjusted is
anticipated to be between $2.26 and $2.38. In 2011, the first full
year Integrys Energy Group expects to be a predominantly Midwestern
regional regulated utility company, the projected guidance range
for diluted earnings per share - adjusted is anticipated to be
between $2.80 and $3.20. This guidance assumes operational
improvements and rate relief for certain utilities, the
availability of generation units, successful execution of the
strategy related to Integrys Energy Services, and normal weather
conditions. Diluted earnings per share - 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 - NonGAAP Financial
Information" included at the end of this news release and also
included with the supplemental data package on the company's Web
site for a reconciliation of diluted earnings per share to diluted
earnings per share - adjusted. Integrys Energy Group reiterates its
expected long-term diluted earnings per share growth rate of 4% to
6%, on an average annualized basis, with 2011 as its base year.
Integrys Energy Group's management will discuss earnings guidance
for 2009 and also for 2011, the first full year it expects to be a
predominantly Midwestern regional regulated utility company, during
its earnings conference call at 8 a.m. CST on Thursday, November 5.
SUPPLEMENTAL DATA PACKAGE Concurrent with this news release, a
supplemental data package has been posted on Integrys Energy
Group's corporate Web site that includes this narrative news
release, as well as financial statements, non-GAAP financial
information, supplemental quarterly financial information by
reportable segment, and a summary of earnings (loss) by reportable
segment. CONFERENCE CALL An earnings conference call is scheduled
for 8 a.m. CST on Thursday, November 5, 2009. Integrys Energy Group
will discuss 2009 third quarter financial results, as well as
future prospects. To access the call, which is open to the public,
call 888788-9425 (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 February 23, 2010, by
dialing 888-673-3573 (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. CST on Thursday, November 5. FORWARD-LOOKING
STATEMENTS Financial results in this news release are unaudited. In
this news release, Integrys Energy Group and its subsidiaries make
statements concerning expectations, beliefs, plans, objectives,
goals, strategies, and future events or performance. Such
statements are "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to assumptions and
uncertainties; therefore, actual results may differ materially from
those expressed or implied by such forward-looking statements.
Although Integrys Energy Group and its subsidiaries believe that
these forward-looking statements and the underlying assumptions are
reasonable, they cannot provide assurance that such statements will
prove correct. Forward-looking statements include, among other
things, statements concerning management's expectations and
projections regarding earnings, regulatory matters, fuel costs,
sources of electric energy supply, coal and natural gas deliveries,
remediation costs, environmental and other capital expenditures,
liquidity and capital resources, trends, estimates, completion of
construction projects, and other matters. Forward-looking
statements involve a number of risks and uncertainties. Some risk
factors that could cause results to differ from any forward-looking
statement include those described in Item 1A of our Annual Report
on Form 10-K for the year ended December 31, 2008, as may be
amended or supplemented in our Quarterly Reports on Form 10-Q.
Other factors include: -- 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 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, reconciliation of revenues
from the gas charge and related natural gas costs, and the
proceeding regarding the Weston 4 air permit; -- The impacts of
changing financial market conditions, credit ratings, and interest
rates on the liquidity and financing efforts of Integrys Energy
Group and its subsidiaries; -- The risks associated with executing
Integrys Energy Group's plan to significantly reduce the scope and
scale of, or divest in its entirety, the nonregulated energy
services business; -- The risks associated with changing commodity
prices (particularly natural gas and electricity) and the available
sources of fuel and purchased power, including their impact on
margins; -- 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 Integrys Energy
Group's subsidiaries operate; -- The retention of market-based rate
authority; -- The risk associated with the value of goodwill or
other intangibles and their possible impairment; -- 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; -- 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
effectiveness of risk management strategies and the use of
financial and derivative instruments; -- The risks associated with
the inability of Integrys Energy Group's and its subsidiaries'
counterparties, affiliates, and customers to meet their
obligations; -- Weather and other natural phenomena, in particular
the effect of weather on natural gas and electricity sales; -- The
utilization of tax credit and loss carryforwards; -- The effect of
accounting pronouncements issued periodically by standard-setting
bodies; and -- Other factors discussed in the 2008 Annual Report on
Form 10-K and in other reports filed by Integrys Energy Group from
time to time with the United States Securities and Exchange
Commission. Except to the extent required by the federal securities
laws, Integrys Energy Group and its subsidiaries undertake no
obligation to publicly update or revise any forwardlooking
statements, whether as a result of new information, future events,
or otherwise. About Integrys Energy Group, Inc. Integrys Energy
Group is a diversified holding company with regulated utility
operations operating through six wholly owned subsidiaries,
Wisconsin Public Service Corporation, The Peoples Gas Light and
Coke Company, North Shore Gas Company, Upper Peninsula Power
Company, Michigan Gas Utilities Corporation, and Minnesota Energy
Resources Corporation; nonregulated operations through its wholly
owned nonregulated subsidiary, Integrys Energy Services; and also a
34% equity ownership interest in American Transmission Company LLC
(an electric transmission company operating in Wisconsin, Michigan,
Minnesota, and Illinois). More information about Integrys Energy
Group, Inc. is available online at http://www.integrysgroup.com/.
Integrys Energy Group, Inc. Diluted Earnings Per Share Information
- Non-GAAP Financial Information Non-GAAP Financial Information
Integrys Energy Group prepares financial statements in accordance
with accounting principles generally accepted in the United States
(GAAP). Along with this information, we disclose and discuss
diluted earnings per share (EPS) - adjusted, which is a non-GAAP
measure. Management uses the measure in its internal performance
reporting and for reports to the Board of Directors. We disclose
this measure in our quarterly earnings releases, on investor
conference calls, and during investor conferences and related
events. Management believes that diluted EPS - adjusted is a useful
measure for providing investors with additional insight into our
operating performance because it eliminates the effects of certain
items that are not comparable from one period to the next.
Therefore, this measure allows investors to better compare our
financial results from period to period. The presentation of this
additional information is not meant to be considered in isolation
or as a substitute for our results of operations prepared and
presented in conformance with GAAP. Actual Quarter and Year-to-Date
Results for Periods Ended September 30, 2009 and 2008 Three Months
Ended Nine Months Ended September 30 September 30 2009 2008 2009
2008 ---- ---- ---- ---- Diluted EPS $0.66 $(0.77) $(1.23) $1.31
Average Shares of Common Stock - Diluted 76.9 76.7 76.8 76.9
-------------------------------- ---- ---- ---- ---- Information on
Special Items: Diluted earnings per share are adjusted for special
items and their financial impact on diluted earnings per share for
the three and nine months ended September 30, 2009 and 2008. Due to
Integrys Energy Group's change in strategy related to Integrys
Energy Services, the results of the business operations of Integrys
Energy Services are shown as a special adjusting item. Diluted EPS
$0.66 $(0.77) $(1.23) $1.31 Special Items (net of taxes): Goodwill
impairment - natural gas segment - - 3.24 0.08 Integrys Energy
Services' total segment results (0.31) 1.23 (0.08) 0.44
---------------------- ---- ---- ---- ---- Diluted EPS - Adjusted
0.35 0.46 1.93 1.83 ====================== ==== ==== ==== ====
Integrys Energy Group, Inc. Diluted Earnings Per Share Information
- Non-GAAP Financial Information Due to Integrys Energy Group's
change in strategy related to Integrys Energy Services, the actual
2008 results for the business operations of Integrys Energy
Services, including the impacts of discontinued operations, are
shown as an adjustment to diluted EPS. There are a number of
scenarios that we are considering for the restructuring of Integrys
Energy Services that can produce a wide range of impacts on our
financial results. As a result, we have excluded any guidance
related to Integrys Energy Services from the tables below. Actual
2008 Results with 2009 and 2011 Forecasts Potential 2009 Potential
2011 -------------- -------------- Actual Low High Low High 2008
Scenario Scenario Scenario Scenario ---- -------- -------- --------
-------- Diluted EPS $1.64 Integrys Energy Services' total segment
results 0.80 ---- Diluted EPS (excluding Integrys Energy Services)
$2.44 $(0.98) $(0.86) $2.80 $3.20 ===== ====== ===== ===== =====
Average Shares of Common Stock - Diluted 77.0 76.7 76.7 77.4 77.4
---- ---- ---- ---- ---- Information on Special Items: Diluted
earnings per share are adjusted for special items and their
financial impact on the actual 2008 diluted earnings per share and
diluted earnings per share guidance for 2009. Diluted EPS
(excluding Integrys Energy Services) $2.44 $(0.98) $(0.86) $2.80
$3.20 Special Items (net of taxes): Goodwill impairment - natural
gas segment 0.08 3.24 3.24 - - ------- ----- ----- ----- -----
----- Diluted EPS - Adjusted $2.52 $2.26 $2.38 $2.80 $3.20
========= ===== ===== ===== ===== ===== * Key Assumptions for 2009
and 2011: -- Operational improvements and rate relief for certain
utilities -- Availability of generation units -- Successful
execution of the strategy related to Integrys Energy Services --
Normal weather conditions DATASOURCE: Integrys Energy Group, Inc.
CONTACT: Steven P. Eschbach, CFA, Vice President - Investor
Relations of Integrys Energy Group, Inc., +1-312-228-5408 Web Site:
http://www.integrysgroup.com/
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