At the Board of Directors meeting of The Empire District
Electric Company (NYSE:EDE) (the “Company”) held today, the
Directors declared a quarterly dividend of $0.26 per share.
The dividend is payable December 15, 2016, to holders of record
as of December 1, 2016. The Company, an operator of
regulated electric, gas and water utilities, announced today the
results for the quarter and twelve months ended September 30,
2016.
Highlights:
- Consolidated earnings for the third
quarter ended September 30, 2016 were $27.5 million, or $0.62 per
share, inclusive of $0.3 million of pre-tax merger costs. Earnings
for the same quarter 2015 were $25.3 million, or $0.58 per
share.
- Consolidated earnings for the twelve
months ended September 30, 2016, including $8.7 million of pre-tax
merger-related costs, were $60.6 million, or $1.38 per share.
Absent merger-related costs, twelve months ended tax-adjusted
earnings would have been $66.0 million, or $1.50 per share.
Earnings for the twelve months ended September 30, 2015 were $57.8
million, or $1.33 per share ($1.32 diluted).
- Earnings for the third quarter 2016
were higher than the respective 2015 period primarily as a result
of increased Missouri electric rates that became effective in late
July 2015. New Missouri rates effective on September 14, 2016 and
higher sales from more favorable weather also had a positive
impact. Lower operating and maintenance expenses were also a
positive driver, but were more than offset by higher depreciation
expenses discussed below.
- The July 2015 Missouri rate increase
was also a positive driver of the September 2016 twelve month ended
results, however this positive effect was offset in the 2016
twelve-month period by mild winter heating season weather.
- On September 9, 2016, the Missouri
Public Service Commission (MPSC) approved the Unanimous Stipulation
and Agreement for changes in Missouri customer rates. The approval
provided for an annual increase in base revenues of approximately
$20.4 million, or 4.46%, to be effective, as mentioned above, on
September 14, 2016. Base revenues established by the agreement are
lower than the originally requested level of $33.4 million due
primarily to lower fuel and purchased power costs than those built
into current customer rates. The offsetting effect of reduced
revenues and reduced fuel costs results in little impact to gross
margin.
- On September 7, 2016, the Company
announced the MPSC’s approval of the Company’s merger with Liberty
Utilities (Central) Co., an indirect subsidiary of Algonquin Power
& Utilities Corp. The Arkansas Public Service Commission also
approved the merger on September 29, 2016. And most recently on
October 6, 2016, the Company announced the filing of a joint motion
with the Kansas Corporation Commission (KCC) for approval of a
Unanimous Settlement Agreement to approve the merger. Approval of
the Settlement Agreement is pending before the KCC, and an order is
due no later than January 10, 2017.
According to Brad Beecher, Empire’s President and CEO, “Our
third quarter results, adjusted for weather and the merger-related
costs incurred during the period, continue to meet our
expectations. Taking these results into account and considering the
Missouri electric rate case outcome, our earnings guidance
communicated on February 26, 2016 remains unchanged.” Beecher
added, “With the expiration of the waiting period under the
Hart-Scott Rodino Act, receipt of approvals from the Federal Energy
Regulatory Commission, the Federal Communications Commission, the
Committee on Foreign Investments in the United States, the Public
Service Commissions of Arkansas and Missouri and the Oklahoma
Corporation Commission and a settlement agreement filed in Kansas,
we are awaiting only approval from the Kansas Corporation
Commission to close our merger with Algonquin Power & Utilities
Corp. We continue to expect closing in the first quarter of
2017.”
Third Quarter 2016 Results
Electric segment gross margin (electric revenue less cost of
fuel and purchased power) increased $6.7 million, or 5.7%, during
the third quarter 2016 compared to the third quarter 2015. Quarter
over quarter electric segment gross margin impacts include:
- Increased customer rates, net of a $1.1
million decrease in Missouri base fuel recovery, increased revenues
by an estimated $3.9 million.
- Weather and other volumetric factors
increased revenues by an estimated $3.0 million, and
- Improved customer counts added an
estimated $1.2 million to revenues.
Fuel expense changes reflective of the timing of the deferral
and recovery of non-Missouri fuel and consumable costs had a
negligible impact on electric segment gross margin when compared to
the 2015 quarter.
Gas segment gross margin (gas revenues less cost of gas sold and
transported) was relatively flat when compared to third quarter
2015 results.
Consolidated third quarter 2016 earnings were favorably impacted
by decreased operating and maintenance costs of approximately $2.4
million, primarily driven by lower transmission expense, while
unfavorable impacts included the following:
- Depreciation and amortization expense
increases of approximately $3.7 million, reflecting a one-time $2.6
million adjustment for the 2016 Missouri electric rate case and
higher depreciation due to the completion of our Riverton combined
cycle facility,
- Interest expense increases of
approximately $0.3 million,
- Changes in AFUDC, which decreased
earnings by approximately $1.6 million, and
- Merger-related costs of approximately
$0.3 million.
Consolidated net income increased approximately $2.2 million, or
8.8%, for the third quarter of 2016 compared to the third quarter
of 2015. Absent the aforementioned merger-related costs, adjusted
for taxes, consolidated earnings for the third quarter 2016 would
have been $27.7 million, or $0.63 per share, a 9.4% increase over
the 2015 third quarter.
Twelve Months Ended September 30, 2016 Results
Electric segment gross margin increased approximately $18.9
million, or 4.9%, during the twelve month period ended September
30, 2016 compared to the prior year period. Year over year electric
segment gross margin impacts include:
- Increased customer rates, net of a
decrease in Missouri base fuel recovery of $5.4 million, increased
revenues an estimated $18.3 million,
- Improved customer counts added an
estimated $3.2 million to revenues, and
- Weather and other volumetric factors
decreased revenues an estimated $13.7 million.
Fuel expense changes reflective of the timing of the deferral
and recovery of non-Missouri fuel and consumable costs contributed
positively to electric segment gross margin when compared to the
2015 period.
Gas segment gross margin was approximately $2.3 million, or
10.1%, below the twelve month period ended September 30, 2015, as
mild weather during the current period winter heating season drove
a 13.8% decline in overall sales.
Twelve month ended consolidated earnings were favorably impacted
by lower maintenance expenses of approximately $5.8 million,
primarily driven by lower transmission and distribution maintenance
costs and the timing of a plant outage in 2015 at our State Line
Combined Cycle plant. Unfavorable impacts included the
following:
- Depreciation and amortization expense
increases of approximately $6.6 million, reflecting a one-time $2.6
million adjustment for the 2016 Missouri electric rate case and
higher depreciation due to the completion of our Riverton combined
cycle facility,
- Interest expense increase of
approximately $2.3 million resulting from the issuance of long-term
debt in August 2015 which had a full-year impact in the current
period ,
- Changes in AFUDC, which decreased
earnings by approximately $1.3 million, and
- Merger-related costs of approximately
$8.7 million.
Consolidated net income increased approximately $2.8 million, or
4.9%, for the twelve month period ended September 30, 2016 compared
to the prior year period. As noted above, absent the aforementioned
merger-related costs, adjusted for taxes, consolidated earnings for
the twelve month period ended September 30, 2016 would have been
approximately $66.0 million, or $1.50 per share, a 14.1% increase
over the 2015 period.
Selected unaudited consolidated financial data for the quarters
and twelve months ended September 30, 2016 and September 30, 2015
is presented in the following table.
(dollars in millions, except Per Share
data)
Three Months EndedSeptember 30,
2016
Twelve Months EndedSeptember 30,
2016
2016 2015
Change* 2016 2015
Change* Electric Margin $
123.3 $ 116.6 $ 6.7 $
401.9 $ 383.0 $ 18.9 Gas
Margin 3.7 3.8 (0.1 ) 21.2
23.5 (2.3 ) Other Revenues
1.7 2.2 (0.5 )
7.9 8.3 (0.4 ) Gross
Margin 128.7 122.6
6.1 431.0 414.8
16.2 Less: Operating and Maintenance
Expenses 38.4 40.8 (2.4 )
159.4 165.7 (6.3 ) Merger-related
costs 0.3 0.0 0.3 8.7 0.0
8.7 Depreciation and Amortization 23.8
20.1 3.7 85.4 78.8 6.6
Taxes 27.2 25.9
1.3 76.1 74.5
1.6 Operating Income 39.0 35.8
3.2 101.4 95.8 5.6 Interest Expense
and Other, net 11.5 10.5
1.0 40.8 38.0
2.8 Net Income $ 27.5 $
25.3 $ 2.2 $ 60.6
$ 57.8 $ 2.8 Earnings
Per Share (Basic) $ 0.62 $ 0.58
$ 0.04 $ 1.38 $ 1.33
$ 0.05 Earnings Per Share (Diluted) $
0.62 $ 0.58 $ 0.04 $
1.38 $ 1.32 $ 0.06
Reconciliation of Net Income/Earnings
Per Share
Net Income (GAAP) $ 27.5 $
25.3 $ 2.2 $ 60.6 $
57.8 $ 2.8 Merger-related costs (adjusted
for taxes) 0.2 0.0
0.2 5.4 0.0
5.4 Net Income (excl. merger-related costs)
$ 27.7 $ 25.3 $ 2.4
$ 66.0 $ 57.8 $
8.2 Earnings Per Share (Basic) $
0.63 $ 0.58 $ 0.05 $
1.50 $ 1.33 $ 0.17 Earnings
Per Share (Diluted) $ 0.63 $ 0.58
$ 0.05 $ 1.50 $ 1.32
$ 0.18
Three Months EndedSeptember 30,
2016
Twelve Months EndedSeptember 30,
2016
2016
2015
%Change*
2016
2015
%Change*
Electric On-System kWh Sales (in millions):
Residential 541 514 5.1 %
1,798 1,895 -5.1 % Commercial
444 437 1.6 % 1,567 1,595
-1.7 % Industrial 289 287
0.7 % 1,075 1,061 1.3 %
Other 130 128 2.0 % 462
465 2.0 % Total On-System Electric
Sales 1,404 1,366 2.8 %
4,902 5,016 -2.3 % Retail Gas
Sales (billion cubic feet): Residential 0.08
0.11 -24.3 % 2.02 2.46
-17.8 % Commercial/Industrial 0.11
0.10 1.2 % 1.00 1.19
-15.9 % Other 0.00 0.00
-7.2 % 0.03 0.03 -3.2 %
Total Retail Gas Sales 0.19 0.21 -11.8
% 3.05 3.68 -17.1 %
* Slight differences from actual
results may occur due to rounding to millions.
Reconciliation of Earnings Per
Share
Quarter
Ended
Twelve
Months
Ended
Basic Earnings Per Share – September 30, 2015 $
0.58 $ 1.33 Gross Margins Electric
segment 0.09 0.27 Gas segment 0.00 (0.03 ) Other segment
(0.01 ) (0.01
) Total Gross Margin 0.08 0.23
Expenses Operating 0.02 0.01 Maintenance and repairs 0.01
0.08 Depreciation and amortization (0.05 ) (0.09 ) Merger-related
costs 0.00 (0.12 ) Other taxes 0.00 0.00 Change in effective income
tax rates (0.01 ) (0.01 ) Other income and deductions 0.02 0.01
Interest charges 0.00 (0.03 ) AFUDC (0.02 ) (0.02 ) Dilutive effect
of additional shares issued
(0.01
) (0.01 )
Basic Earnings Per Share – September 30, 2016
$ 0.62
$ 1.38
The reconciliation of basic earnings per share (EPS) presented
above compares the quarter and twelve months ended September 30,
2016 versus September 30, 2015 and is a non-GAAP presentation. The
economic substance behind this non-GAAP EPS measure is to present
the after tax impact of significant items and components of the
statement of income on a per share basis before the impact of
additional stock issuances. The Company believes this presentation
is useful to investors because the statement of income does not
readily show the EPS impact of the various components, including
the effect of new stock issuances. This could limit the readers’
understanding of the reasons for the EPS change from previous
years. This information is useful to management, and the Company
believes useful to investors, to better understand the reasons for
the fluctuation in EPS between the prior and current years on a per
share basis. The presentation of net income and EPS excluding
merger-related costs throughout this press release is also a
non-GAAP presentation. The Company believes this presentation is
useful to investors because merger-related costs are not reflective
of the underlying ongoing operations of the Company and has
included the analysis as a complement to the financial information
provided in accordance with GAAP.
In addition, although a non-GAAP presentation, the Company
believes the presentation of gross margin (reflected in the table
above and elsewhere in this press release) is useful to investors
and others in understanding and analyzing changes in operating
performance from one period to the next, and has included the
analysis as a complement to the financial information provided in
accordance with GAAP.
This reconciliation and margin information may not be comparable
to other companies or more useful than the GAAP presentation
included in the statements of income. The presentation does not
purport to be an alternative to EPS determined in accordance with
GAAP as a measure of operating performance or any other measure of
financial performance presented in accordance with GAAP. Management
compensates for the limitations of using non-GAAP financial
measures by using them to supplement GAAP results to provide a more
complete understanding of the factors and trends affecting the
business than GAAP results alone. The dilutive effect of additional
shares issued in this table reflects the impact of all shares
issued in the respective periods presented.
Earnings Guidance
Our revised 2016 guidance range of $1.26 to $1.44 per share
communicated on February 26, 2016 assumes approximately 50% of the
expected external merger-related costs of $15 to $17 million will
be payable in 2016, assuming a 2017 closing date. It also assumes
30-year average weather, overall system energy growth of less than
1% and increased operating costs driven by costs related to our
Riverton combined cycle project. Given the recently approved
Missouri electric rate case previously mentioned, our revised
guidance range remains unchanged.
Other factors that may impact earnings include variations in
customer growth and usage projections, unanticipated or unplanned
events that may impact operating and maintenance costs and the
impact of actual rate case results differing from our assumptions.
The effects of assumptions and other factors evaluated for the
purpose of providing guidance are not necessarily independent of
one another, and the combination of effects can cause individual
impacts smaller or larger than the indicated guidance range.
Based in Joplin, Missouri, The Empire District Electric Company
(NYSE:EDE) is an investor-owned, regulated utility providing
electric, natural gas (through its wholly owned subsidiary, The
Empire District Gas Company) and water service, with approximately
218,000 customers in Missouri, Kansas, Oklahoma, and Arkansas. A
subsidiary of the Company also provides fiber optic services.
Certain matters discussed in this press release are
“forward-looking statements” intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995. Such statements address or may
address future plans, objectives, expectations and events or
conditions concerning various matters such as the pending
acquisition of Empire by Liberty Utilities (Central) Co. (Liberty
Central), a subsidiary of Algonquin Power & Utilities Corp.
(APUC) (the Merger), capital expenditures, earnings, pension and
other costs, competition, litigation, our construction program, our
generation plans, our financing plans, rate and other regulatory
matters, liquidity and capital resources and accounting matters.
Actual results in each case could differ materially from those
currently anticipated in such statements, by reason of the factors
noted in the Company’s filings with the SEC, including the most
recent Form 10-K and 10-Q.
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version on businesswire.com: http://www.businesswire.com/news/home/20161027006899/en/
The Empire District Electric CompanyInvestor
RelationsDale Harrington, 417-625-4222Director of
Investor Relationsdharrington@empiredistrict.comorMedia
CommunicationsJulie Maus, 417-625-5101Director of
Corporate Communicationsjmaus@empiredistrict.com
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