8-K 1 f8k110206.htm 3RD QUARTER EARNINGS RELEASE 3rd Quarter Earnings Release


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549


FORM 8-K


CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): November 2, 2006

 
Exact name of registrant as specified
I.R.S.
 
in its charter, state of incorporation,
Employer
Commission
address of principal executive offices,
Identification
File Number
Telephone
Number


1-16305
PUGET ENERGY, INC.
91-1969407
 
A Washington Corporation
 
 
10885 - N.E. 4th Street, Suite 1200
 
 
Bellevue, Washington 98004-5591
 
 
(425) 454-6363
 

 
1-4393
PUGET SOUND ENERGY, INC.
91-0374630
 
A Washington Corporation
 
 
10885 - N.E. 4th Street, Suite 1200
 
 
Bellevue, Washington 98004-5591
 
 
(425) 454-6363
 
 
___________
 
Check the appropriate box below if the Form 8−K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o
 
Soliciting material pursuant to Rule 14a−12 under the Exchange Act (17 CFR 240.14a−12)
 
o
 
Pre−commencement communications pursuant to Rule 14d−2(b) under the Exchange Act (17 CFR 240.14d−2(b))
 
o
 
Pre−commencement communications pursuant to Rule 13e−4(c) under the Exchange Act (17 CFR 240.13e−4(c))
 
 


Item 2.02 Results of Operations and Financial Condition

On November 2, 2006, the Company issued the following press release.

Puget Energy Reports Third-Quarter 2006 Earnings
 
 ·  Reports income of 14 cents per diluted share
 ·  Wild Horse Wind Project towers and turbines erected and on schedule for year-end operation
 
 
BELLEVUE, Wash. — Puget Energy (NYSE: PSD), the parent of Puget Sound Energy (PSE), Washington state's oldest and largest utility, today reported net income of $15.9 million, or 14 cents per diluted share, for the third quarter 2006 compared to $5.9 million, or 6 cents per diluted share, in the third quarter 2005.
“We are on track to complete our Wild Horse Wind Project and our general rate case by the end of the year,” said Stephen P. Reynolds, chairman, president and CEO of Puget Energy and PSE. “We’re in good shape to meet Puget Energy’s financial and PSE’s operational goals in 2006 and to position us to meet the growing needs of the vibrant Puget Sound region.”
Table 1: Third quarter 2006 vs. third quarter 2005
EPS reconciliation
 
Cents per
diluted share
  
Puget Energy’s Third Quarter 2005 earnings
 
$
0.06
  
Increase in PSE electric margin
   
0.12
  
Increase in PSE utility operations and maintenance expense
    
(0.03
)
Increase in PSE depreciation and amortization expense
   
(0.03
)
Increase in PSE other income, net of tax
    
0.03
  
Impact of dilution from higher common shares outstanding
   
(0.02
)
Other and Rounding
    
0.01
  
Puget Energy's Third Quarter 2006 Earnings
 
$
0.14
  
 
Net income from Puget Energy's regulated electric and gas utility subsidiary, PSE, was $15.6 million, or 13 cents per share, in the third quarter of 2006. This compares to third-quarter 2005 net income of $6.2 million, or 6 cents per share.
 
PSE Third-Quarter 2006 Highlights:
Key components of PSE’s third-quarter financial performance are highlighted below. All items are pre-tax unless otherwise noted.

·  
PSE’s third-quarter 2006 net income increased by $9.4 million, to $15.6 million, from $6.2 million in the third quarter 2005.
 
·  
As of Sept. 30, 2006, PSE provided service to 1,033,170 electric customers and 705,222 natural gas customers in Washington, representing a 1.8 percent and 3 percent increase, respectively, in the last 12 months.

·  
PSE's retail sales volumes of electricity increased by 3.4 percent in the third quarter of 2006 as compared to the same period a year ago, while natural gas sales were essentially unchanged. PSE's energy sales, in particular natural gas volumes, are highly seasonal, with the lowest volumes occurring during summer months.

·  
PSE’s electric margin increased by $22.2 million before taxes in the third quarter of 2006 as compared to the same period in 2005 primarily as a result of higher retail sales volumes and favorable power costs. PSE anticipates that electric margins will decline during the fourth quarter of 2006 due to the seasonal nature of power prices in the Pacific Northwest (power prices are typically lower in the summer months and higher during the winter heating season).

PSE’s electric margin represents electric sales, net of revenue-based taxes, to retail and transportation customers less the cost of generating, purchasing and wheeling electricity.

·  
PSE's utility operations and maintenance expense increased by $6 million in the third quarter of 2006. The increase over third-quarter 2005 levels was due to higher planned maintenance work conducted at PSE's electric generating facilities as well as infrastructure reliability work performed on utility transmission and distribution systems.

·  
PSE’s depreciation and amortization expense increased by $5 million in the third quarter of 2006. The increase was due to additional utility plant placed in service during the last 12 months, including $2.3 million of depreciation expense related to the 150-megawatt Hopkins Ridge wind-powered electric generating facility that became operational in November 2005. PSE is fully recovering the operating and ownership costs of this facility, including depreciation expense, in its electric rates.

·  
Other income, net of taxes, increased by $3 million in the third quarter of 2006 compared to the same period a year ago. The increase was primarily due to carrying costs associated with regulatory assets and lower share-based employee compensation costs.

·  
The average number of Puget Energy fully diluted common shares outstanding in the third quarter of 2006 increased to 116.6 million compared to 101 million during the same period in 2005. The increase was primarily the result of a secondary offering of 15 million shares completed in November 2005. The impact of dilution as a result of the higher shares outstanding resulted in an earnings per share reduction of 2 cents per share in the third quarter of 2006.

 
Puget Energy 2006 Outlook:
Puget Energy re-affirms calendar-year 2006 guidance for PSE of $1.40 to $1.55 per fully diluted share. Puget Energy earnings guidance assumes normal weather patterns occur in PSE's Pacific Northwest service area in the fourth quarter of 2006.


Puget Energy Discontinued Operations
Puget Energy’s results from discontinued operations for the nine months ended both Sept. 30, 2006, and Sept. 30, 2005, reflect the company’s former utility construction services subsidiary, InfrastruX Group (InfrastruX). Puget Energy sold InfrastruX to Tenaska Power Fund on May 7, 2006.

Conference Call:
Puget Energy will provide additional information regarding its third-quarter 2006 results during a conference call for analysts scheduled at 10 a.m. ET (7 a.m. PT) on Friday, Nov. 3, 2006. The call will be broadcast live through a Webcast at www.pugetenergy.com. The Webcast will be archived and available for replay following the call. A tape-recorded replay of the call will be available two hours after completion of the conference call through midnight (ET) on Nov. 17, 2006, by dialing 888-286-8010 and entering the conference identification number: 90553841.

Form 10-Q Quarterly Report for the Third Quarter of 2006
Puget Energy will file its Form 10-Q for the third quarter of 2006 with the Securities and Exchange Commission (SEC) on Nov. 3, 2006, a copy of which will be available through the SEC’s Web site at www.sec.gov or the company’s Web site at www.pugetenergy.com. Investors are encouraged to read the financial statements and disclosures that will be contained in the Form 10-Q filing.

About Puget Energy
Puget Energy (NYSE:PSD) is the parent company of Puget Sound Energy (PSE), a regulated utility providing electric and natural gas service to the growing Puget Sound region of western Washington.
 
About Puget Sound Energy
Washington state’s oldest and largest energy utility, with a 6,000-square-mile service area stretching across 11 counties, Puget Sound Energy (PSE) serves more than 1 million electric customers and 700,000 natural gas customers, primarily in western Washington. PSE meets the energy needs of its growing customer base through incremental, cost-effective energy efficiency, low-cost procurement of sustainable energy resources, and far-sighted investment in the energy-delivery infrastructure.
 
CAUTIONARY STATEMENT: Certain statements contained in this news release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, among which include Puget Sound Energy’s (PSE’s) plans relating to utility plant additions and expenses, and factors that could impact Puget Energy’s earnings guidance for the year-end 2006. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect actual results include, among others, governmental policies and regulatory actions, including those of the Washington Utilities and Transportation Commission, and weather conditions. More information about these and other factors that potentially could affect the company’s financial results is included in Puget Energy's and PSE's most recent annual report on Form 10-K, quarterly report on Form 10-Q and in their other public filings filed with the Securities and Exchange Commission. Except as required by law, Puget Energy and PSE undertake no obligation to update any forward-looking statements.


####




 
PUGET ENERGY -- SUMMARY INCOME STATEMENT  
  
(In thousands, except per-share amounts)
                   
   
Unaudited
  
 Unaudited
  
   
Three months ended 9/301
  
 Nine months ended 9/301
  
   
2006
  
2005
  
 2006
  
2005
  
                    
Operating revenues
                   
Electric
  
$
399,246
  
$
375,035
  
$
1,247,650
  
$
1,140,545
  
Gas
    
119,610
   
111,042
   
718,655
   
594,737
 
Other
    
607
   
4,306
   
5,115
   
6,866
 
Total operating revenues
    
519,463
   
490,383
   
1,971,420
   
1,742,148
 
Operating expenses
                          
Purchased electricity
    
183,723
   
200,861
   
623,793
   
587,983
 
Electric generation fuel
    
36,282
   
21,058
   
72,158
   
54,400
 
Residential exchange
    
(35,923
)
  
(34,525
)
  
(131,226
)
  
(126,676
)
Purchased gas
    
68,294
   
59,151
   
453,335
   
359,037
 
Unrealized net (gain) on derivative instruments
    
(611
)
  
477
   
214
   
395
 
Utility operations & maintenance
    
87,687
   
81,645
   
258,653
   
240,299
 
Other operations & maintenance
    
494
   
745
   
2,038
   
2,045
 
Depreciation & amortization
    
65,530
   
60,550
   
193,959
   
178,284
 
Conservation amortization
    
7,127
   
5,633
   
22,638
   
16,746
 
Goodwill impairment 5
    
---
   
---
   
---
   
---
 
Taxes other than income taxes
    
46,325
   
44,784
   
180,236
   
165,005
 
Income taxes
    
8,281
   
2,476
   
64,004
   
54,649
 
Total operating expenses
    
467,209
   
442,855
   
1,739,802
   
1,532,167
 
Operating income
    
52,254
   
47,528
   
231,618
   
209,981
 
Other income (deductions):
                          
Charitable foundation funding
    
---
   
---
   
(15,000
)
  
---
 
Other income
    
5,242
   
1,350
   
13,453
   
5,071
 
Income taxes
    
(841
)
  
72
   
3,956
   
(887
)
Interest Charges:
                          
AFUDC
    
5,189
   
2,680
   
10,238
   
6,183
 
Interest expense
    
(45,900
)
  
(45,695
)
  
(134,129
)
  
(130,307
)
Mandatorily redeemable securities interest expense
    
(23
)
  
(23
)
  
(68
)
  
(68
)
Net income from continuing operations
   
15,921
   
5,912
   
110,068
   
89,973
 
Income from discontinued operations, net of tax
    
1
   
(1
)
  
51,903
   
908
 
Net income before cumulative effect of
                          
accounting change
    
15,922
   
5,911
   
161,971
   
90,881
 
Cumulative effect of accounting change
    
---
   
---
   
(89
)
  
---
 
Net Income
  
$
15,922
  
$
5,911
  
$
162,060
  
$
90,881
  
Common shares outstanding
   
116,101
   
100,371
   
115,910
   
100,160
 
Diluted shares outstanding
   
116,568
   
100,964
   
116,311
   
100,754
 
Basic earnings per common share before cumulative effect
                          
of accounting change from continuing operations
 
$
0.14
  
$
0.06
  
$
0.95
  
$
0.90
  
Basic earnings from discontinued operations
    
---
   
---
   
0.45
   
0.01
 
Cumulative effect from accounting change
    
---
   
---
   
---
   
---
 
Basic earnings per common share
  
$
0.14
  
$
0.06
  
$
1.40
  
$
0.91
  
                           
Diluted earnings per common share before cumulative effect
                          
of accounting change from continuing operations
 
$
0.14
  
$
0.06
  
$
0.95
  
$
0.89
  
Diluted earnings from discontinued operations
    
---
   
---
   
0.44
   
0.01
 
Cumulative effect from accounting change
    
---
   
---
   
---
   
---
 
Diluted earnings per common share2
  
$
0.14
  
$
0.06
  
$
1.39
  
$
0.90
  
 
1 
  Partial-year results may not accurately predict full-year performance, as earnings are significantly affected by weather.  
2 
  Diluted earnings per common share include the dilutive effect of securities related to employee compensation plans.  
 
 

PUGET SOUND ENERGY -- UTILITY OPERATING DATA  
    
   
Three months ended 9/30
  
 Nine months ended 9/30
  
   
2006
  
2005
  
 2006
  
2005
  
Energy sales revenues ($ in thousands; unaudited)
                          
Electricity
                          
Residential
  
$
150,168
  
$
131,719
  
$
559,277
  
$
496,517
  
Commercial
    
174,670
   
153,138
   
516,922
   
461,073
 
Industrial
   
25,963
   
23,667
   
76,429
   
68,902
 
Other retail sales, including change in unbilled
   
12,465
   
6,810
   
(8,939
)
  
(7,584
)
Subtotal, retail sales
    
363,266
   
315,334
   
1,143,689
   
1,018,908
 
Transportation, including change in unbilled
    
3,404
   
1,654
   
8,779
   
6,741
 
Sales to other utilities & marketers
    
24,309
   
40,626
   
56,863
   
73,818
 
Other1
    
8,267
   
17,421
   
38,319
   
41,078
 
Total electricity sales
    
399,246
   
375,035
   
1,247,650
   
1,140,545
 
Gas
                          
Residential
    
60,915
   
57,260
   
436,023
   
360,659
 
Commercial
    
41,776
   
37,252
   
221,000
   
178,878
 
Industrial
   
9,995
   
9,221
   
39,399
   
32,247
 
Subtotal, retail sales
    
112,686
   
103,733
   
696,422
   
571,784
 
Transportation
    
3,092
   
3,332
   
9,807
   
9,944
 
Other
    
3,832
   
3,977
   
12,426
   
13,009
 
Total gas sales
    
119,610
   
111,042
   
718,655
   
594,737
 
Total energy sales revenues
  
$
518,856
  
$
486,077
  
$
1,966,305
  
$
1,735,282
  
Energy sales volumes (unaudited)
                          
Electricity (in mWh)
                          
Residential
   
2,007,384
   
1,957,275
   
7,810,169
   
7,515,907
 
Commercial
   
2,253,699
   
2,168,625
   
6,714,507
   
6,432,238
 
Industrial
   
352,479
   
352,808
   
1,036,673
   
1,014,948
 
Other, including change in unbilled
    
69,787
   
51,992
   
(272,436
)
  
(229,002
)
Subtotal, retail sales
    
4,683,349
   
4,530,700
   
15,288,913
   
14,734,091
 
Transportation, including change in unbilled
    
551,214
   
516,588
   
1,603,624
   
1,516,519
 
Sales to other utilities & marketers
    
443,440
   
705,593
   
1,549,405
   
1,498,527
 
Total mWh
   
5,678,003
   
5,752,881
   
18,441,942
   
17,749,137
 
Gas (in 000's of therms)
                          
Residential
   
41,086
   
43,750
   
339,576
   
322,792
 
Commercial
   
36,023
   
36,551
   
196,740
   
183,012
 
Industrial
   
9,348
   
10,052
   
36,914
   
34,897
 
Transportation
   
46,637
   
44,306
   
152,096
   
145,869
 
Total gas volumes
    
133,094
   
134,659
   
725,326
   
686,570
 
Margins2 ($ in thousands; unaudited)
                          
Electric
  
$
171,798
  
$
149,627
  
$
547,767
  
$
503,605
  
Gas
    
37,537
   
38,793
   
190,633
   
171,971
 
Weather (unaudited)
                          
Actual heating degree days
    
174
   
212
   
2,720
   
2,811
 
Normal heating degree days3
    
238
   
238
   
3,068
   
3,068
 
Customers served at September 304 (unaudited)
                          
Electricity
                         
Residential
   
912,354
   
896,158
             
Commercial
    
114,270
   
112,691
             
Industrial
   
3,785
   
3,898
             
Other
    
2,743
   
2,479
             
Transportation
   
18
   
17
             
Total electricity customers
    
1,033,170
   
1,015,243
             
Gas
                          
Residential
   
650,836
   
630,911
             
Commercial
   
51,606
   
50,671
             
Industrial
   
2,659
   
2,673
             
Transportation
   
121
   
130
             
Total gas customers
    
705,222
   
684,385
             
 
1
Includes sales of non-core gas supplies.
2
Electric margin is electric sales to retail and transportation customers less the cost of generating and purchasing electric energy sold to customers, including transmission costs, to bring electric energy to PSE's service territory. Gas margin is gas sales to retail and transportation customers less the cost of gas purchased, including gas transportation costs, to bring gas to PSE's service territory.
3
Seattle-Tacoma Airport statistics reported by NOAA which are based on a 30-year average, 1971-2000. Heating degree days measure how far the daily average temperature falls below 65 degrees.
4
Customers represents average served at month end. 
 

 
SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.
 
 
PUGET ENERGY, INC.
 
 
 
 
 
PUGET SOUND ENERGY, INC.
 
 
 
 
 
By: /s/ James W. Eldredge
 
 
 
Dated: November 2, 2006
James W. Eldredge
Vice President, Corporate Secretary
and Chief Accounting Officer