EX-99.1 2 exhibit991q12014.htm EXHIBIT Exhibit 99.1 Q1 2014




Integrys Energy Group, Inc.


First Quarter 2014 Earnings

Released May 1, 2014
 

Contents
 
 
Pages
News Release
1-4
Condensed Consolidated Statements of Income
5
Condensed Consolidated Statements of Comprehensive Income
6
Condensed Consolidated Balance Sheets
7
Condensed Consolidated Statements of Cash Flows
8
Diluted Earnings Per Share – Adjusted and Weather Impacts
9
Non-GAAP Financial Information Reported by Segment
10-11
Key Variances in Non-GAAP Adjusted Earnings – By Segment
12
Diluted Earnings Per Share Guidance Information
13
Supplemental Quarterly Financial Highlights
14-17


NEWS RELEASE

For Immediate Release
 
 
May 1, 2014
 
 
 
 
 
 
Contact:
Steven P. Eschbach, CFA
 
 
Vice President – Investor Relations
 
 
Integrys Energy Group, Inc.
 
 
(312) 228-5408


Integrys Energy Group, Inc. Reports First Quarter 2014 Earnings

Guidance Range for 2014 Diluted EPS - Adjusted Remains Between $3.50 and $3.75
 

Chicago – May 1, 2014 – Integrys Energy Group, Inc. (NYSE: TEG) recognized earnings on a Generally Accepted Accounting Principles (GAAP) basis and an adjusted basis as follows:
 
Three Months Ended
March 31
 
2014
2013
GAAP earnings (millions)
$152.4
$187.5
GAAP diluted earnings per share
$1.89
$2.37
Adjusted earnings (millions) *
$139.7
$139.9
Diluted earnings per share – adjusted *
$1.73
$1.76

Adjusted earnings exclude the effects of certain items that are not comparable from one period to the next.

FIRST QUARTER RESULTS

Adjusted earnings for the first quarter of 2014 did not change significantly from the first quarter of 2013.

Both utility segments saw increases in adjusted earnings. Rate increases related to the Fox Energy Center purchase and the main replacement program in the City of Chicago were the primary drivers for these increases. While weather contributed to an increase in margins at the regulated utilities, this increase was substantially offset by increased operating expenses driven primarily by weather and increased plant maintenance.

A decrease in adjusted earnings at Integrys Energy Services was driven by a decrease in realized retail electric margins, partially offset by increased realized retail natural gas margins, and increased operating costs due to expansion of the retail natural gas business.

__________________________
* This news release includes non-GAAP financial measures. Schedules that provide details on these measures and reconcile these measures to the most comparable GAAP figures are included with this news release.

 
 
Media Hotline: 800-977-2250 - NYSE: TEG
 
 
200 East Randolph Drive
 
 
Chicago, IL 60601
 
 
www.integrysenergygroup.com

Integrys Energy Group, Inc.
First Quarter 2014 Earnings News Release
May 1, 2014



EARNINGS FORECAST

Integrys Energy Group’s guidance range for 2014 diluted earnings per share on a GAAP basis is $4.10 to $4.35. This guidance assumes the availability of generation units, and normal weather conditions for the rest of the year. Integrys Energy Group is not estimating the impact of derivative and inventory fair value accounting activities for 2014. The company's guidance range for 2014 diluted earnings per share – adjusted is $3.50 to $3.75.

SUPPLEMENTAL DATA PACKAGE

A supplemental data package has been posted on Integrys Energy Group’s website. It includes this news release, as well as financial statements, non-GAAP financial information, guidance information for diluted earnings per share, and quarterly financial information by reportable segment.

CONFERENCE CALL

An earnings conference call is scheduled for 8 a.m. Central time on Friday, May 2, 2014. The call can be accessed 15 minutes prior to the scheduled start time by dialing 888-788-9425. Callers will be required to supply EARNINGS as the passcode and MR. STEVEN ESCHBACH as the leader. A replay of the conference call will be available through July 29, 2014, by dialing 866-424-4009.

Investors may also listen to the live conference or a replay on Integrys Energy Group’s website at
http://www.integrysgroup.com/investor/presentations.aspx.

PowerPoint slides will be posted on the website and will be referred to within the prepared remarks during the call. The slides will be available at 6 a.m. Central time on May 2, 2014.

FORWARD-LOOKING STATEMENTS

Financial results in this news release are unaudited. In this news release, Integrys Energy Group makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. These statements are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future results and conditions. Although Integrys Energy Group believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that such statements will prove correct.

Forward-looking statements involve a number of risks and uncertainties. Some risks that could cause actual results to differ materially from those expressed or implied in forward-looking statements include those described in Item 1A of Integrys Energy Group’s Annual Report on Form 10-K for the year ended December 31, 2013, as may be amended or supplemented in Part II, Item 1A of subsequently filed Quarterly Reports on Form 10-Q, and those identified below.

•
The timing and resolution of rate cases and related negotiations, including recovery of deferred and current costs and the ability to earn a reasonable return on investment, and other regulatory decisions impacting the regulated businesses;
•
Federal and state legislative and regulatory changes, including deregulation and restructuring of the electric and natural gas utility industries, financial reform, health care reform, energy efficiency mandates, reliability standards, pipeline integrity and safety standards, and changes in tax and other laws and regulations to which Integrys Energy Group and its subsidiaries are subject;

2

Integrys Energy Group, Inc.
First Quarter 2014 Earnings News Release
May 1, 2014


•
The risk of terrorism or cyber security attacks, including the associated costs to protect assets and respond to such events;
•
The risk of failure to maintain the security of personally identifiable information, including the associated costs to notify affected persons and to mitigate their information security concerns;
•
Federal and state legislative and regulatory changes relating to the environment, including climate change and other environmental regulations impacting generation facilities and renewable energy standards;
•
Costs and effects of litigation and administrative proceedings, settlements, investigations, and claims;
•
The ability to retain market-based rate authority;
•
The effects, extent, and timing of competition or additional regulation in the markets in which Integrys Energy Group’s subsidiaries operate;
•
Changes in credit ratings and interest rates caused by volatility in the financial markets and actions of rating agencies and their impact on Integrys Energy Group's and its subsidiaries' liquidity and financing efforts;
•
The risk of financial loss, including increases in bad debt expense, associated with the inability of Integrys Energy Group’s and its subsidiaries’ counterparties, affiliates, and customers to meet their obligations;
•
The effects of political developments, as well as changes in economic conditions and the related impact on customer energy use, customer growth, and the ability to adequately forecast energy use for Integrys Energy Group’s customers;
•
The ability to use tax credit and loss carryforwards;
•
The investment performance of employee benefit plan assets and related actuarial assumptions, which impact future funding requirements;
•
The risk associated with the value of goodwill or other intangible assets and their possible impairment;
•
The timely completion of capital projects within estimates, as well as the recovery of those costs through established mechanisms;
•
Potential business strategies, including acquisitions or dispositions of assets or businesses, which cannot be assured to be completed timely or within budgets;
•
The risks associated with changing commodity prices, particularly natural gas and electricity, and the available sources of fuel, natural gas, and purchased power, including their impact on margins, working capital, and liquidity requirements;
•
Changes in technology, particularly with respect to new, developing, or alternative sources of generation;
•
Unusual weather and other natural phenomena, including related economic, operational, and/or other ancillary effects of any such events;
•
The impact of unplanned facility outages;
•
The financial performance of American Transmission Company and its corresponding contribution to Integrys Energy Group’s earnings;
•
The timing and outcome of any audits, disputes, and other proceedings related to taxes;
•
The effectiveness of risk management strategies, the use of financial and derivative instruments, and the related recovery of these costs from customers in rates;
•
The effect of accounting pronouncements issued periodically by standard-setting bodies; and
•
Other factors discussed in reports Integrys Energy Group files with the United States Securities and Exchange Commission.

Except to the extent required by the federal securities laws, Integrys Energy Group undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

About Integrys Energy Group, Inc.
Integrys Energy Group is a diversified energy holding company with regulated natural gas and electric utility operations (serving customers in Illinois, Michigan, Minnesota, and Wisconsin), an approximate 34% equity ownership interest in

3

Integrys Energy Group, Inc.
First Quarter 2014 Earnings News Release
May 1, 2014


American Transmission Company (a federally regulated electric transmission company operating primarily in Wisconsin, Michigan, Minnesota, and Illinois), and nonregulated energy operations.
More information is available at www.integrysgroup.com.

Connect With Us:
@TEGinvestors on 

– Unaudited Financial Statements to Follow –


4

INTEGRYS ENERGY GROUP, INC.
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
 
Three Months Ended
 
 
March 31
(Millions, except per share data)
 
2014
 
2013
Utility revenues
 
$
1,616.7

 
$
1,123.8

Nonregulated revenues
 
1,308.2

 
554.4

Total revenues
 
2,924.9

 
1,678.2

 
 
 
 
 
Utility cost of fuel, natural gas, and purchased power
 
960.2

 
565.1

Nonregulated cost of sales
 
1,247.5

 
436.8

Operating and maintenance expense
 
364.6

 
295.1

Depreciation and amortization expense
 
71.3

 
60.9

Taxes other than income taxes
 
28.1

 
27.2

Operating income
 
253.2

 
293.1

 
 
 
 
 
Earnings from equity method investments
 
22.9

 
22.3

Miscellaneous income
 
6.0

 
5.7

Interest expense
 
39.1

 
29.3

Other expense
 
(10.2
)
 
(1.3
)
 
 
 
 
 
Income before taxes
 
243.0

 
291.8

Provision for income taxes
 
89.8

 
109.6

Net income from continuing operations
 
153.2

 
182.2

 
 
 
 
 
Discontinued operations, net of tax
 
(0.1
)
 
6.1

Net income
 
153.1

 
188.3

 
 
 
 
 
Preferred stock dividends of subsidiary
 
(0.8
)
 
(0.8
)
Noncontrolling interest in subsidiaries
 
0.1

 
—

Net income attributed to common shareholders
 
$
152.4

 
$
187.5

 
 
 
 
 
Average shares of common stock
 
 

 
 

    Basic
 
80.2

 
78.7

    Diluted
 
80.5

 
79.3

 
 
 
 
 
Earnings per common share (basic)
 
 

 
 

Net income from continuing operations
 
$
1.90

 
$
2.30

Discontinued operations, net of tax
 
—

 
0.08

Earnings per common share (basic)
 
$
1.90

 
$
2.38

 
 
 
 
 
Earnings per common share (diluted)
 
 

 
 

Net income from continuing operations
 
$
1.89

 
$
2.29

Discontinued operations, net of tax
 
—

 
0.08

Earnings per common share (diluted)
 
$
1.89

 
$
2.37

 
 
 
 
 
Dividends per common share declared
 
$
0.68

 
$
0.68


5

INTEGRYS ENERGY GROUP, INC.
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 
Three Months Ended
 
 
March 31
(Millions)
 
2014
 
2013
Net income
 
$
153.1

 
$
188.3

 
 
 
 
 
Other comprehensive income (loss), net of tax:
 
 
 
 
Cash flow hedges
 
 
 
 
Unrealized net gains arising during period, net of tax of $ – million and $ – million, respectively
 
—

 
0.1

Reclassification of net (gains) losses to net income, net of tax of $0.9 million and $0.6 million, respectively
 
(0.6
)
 
0.9

Cash flow hedges, net
 
(0.6
)
 
1.0

 
 
 
 
 
Defined benefit plans
 
 
 
 
Pension and other postretirement benefit costs arising during period, net of tax of $(0.1) million and $ – million, respectively
 
(0.1
)
 
—

Amortization of pension and other postretirement benefit costs included in net periodic benefit cost, net of tax of $0.3 million and $0.4 million, respectively
 
0.3

 
0.6

Defined benefit plans, net
 
0.2

 
0.6

 
 
 
 
 
Other comprehensive income (loss), net of tax
 
(0.4
)
 
1.6

 
 
 
 
 
Comprehensive income
 
152.7

 
189.9

 
 
 
 
 
Preferred stock dividends of subsidiary
 
(0.8
)
 
(0.8
)
Noncontrolling interest in subsidiaries
 
0.1

 
—

Comprehensive income attributed to common shareholders
 
$
152.0

 
$
189.1







6

         INTEGRYS ENERGY GROUP, INC.
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
 
March 31
 
December 31
(Millions, except share and per share data)
 
2014
 
2013
Assets
 
 
 
 
Cash and cash equivalents
 
$
56.6

 
$
22.3

Collateral on deposit
 
74.4

 
37.4

Accounts receivable and accrued unbilled revenues, net of reserves of $61.9 and $49.4, respectively
 
1,543.8

 
1,037.0

Inventories
 
134.9

 
253.1

Assets from risk management activities
 
269.9

 
239.5

Regulatory assets
 
238.8

 
127.4

Assets held for sale
 
286.7

 
272.6

Deferred income taxes
 
—

 
31.4

Prepaid taxes
 
74.5

 
146.9

Other current assets
 
37.5

 
50.0

Current assets
 
2,717.1

 
2,217.6

 
 
 
 
 
Property, plant, and equipment, net of accumulated depreciation of $3,283.5 and $3,236.9, respectively
 
6,301.2

 
6,216.7

Regulatory assets
 
1,346.7

 
1,361.4

Assets from risk management activities
 
60.3

 
75.4

Equity method investments
 
548.1

 
540.9

Goodwill
 
662.1

 
662.1

Other long-term assets
 
166.7

 
169.4

Total assets
 
$
11,802.2

 
$
11,243.5

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Short-term debt
 
$
321.9

 
$
326.0

Current portion of long-term debt
 
100.0

 
100.0

Accounts payable
 
864.9

 
604.8

Liabilities from risk management activities
 
175.8

 
163.8

Accrued taxes
 
111.4

 
80.9

Regulatory liabilities
 
149.9

 
101.1

Temporary LIFO liquidation credit
 
150.9

 
—

Liabilities held for sale
 
36.7

 
49.1

Deferred income taxes
 
12.8

 
—

Other current liabilities
 
218.6

 
228.8

Current liabilities
 
2,142.9

 
1,654.5

 
 
 
 
 
Long-term debt
 
2,956.2

 
2,956.2

Deferred income taxes
 
1,439.9

 
1,390.3

Deferred investment tax credits
 
57.6

 
57.6

Regulatory liabilities
 
438.8

 
383.7

Environmental remediation liabilities
 
588.4

 
600.0

Pension and other postretirement benefit obligations
 
95.6

 
200.8

Liabilities from risk management activities
 
46.2

 
62.8

Asset retirement obligations
 
497.0

 
491.0

Other long-term liabilities
 
133.6

 
133.2

Long-term liabilities
 
6,253.3

 
6,275.6

 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
Common stock – $1 par value; 200,000,000 shares authorized; 79,963,091 shares issued; 79,534,371 shares outstanding
 
80.0

 
79.9

Additional paid-in capital
 
2,653.4

 
2,660.5

Retained earnings
 
665.0

 
567.1

Accumulated other comprehensive loss
 
(23.6
)
 
(23.2
)
Shares in deferred compensation trust
 
(20.8
)
 
(23.0
)
Total common shareholders’ equity
 
3,354.0

 
3,261.3

 
 
 
 
 
Preferred stock of subsidiary – $100 par value; 1,000,000 shares authorized; 511,882 shares issued; 510,495 shares outstanding
 
51.1

 
51.1

Noncontrolling interest in subsidiaries
 
0.9

 
1.0

Total liabilities and equity
 
$
11,802.2

 
$
11,243.5




7

INTEGRYS ENERGY GROUP, INC.
 
 
 
 
 
 
 
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended
 
 
March 31
(Millions)
 
2014
 
2013
Operating Activities
 
 
 
 
Net income
 
$
153.1

 
$
188.3

Adjustments to reconcile net income to net cash provided by operating activities
 
 

 
 

Discontinued operations, net of tax
 
0.1

 
(6.1
)
Depreciation and amortization expense
 
71.3

 
60.9

Recoveries and refunds of regulatory assets and liabilities
 
54.1

 
16.5

Net unrealized gains on energy contracts
 
(19.7
)
 
(65.2
)
Bad debt expense
 
19.3

 
9.3

Pension and other postretirement expense
 
7.2

 
15.9

Pension and other postretirement contributions
 
(68.6
)
 
(63.2
)
Deferred income taxes and investment tax credits
 
90.2

 
68.3

Equity income, net of dividends
 
(3.9
)
 
(4.4
)
Termination of tolling agreement with Fox Energy Company LLC
 
—

 
(50.0
)
Other
 
1.1

 
6.3

Changes in working capital
 
 

 
 

Collateral on deposit
 
(37.0
)
 
15.4

Accounts receivable and accrued unbilled revenues
 
(531.5
)
 
(182.8
)
Inventories
 
121.6

 
137.9

Other current assets
 
(71.7
)
 
45.4

Accounts payable
 
272.1

 
24.7

Temporary LIFO liquidation credit
 
150.9

 
83.2

Other current liabilities
 
54.7

 
19.2

Net cash provided by operating activities
 
263.3

 
319.6

 
 
 
 
 
Investing Activities
 
 
 
 
Capital expenditures
 
(159.6
)
 
(147.0
)
Capital contributions to equity method investments
 
(5.1
)
 
(1.7
)
Acquisition of Fox Energy Company LLC
 
—

 
(391.6
)
Grant received related to Crane Creek wind project
 
—

 
69.0

Other
 
1.4

 
(1.9
)
Net cash used for investing activities
 
(163.3
)
 
(473.2
)
 
 
 
 
 
Financing Activities
 
 

 
 

Short-term debt, net
 
(4.1
)
 
74.0

Borrowing on term credit facility
 
—

 
200.0

Repayment of long-term debt
 
—

 
(22.0
)
Proceeds from stock option exercises
 
0.4

 
6.4

Shares purchased for stock-based compensation
 
(9.8
)
 
(2.0
)
Payment of dividends
 
 
 
 
Preferred stock of subsidiary
 
(0.8
)
 
(0.8
)
Common stock
 
(54.1
)
 
(50.1
)
Other
 
(3.7
)
 
(8.3
)
Net cash (used for) provided by financing activities
 
(72.1
)
 
197.2

 
 
 
 
 
Change in cash and cash equivalents - continuing operations
 
27.9

 
43.6

Change in cash and cash equivalents - discontinued operations
 
 
 
 
Net cash provided by (used for) operating activities
 
6.4

 
(0.6
)
Net cash provided by investing activities
 
—

 
1.6

Net change in cash and cash equivalents
 
34.3

 
44.6

Cash and cash equivalents at beginning of period
 
22.3

 
27.4

Cash and cash equivalents at end of period
 
$
56.6

 
$
72.0


8

Integrys Energy Group, Inc.

Diluted Earnings Per Share – Adjusted
and Weather Impacts

Diluted Earnings Per Share Information (Non-GAAP Information)

We prepare financial statements in accordance with accounting principles generally accepted in the United States (GAAP). In addition, we disclose and discuss diluted earnings per share (EPS) – adjusted and adjusted earnings (loss), which are non-GAAP measures. Management uses these measures in its internal performance reporting and for reports to the Board of Directors. We disclose these measures in our quarterly earnings releases, on investor conference calls, and during investor conferences and related events. Management believes that diluted EPS – adjusted and adjusted earnings (loss) are useful measures for providing investors with additional insight into our operating performance. These measures allow investors to better compare our financial results from period to period, as they eliminate the effects of certain items that are not comparable. 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. Tax impacts are calculated using the applicable combined federal and state statutory rate modified for any attributable permanent tax effect and/or tax credit.
 
 
Three Months Ended March 31
 
 
2014
 
2013
Diluted EPS
 
$
1.89

 
$
2.37

 
 
 
 
 
Special Items (net of taxes):
 
 
 
 
 
 
 
 
 
Net noncash gains related to derivative and inventory accounting activities
 
(0.16
)
 
(0.53
)
 
 
 
 
 
Discontinued operations
 
—

 
(0.08
)
 
 
 
 
 
Diluted EPS – adjusted
 
$
1.73

 
$
1.76

 
 
 
 
 
 Average Shares of Common Stock – Diluted (in millions)
 
80.5

 
79.3


Weather Impacts (Compared to Normal, Net of Decoupling)
 
 
Three Months Ended March 31
Dollar Impacts, net of taxes  (Millions)
 
2014
 
2013
Natural Gas Utility Segment
 
$
7.4

 
$
0.6

Electric Utility Segment
 
5.7

 
—

Integrys Energy Services – Core
 
(2.8
)
 
0.2

Reversal of the full calendar year 2012 reserves related to decoupling mechanisms at Peoples Gas and North Shore Gas
 
—

 
9.9

Total
 
$
10.3

 
$
10.7


 
 
Three Months Ended March 31
Diluted EPS Impacts, net of taxes
 
2014
 
2013
Natural Gas Utility Segment
 
$
0.09

 
$
0.01

Electric Utility Segment
 
0.07

 
—

Integrys Energy Services – Core
 
(0.03
)
 
—

Reversal of the full calendar year 2012 reserves related to decoupling mechanisms at Peoples Gas and North Shore Gas
 
—

 
0.12

Total
 
$
0.13

 
$
0.13





9

Integrys Energy Group, Inc.

Non-GAAP Financial Information Reported by Segment
 
Net income (loss) attributed to common shareholders is adjusted by reportable segment for the financial impact of special items for the quarters ended March 31, 2014 and 2013.
March 31, 2014
(Millions)
 
Natural Gas Utility
 
Electric
Utility
 
Electric Transmission Investment
 
Integrys Energy Services
 
Holding Company and Other
 
Integrys Energy Group Consolidated
 
Core
 
Other
 
Net income (loss) attributed to common shareholders
 
$
99.1

 
$
31.1

 
$
13.7

 
$
(1.9
)
 
$
12.7

 
$
(2.3
)
 
$
152.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Items (net of taxes)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net noncash gains related to derivative and inventory accounting activities
 
—

 
—

 
—

 
—

 
(12.8
)
 
—

 
(12.8
)
Discontinued operations
 
—

 
—

 
—

 
—

 
0.1

 
—

 
0.1

Adjusted earnings (loss)
 
$
99.1


$
31.1


$
13.7

 
$
(1.9
)
 
$
—

 
$
(2.3
)

$
139.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2013
(Millions)
 
Natural Gas
Utility
 
Electric
Utility
 
Electric Transmission Investment
 
Integrys Energy Services
 
Holding Company and Other
 
Integrys Energy Group Consolidated
 
Core
 
Other
 
Net income attributed to common shareholders
 
$
89.7

 
$
28.6

 
$
13.4

 
$
9.9

 
$
41.5

 
$
4.4

 
$
187.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Items (net of taxes)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net noncash gains related to derivative and inventory accounting activities
 
(0.1
)
 
—

 
—

 
—

 
(41.4
)
 
—

 
(41.5
)
Discontinued operations
 
—

 
—

 
—

 
—

 
(0.1
)
 
(6.0
)
 
(6.1
)
Adjusted earnings (loss)
 
$
89.6

 
$
28.6

 
$
13.4

 
$
9.9

 
$
—

 
$
(1.6
)
 
$
139.9



10

Integrys Energy Group, Inc.

Non-GAAP Financial Information Reported by Segment
 
Diluted earnings per share is adjusted by reportable segment for the financial impact of special items on diluted earnings per share for the quarters ended March 31, 2014 and 2013.
March 31, 2014
 
Natural Gas
Utility
 
Electric
Utility
 
Electric Transmission Investment
 
Integrys Energy Services
 
Holding Company and Other
 
Integrys Energy Group Consolidated
 
Core
 
Other
 
Diluted EPS
 
$
1.23

 
$
0.39

 
$
0.17

 
$
(0.03
)
 
$
0.16

 
$
(0.03
)
 
$
1.89

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Items (net of taxes)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net noncash gains related to derivative and inventory accounting activities
 
—

 
—

 
—

 
—

 
(0.16
)
 
—

 
(0.16
)
Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
—

 
—

Diluted EPS – adjusted
 
$
1.23

 
$
0.39

 
$
0.17

 
$
(0.03
)
 
$
—

 
$
(0.03
)
 
$
1.73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2013
 
Natural Gas
Utility
 
Electric
Utility
 
Electric Transmission Investment
 
Integrys Energy Services
 
Holding Company and Other
 
Integrys Energy Group Consolidated
 
Core
 
Other
 
Diluted EPS
 
$
1.13

 
$
0.36

 
$
0.17

 
$
0.12

 
$
0.53

 
$
0.06

 
$
2.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Special Items (net of taxes)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net noncash gains related to derivative and inventory accounting activities
 
—

 
—

 
—

 
—

 
(0.53
)
 
—

 
(0.53
)
Discontinued operations
 
—

 
—

 
—

 
—

 
—

 
(0.08
)
 
(0.08
)
Diluted EPS – adjusted
 
$
1.13

 
$
0.36

 
$
0.17

 
$
0.12

 
$
—

 
$
(0.02
)
 
$
1.76



11

Integrys Energy Group, Inc.
Key Variances in Non-GAAP Adjusted Earnings - By Segment (in Millions)
Three Months Ended March 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reporting Segment
 
First Quarter 2013 Adjusted Earnings / Loss
 
Weather, Net of Decoupling
 
 Decoupling Reserve Reversal (2)
 
Utility Rate Impacts / Other Nonregulated Margins
 
Operating Expense Impacts
 
Tax Impacts / Other (1)
 
First Quarter 2014 Adjusted Earnings / Loss
Natural Gas Utility
 
$
89.6

 
$
6.8

 
$
(9.9
)
 
$
17.5

 
$
(12.5
)
(3) 
$
7.6

 
$
99.1

Electric Utility
 
28.6

 
5.7

 
—

 
8.9

(4) 
(10.8
)
(5) 
(1.3
)
 
31.1

Electric Transmission Investment
 
13.4

 
—

 
—

 
—

 
—

 
0.3

 
13.7

Integrys Energy Services
 
9.9

 
(3.0
)
 
—

 
(3.0
)
 
(2.4
)
 
(3.4
)
 
(1.9
)
Holding Company and Other
 
(1.6
)
 
—

 
—

 
1.7

 
0.2

 
(2.6
)
 
(2.3
)
Total
 
$
139.9

 
$
9.5

 
$
(9.9
)
 
$
25.1

 
$
(25.5
)
 
$
0.6

 
$
139.7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Note: All amounts are shown net of tax. Certain variances have been adjusted to exclude amounts that have no impact on net income, including certain utility riders.

(1) Includes the impact of variances in weather-normalized sales volumes on utility margins, changes in interest expense, and other miscellaneous items
(2) In the first quarter of 2013, Peoples Gas and North Shore Gas reversed reserves that had been recorded in 2012 against decoupling amounts
(3) Driven by an increase in natural gas distribution costs at Peoples Gas as well as an increase in depreciation and amortization expense
(4) Includes the impact of the purchase of the Fox Energy Center
(5) Driven by increased maintenance costs at Wisconsin Public Service's Pulliam generation plant and the purchase of the Fox Energy Center at the end of the first quarter of 2013



12

Integrys Energy Group, Inc.

Diluted Earnings Per Share Guidance Information

 
 
Potential 2014
Diluted EPS Guidance
 
Low
Scenario
 
High
Scenario
 
 
 
 
 
Regulated natural gas utility segment
 
$
1.42

 
$
1.53

 
 
 
 
 
Regulated electric utility segment
 
1.45

 
1.60

 
 
 
 
 
Electric transmission investment segment
 
0.70

 
0.71

 
 
 
 
 
Integrys Energy Services
 
 
 
 
Core
 
0.17

 
0.21

 
 
 
 
 
Holding company and other segment
 
0.31

 
0.35

 
 
 
 
 
Integrys Energy Group Consolidated Diluted EPS *
 
$
4.10

 
$
4.35

Average Shares of Common Stock – Diluted (in millions)
 
80.7

 
80.7



Information on Special Items:
Diluted EPS guidance is adjusted for special items and their financial impact on the diluted EPS guidance for 2014.
 
 
 
 
 
Integrys Energy Group Consolidated Diluted EPS
 
$
4.10

 
$
4.35

Special Items (net of taxes)
 
 
 
 
 
 
 
 
 
Holding company and other segment - Gain on sale of Upper Peninsula Power Company
 
(0.60
)
 
(0.60
)
 
 
 
 
 
Integrys Energy Group Consolidated Diluted EPS – Adjusted
 
$
3.50

 
$
3.75

Average Shares of Common Stock – Diluted (in millions)
 
80.7

 
80.7


Key Assumptions for 2014:

▪
Availability of generation units
▪
Normal weather conditions for the rest of the year
▪
Not estimating the impact of derivative and inventory fair value accounting activities


* Note that the consolidated guidance is slightly narrower than the sum of the segments.


13

Integrys Energy Group, Inc.
Supplemental Quarterly Financial Highlights
(millions, except per share amounts)
 
 
2013
 
2014
 
 
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Year Ended
 
1st Qtr
Regulated Natural Gas Utility Segment
 
 
Revenues
 
$
793.9

$
369.9

$
257.2

$
684.0

$
2,105.0

 
$
1,272.0

year-over-year change
 
19.3
%
45.8
 %
16.9
 %
28.4
 %
25.9
 %
 
60.2
 %
Purchased natural gas costs
 
424.1

167.5

93.8

360.8

1,046.2

 
830.4

Margins
 
$
369.8

$
202.4

$
163.4

$
323.2

$
1,058.8

 
$
441.6

   year-over-year change
 
15.9
%
25.7
 %
10.3
 %
20.3
 %
18.0
 %
 
19.4
 %
margins/revenues
 
46.6
%
54.7
 %
63.5
 %
47.3
 %
50.3
 %
 
34.7
 %
Operating and maintenance expense
 
162.1

147.9

144.9

177.8

632.7

 
215.4

Depreciation and amortization expense
 
32.2

32.3

35.6

35.9

136.0

 
36.4

Taxes other than income taxes
 
9.9

9.5

9.6

9.2

38.2

 
10.8

Operating income (loss)
 
165.6

12.7

(26.7
)
100.3

251.9

 
179.0

   year-over-year change
 
16.6
%
N/M*

93.5
 %
23.5
 %
24.6
 %
 
8.1
 %
Net income (loss) attributed to common shareholders
 
$
89.7

$
1.5

$
(19.6
)
$
51.8

$
123.4

 
$
99.1

Total throughput in therms
 
1,695.6

711.9

454.4

1,313.8

4,175.7

 
2,006.8

year-over-year change
 
23.6
%
18.3
 %
(1.7
)%
16.1
 %
17.0
 %
 
18.4
 %
Retail throughput in therms
 
 

 

 

 

 

 
 

Residential
 
775.9

243.0

89.2

555.5

1,663.6

 
927.2

Commercial and industrial
 
236.8

78.9

43.2

175.9

534.8

 
301.4

Other
 
20.0

10.8

14.6

28.6

74.0

 
23.9

Total retail throughput in therms
 
1,032.7

332.7

147.0

760.0

2,272.4

 
1,252.5

Transport throughput in therms
 
 
 
 
 
 
 
 
Residential
 
111.3

39.1

16.4

85.9

252.7

 
135.4

Commercial and industrial
 
551.6

340.1

291.0

467.9

1,650.6

 
618.9

  Total transport throughput in therms
 
662.9

379.2

307.4

553.8

1,903.3

 
754.3

 
 
 
 
 
 
 
 
 
Regulated Electric Utility Segment
 
 
 
 
 
 
 
 
Revenues
 
$
331.8

$
327.0

$
354.0

$
319.3

$
1,332.1

 
$
349.2

   year-over-year change
 
8.1
%
4.9
 %
(3.5
)%
2.4
 %
2.7
 %
 
5.2
 %
Fuel and purchased power costs
 
143.2

131.3

133.6

128.8

536.9

 
136.7

Margins
 
$
188.6

$
195.7

$
220.4

$
190.5

$
795.2

 
$
212.5

   year-over-year change
 
5.1
%
11.0
 %
7.0
 %
9.7
 %
8.1
 %
 
12.7
 %
margins/revenues
 
56.8
%
59.8
 %
62.3
 %
59.7
 %
59.7
 %
 
60.9
 %
Operating and maintenance expense
 
101.4

111.5

110.6

116.7

440.2

 
116.0

Depreciation and amortization expense
 
21.5

25.8

25.7

25.6

98.6

 
25.6

Taxes other than income taxes
 
12.8

12.1

12.1

12.1

49.1

 
12.8

Operating income
 
52.9

46.3

72.0

36.1

207.3

 
58.1

   year-over-year change
 
19.4
%
8.4
 %
(4.4
)%
17.2
 %
7.4
 %
 
9.8
 %
Net income attributed to common shareholders
 
$
28.6

$
23.7

$
40.3

$
18.3

$
110.9

 
$
31.1

Sales in kilowatt-hours
 
3,953.1

3,942.1

4,181.0

3,924.9

16,001.1

 
3,671.6

   year-over-year change
 
4.1
%
(0.2
)%
(9.9
)%
(0.5
)%
(2.0
)%
 
(7.1
)%
Residential
 
823.8

692.6

837.8

778.1

3,132.3

 
898.3

Commercial and industrial
 
2,072.0

2,103.7

2,242.8

2,085.5

8,504.0

 
2,077.9

Wholesale
 
1,046.6

1,138.1

1,092.4

1,050.1

4,327.2

 
684.8

Other
 
10.7

7.7

8.0

11.2

37.6

 
10.6

 
 
 
 
 
 
 
 
 
Electric Transmission Investment Segment
 
 
 
 
 
 
American Transmission Company (ATC)
 
 
 
 
 
 
 
 
Equity contributions to ATC
 
$
1.7

$
5.1

$
3.4

$
3.5

$
13.7

 
$
5.1

After-tax equity earnings recognized from ATC investment
 
13.4

13.6

13.7

13.2

53.9

 
13.7

 
 
 
 
 
 
 
 
 
Notes:
 
 
 
 
 
 
 
 
* Not meaningful

14


Integrys Energy Group, Inc.
 
Supplemental Quarterly Financial Highlights
 
(millions, except Integrys Energy Services' sales volumes)
 
 
 
2013
 
2014
 
 
 
1st Qtr
2nd Qtr
 
3rd Qtr
 
4th Qtr
 
Year Ended
 
1st Qtr
 
Nonregulated Segment - Integrys Energy Services
 
Revenues
 
$
545.7

$
412.9

 
$
513.0

 
$
695.9

 
$
2,167.5

 
$
1,292.2

 
Cost of sales
 
430.7

443.7

 
469.3

 
567.1

 
1,910.8

 
1,234.8

 
Margins
 
$
115.0

$
(30.8
)
 
$
43.7

 
$
128.8

 
$
256.7

 
$
57.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Margin Detail:
 
 
 
 
 
 
 
 
 
 
 
 
Electric and renewable energy asset margins
 
89.6

(33.2
)
 
38.3

 
107.4

 
202.1

 
29.7

(1) 
Natural gas margins
 
25.4

2.4

(2) 
5.4

(2) 
21.4

(2) 
54.6

 
27.7

(2) 
Margins
 
115.0

(30.8
)
 
43.7

 
128.8

 
256.7

 
57.4

 
Retail Electric Realized Unit Margins
 
$
5.53

$
5.50

 
$
2.53

 
$
4.43

 
$
4.34

 
$
1.54

 
Retail Natural Gas Realized Unit Margins
 
$
0.37

$
0.16

 
$
0.17

 
$
0.26

 
$
0.25

 
$
0.31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating and maintenance expense
 
32.8

30.1

 
27.5

 
32.0

 
122.4

 
36.4

 
Depreciation and amortization expense
 
2.7

2.8

 
2.9

 
3.0

 
11.4

 
2.9

 
Taxes other than income taxes
 
1.0

1.0

 
0.6

 
0.7

 
3.3

 
1.2

 
Operating income (loss)
 
78.5

(64.7
)
 
12.7

 
93.1

 
119.6

 
16.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discontinued operations, net of tax
 
0.1

(0.7
)
 
(0.6
)
 
0.1

 
(1.1
)
 
(0.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributed to common shareholders
 
$
51.4

$
(41.8
)
 
$
11.7

 
$
57.0

 
$
78.3

 
$
10.8

 
Physically settled volumes
 
 
 
 
 
 
 
 
 
 
 
 
Retail electric sales volumes in million kilowatt-hours
 
4,318.2

4,838.1

 
6,291.0

 
5,887.1

 
21,334.4

 
6,356.9

 
Wholesale assets and distributed solar electric sales volumes in million kilowatt-hours (1)
 
18.0

15.7

 
17.4

 
12.9

 
64.0

 
14.1

 
Retail natural gas sales volumes in billion cubic feet
 
50.7

37.1

 
34.8

 
61.0

 
183.6

 
87.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nonregulated Segment - Holding Company and Other
 
Net income (loss) attributed to common shareholders
 
$
4.4

$
(2.4
)
 
$
(8.0
)
 
$
(8.7
)
 
$
(14.7
)
 
$
(2.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes:
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Includes negative margins of $0.4 million related to purchase accounting adjustments resulting from acquisitions.
 
 
 
(2)  These amounts include negative margins of $1.5 million, $1.3 million, and $2.0 million for the second, third, and fourth quarters of 2013, respectively, and $2.6 million for the first quarter of 2014, related to purchase accounting adjustments resulting from acquisitions.
 

15

Integrys Energy Group, Inc.
Supplemental Quarterly Financial Highlights
 
 
2013
 
2014
 
 
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Year Ended
 
1st Qtr
Weather information:
 
 
 
 
 
 
 
 
Heating and Cooling Degree Days - WPS
 
 
Heating Degree Days - Actual
 
3,803

1,107

216

2,925

8,051

 
4,515

period-over-period change
 
32.8
 %
48.0
 %
(14.3
)%
17.4
 %
26.7
 %
 
18.7
 %
compared with normal
 
4.4
 %
13.2
 %
—
 %
11.9
 %
8.0
 %
 
23.8
 %
Heating Degree Days - Normal
 
3,643

978

216

2,615

7,452

 
3,646

Cooling Degree Days - Actual
 
—

131

396

2

529

 
—

period-over-period change
 
(100.0
)%
(50.4
)%
(23.0
)%
N/M *

(33.0
)%
 
N/M *

compared with normal
 
(100.0
)%
(3.7
)%
9.7
 %
(60.0
)%
5.2
 %
 
(100.0
)%
Cooling Degree Days - Normal
 
1

136

361

5

503

 
1

 
 
 
 
 
 
 
 
 
Heating and Cooling Degree Days - UPPCO
 
 
Heating Degree Days - Actual
 
4,087

1,629

473

3,307

9,496

 
4,884

period-over-period change
 
24.5
 %
37.8
 %
9.0
 %
16.0
 %
22.5
 %
 
19.5
 %
compared with normal
 
3.0
 %
16.4
 %
17.1
 %
14.2
 %
9.6
 %
 
23.0
 %
Heating Degree Days - Normal
 
3,967

1,399

404

2,895

8,665

 
3,972

Cooling Degree Days - Actual
 
—

36

194

—

230

 
—

period-over-period change
 
N/M *

(63.6
)%
(17.8
)%
N/M *

(31.3
)%
 
N/M *

compared with normal
 
N/M *

(34.5
)%
10.2
 %
(100.0
)%
(0.9
)%
 
N/M *

Cooling Degree Days - Normal
 
—

55

176

1

232

 
—

 
 
 
 
 
 
 
 
 
Heating Degree Days - MGU
 
 
 
 
 
 
 
 
Heating Degree Days - Actual
 
3,150

788

154

2,372

6,464

 
3,915

period-over-period change
 
27.4
 %
19.6
 %
(13.5
)%
15.1
 %
20.4
 %
 
24.3
 %
compared with normal
 
3.2
 %
4.6
 %
18.5
 %
10.6
 %
6.4
 %
 
26.3
 %
Heating Degree Days - Normal
 
3,051

753

130

2,144

6,078

 
3,099

 
 
 
 
 
 
 
 
 
Heating Degree Days - MERC
 
 
 
 
 
 
 
 
Heating Degree Days - Actual
 
4,081

1,220

174

3,290

8,765

 
4,701

period-over-period change
 
32.4
 %
68.7
 %
(23.0
)%
17.4
 %
28.3
 %
 
15.2
 %
compared with normal
 
3.8
 %
27.0
 %
(29.8
)%
13.4
 %
9.0
 %
 
19.7
 %
Heating Degree Days - Normal
 
3,931

961

248

2,900

8,040

 
3,926

 
 
 
 
 
 
 
 
 
Heating Degree Days - PGL and NSG
 
 
Heating Degree Days - Actual
 
3,247

802

78

2,446

6,573

 
3,870

period-over-period change
 
36.5
 %
51.3
 %
(29.7
)%
21.0
 %
30.4
 %
 
19.2
 %
compared with normal
 
4.9
 %
13.6
 %
(9.3
)%
14.1
 %
9.0
 %
 
25.1
 %
Heating Degree Days - Normal
 
3,095

706

86

2,144

6,031

 
3,093

 
 
 
 
 
 
 
 
 
Notes:
 
 
 
 
 
 
 
 
* Not meaningful
 
 
 
 
 
 
 
 




16



Integrys Energy Group, Inc.
Supplemental Quarterly Financial Highlights
(millions, except Integrys Energy Services' sales volumes)
 
 
 
 
 
 
 
 
 
Other Information:
 
 
 
 
 
 
 
 
Capital Expenditures
 
2013
 
2014
 
 
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Year Ended
 
1st Qtr
Regulated utility expenditures
 
$
525.7

$
139.9

$
154.6

$
164.8

$
985.0

 
$
123.9

Integrys Energy Services
 
3.4

0.8

4.6

7.0

15.8

 
7.5

Other
 
9.5

12.4

15.4

22.7

60.0

 
28.2

Total Capital Expenditures
 
$
538.6

$
153.1

$
174.6

$
194.5

$
1,060.8

 
$
159.6

Nonregulated Segment - Integrys Energy Services
 
Forward Contracted Volumes at 03/31/13
 
Forward Contracted Volumes at 03/31/14
By Rolling Twelve Months
 
04/01/13 - 03/31/14
 
04/01/14 - 03/31/15
 
Post 03/31/15
 
04/01/14 - 03/31/15
 
04/01/15 - 03/31/16
 
Post 03/31/16
Retail natural gas sales volumes - billion cubic feet
 
90.8

 
28.4

 
5.4

 
155.7

 
51.8

 
12.1

Retail electric sales volumes - million kilowatt-hours
 
16,219

 
4,558

 
1,580

 
17,004

 
6,017

 
2,267

 
 
 
 
 
 
 
 
 
 
 
 
 
By Calendar Year
 
04/01/13 - 12/31/13
 
01/01/14 - 12/31/14
 
Post 12/31/14
 
04/01/14 - 12/31/14
 
01/01/15 - 12/31/15
 
Post 12/31/15
Retail natural gas sales volumes - billion cubic feet
 
68.2

 
42.9

 
13.5

 
115.4

 
79.7

 
24.5

Retail electric sales volumes - million kilowatt-hours
 
13,304

 
7,056

 
1,997

 
14,098

 
7,951

 
3,239

 
 
These tables represent estimated physical sales volumes related to contracts for natural gas and electric power for delivery or settlement in future periods.
Nonregulated Segment - Integrys Energy Services
 
Wholesale Counterparty Credit Exposure at 03/31/13
 
Wholesale Counterparty Credit Exposure at 03/31/14
Counterparty Rating
 
Total
 
< 1 Year
 
1 to 3 Years
 
> 3 Years
 
Total
 
< 1 Year
 
1 to 3 Years
 
> 3 Years
Investment grade - regulated utilities
 
$
5.0

 
$
4.0

 
$
1.0

 
$
—

 
$
7.4

 
$
6.9

 
$
0.6

 
$
(0.1
)
Investment grade - other
 
9.5

 
6.3

 
3.3

 
(0.1
)
 
33.6

 
30.7

 
2.9

 
—

Non-investment grade - regulated utilities
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Non-investment grade - other
 
1.8

 
1.8

 
—

 
—

 
2.8

 
2.4

 
0.4

 
—

Non-rated - regulated utilities
 
—

 
—

 
—

 
—

 
0.1

 
0.1

 
—

 
—

Non-rated - other
 
7.6

 
5.2

 
2.4

 
—

 
4.5

 
3.5

 
1.0

 
—

Total Exposure
 
$
23.9

 
$
17.3

 
$
6.7

 
$
(0.1
)
 
$
48.4

 
$
43.6

 
$
4.9

 
$
(0.1
)
 
 
The investment and non-investment grade categories are determined by publicly available credit ratings of the counterparty or the rating of any guarantor, whichever is higher.  Investment grade counterparties are those with a senior unsecured Moody's rating of Baa3 or above or a Standard & Poor's rating of BBB- or above.  Exposure considers netting of accounts receivable and accounts payable where netting agreements are in place, as well as net mark-to-market exposure.  


17