EX-99.2 3 c84791exv99w2.htm EXHIBIT 99.2 Exhibit 99.2
Exhibit 99.2
UniSource Energy Corporation
Supplemental Earnings & Outlook Information
May 4, 2009
SAFE HARBOR AND NON-GAAP MEASURES
This document contains forward-looking information that involves risks and uncertainties, that include, but are not limited to: state and federal regulatory and legislative decisions and actions; regional economic and market conditions which could affect customer growth and energy usage; weather variations affecting energy usage; the cost of debt and equity capital and access to capital markets; the performance of the stock market and changing interest rate environment, which affect the value of the company’s pension and other postretirement benefit plan assets and the related contribution requirements and expense; unexpected increases in O&M expense; resolution of pending litigation matters; changes in accounting standards; changes in critical accounting estimates; the ongoing restructuring of the electric industry; changes to long-term contracts; the cost of fuel and power supplies; performance of TEP’s generating plants; and other factors listed in UniSource Energy’s Form 10-K and 10-Q filings with the Securities and Exchange Commission. The preceding factors may cause future results to differ materially from historical results or from outcomes currently expected by UniSource Energy.
The Company’s press releases and other communications may include certain non-Generally Accepted Accounting Principles (GAAP) financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the Company’s financial statements.
Non-GAAP financial measures utilized by the Company include presentations of revenues, operating expenses, operating income and earnings (loss) per share. The Company uses these non-GAAP measures to evaluate the operations of the Company. Certain non-GAAP financial measures utilized by the Company exclude: the impact of non-recurring items: the effect of accounting changes or adjustments; expenses that are reimbursed by third parties; and other items. The Company’s management believes that these non-GAAP financial measures provide useful information to investors by removing the effect of variances in GAAP reported results of operations that are not indicative of fundamental changes in the earnings or cash flow capacity of the Company’s operations. Management also believes that the presentation of the non-GAAP financial measures is largely consistent with its past practice, as well as industry practice in general, and will enable investors and analysts to compare current non-GAAP measures with non-GAAP measures with respect to prior periods.

 

1

 

QUARTER OVER QUARTER VARIANCE EXPLANATION
                 
$ in millions   Pre-Tax     After Tax  
2008 1st Quarter UNS Net Income
             ($2.6 )
 
                
TEP Q1 2009 vs. Q1 2008
                
Change in Revenues
                
Lower retail revenues (excluding REST and DSM revenues) due to economic conditions
     (4.6 )     (2.7 )
 
                
Impact of mild weather residential revenues. Heating degree days were 20% below the 10-year average.
     (0.6 )     (0.4 )
 
                
Change in PPFAC-Related Expenses
                
Lower fuel and purchased power expense (net of short-term wholesale revenues) resulting from a 16% decrease in generating output due to lower retail demand and over 50% decreases in the wholesale market prices for power and natural gas
     12.4       7.5  
 
                
Lower transmission expense
     1.5       0.9  
 
                
Deferred fuel and purchased power expense
     0.4       0.2  
 
            
Change in TEP Utility Gross Margin
   $ 9.1     $ 5.5  
 
                
Change in Other Operating Expenses
                
Higher Base O&M due primarily to an increase in plant outage and maintenance costs, as well as an increase in pension expense
     (11.9 )     (7.1 )
 
                
Higher depreciation and amortization due to additions to plant in service, new depreciation rates for generation assets and amortization of regulatory assets resulting from the 2008 TEP Rate Order;
     (3.8 )     (2.3 )
 
                
No Amortization of the 1999 Transition Recovery Asset (it became fully amortized in May 2008)
     17.3       10.4  
 
                
Lower interest expense net of change in other income
     1.2       0.7  
 
                
Other Changes
     1.9       1.1  
 
            
Change in TEP’s Other Operating Expenses
   $ 4.7     $ 2.8  
 
                
 
            
Total TEP Change Q1 2009 vs. Q1 2008
   $ 13.8     $ 8.3  
 
            
 
                
UNS Gas and UNS Electric Q1 2009 vs. Q1 2008:
                
 
                
Change in UNS Gas’ Net Income Q1 2009 vs. Q1 2008
             (1.4 )
Mild weather
                
 
                
Change in UNS Electric’s Net Income Q1 2009 vs. 2009
             0.3  
Addition of a copper mining customer
                
 
                
Total UNS Gas and UNS Electric Change Q1 2009 vs Q1 2008
             (1.1 )
 
                
Consolidating Adjustments and Other
             0.3  
 
            
 
                
Total Change in UNS Net Income
             6.4  
 
                
 
            
2009 1st Quarter UNS Net Income
           $ 4.9  
 
            

 

2

 

TEP UTILITY GROSS MARGIN RECONCILIATION
                 
TEP - Three Months Ended March 31,   2009     2008  
    -Millions of Dollars-  
Retail Electric Revenues * (Excluding DSM & REST)
   $ 155.4     $ 160.6  
Long-Term Wholesale Electric Sales
     14.1       15.4  
Wholesale Transmission Revenues
     3.9       2.7  
 
            
Total
   $ 173.4     $ 178.7  
 
                
Less Fuel, Purchased Power and Transmission Expense
                
Fuel
     51.4       69.2  
Reimbursed Fuel
     (1.0 )     (1.0 )
Purchased Power
     23.0       32.2  
Increase (Decrease) to Reflect PPFAC Recovery
     (0.4 )     0.0  
Transmission
     0.5       2.0  
Short-Term Wholesale Electric Sales
     (19.6 )     (34.2 )
 
            
Net Fuel, Purchased Power and Transmission Expense
     53.9       68.2  
 
                
 
            
Utility Gross Margin (non-GAAP)
   $ 119.5     $ 110.5  
 
            
 
                
Reconciling Line Items to Operating Income
                
Other Revenue
     17.8       14.4  
REST & DSM Revenues
     2.4       1.3  
 
                
Other Operating Expenses (Income):
                
Reimbursed Fuel
     1.0       1.0  
Other Operations & Maintenance
     74.7       58.6  
Depreciation & Amortization
     35.1       31.3  
Amortization of 1999 Transition Recovery Asset
     0.0       17.3  
Taxes Other Than Income Taxes
     10.3       10.5  
 
                
 
            
Operating Income (GAAP)
   $ 18.6     $ 7.5  
 
            
     
*   For the first three months of 2009, TEP’s Retail Electric Revenues, excluding components for fuel, DSM and REST, were $108 million

 

3

 

UNISOURCE ENERGY AND TEP BASE O&M RECONCILIATION
                 
UniSource Energy            
O&M Components - Three Months Ended March 31,   2009     2008  
    -Millions of Dollars-  
TEP Base O&M (Non-GAAP)
   $ 63.1     $ 51.2  
UNS Gas O&M
     6.3       6.4  
UNS Electric O&M
     5.4       4.6  
Consolidating Adjustments & Other
     (1.4 )     (2.1 )
 
            
UniSource Energy Base O&M (Non-GAAP)
   $ 73.4     $ 60.1  
Reimbursed O&M Related to Springerville Units 3 and 4
     9.2       6.1  
Expenses Related to Customer-funded Renewable Energy and DSM Programs
     2.4       1.3  
 
            
UniSource Energy O&M (GAAP)
   $ 85.0     $ 67.5  
 
            
                 
TEP            
O&M Components - Three Months Ended March 31,   2009     2008  
    -Millions of Dollars-  
A&G, T&D, Customer Service, Etc.
   $ 33.3     $ 34.3  
Generating Plant Maintenance Expense
     25.8       15.7  
Pension and Postretirement Benefits Expense
     4.0       1.2  
 
            
TEP Base O&M (Non-GAAP)
   $ 63.1     $ 51.2  
Reimbursed O&M Related to Springerville Units 3 and 4
     9.2       6.1  
Expenses Related to Customer-funded Renewable Energy and DSM Programs
     2.4       1.3  
 
            
TEP O&M (GAAP)
   $ 74.7     $ 58.6  
 
            

 

4

 

TUCSON ELECTRIC POWER — OPERATING STATISTICS
                                 
    3 Months Ended March 31  
    2009     2008     Incr (Decr)     % Change  
AVG. ELECTRIC CUSTOMERS
                                
Residential
     364,825       362,311       2,514       0.7 %
Commercial
     35,502       34,887       615       1.8 %
Industrial
     636       640       (4 )     -0.6 %
Mining
     2       2       —       0.0 %
Other
     61       61       —       0.0 %
 
                        
Total
     401,026       397,901       3,125       0.8 %
 
                        
RETAIL SALES — MWH
                                
Residential
     727,177       772,839       (45,662 )     -5.9 %
Commercial
     403,863       415,458       (11,595 )     -2.8 %
Industrial
     489,508       517,481       (27,973 )     -5.4 %
Mining
     258,694       266,453       (7,759 )     -2.9 %
Other
     50,016       54,851       (4,835 )     -8.8 %
 
                        
Total
     1,929,258       2,027,082       (97,824 )     -4.8 %
 
                        
RETAIL USAGE — KWH/CUSTOMER
                                
Residential
     1,993       2,133       (140 )     -6.6 %
Commercial
     11,376       11,909       (533 )     -4.5 %
Industrial
     769,667       808,564       (38,897 )     -4.8 %
Mining
     129,347,000       133,226,500       (3,879,500 )     -2.9 %
Other
     819,934       899,197       (79,262 )     -8.8 %
 
                        
Total
     4,811       5,094       (284 )     -5.6 %
 
                        
RETAIL REVENUES — MILLIONS
                                
Residential
   $ 64.4     $ 64.7       ($0.3 )     -0.5 %
Commercial
     40.5       42.2       (1.7 )     -3.9 %
Industrial
     33.9       36.2       (2.3 )     -6.4 %
Mining
     13.1       13.4       (0.3 )     -2.3 %
Other
     3.5       4.1       (0.6 )     -14.2 %
 
                        
Total
   $ 155.4     $ 160.6       ($5.2 )     -3.2 %
 
                        
DSM / REST
     2.4       1.3       1.1       84.6 %
 
                        
Total Retail Revenues
     157.8       161.9       ($4.1 )     -2.5 %
 
                        
                                 
    3 Months Ended March 31  
    2009     2008     Incr (Decr)     % Change  
WEATHER NORMALIZED
                                
RETAIL SALES — MWH
                                
Residential
     734,690       767,762       (33,072 )     -4.3 %
Commercial (1)
     403,863       415,458       (11,595 )     -2.8 %
 
                                
WEATHER NORMALIZED
                                
RETAIL USAGE — KWH/CUSTOMER
                                
Residential
     2,014       2,118       (104 )     -4.9 %
Commercial
     11,376       11,909       (533 )     -4.5 %
 
                                
WEATHER NORMALIZED
                                
RETAIL REVENUES — MILLIONS
                                
Residential
   $ 65.0     $ 64.6       0.4       0.6 %
Commercial
   $ 40.5     $ 42.3       (1.8 )     -4.2 %
 
                                
WEATHER — HEATING DEGREE DAYS
                                
Actual
     646       858       (212 )     -24.7 %
10-Year Average
     805       811                  
% Change Actual vs. 10-Year Avg.
     -19.8 %     5.8 %                
 
                                
ENERGY MARKET INDICATORS
                                
Avg. Wholesale Power Prices
                                
Palo Verde Index — $/MWh
                                
On Peak
   $ 33.75     $ 70.10       ($36.35 )     -51.9 %
Off Peak
   $ 25.79     $ 60.23       ($34.44 )     -57.2 %
 
                                
Avg. Natural Gas Prices
                                
Permian Index — $/MMBtu
   $ 3.57     $ 7.30       ($3.73 )     -51.1 %
     
(1)   We do not expect weather to impact commercial kWh sales until the summer months

 

5

 

UNS GAS — OPERATING STATISTICS
                                 
    3 Months Ended March 31  
    2009     2008     Incr (Decr)     % Change  
AVG. GAS CUSTOMERS
                                
Residential
     133,212       133,408       (196 )     -0.1 %
Commercial
     11,526       11,617       (91 )     -0.8 %
All Other
     1,108       1,105       3       0.3 %
 
                        
Total
     145,846       146,130       (284 )     -0.2 %
 
                        
 
                                
RETAIL SALES — THOUSANDS OF THERMS
                                
Residential
     29,569       34,795       (5,226 )     -15.0 %
Commercial
     10,374       12,159       (1,785 )     -14.7 %
All Other
     3,524       4,220       (696 )     -16.5 %
 
                        
Total
     43,467       51,174       (7,707 )     -15.1 %
 
                        
 
                                
RETAIL USAGE — THERMS/CUSTOMER
                                
Residential
     222       261       (39 )     -14.9 %
Commercial
     900       1,047       (147 )     -14.0 %
 
                                
RETAIL REVENUES — MILLIONS
                                
Non-Fuel Revenues:
                                
Residential
   $ 12.9     $ 14.7       (1.8 )     -12.2 %
Commercial
     3.2       3.7       (0.5 )     -13.5 %
All Other
     0.7       0.9       (0.2 )     -22.2 %
 
                        
Total
   $ 16.8     $ 19.3       ($2.5 )     -13.0 %
 
                        
DSM Revenues
     0.1       0.0       0.1       N/M  
Fuel Revenues:
                                
Recovered from Customers
     37.1       40.2       (3.1 )     -7.7 %
 
                        
Total Retail Revenues
   $ 54.0     $ 59.5       ($5.5 )     -9.2 %
 
                        
                                 
    3 Months Ended March 31  
    2009     2008     Incr (Decr)     % Change  
WEATHER NORMALIZED
                                
RETAIL SALES — THOUSANDS OF THERMS
                                
Residential
     31,369       33,297       (1,928 )     -5.8 %
Commercial
     10,826       11,717       (891 )     -7.6 %
 
                                
WEATHER NORMALIZED
                                
RETAIL USAGE — THERMS/CUSTOMER
                                
Residential
     235       250       (14 )     -5.7 %
Commercial
     939       1,009       (69 )     -6.9 %
 
                                
WEATHER NORMALIZED
                                
RETAIL REVENUES — MILLIONS
                                
Residential
   $ 15.0     $ 13.0       2       15.4 %
Commercial
     3.7       3.2       0.5       15.6 %
 
                                
WEATHER — HEATING DEGREE DAYS
                                
Actual
     11,127       12,627       (1,500 )     -11.9 %
10-Year Average
     11,925       11,960                  
% Change Actual vs. 10-Year Avg.
     -6.7 %     5.6 %                

 

6

 

UNS ELECTRIC — OPERATING STATISTICS
                                 
    3 Months Ended March 31  
    2009     2008     Incr (Decr)     % Change  
AVG. ELECTRIC CUSTOMERS
                                
Residential
     79,408       79,477       (69 )     -0.1 %
Commercial
     10,345       10,309       36       0.3 %
All Other
     280       271       9       3.3 %
 
                        
Total
     90,033       90,057       (24 )     0.0 %
 
                        
 
                                
RETAIL SALES — MWH
                                
Residential
     166,570       183,320       (16,750 )     -9.1 %
Commercial
     133,650       134,541       (891 )     -0.7 %
Industrial
     38,357       44,788       (6,431 )     -14.4 %
Mining
     33,927       5,504       28,423     NM  
Other
     612       608       4       0.7 %
 
                        
Total
     373,116       368,761       4,355       1.2 %
 
                        
 
                                
RETAIL USAGE — KWH/CUSTOMER
                                
Residential
     2,098       2,307       (209 )     -9.1 %
Commercial
     12,919       13,051       (132 )     -1.0 %
 
                                
RETAIL REVENUES — MILLIONS
                                
Non-Fuel Revenues:
                                
Residential
   $ 4.3     $ 5.8       (1.5 )     -25.9 %
Commercial
     5.0       4.3       0.7       16.3 %
Industrial
     1.9       0.5       1.4     NM  
Mining
     0.3       0.0       0.3     NM  
Other
     0.1       0.0       0.1     NM  
 
                        
Total
   $ 11.6     $ 10.6     $ 1.0       9.4 %
 
                        
DSM / REST
     0.7       0.1       0.6       N/M  
Fuel Revenues:
                                
Recovered from Customers
     31.3       25.9       5.4       20.8 %
 
                        
Total Retail Revenues
   $ 43.6     $ 36.6     $ 7.0       19.1 %
 
                        
                                 
    3 Months Ended March 31  
    2009     2008     Incr (Decr)     % Change  
WEATHER NORMALIZED
                                
RETAIL SALES — MWH
                                
Residential
     169,538       177,900       (8,362 )     -4.7 %
Commercial (1)
     133,650       134,541       (891 )     -0.7 %
 
                                
WEATHER NORMALIZED
                                
RETAIL USAGE — KWH/CUSTOMER
                                
Residential
     2,135       2,238       (103 )     -4.6 %
Commercial (1)
     12,919       13,051       (132 )     -1.0 %
 
                                
WEATHER NORMALIZED
                                
RETAIL NON-FUEL REVENUES — MILLIONS
                                
Residential
   $ 4.6     $ 5.3       (0.7 )     -13.2 %
Commercial
     5.0       4.3       0.7       16.3 %
 
                                
WEATHER — HEATING DEGREE DAYS
                                
Actual
     3,121       3,768       (647 )     -17.2 %
10-Year Average
     3,364       3,368                  
% Change Actual vs. 10-Year Avg.
     -7.2 %     11.9 %                
 
                                
WEATHER — COOLING DEGREE DAYS
                                
Actual
     77       88       (11 )     -12.5 %
10-Year Average
     115       112                  
% Change Actual vs. 10-Year Avg.
     -33.0 %     -21.4 %                
     
(1)   We do not expect weather to impact commercial kWh sales or revenues until the summer months

 

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BASIC AND DILUTED SHARES OUTSTANDING
                 
    Three Months Ended  
    March 31,  
    2009     2008  
    - In Thousands -  
Numerator:
                
Net Income (Loss)
   $ 4,919     $ (2,615 )
Income from Assumed Conversion of Convertible Senior Notes
     —       —  
 
            
Adjusted Numerator
   $ 4,919     $ (2,615 )
 
            
 
                
Denominator:
                
Weighted-average Shares of Common Stock Outstanding:
                
Common Shares Issued
     35,557       35,354  
Fully Vested Deferred Stock Units
     108       205  
 
            
Total Weighted-average Shares of Common Stock Outstanding-Basic
     35,665       35,559  
Effect of Dilutive Securities:
                
Convertible Senior Notes
     —       —  
Options and Stock Issuable Under Benefit Plans
     540       —  
 
            
Total Shares — Diluted
     36,205       35,559  
 
            
For the three months ended March 31, 2009 and March 31, 2008, 4 million potentially dilutive shares from the conversion of convertible senior notes, and after-tax interest expense of $1 million were not included in the computation of diluted EPS because to do so would be anti-dilutive.
Stock options with an exercise price greater than the average market price of the common stock are excluded from the dilution calculation.

 

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