EX-99.2 3 c99892exv99w2.htm EXHIBIT 99.2 Exhibit 99.2

Exhibit 99.2

UniSource Energy Corporation
Supplemental Earnings Information
April 30, 2010

         
TABLE OF CONTENTS        
Safe Harbor and Non-GAAP Measures
     1  
Variance Explanation
     2  
Operations & Maintenance Components
     3  
TEP Operating Statistics
     4  
TEP Margin Revenues
     5  
UNS Electric Operating Statistics
     6  
UNS Gas Operating Statistics
     7  
Basic & Diluted Shares Outstanding
     8  

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 forecast assumptions and estimates below are not intended to be a full list of factors which could cause UniSource Energy’s future results to differ from current expectations. Please refer to UniSource Energy’s SEC filings for more information regarding risks and other uncertainties that could cause current expectations to differ from future results.

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 EARNINGS VARIANCE EXPLANATION
                                         
1st Quarter 2009 UniSource Energy Net Income   $ 4.9
 
                        
    1st Quarter     Change        
    2010     2009     Pre-Tax     After Tax    
TEP   -millions of dollars-        
Retail Margin Revenues
   $ 108.4     $ 107.6     $ 0.8     $ 0.5    
L-T Wholesale Margin Revenues
     8.1       7.7       0.4       0.2    
Transmission Revenues
     7.5       3.9       3.6       2.2    
 
                        
TEP Utility Gross Margin (Non-GAAP)
     124.0       119.2     $ 4.8       3.0    
 
                        
Loss related to the settlement of a dispute over transactions with the California Power Exchange
     (3.0 )     0.0       (3.0 )     (1.9 )  
Base O&M
     54.1       63.1       9.0       5.6    
Depreciation
     24.1       26.8       (2.7 )     (1.7 )  
Amortization
     7.8       8.3       (0.5 )     (0.3 )  
Operating synergies related to Springerville Unit 3&4
     6.5       2.5       4.0       2.5    
Other Line Item Changes
     (5.0 )     (4.9 )     (0.1 )     (0.1 )  
 
                        
TEP Operating Income (GAAP)
     36.5       18.6       17.9       11.1    
Other Income
     2.1       2.2       (0.1 )     (0.1 )  
Total Interest Expense
     21.9       21.7       0.2       0.1    
Income Tax Expense (Benefit)
     6.3       (0.3 )     6.6       6.6    
 
                        
TEP Net Income (Loss)
   $ 10.4     $ ($0.6 )     NM       $11.0    
 
                        
 
                        
Change in TEPNet Income   11.0
 
                                
 
                        
Other Business Segments
                                  
Gain recorded by UNS Electric related to the settlement of a dispute over transactions with the California Power Exchange
     3.0       0.0       3.0       1.9    
 
                        
Other Net Income at UNS Electric
     1.0       0.8       NM       0.2    
UNS Gas Net Income
     5.8       4.9       NM       0.9    
After-Tax Income from MEH, UED and Consolidating Adj.
     1.1       0.0       NM       1.1    
 
                  
Total Other Income and Consolidating Adjustments
     10.9       5.7       NM       4.1    
 
                        
 
                        
Change in UNS Electric, UNS Gas and Other   4.1
 
                        
 
                                
1st Quarter 2010 UniSource Energy Net Income   $20.0
 
                                
2 — Variance Explanation

 

 

 

UNISOURCE ENERGY AND TEP O&M
                 
    1st Quarter  
UniSource Energy   2010     2009  
O&M Components   -millions of dollars-  
TEP Base O&M (Non-GAAP)
   $ 54.1     $ 63.1  
UNS Gas O&M
     6.2       6.2  
UNS Electric O&M
     4.8       4.7  
Consolidating Adjustments & Other
     (1.9 )     (1.5 )
 
            
UniSource Energy Base O&M (Non-GAAP)
   $ 63.2     $ 72.5  
Reimbursed O&M Related to Springerville Units 3 and 4
     12.7       9.2  
O&M Related to Customer-funded Renewable Energy and DSM Programs
     7.0       3.3  
 
            
UniSource Energy O&M (GAAP)
   $ 82.9     $ 85.0  
 
            
                 
    1st Quarter  
TEP   2010     2009  
O&M Components   -millions of dollars-  
Wages, A&G, Other
   $ 34.2     $ 36.0  
Generating Plant Maintenance Expense
     16.4       22.6  
Pension and Postretirement Benefits Expense
     3.5       4.5  
 
            
TEP Base O&M (Non-GAAP)
   $ 54.1     $ 63.1  
Reimbursed O&M Related to Springerville Units 3 and 4
     12.7       9.2  
O&M Related to Customer-funded Renewable Energy and DSM Programs
     5.2       2.4  
 
            
TEP O&M (GAAP)
   $ 72.0     $ 74.7  
 
            
3 — O&M

 

 

 

TEP — OPERATING STATISTICS
                                 
    3 Months Ended Mar. 31  
    2010     2009     Incr (Decr)     % Change  
AVG. ELECTRIC CUSTOMERS
                                
Residential
     365,627       364,825       802       0.2 %
Commercial
     35,814       35,502       312       0.9 %
Industrial
     632       636       (4 )     -0.6 %
Mining
     2       2       —       0.0 %
Other
     61       61       —       0.0 %
 
                        
Total
     402,136       401,026       1,110       0.3 %
 
                        
 
                                
RETAIL SALES — MWH
                                
Residential
     754,738       727,177       27,561       3.8 %
Commercial
     394,607       403,863       (9,256 )     -2.3 %
Industrial
     473,771       489,508       (15,737 )     -3.2 %
Mining
     261,037       258,694       2,343       0.9 %
Other
     44,659       50,016       (5,357 )     -10.7 %
 
                        
Total
     1,928,812       1,929,258       (446 )     0.0 %
 
                        
 
                                
RETAIL USAGE — KWH/CUSTOMER
                                
Residential
     2,064       1,993       71       3.6 %
Commercial
     11,018       11,376       (358 )     -3.1 %
Industrial
     749,638       769,667       (20,029 )     -2.6 %
Mining
     130,518,500       129,347,000       1,171,500       0.9 %
Other
     732,115       819,934       (87,820 )     -10.7 %
 
                        
Total
     4,796       4,811       (14 )     -0.3 %
 
                        
 
                                
WEATHER — HEATING DEGREE DAYS
                                
Actual
     881       646       235       36.4 %
10-Year Average
     805       805                  
% Change Actual vs. 10-Year Avg.
     9.4 %     -19.8 %                
 
                                
ENERGY MARKET INDICATORS
                                
Avg. Wholesale Power Prices
                                
Palo Verde Index — $/MWh
                                
On Peak
   $ 45.19     $ 33.75     $ 11.44       33.9 %
Off Peak
   $ 34.77     $ 25.79     $ 8.98       34.8 %
 
                                
Avg. Natural Gas Prices
                                
Permian Index — $/MMBtu
   $ 5.26     $ 3.57     $ 1.69       47.3 %
4 — TEP Operating Statistics

 

 

 

TEP — RETAIL AND WHOLESALE MARGIN REVENUES
                                 
    3 Months Ended Mar. 31  
    2010     2009     Incr (Decr)     % Change  
RETAIL REVENUES — $ MILLIONS
                                
Margin Revenues:
                                
Residential
   $ 47.3     $ 45.3       2.0       4.4 %
Commercial
     30.6       30.3       0.3       1.0 %
Industrial
     21.0       22.6       (1.6 )     -7.1 %
Mining
     7.3       7.1       0.2       2.8 %
Other
     2.2       2.3       (0.1 )     -4.3 %
 
                        
Total
   $ 108.4     $ 107.6     $ 0.8       0.7 %
DSM / REST
     8.0       2.4       5.6     NM  
Fuel Revenues:
                                
Recovered from Customers
     51.0       47.5       3.5       7.4 %
 
                        
Total Retail Revenues
   $ 167.4     $ 157.5     $ 9.9       6.3 %
 
                        
 
                                
RETAIL REVENUES — CENTS / KWH
                                
Margin Revenues:
                                
Residential
     6.27       6.23       0.04       0.6 %
Commercial
     7.75       7.50       0.25       3.4 %
Industrial
     4.43       4.62       (0.18 )     -4.0 %
Mining
     2.80       2.74       0.05       1.9 %
Other
     4.93       4.60       0.33       7.1 %
 
                        
Total
     5.62       5.58       0.04       0.8 %
DSM / REST
     0.41       0.12       0.29     NM  
Fuel Revenues:
                                
Recovered from Customers
     2.64       2.46       0.18       7.4 %
 
                        
Total Retail Revenues
     8.68       8.16       0.52       6.3 %
 
                        
 
                                
LONG-TERM WHOLESALE MARGIN — $ MILLIONS
                                
Long-term Wholesale Revenues
   $ 14.9     $ 14.1       0.8       5.7 %
Fuel and Purchased Power Expense
     (6.8 )     (6.4 )     (0.4 )     6.2 %
 
                        
Net
   $ 8.1     $ 7.7       0.4       5.2 %
                         
5 — TEP Margin Revenues

 

 

 

UNS ELECTRIC — OPERATING STATISTICS
                                 
    Three Months Ended March 31,  
    2010     2009     Incr (Decr)     % Change  
AVG. ELECTRIC CUSTOMERS
                                
Residential
     80,023       79,408       615       0.8 %
Commercial
     10,336       10,344       (8 )     -0.1 %
Industrial
     24       18       6       33.3 %
Mining
     1       1       —       0.0 %
Other
     266       261       5       1.9 %
 
                        
Total
     90,650       90,032       618       0.7 %
 
                        
 
                                
RETAIL SALES — MWH
                                
Residential
     175,345       166,570       8,775       5.3 %
Commercial
     131,308       133,650       (2,342 )     -1.8 %
Industrial
     51,834       38,357       13,477       35.1 %
Mining
     46,852       33,927       12,925       38.1 %
Other
     566       612       (46 )     -7.5 %
 
                        
Total
     405,905       373,116       32,789       8.8 %
 
                        
 
                                
RETAIL USAGE — KWH/CUSTOMER
                                
Residential
     2,191       2,098       94       4.5 %
Commercial
     12,704       12,921       (217 )     -1.7 %
Industrial
     2,159,750       2,130,944       28,806       1.4 %
Mining
     46,852,000       33,927,000       12,925,000       38.1 %
Other
     2,128       2,345       (217 )     -9.3 %
 
                        
Total
     4,478       4,144       333       8.0 %
 
                        
 
                                
RETAIL REVENUES — MILLIONS
                                
Margin Revenues:
                                
Residential
   $ 4.5     $ 4.3       0.2       4.7 %
Commercial
     5.0       5.0       (0.0 )     -0.4 %
Industrial
     1.7       1.5       0.3       20.2 %
Mining
     1.0       0.8       0.2       27.3 %
Other
     0.1       0.1       0.0       3.6 %
 
                        
Total Margin Revenues
   $ 12.3     $ 11.6     $ 0.7       5.9 %
DSM / REST
     1.6       0.7       0.9     NM  
Fuel Revenues:
                                
Recovered from Customers
     23.4       31.3       (7.9 )     -25.2 %
 
                        
Total Retail Revenues
   $ 37.3     $ 43.6       ($6.3 )     -14.4 %
 
                        
 
                                
WEATHER — HEATING DEGREE DAYS
                                
Actual
     3,570       3,121       449       14.4 %
10-Year Average
     3,389       3,364                  
% Change Actual vs. 10-Year Avg.
     5.3 %     -7.2 %                
 
                            
6 — UNS Electric

 

 

 

UNS GAS — OPERATING STATISTICS
                                 
    Three Months Ended March 31,  
    2010     2009     Incr (Decr)     % Change  
AVG. GAS CUSTOMERS
                                
Residential
     133,715       133,212       503       0.4 %
Commercial
     11,405       11,526       (121 )     -1.0 %
Industrial
     23       24       (1 )     -4.2 %
All Other
     1,107       1,101       6       0.5 %
 
                        
Total
     146,250       145,863       387       0.3 %
 
                        
 
                                
RETAIL SALES — THOUSANDS OF THERMS
                                
Residential
     33,401       29,569       3,832       13.0 %
Commercial
     11,445       10,374       1,071       10.3 %
Industrial
     692       659       33       5.0 %
All Other
     10,411       11,393       (982 )     -8.6 %
 
                        
Total
     55,950       51,996       3,953       7.6 %
 
                        
 
                                
RETAIL USAGE — THERMS/CUSTOMER
                                
Residential
     250       222       28       12.5 %
Commercial
     1,004       900       103       11.5 %
Industrial
     30,103       27,474       2,629       9.6 %
All Other
     9,404       10,348       (944 )     -9.1 %
 
                        
Total
     383       356       26       7.3 %
 
                        
 
                                
RETAIL REVENUES — MILLIONS
                                
Margin Revenues:
                                
Residential
   $ 14.1     $ 12.9       1.2       9.3 %
Commercial
     3.4       3.2       0.3       8.8 %
All Other
     0.9       0.8       0.1       7.7 %
 
                        
Total Margin Revenues
   $ 18.4     $ 16.8     $ 1.5       9.1 %
DSM Revenues
     0.2       0.2       0.1       58.9 %
Transport/NSP Revenues
     5.1       5.3       (0.1 )     -2.0 %
Fuel Revenues:
                                
Recovered from Customers
     32.9       37.2       (4.2 )     -11.4 %
 
                        
Total Gas Revenues
   $ 56.7     $ 59.4       ($2.7 )     -4.6 %
 
                        
WEATHER — HEATING DEGREE DAYS
                                
Actual
     10,356       9,254       1,102       11.9 %
10-Year Average
     9,885       9,901                  
% Change Actual vs. 10-Year Avg.
     4.8 %     -6.5 %                
 
                            
7 — UNS Gas

 

 

 

BASIC AND DILUTED SHARES OUTSTANDING
                 
    Three Months Ended  
    March 31,  
    2010     2009  
    -Thousands of Dollars-  
Numerator:
                
Net Income
   $ 19.972     $ 4.919  
Income from Assumed Conversion of Convertible Senior Notes
     1,097       —  
 
            
Adjusted Numerator
   $ 21,069     $ 4,919  
 
            
 
                
Denominator:
                
Weighted-average Shares of Common Stock Outstanding:
                
Common Shares Issued
     35,850       35,557  
Fully Vested Deferred Stock Units
     107       108  
Participating Securities
     95       —  
 
            
Total Weighted-average Shares of Common Stock Outstanding and Participating Securities — Basic
     36.052       35,665  
Effect of Dilutive Securities:
                
Convertible Senior Notes
     4,140       —  
Options and Stock Issuable Under Employee Benefit Plans and the Directors’ Plans
     481       540  
 
            
Total Shares — Diluted
     40,673       36,205  
 
            
Stock options to purchase 234,000 and 395,000 shares of Common Stock were outstanding during the three months ended March 31, 2010 and 2009, respectively, but were not included in the computation of diluted EPS because the stock options’ exercise prices were greater than the average market price of the Common Stock.
Additionally, for the three months ended March 31, 2009, 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.
8 — Diluted Share Count