EX-99.2 3 ex992.htm EX-99.2 Ex 99.2


Exhibit 99.2
UNS Energy Corporation
1st Quarter 2013 Supplemental Earnings Information
As of April 29, 2013
 
TABLE OF CONTENTS
 
Safe Harbor and Non-GAAP Measures
1

Variance Explanation
2

UNS Energy and TEP O&M
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, which 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 retiree 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 UNS 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 UNS Energy. The forecast assumptions and estimates below are not intended to be a full list of factors which could cause UNS Energy’s future results to differ from current expectations. Please refer to UNS 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


UNS ENERGY 1ST QUARTER EARNINGS VARIANCE EXPLANATION
 
1st Quarter 2012 UNS Energy Net Income
 
 
 
$6.5
 
 
1st Quarter
 
Change
 
 
TEP
 
2013
 
2012
 
Pre-Tax
 
After Tax
 
 
 
 
Millions of Dollars
 
 
Utility Gross Margin Components:
 
 
 
 
 
 
 
 
 
 
Retail Margin Revenues (1)
 
$
109.9

 
$
105.4

 
$
4.5

 
$
2.7

 
 
L-T Wholesale Margin Revenues (1)
 
2.3

 
1.9

 
0.4

 
0.2

 
 
Transmission Revenues
 
3.8

 
3.9

 
(0.1
)
 
(0.1
)
 
 
Total
 
116.0

 
111.2

 
4.8

 
2.9

 
 
Other Income Sources:
 
 
 
 
 
 
 
 
 
 
Operating synergies—Springerville Units 3&4
 
5.4

 
5.6

 
(0.2
)
 
(0.1
)
 
 
Expenses:
 
 
 
 
 
 
 
 
 
 
Base O&M (1)
 
60.5

 
60.6

 
(0.1
)
 
(0.1
)
 
 
Depreciation
 
28.6

 
27.5

 
1.1

 
0.7

 
 
Amortization
 
9.2

 
9.6

 
(0.4
)
 
(0.2
)
 
 
Total Other Deductions (Income)
 
—

 
(1.0
)
 
1.0

 
0.6

 
 
Total Interest Expense
 
20.0

 
22.3

 
(2.3
)
 
(1.4
)
 
 
Other Line Item Changes
 
0.3

 
1.3

 
(1.0
)
 
(0.6
)
 
 
Income Tax Expense (Benefit)
 
1.3

 
(2.0
)
 
NM

 
3.3

 
 
TEP Net Income (Loss) (GAAP)
 
$
1.5

 
$
(1.5
)
 
NM

 
$
3.0

 
 
Change in TEP Net Income
 
 
 
3.0

Other Business Segments—After Tax Amounts
 
 
 
 
 
 
 
 
 
 
UNS Electric Net Income
 
$
2.3

 
$
2.9

 
NM

 
$
(0.6
)
 
 
UNS Gas Net Income
 
7.4

 
5.4

 
NM

 
2.0

 
 
Millennium Energy Holdings Net Income
 
0.2

 
0.8

 
NM

 
(0.6
)
 
 
Other and Consolidating Adjustments
 
(0.1
)
 
(1.1
)
 
NM

 
1.0

 
 
Total Net Income (Loss) from Other Business Segments and Consolidating Adjustments
 
$
9.8

 
$
8.0

 
NM

 
$
1.8

 
 
Change in UNS Electric, UNS Gas, Millennium Energy Holdings and Other Net Income
 
1.8

1st Quarter 2013 UNS Energy Net Income
 
$
11.3

(1) Retail Margin Revenues, Long-Term Wholesale Margin and Base O&M are all non-GAAP measures. See the following pages for a reconciliation of these non-GAAP measures.

2


UNS ENERGY AND TEP O&M
 
UNS Energy
 
1st Quarter
O&M Components
 
2013
 
2012
 
 
Millions of Dollars
UNS Energy Base O&M (Non-GAAP) (1)
 
$
69.3

 
$
69.0

Reimbursed O&M Related to Springerville Units 3 and 4
 
13.8

 
13.3

O&M Related to Customer-funded Renewable Energy and DSM Programs
 
6.8

 
12.0

UNS Energy O&M (GAAP)
 
$
89.9

 
$
94.3

 
TEP
 
1st Quarter
O&M Components
 
2013
 
2012
 
 
Millions of Dollars
TEP Base O&M (Non-GAAP) (1)
 
$
60.5

 
$
60.6

O&M Included in Other Expense
 
(1.8
)
 
(0.9
)
Reimbursed O&M Related to Springerville Units 3 and 4
 
13.8

 
13.3

O&M Related to Customer-funded Renewable Energy and DSM Programs
 
5.3

 
9.5

TEP O&M (GAAP)
 
$
77.8

 
$
82.5

(1) Base O&M, a non-GAAP financial measure, should not be considered as an alternative to Other O&M, which is determined in accordance with GAAP. We believe Base O&M provides useful information to investors because it represents the fundamental level of operating and maintenance expense related to our core utility business. Base O&M excludes expenses that are directly offset by revenues collected from customers and other third parties.

3


TEP—OPERATING STATISTICS
 
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
Incr (Decr)
 
% Change
AVG. ELECTRIC CUSTOMERS
 
 
 
 
 
 
 
 
Residential
 
369,785

 
367,405

 
2,380

 
0.6
 %
Commercial
 
36,211

 
36,198

 
13

 
—
 %
Industrial
 
627

 
634

 
(7
)
 
(1.1
)%
Mining
 
2

 
2

 
—

 
—
 %
Other
 
62

 
62

 
—

 
—
 %
Total
 
406,687

 
404,301

 
2,386

 
0.6
 %
RETAIL SALES—MWH
 
 
 
 
 
 
 
 
Residential
 
792,981

 
730,339

 
62,642

 
8.6
 %
Commercial
 
402,668

 
395,571

 
7,097

 
1.8
 %
Industrial
 
473,449

 
468,953

 
4,496

 
1.0
 %
Mining
 
269,659

 
272,979

 
(3,320
)
 
(1.2
)%
Other
 
56,712

 
50,200

 
6,512

 
13.0
 %
Total
 
1,995,469

 
1,918,042

 
77,427

 
4.0
 %
RETAIL USAGE—KWH/CUSTOMER
 
 
 
 
 
 
 
 
Residential
 
2,144

 
1,988

 
156

 
7.8
 %
Commercial
 
11,120

 
10,928

 
192

 
1.8
 %
Industrial
 
755,102

 
739,674

 
15,428

 
2.1
 %
Mining
 
134,829,500

 
136,489,500

 
(1,660,000
)
 
(1.2
)%
Other
 
914,710

 
809,677

 
105,033

 
13.0
 %
Total
 
4,907

 
4,744

 
163

 
3.4
 %
WEATHER—HEATING DEGREE DAYS
 
 
 
 
 
 
 
 
Actual
 
953

 
739

 
214

 
29.0
 %
10-Year Average
 
821

 
795

 
 
 
 
% Change Actual vs. 10-Year Avg.
 
16.1
%
 
(7.0
)%
 
 
 
 
ENERGY MARKET INDICATORS
 
 
 
 
 
 
 
 
Avg. Wholesale Power Prices
 
 
 
 
 
 
 
 
Palo Verde Index—$/MWh
 
 
 
 
 
 
 
 
On Peak
 
$
32.00

 
$
24.96

 
$
7.04

 
28.2
 %
Off Peak
 
$
26.58

 
$
19.18

 
$
7.40

 
38.6
 %
Avg. Natural Gas Prices
 
 
 
 
 
 
 
 
Permian Index—$/MMBtu
 
$
3.41

 
$
2.39

 
$
1.02

 
42.7
 %


4


TEP—RETAIL AND WHOLESALE MARGIN REVENUES
 
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
Incr (Decr)
 
% Change
RETAIL REVENUES—$ MILLIONS
 
 
 
 
 
 
 
 
Retail Margin Revenues:(1)
 
 
 
 
 
 
 
 
Residential
 
$
49.9

 
$
46.1

 
3.8

 
8.2
 %
Commercial
 
31.3

 
30.7

 
0.6

 
2.0
 %
Industrial
 
19.4

 
19.6

 
(0.2
)
 
(1.0
)%
Mining
 
6.5

 
6.5

 
—

 
—
 %
Other
 
2.8

 
2.5

 
0.3

 
12.0
 %
Total
 
$
109.9

 
$
105.4

 
$
4.5

 
4.3
 %
RES & DSM Revenues
 
10.7

 
11.8

 
(1.1
)
 
(9.3
)%
Fuel and Purchased Power Revenues
 
64.3

 
49.1

 
15.2

 
31.0
 %
Total Retail Revenues
 
$
184.9

 
$
166.3

 
$
18.6

 
11.2
 %
RETAIL REVENUES—CENTS / KWH
 
 
 
 
 
 
 
 
Average Retail Margin Rate (Cents/kWh):
 
 
 
 
 
 
 
 
Residential
 
6.29

 
6.31

 
(0.02
)
 
(0.3
)%
Commercial
 
7.77

 
7.76

 
0.01

 
0.1
 %
Industrial
 
4.10

 
4.18

 
(0.08
)
 
(1.9
)%
Mining
 
2.41

 
2.38

 
0.03

 
1.3
 %
Other
 
4.94

 
4.98

 
(0.04
)
 
(0.8
)%
Average Retail Margin Revenue
 
5.51

 
5.50

 
0.01

 
0.2
 %
Average RES & DSM Revenue
 
0.54

 
0.62

 
(0.08
)
 
(12.9
)%
Average Fuel and Purchased Power Revenue
 
3.22

 
2.56

 
0.66

 
25.8
 %
Total Average Retail Revenue
 
9.27

 
8.68

 
0.59

 
6.8
 %
LONG-TERM WHOLESALE MARGIN (Non-GAAP)—$ MILLIONS(2)
 
 
 
 
 
 
 
 
Long-Term Wholesale Margin Revenues (Non-GAAP)
 
$
2.3

 
$
1.9

 
$
0.4

 
21.1
 %
Fuel and Purchased Power Expense Allocated to Long-Term Wholesale Revenues
 
5.5

 
4.8

 
0.7

 
14.6
 %
Long-Term Wholesale Revenues
 
$
7.8

 
$
6.7

 
$
1.1

 
16.4
 %
Wholesale Transmission Revenues
 
3.8

 
3.9

 
(0.1
)
 
(2.6
)%
Short-term Wholesale Revenues
 
22.8

 
19.2

 
3.6

 
18.8
 %
Electric Wholesale Sales (GAAP)
 
$
34.4

 
$
29.8

 
$
4.6

 
15.4
 %
(1) Retail Margin Revenues, a non-GAAP financial measure, should not be considered as an alternative to Net Electric Retail Sales, which is determined in accordance with GAAP. Retail Margin Revenues excludes: (i) revenues collected from retail customers that are directly offset by expenses recorded in other line items; and (ii) revenues collected from third parties that are unrelated to kWh sales to retail customers. We believe the change in Retail Margin Revenues between periods provides useful information to investors because it demonstrates the underlying revenue trend and performance of our core utility business. Retail Margin Revenues represents the portion of retail operating revenues available to cover the operating expenses of our core utility business.
(2) Long-Term Wholesale Margin Revenues, a non-GAAP financial measure, should not be considered as an alternative to Electric Wholesale Sales, which is determined in accordance with GAAP. We believe the change in Long-Term Wholesale Margin Revenues between periods provides useful information to investors because it demonstrates the underlying profitability of TEP’s long-term wholesale sales contracts. Long-Term Wholesale Margin Revenues represents the portion of long-term wholesale revenues available to cover the operating expenses of our core utility business.
 
Note: Some items above are calculated on un-rounded data and may not precisely correspond to data shown in table.


5


UNS ELECTRIC—OPERATING STATISTICS
 
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
Incr (Decr)
 
% Change
AVG. ELECTRIC CUSTOMERS
 
 
 
 
 
 
 
 
Residential
 
81,340

 
80,789

 
551

 
0.7
 %
Commercial
 
10,532

 
10,417

 
115

 
1.1
 %
Industrial
 
19

 
21

 
(2
)
 
(9.5
)%
Mining
 
2

 
2

 
—

 
—
 %
Other
 
532

 
436

 
96

 
22.0
 %
Total
 
92,425

 
91,665

 
760

 
0.8
 %
RETAIL SALES—MWH
 
 
 
 
 
 
 
 
Residential
 
190,212

 
170,698

 
19,514

 
11.4
 %
Commercial
 
127,625

 
131,061

 
(3,436
)
 
(2.6
)%
Industrial
 
42,349

 
53,242

 
(10,893
)
 
(20.5
)%
Mining
 
13,200

 
27,602

 
(14,402
)
 
(52.2
)%
Other
 
555

 
430

 
125

 
29.1
 %
Total
 
373,941

 
383,033

 
(9,092
)
 
(2.4
)%
RETAIL USAGE—KWH/CUSTOMER
 
 
 
 
 
 
 
 
Residential
 
2,338

 
2,113

 
225

 
10.6
 %
Commercial
 
12,118

 
12,581

 
(463
)
 
(3.7
)%
Industrial
 
2,228,895

 
2,535,333

 
(306,438
)
 
(12.1
)%
Mining
 
6,600,000

 
13,801,000

 
(7,201,000
)
 
(52.2
)%
Other
 
1,043

 
986

 
57

 
5.8
 %
Total
 
4,046

 
4,179

 
(133
)
 
(3.2
)%
RETAIL REVENUES—MILLIONS
 
 
 
 
 
 
 
 
Retail Margin Revenues:
 
 
 
 
 
 
 
 
Residential
 
$
7.3

 
$
6.6

 
$
0.7

 
10.6
 %
Commercial
 
6.2

 
6.3

 
(0.1
)
 
(1.6
)%
Industrial
 
2.0

 
2.3

 
(0.3
)
 
(13.0
)%
Mining
 
1.4

 
1.7

 
(0.3
)
 
(17.6
)%
Other
 
0.1

 
0.1

 
—

 
—
 %
Total Retail Margin Revenues (Non-GAAP)(1)
 
$
17.0

 
$
17.0

 
$
—

 
—
 %
RES & DSM Revenues
 
1.7

 
2.8

 
(1.1
)
 
(39.3
)%
Fuel and Purchased Power Revenues
 
17.3

 
19.3

 
(2.0
)
 
(10.4
)%
Total Retail Revenues
 
$
36.0

 
$
39.1

 
$
(3.1
)
 
(7.9
)%
WEATHER—HEATING DEGREE DAYS
 
 
 
 
 
 
 
 
Actual
 
1,160

 
1,015

 
145

 
14.3
 %
10-Year Average
 
1,102

 
1,114

 
 
 
 
% Change Actual vs. 10-Year Avg.
 
5.3
%
 
(8.9
)%
 
 
 
 
(1)Retail Margin Revenues, a non-GAAP financial measure, should not be considered as an alternative to Total Retail Revenues, which is determined in accordance with GAAP. Retail Margin Revenues exclude revenues collected from retail customers that are directly offset by expenses recorded in other line items. We believe the change in Retail Margin Revenues between periods provides useful information to investors because it demonstrates the underlying revenue trend and performance of our core utility business. Retail Margin Revenues represents the portion of retail operating revenues available to cover the operating expenses of our core utility business.
 
Note: Some items above are calculated on un-rounded data and may not precisely correspond to data shown in table.



6


UNS GAS —OPERATING STATISTICS
 
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
Incr (Decr)
 
% Change
AVG. GAS CUSTOMERS
 
 
 
 
 
 
 
 
Residential
 
136,438

 
135,085

 
1,353

 
1.0
 %
Commercial
 
11,484

 
11,368

 
116

 
1.0
 %
Industrial
 
22

 
22

 
—

 
—
 %
All Other
 
1,116

 
1,120

 
(4
)
 
(0.4
)%
Total
 
149,060

 
147,595

 
1,465

 
1.0
 %
RETAIL SALES—THOUSANDS OF THERMS
 
 
 
 
 
 
 
 
Residential
 
34,887

 
30,758

 
4,129

 
13.4
 %
Commercial
 
11,750

 
10,803

 
947

 
8.8
 %
Industrial
 
730

 
613

 
117

 
19.1
 %
All Other
 
3,144

 
2,853

 
291

 
10.2
 %
Total
 
50,511

 
45,027

 
5,484

 
12.2
 %
RETAIL USAGE—THERMS/CUSTOMER
 
 
 
 
 
 
 
 
Residential
 
256

 
228

 
28

 
12.3
 %
Commercial
 
1,023

 
950

 
73

 
7.7
 %
Industrial
 
33,182

 
27,864

 
5,318

 
19.1
 %
All Other
 
2,817

 
2,547

 
270

 
10.6
 %
Total
 
339

 
305

 
34

 
11.1
 %
RETAIL REVENUES—MILLIONS
 
 
 
 
 
 
 
 
Retail Margin Revenues:
 
 
 
 
 
 
 
 
Residential
 
$
15.8

 
$
13.9

 
$
1.9

 
13.7
 %
Commercial
 
4.0

 
3.5

 
0.5

 
14.3
 %
All Other
 
1.0

 
0.9

 
0.1

 
11.1
 %
Total Retail Margin Revenues (Non-GAAP)(1)
 
$
20.8

 
$
18.3

 
$
2.5

 
13.7
 %
DSM Revenues
 
0.3

 
0.1

 
0.2

 
N/M

Transport/NSP Revenues
 
4.3

 
3.7

 
0.6

 
16.2
 %
Fuel Revenues Recovered from Customers
 
26.0

 
28.5

 
(2.5
)
 
(8.8
)%
Total Gas Revenues
 
$
51.4

 
$
50.6

 
$
0.8

 
1.6
 %
WEATHER—HEATING DEGREE DAYS
 
 
 
 
 
 
 
 
Actual
 
2,188

 
2,013

 
175

 
8.7
 %
10-Year Average
 
2,096

 
2,103

 
 
 
 
% Change Actual vs. 10-Year Avg.
 
4.4
%
 
(4.3
)%
 
 
 
 
(1)Retail Margin Revenues, a non-GAAP financial measure, should not be considered as an alternative to Total Gas Revenues, which is determined in accordance with GAAP. Retail Margin Revenues excludes revenues collected from retail customers that are directly offset by expenses recorded in other line items. We believe the change in Retail Margin Revenues between periods provides useful information to investors because it demonstrates the underlying revenue trend and performance of our core utility business. Retail Margin Revenues represents the portion of retail operating revenues available to cover the operating expenses of our core utility business.
 
Note: Some items above are calculated on un-rounded data and may not precisely correspond to data shown in table.



7


BASIC AND DILUTED SHARES OUTSTANDING
 
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
Thousands of Dollars
Numerator:
 
 
 
 
Net Income
 
$
11,345

 
$
6,476

Income from Assumed Conversion of Convertible Senior Notes
 
—

 
—

Adjusted Numerator
 
$
11,345

 
$
6,476

Denominator:
 
 
 
 
Weighted-Average Shares of Common Stock Outstanding:
 
 
 
 
Common Shares Issued
 
41,381

 
37,893

Participating Securities
 
—

 
—

Fully Vested Deferred Stock Units
 
159

 
138

Total Weighted-Average Shares of Common Stock Outstanding and Participating Securities—Basic
 
41,540

 
38,031

Effect of Dilutive Securities:
 
 
 
 
Convertible Senior Notes
 
—

 
—

Options and Stock Issuable Under Share-Based Compensation Plans
 
335

 
290

Total Shares—Diluted
 
41,875

 
38,321


We excluded the following contingently issuable shares and outstanding options, with an exercise price above market, from our diluted computation as their effect would be anti-dilutive:

 
Three Months Ended March 31,
 
2013
 
2012
 
Thousands of Shares
Shares from Potential Conversion of Convertible Senior Notes
—

 
3,340

Stock Options
—

 
101

Restricted Stock Units
24

 
—

Total Anti-Dilutive Shares Excluded from the Diluted EPS Computation
24

 
3,441


8