Empire District Electric Company (The) (EDE)

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The Empire District Electric (EDE)

Q3 2013 Earnings Call

November 01, 2013 1:00 pm ET

Executives

Janet S. Watson - Secretary and Treasurer

Bradley P. Beecher - Chief Executive Officer, President and Director

Laurie A. Delano - Chief Financial Officer and Vice President of Finance

Kelly S. Walters - Chief Operating Officer of Electric and Vice President

Analysts

Julien Dumoulin-Smith - UBS Investment Bank, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Empire District Electric Third Quarter 2013 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Jan Watson. Please go ahead.

Janet S. Watson

Thank you. Good afternoon, and thank you for joining us for Empire's third quarter 2013 earnings conference call. Brad Beecher, President and Chief Executive Officer; and Laurie Delano, Vice President and Chief Financial Officer will discuss our third quarter and 12 months ended results and provide highlights on other key points. We also have other members of management who may assist in answering questions following the prepared remarks.

Our press release announcing third quarter earnings was issued yesterday evening. The press release and a live webcast of this call is available on Empire website at empiredistrict.com. The replay of the call will be available on the Empire website for 1 year.

Today's discussion will include forward-looking information and the use of non-GAAP financial measures. Slide 2 of slide deck presents the Safe Harbor statement which accompanies our presentation material. You should also refer to the information in our 2012 10-K and other SEC filings concerning factors that could cause future results to differ from this forward-looking information.

Also, the estimated earnings per share impact of individual items and the presentation of gross margins are non-GAAP presentations, and we will direct you to the third quarter earnings press release, for further information on why we feel the non-GAAP presentation is beneficial for investors in understanding our financial results.

And with that, I will turn the call over to Brad Beecher.

Bradley P. Beecher

Thank you, Jan. Good afternoon, everyone, and welcome.

Today, we will discuss the financial results from the third quarter and 12 months ended September 30, 2013 period and other recent company activities.

As we reported in our press release yesterday, we are pleased to announce that during their meeting yesterday, the Board declared a quarterly dividend of $0.255 per share, reflecting a 2% increase over the previous quarter's dividend.

The dividend is payable December 16, 2013, for shareholders of record as of December 2.

This represents a 4.5% annual yield at yesterday's closing price of $22.49.

The dividend increase comes as a result of improved financial metrics on both our income statement and balance sheet over the last 2 years.

It also reflects the future earnings growth we expect to see as we continue to execute our business strategy and complete our investment in our Asbury environmental and Riverton combined cycle projects.

Since the dividend was reinstated in February 2012, we have improved the absolute level of our earnings, had a successful rate case outcome and rebuilt our retained earnings. All of these were supported by continued successful recovery from the 2011 Joplin tornado.

As shown on Slide 3, we reported third quarter 2013 earnings of $24 million or $0.56 per share. This comes to the same period in 2012 when earnings were $25.5 million or $0.60 per share.

Earnings for the 12 months ended September 30, 2013, were $57.9 million or $1.36 per share, compared to same earnings of $54.7 million or $1.30 per share for the 12-month period.

The primary positive earnings driver for the quarter was increased Missouri electric rates, which became effective April 1 this year. However, this positive impact was offset by cooler weather when compared to the 2012 quarter.

We also saw an increase in the average customer count quarter-over-quarter. We are about 470 customers below pre-tornado levels.

The Midwest saw a near normal summer on a Cooling Degree basis with the Springfield Missouri weather station reporting only 2% fewer Cooling Degree Days during the quarter than the 30-year normal.

Yet the summer was filled with abnormal weather. The weather channel reported that Sunday afternoon, July 28, in Concordia, Kansas, was unlike any other July day in the history books. The daytime high was only 62 degrees, topping the previous record coolest July daily high of 63 degrees on July 1, 1988 and July 6, 1979.

Our service territory was impacted in the similar fashion. Cooling Degree Days for the month of July were 39% lower than last year and 9% lower than the 30-year average.

August began with an extended and uncharacteristic rainy spell and finished with 10% less Cooling Degree Days than normal.

Fortunately, in September, our fortunes reversed and we experienced 33% more Cooling Degree Days than normal.

On a quarter-over-quarter basis, Cooling Degree Days were 15% lower than last year, resulting in Cooling Degree Days that were 2% lower than the 30-year average.

Higher electric operating depreciation and amortization expenses also impacted results negatively for the quarter.

On September 17, 2013, we filed a Notice of Intent to file for new electric rates for our Arkansas customers. We anticipate filing new rates around the middle of November.

As we communicated in our press release yesterday, we expect full year 2013 earnings to be in the mid to upper end of our guidance range of $1.26 to $1.43 per share, which was communicated in February of 2013.

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