Empire District Electric Company (The) (EDE)

EDE 
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The Empire District Electric (EDE)

Q4 2013 Earnings Call

February 07, 2014 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

Analysts

Glen F. Pruitt - Wells Fargo Securities, LLC, Research Division

Julien Dumoulin-Smith - UBS Investment Bank, Research Division

Michael Goldenberg - Luminus Management, LLC

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Empire District Electric Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions]

I'd now like to turn the conference over to Jan Watson. Please go ahead, ma'am.

Janet S. Watson

Thank you. Good afternoon, and thank you for joining us for Empire's fourth quarter 2013 earnings conference call. Brad Beecher, President and Chief Executive Officer; and Laurie Delano, Vice President and Chief Financial Officer, will discuss our fourth quarter and 2013 results and provide highlights on other key points.

Our press release announcing fourth quarter earnings was issued yesterday afternoon. Press release and a live webcast of this call are available on the 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 the slide deck presents the Safe Harbor statement which accompanies our presentation material. You should also refer to the information in our 2012 10-K, the quarterly 10-Qs 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 margin are non-GAAP presentations, and we would direct you to the fourth 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'll 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 fourth quarter and 12 months ended periods December 31, 2013, as well as other recent events impacting the company.

During their meeting yesterday, the Board declared a quarterly dividend of $0.255 per share, payable March 17, 2014, for shareholders of record as of March 3, 2014. This represents a 4.56% annual yield at yesterday's closing price of $22.35.

As shown on Slide 3, earnings for the year ended December 31, 2013, were $63.4 million, or $1.48 per share, compared to earnings of $55.7 million, or $1.32 per share for 2012.

Slide 3 also illustrates the strong growth in earnings we have experienced over the past several years. Our earnings level reflects our continued investment in infrastructure to reliably serve our customers.

We also received good news late last week that Moody's has upgraded our corporate credit rating from Baa1 -- to Baa1 from Baa2. Moody's upgraded several of our peers to give a more favorable view of the relative credit supportiveness of the U.S. regulatory framework.

In particular, their view includes better cost recovery provisions, reduced regulatory lag and a generally fair and open relationship between utilities and regulators. Moody's specifically cited our constructive regulatory relationship and improved recovery of our operating cost.

We reported fourth quarter 2013 earnings of $15.2 million, or $0.35 per share. This compares to the same period in 2012, when earnings were $9.6 million, or $0.23 per share.

The primary positive earning driver for the quarter was colder-than-normal weather as December 2013, was the second coldest December in the past 10 years. The cold December weather lifted both quarter and annual earnings.

Increased Missouri electric rates, which became effective April 1, 2013, also contributed to the quarter's earnings. Laurie will discuss these driving factors in more detail in her financial comments.

During the fourth quarter, our electric customer count eclipsed our pre-tornado numbers. We ended the year over 400 customers above, the May 2011 count, and our yearly average count for 2013 was up about 900 customers from the 2012 count.

On December 3, 2013, we filed for increased electric rates for our Arkansas customers. We are seeking to increase rates annually by about $2.2 million, or roughly 18%. We last changed rates in Arkansas in April 2011.

I will now turn the call over to Laurie for a discussion of our financial results.

Laurie A. Delano

Thank you, Brad, and good afternoon, everyone. We are very pleased with our fourth quarter and annual results.

As we review our 2013 earnings per share results of $1.48, compared to our 2012 results of $1.32, I'll continue to refer to our webcast presentation slides to talk about the various impacts year-over-year.

As usual, the slides provide a consolidated non-GAAP basic earnings per share reconciliation for the year. Our press release also has this information included. And to remind you, the earnings per share numbers throughout the call are provided on an after-tax estimated basis.

I'll briefly touch on our 2013 fourth quarter results before I discuss our annual results. From a Heating Degree Days perspective, fourth quarter weather was about 10% colder than normal, and more than 20% colder than the 2012 quarter. We estimate that the cold weather added between $0.03 and $0.04 per share to earnings on the electric side of the business for the quarter, when compared to normal weather.

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