Piedmont Natural Gas Reports Second Quarter 2016 Results

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Jun 08, 2016, 08:23 ET

CHARLOTTE, N.C., June 8, 2016 /PRNewswire/ -- Piedmont Natural Gas (NYSE: PNY) today announced results for its second fiscal quarter ended April 30, 2016. For the quarter, the Company reported net income of $63.4 million, or $0.78 per diluted share, compared to net income of $66.4 million, or $0.84 per diluted share, for the same period in 2015. Adjusted for merger-related expenses incurred during the Company's second quarter, net income was $64.1 million, or $0.79 per diluted share.

For the six months ended April 30, 2016, net income was $161.2 million and diluted earnings per share were $1.98, compared with net income of $159.4 million and diluted earnings per share of $2.02 for the same period in 2015. Adjusted for merger-related expenses incurred during the Company's six months ended April 30, 2016, net income was $169.1 million, or $2.08 per diluted share.

Margin for the quarter was $224.4 million, a decrease of $1.3 million from the same period in 2015. The decrease in the three month period is primarily attributable to lower margin sales from secondary market activity and warmer weather, partially offset by integrity management rider (IMR) rate adjustments in North Carolina and Tennessee and customer growth. Margin for the six months ended April 30, 2016 was $510.6 million, an increase of $14.9 million from the same period in 2015. The increase is primarily attributable to IMR rate adjustments in North Carolina and Tennessee and customer growth, partially offset by lower margin sales from secondary market activity and warmer weather.

Operation and maintenance (O&M) expenses totaled $75.5 million during the second quarter of 2016, an increase of $4.1 million from the same quarter in 2015. O&M expenses totaled $146.8 million during the six months ended April 30, 2016, an increase of $9.2 million from the same period in 2015. The increase in O&M expenses for the quarter is primarily due to increases in payroll and contract labor, partially offset by a decrease in employee benefits. The increase for the six month period is primarily due to increases in payroll and $5.5 million incremental expense from the acceleration and payment of certain equity incentive awards in connection with the proposed Duke Energy acquisition and $2.1 million integration expenses related to the Duke Energy acquisition.

Pre-tax income from Piedmont's joint ventures decreased 7.9% for the quarter compared to the same period in 2015 due to a decrease in SouthStar's income from lower customer usage due to warmer weather and lower value of hedged derivatives, partially offset by lower operating expenses. Pre-tax income from Piedmont's joint ventures decreased 1.3% for the six months ended April 30, 2016 compared to the same period in 2015 due to the same factors discussed for SouthStar for the quarter that were partially offset by an increase in ACP's income due to higher capitalized interest expense and lower outreach cost.

Utility interest charges for the quarter were $16.6 million compared to $18.1 million for the same period in 2015. Utility interest charges for the six months ended April 30, 2016 were $33.7 million compared to $35.8 million for the same period in 2015. The decreases in utility interest charges for both periods is primarily due to recording interest income on net amounts due from customers compared with interest expense due to customers in the prior periods, partially offset by additional interest from an increase in long-term debt outstanding in 2016.

DIVIDEND DECLARED

At the Company's regular quarterly meeting of its Board of Directors held June 7, 2016, a quarterly dividend on Common Stock of 34 cents per share was declared, payable on July 15, 2016 to holders of record at the close of business on June 24, 2016.

FISCAL 2016 EARNINGS GUIDANCE REVISED

Piedmont Natural Gas revises its fiscal year 2016 earnings guidance to $1.90 to $1.95 per diluted share before any merger-related expenses. The Company's previous guidance was a range of $1.92 to $2.02 per diluted share before any merger-related expenses. Despite weather during the first six months of the year that was 19% warmer than normal and 25% warmer than last year, the Company performed as expected reflecting the strength of Piedmont's margin stabilizing rate mechanisms as well as customer growth. The revised guidance is solely based on the Company's assessment of lower earnings from its investment in Constitution Pipeline during fiscal year 2016 pending resolution of Constitution Pipeline's ongoing legal actions challenging the legality and appropriateness of the New York Department of Environmental Conservation denial of a necessary water quality certificate for the New York portion of the pipeline.

Summary of Operations
(in thousands except per share amounts and degree days)

Three Months Ended		April 30				% Increase (Decrease)
		2016		2015
	(Unaudited)
Operating Revenues		$	350,186	$	424,924	(18)%
Cost of Gas		125,822		199,303		(37)%
Margin		224,364		225,621		(1)%
Operations and Maintenance Expenses		75,508		71,424		6%
Depreciation		34,045		31,689		7%
General Taxes		10,882		10,976		(1)%
Utility Income Taxes		32,089		36,409		(12)%
Operating Income		71,840		75,123		(4)%
Other Income (Expense), net		8,176		9,360		(13)%
Utility Interest Charges		16,584		18,081		(8)%
Net Income		63,432		66,402		(4)%

Average Shares of Common Stock:
Basic		81,109		78,818		3%
Diluted		81,388		79,115		3%

Earnings Per Share of Common Stock:
Basic		$	0.78	$	0.84	(7)%
Diluted		$	0.78	$	0.84	(7)%

System Throughput - Dekatherms		136,759		125,132		9%
Gas Customers Billed in April		1,043		1,028		2%
System Average Degree Days – Actual		1,008		1,322		(24)%
System Average Degree Days – Normal		1,182		1,176		1%
Percent Normal Degree Days		(15)%		12%		n/a

Six Months Ended		April 30				% Increase (Decrease)
		2016		2015

Operating Revenues		$	811,523	$	1,032,196	(21)%
Cost of Gas		300,910		536,505		(44)%
Margin		510,613		495,691		3%
Operations and Maintenance Expenses		146,808		137,574		7%
Depreciation		67,730		63,583		7%
General Taxes		20,804		20,972		(1)%
Utility Income Taxes		93,999		92,680		1%
Operating Income		181,272		180,882		—%
Other Income (Expense), net		13,602		14,291		(5)%
Utility Interest Charges		33,652		35,793		(6)%
Net Income		161,222		159,380		1%

Average Shares of Common Stock:
Basic		81,035		78,717		3%
Diluted		81,324		79,048		3%

Earnings Per Share of Common Stock:
Basic		$	1.99	$	2.02	(1)%
Diluted		1.98		$	2.02	(2)%

System Throughput - Dekatherms		274,751		265,920		3%
Gas Customers Billed in April		1,043		1,028		2%
System Average Degree Days - Actual		2,463		3,267		(25)%
System Average Degree Days - Normal		3,023		3,015		—%
Percent Normal Degree Days		(19)%		8%		n/a

Non-GAAP Reconciliation of Merger and Integration-Related Expenses
$ in thousands except per share amounts
	2016
	Three Months Ended April 30		Six Months Ended April 30
GAAP net income	$	63,432	$	161,222

Merger and integration-related expenses:
Related expenses	$	1,040	$	7,539
Associated income tax benefit (expense)	$	409	$	(314)

After-tax merger and integration-related expenses	$	631	$	7,853

Adjusted net income	$	64,063	$	169,075
Average basic shares outstanding (in thousands)	81,109		81,035
Average diluted shares outstanding (in thousands)	81,388		81,324
Adjusted basic EPS	$	0.79	$	2.09
Adjusted diluted EPS	$	0.79	$	2.08

Forward-Looking Statements

This press release contains forward-looking statements. These statements are based on management's current expectations and information currently available and are believed to be reasonable and are made in good faith. However, the forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the statements. Factors that may make the actual results differ materially from anticipated results include, but are not limited to, weather conditions, rate of customer growth, the cost and availability of natural gas, competition from other energy providers, new legislation and regulations and application of existing laws and regulations, economic and capital market conditions, operational interruptions to our gas distribution and transmission activities, cybersecurity breaches or failure of technology systems, inability to complete necessary or desirable pipeline expansion or infrastructure projects, costs of providing pension benefits, the cost and availability of labor and materials, the disposition of Constitution Pipeline Company LLC's ongoing legal actions challenging the denial of a necessary water quality certificate for the New York portion of the pipeline, earnings and losses from the joint venture businesses in which we invest, risks and uncertainties related to the proposed acquisition of the Company by Duke Energy Corporation, and other uncertainties, all of which are difficult to predict and some of which are beyond our control. For these reasons, you should not place undue reliance on these forward-looking statements when making investment decisions. The words "expect," "believe," "project," "anticipate," "intend," "may," "should," "could," "assume," "estimate," "forecast," "future," "indicate," "outlook," "plan," "predict," "seek," "target," "would," "guidance," and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements are only as of the date they are made and we do not undertake any obligation to update publicly any forward-looking statement, either as a result of new information, future events or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in Piedmont's latest Forms 10-K and 10-Q, which are available on the SEC's website at http://www.sec.gov.

About Piedmont Natural Gas

Piedmont Natural Gas is an energy services company primarily engaged in the distribution of natural gas to more than one million residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee, including customers served by municipalities who are wholesale customers. Our subsidiaries are invested in joint venture, energy-related businesses, including unregulated retail natural gas marketing, regulated interstate natural gas transportation and storage, and regulated intrastate natural gas transportation businesses. More information about Piedmont Natural Gas is available on the Internet at http://www.piedmontng.com/.

CONTACT: Investor Relations, Nick Giaimo, +1-704-731-4952, [email protected]

SOURCE Piedmont Natural Gas