GREEN BAY, Wis., Jan. 31 /PRNewswire-FirstCall/ — WPS Resources Corporation (NYSE:WPS) , an operator of regulated electric and natural gas utilities and nonregulated energy related business units, today announced the following preliminary financial results for the quarter and year ended December 31, 2006:
Highlights:— WPS Resources Corporation produced income available for common
shareholders of $21.3 million, or $0.49 per diluted share, in the
fourth quarter of 2006 compared to $19.4 million, or $0.49 per diluted
share, for the comparable quarter in 2005.— Electric utility earnings increased by $23.8 million to
$15.6 million for the quarter ended December 31, 2006, compared to a
loss of $8.2 million for the comparable quarter in 2005. The 2005
results included the pre-tax write-off of approximately
$13.7 million of regulatory assets.
— Gas utility earnings increased by $4.9 million to $9.5 million for
the 2006 fourth quarter, from $4.6 million for the comparable
quarter in 2005. Approximately $4.6 million in after-tax income, or
$0.11 per diluted share, was generated at the recently acquired
natural gas distribution operations in Michigan and Minnesota, which
included $0.8 million in after-tax external transition costs.
— Milder weather conditions compared to last year resulted in an
estimated $2 million decrease in after-tax income at our regulated
utility operations, or $0.05 per diluted share, for the fourth
quarter of 2006. Compared to normal weather conditions, the company
estimates that the milder weather lost the regulated utility
operations approximately $4 million, or $0.09 per share in potential
earnings, for the fourth quarter of 2006.
— WPS Energy Services’ earnings declined $19.4 million, to
$0.7 million for the quarter ended December 31, 2006, from
$20.1 million for the quarter ended December 31, 2005. Margins
declined $21.4 million, driven largely by accounting rules which
dictate the timing associated with the recognition of gains and
losses on derivative instruments used to protect the economic value
of electric and natural gas supply contracts and Section 29/45K tax
credits. The offsetting impact of these gains and losses will be
reflected in future periods.
— Forward contracted electric sales volume at WPS Energy Services rose
to 60.6 million megawatt-hours at year end 2006 compared with
23.0 million megawatt-hours at year-end 2005. Forward contracted
natural gas sales volumes rose to 443 billion cubic feet at year-end
2006 compared to 376 billion cubic feet at the end of 2005. The
increase in volume came largely from originated wholesale and retail
customer activity. The company’s expansion into new markets in
Texas and Illinois, ramp-up of activity in the Northeast, and
positive retail customer response during periods of falling energy
prices contributed to the gain in volume. Over 60% of the forward
electric volumes and 70% of the forward natural gas volumes are
contracted to be delivered in 2007.
— Equity earnings recognized from the company’s investment in American
Transmission Company LLC (“ATC”) increased approximately 36% to
$6.1 million after-tax in the fourth quarter of 2006, compared to
$4.5 million after-tax in the fourth quarter of 2005. WPS Resources
owned approximately 31% of ATC at December 31, 2006.— WPS Resources Corporation produced $0.38 diluted earnings per share
from continuing operations — adjusted in the fourth quarter of 2006
compared to $0.36 in the comparable quarter in 2005. Please see the
attached “Diluted Earnings Per Share Information — Non-GAAP Financial
Information” for a reconciliation of diluted earnings per share from
continuing operations to diluted earnings per share from continuing
operations — adjusted. The management of WPS Resources Corporation
believes that diluted EPS from continuing operations — adjusted is a
useful measure for providing investors with additional insight into the
company’s operating performance because it eliminates the effects of
certain items that are not comparable from one period to the next.
— For the year ended December 31, 2006, WPS Resources reported income
available for common shareholders of $155.8 million, or $3.67 per
diluted share, compared to $157.4 million, or $4.07 per diluted share,
for the same period in 2005. The 2006 year-end results included:— $22.7 million, or $0.54 per diluted share, in after-tax income from
asset management initiatives which included a $5.4 million after-tax
gain from the sale of the Kimball natural gas storage field, a
$3.7 million after-tax gain from the sale of the company’s equity
interest in Guardian Pipeline LLC, a $12.5 million after-tax gain
from the sale of the Sunbury generation facility, and a $1.1 million
after-tax gain from land sales.
— $19.8 million in after-tax income from synthetic fuel activities, or
$0.47 per diluted share, which included $29.5 million in recognized
federal tax credits, partially offset by $14.3 million of after-tax
operating losses associated with the company’s synthetic fuel
facility and $1.4 million of net after-tax losses on derivative
instruments used to protect the value of Section 29/45K tax credits.
— $11.3 million in after-tax losses from our recently acquired natural
gas utility operations in Michigan and Minnesota, or $0.27 per
diluted share, including $7.1 million in after-tax external
transition costs.
— $1.3 million in after-tax external transition costs, or $0.03 per
diluted share, related to the pending merger with Peoples Energy
Corporation.— WPS Resources Corporation produced $3.17 diluted earnings per share
from continuing operations — adjusted in 2006 compared to $2.98 in
2005. Please see the attached “Diluted Earnings Per Share
Information — Non-GAAP Financial Information” for more information.
“There were a number of positive developments in the fourth quarter. Our regulated electric operations produced slightly better results than last year despite warmer than normal weather conditions, while our regulated natural gas distribution operations experienced the positive contribution generated at our newly acquired natural gas operations in Michigan and Minnesota,” stated Larry Weyers, WPS Resources’ Chairman, President, and CEO. “At our nonregulated operations, we continue to make strong inroads into new markets including Illinois and Texas, which helped to drive substantial increases in forward contract volumes during the fourth quarter. Although financial results at our nonregulated operations were unfavorably impacted this quarter by non-cash mark-to-market losses on our derivative instruments used to protect the economic value of our natural gas and electric supply contracts, largely due to a drop in energy prices, the same price drop enhanced our ability to sign up new customers and increase transaction volumes. As we deliver on these contracts and unwind the associated derivative instruments, our financial results in future periods will reflect the economic value that has been created.
“We made tremendous strides in 2006, including integrating the natural gas distribution operations in Michigan and Minnesota acquired in April and July, respectively. We also announced the proposed merger with Peoples Energy. These acquisitions allow us to further our strategy,” added Weyers. “Our strategy of providing a high level of service to our customers, maintaining a strong balance sheet, and developing a dedicated employee base has allowed us to grow our operations and deliver value to our shareholders.”
The following tables depict income available for common shareholders and revenue for the comparable fourth quarters and comparable years ended December 31.
WPS Resources’ Income Available for Common Shareholders and Revenue
For the Quarters Ended December 31, 2006 and December 31, 2005Income (Loss) Revenue
Segment 2006 2005 2006 2005
(in millions) (in millions) (in millions) (in millions)
Electric Utility $15.6 $(8.2) $265.6 $254.2
Gas Utility 9.5 4.6 297.2 185.8
WPS Energy Services 0.7 20.1 1,310.0 1,915.2
Holding Company and
Other (4.5) 2.9 5.2 0.2
Intersegment
Eliminations – – (13.4) (12.4)
Total WPS
Resources $21.3 $19.4 $1,864.6 $2,343.0WPS Resources’ Income Available for Common Shareholders and Revenue
For the Years Ended December 31, 2006 and December 31, 2005Income (Loss) Revenue
Segment 2006 2005 2006 2005
(in millions) (in millions) (in millions) (in millions)
Electric Utility $ 85.5 $ 64.2 $1,099.4 $1,037.1
Gas Utility (2.3) 13.2 676.9 522.0
WPS Energy Services 72.3 74.1 5,159.1 5,314.9
Holding Company and
Other 0.3 5.9 6.1 1.1
Intersegment
Eliminations – – (50.8) (49.6)
Total WPS
Resources $155.8 $157.4 $6,890.7 $6,825.5Comparison of Estimated Weather Impact on Utility Earnings and
Diluted Earnings per Share During the Quarters Ended
December 31, 2006 and December 31, 2005Electric Diluted Gas Diluted
EPS Impact EPS Impact
Percent Change (After Tax) (After Tax)
Heating Compared with
Normal – 2006 7% warmer (0.02) (0.07)
Heating Compared with
Normal – 2005 3% warmer (0.01) (0.01)
Cooling Compared with
Normal – 2006 NA – –
Cooling Compared with
Normal – 2005 NA 0.03 –
Heating Compared with
Prior Year 9% warmer (0.01) (0.02)
Cooling Compared with
Prior Year 90% cooler (0.02) –Comparison of Estimated Weather Impact on Utility Earnings and
Diluted Earnings per Share During the Years Ended
December 31, 2006 and December 31, 2005Electric Diluted Gas Diluted
EPS Impact EPS Impact
Percent Change (After Tax) (After Tax)
Heating Compared with
Normal – 2006 10% warmer (0.07) (0.18)
Heating Compared with
Normal – 2005 4% warmer (0.02) (0.07)
Cooling Compared with
Normal – 2006 10% warmer 0.02 –
Cooling Compared with
Normal – 2005 35% warmer 0.20 –
Heating Compared with
Prior Year 8% warmer (0.05) (0.07)
Cooling Compared with
Prior Year 20% cooler (0.15) –Segments
WPS Resources’ Electric Utility segment includes the regulated electric utility operations of two wholly owned utility subsidiaries, Wisconsin Public Service Corporation and Upper Peninsula Power Company. The Gas Utility segment consists of the natural gas utility operations of Wisconsin Public Service, Minnesota Energy Resources Corporation and Michigan Gas Utilities Corporation.
WPS Energy Services, Inc., a diversified energy supply, generation, and services company, offers nonregulated natural gas, electric, and alternative fuel supplies, as well as energy management and consulting services, to retail and wholesale customers in the Midwest and Northeastern United States, Texas, and portions of Canada that are adjacent to areas in the United States where WPS Energy Services conducts business. WPS Energy Services also owns several merchant electric generation plants, primarily in the Midwest and Northeastern United States and adjacent portions of Canada.
The Holding Company and Other segment includes the operations of the WPS Resources holding company and the non-utility activities of Wisconsin Public Service, Upper Peninsula Power, Minnesota Energy Resources and Michigan Gas Utilities. Equity earnings from the company’s investments in ATC and Wisconsin River Power Company are also included in the Holding Company and Other Segment. WPS Resources divested its investment in Guardian Pipeline, LLC in the second quarter of 2006.
Discontinued Operations
In July 2006, WPS Energy Services sold Sunbury Generation, LLC to Corona Power, LLC. Sunbury Generation’s primary asset was the Sunbury generation plant, located in Shamokin Dam, Pennsylvania. The gross proceeds received from the plant were approximately $34 million with a total after-tax gain of $12.5 million. Beginning in the second quarter of 2006, WPS Energy Services began reporting the assets and liabilities of Sunbury that were transferred to Corona Power, LLC as held for sale and also reported Sunbury’s results of operations and cash flows as discontinued operations. Prior periods have also been reclassified, as applicable, to reflect this change in presentation.
In the near future, WPS Energy Services expects to complete the sale of WPS Niagara Generation, LLC (“Niagara”), for approximately $30 million, subject to post closing adjustments. The pre-tax gain on this transaction is expected to be approximately $25 million and will be reported in the first quarter of 2007 as a component of discontinued operations. Beginning in the fourth quarter of 2006, WPS Energy Services began reporting the assets and liabilities of Niagara that were transferred in the sale as held for sale and reported its results of operations and cash flows as discontinued operations. Prior periods have been reclassified, as applicable, to reflect this change in presentation.
Fourth Quarter and Calendar Year Financial ResultsElectric Utility Segment Earnings
Electric utility earnings increased by $23.8 million to $15.6 million for the quarter ended December 31, 2006, compared to a loss of $8.2 million for the comparable quarter in 2005. Earnings during the fourth quarter of 2005 included a pre-tax write-off of approximately $13.7 million of regulatory assets associated with a regulatory ruling from the Public Service Commission of Wisconsin that disallowed the recovery of certain costs that had been deferred related to the 2004 Kewaunee nuclear plant outage, as well as a portion of the loss on the sale of the Kewaunee plant. Electric utility earnings also improved during the fourth quarter of 2006 as a result of improved recovery of fuel and purchased power costs (discussed below) and approved rate increases implemented at Wisconsin Public Service (effective January 1, 2006) and Upper Peninsula Power (effective June 28, 2006), as well as a 3.2% increase in sales volumes.
Electric margins rose $2.6 million to $122.6 million during the fourth quarter of 2006 compared to $120.0 million for the comparable quarter in 2005, primarily due to the implementation of rate increases and higher sales volumes previously mentioned.
For the year, electric utility earnings increased $21.3 million in 2006 to $85.5 million, compared to $64.2 million in 2005, due to improved recovery of fuel and purchased power costs (which contributed an estimated $14 million after-tax increase to earnings), the implementation of rate increases at Wisconsin Public Service and Upper Peninsula Power and the write-off associated with the Kewaunee nuclear plant previously mentioned. The favorable variances were partially offset by unfavorable weather conditions in 2006, which caused an estimated $9 million after-tax decrease in earnings in 2006 compared to 2005.
Natural Gas Utility Segment Earnings
During the fourth quarter of 2006, income available for shareholders from the regulated gas utility operations rose 107% to $9.5 million, compared to $4.6 million during the comparable quarter in 2005. The 2006 fourth quarter results include $4.6 million in after-tax income, including $0.8 million in after-tax transition expenses, from the newly acquired natural gas distribution operations in Michigan and Minnesota.
Natural gas margins increased by $36.2 million, or 102%, to $71.7 million during the fourth quarter of 2006, compared to $35.5 million for the same quarter in 2005, with approximately $35.5 million being added from the newly acquired operations.
For the year, the natural gas utility segment produced a net loss of $2.3 million in 2006, compared to earnings of $13.2 million in 2005. The newly acquired natural gas distribution operations produced an after-tax loss of $11.3 million in 2006, which included $7.1 million in after-tax transition costs. The after-tax loss relating to the recently acquired operations was due in part to the timing of the close of the acquisitions, which occurred after the end of a significant portion of the heating season earlier in 2006.
WPS Energy Services Segment Earnings
WPS Energy Services’ earnings declined $19.4 million, to $0.7 million for the quarter ended December 31, 2006, from $20.1 million for the quarter ended December 31, 2005. Margins declined $21.4 million. Total net mark-to-market losses were $26.4 million in the fourth quarter of 2006, compared to net mark-to-market gains of $14.2 million in the fourth quarter of 2005. The change was driven largely by accounting rules which dictate the timing associated with the recognition of gains and losses on retail supply transactions that do not qualify for hedge accounting. These retail electric supply contracts protect the economic value of customer sales contracts. The offsetting impact of these gains and losses will be reflected in future periods.
Synthetic fuel activities generated an after-tax net gain of $1.3 million during the fourth quarter of 2006, compared to an after-tax net loss of $0.6 million in the comparable quarter of 2005. This was due to a $7.5 million increase in Section 29/45K tax credits recognized in the fourth quarter of 2006 compared to the same quarter in 2005, which was partially offset by a $1.8 million increase in net after-tax losses on oil options used to protect the economic value of synthetic fuel tax credits in 2007. (See page 4 of the Supplemental Quarterly Financial Highlights for more information.)
The 2005 fourth quarter results were impacted by solid results from the company’s discontinued operations; higher energy prices, which resulted in significant mark-to-market gains on certain derivative instruments; and a gain associated with the liquidation of an electric supply contract in Maine during the fourth quarter 2005.
Earnings for the full year declined $1.8 million to $72.3 million in 2006 compared to $74.1 million in 2005. The decrease in earnings was the result of an $11.0 million increase in interest expense due to higher working capital requirements associated with the growth in natural gas operations, a $10.6 million increase in other expenses, primarily associated with increased tons procured from a synthetic fuel facility, and a $4.2 million after-tax decrease in income from discontinued operations. These decreases were partially offset by a $14.4 million increase in margin, a $6.7 million decrease in operating and maintenance expenses, and a $3.4 million increase in Section 29/45K federal tax credits recognized.
Detailed explanations related to the change in WPS Energy Services’ margin and more information on Section 29/45K tax credits will be available in WPS Resources’ Form 10-K that is expected to be filed with the Securities and Exchange Commission by February 28, 2007.
Holding Company and Other Segment Earnings
The Holding Company and Other segment produced an after-tax net loss of $4.5 million during the fourth quarter of 2006 compared to after-tax income of $2.9 million for the comparable quarter in 2005. The decline in earnings was due, in part, to higher interest expense resulting from an increase in borrowings to finance the company’s acquisition of the natural gas distribution operations in Michigan and Minnesota and a decrease in gains from land sales. Also contributing to the loss were $1.3 million of after-tax external transition costs and other costs related to the pending merger with Peoples Energy. Partially offsetting the loss was a $1.6 million increase in after-tax equity earnings recognized from the company’s investment in ATC.
The Holding Company and Other segment generated after-tax income of $0.3 million for the year ended December 31, 2006 compared to after-tax income of $5.9 million for the year ended December 31, 2005. Higher interest and operating costs were offset by pre-tax equity earnings from ATC, which increased to $39.0 million in 2006 from $25.1 million in 2005, and a $6.2 million pre-tax gain recognized in 2006 from the sale of the company’s interest in Guardian Pipeline, LLC.
Average Shares of Common Stock
The change in diluted earnings per share was impacted by the items discussed above as well as an increase in the weighted average number of outstanding shares of WPS Resources’ common stock for the quarter and year ended December 31, 2006, of 4.0 million and 3.7 million shares, respectively compared to the same periods in 2005. WPS Resources issued 1.9 million shares of common stock through a public offering in November 2005 and also issued 2.7 million shares of common stock in May 2006 when it elected to settle its forward equity agreement with an affiliate of J.P. Morgan Securities, Inc. Additional shares were also issued under the Stock Investment Plan and certain stock-based employee benefit plans.
2007 EARNINGS FORECAST
In 2007, WPS Resources Corporation is continuing to manage its portfolio of businesses to achieve long-term growth in its utility and nonregulated operations, while maintaining an emphasis on regulated growth. The company’s emphasis on regulated growth has been demonstrated by the on-going expansion of its generation fleet, as well as the acquisition of retail natural gas distribution operations in Michigan and Minnesota during 2006 and the pending merger with Peoples Energy Corporation. The expansion of the utility generation fleet is aimed at meeting the high level of reliability expected by the company’s customers and ensuring that the company continues to meet anticipated growth in electric demand. In all of the company’s business units, financial tools commonly used in the industry are utilized to help mitigate risk for the benefit of both shareholders and customers. Also, the company’s asset management strategy continues to deliver shareholder return from certain asset transactions. The company’s long-term diluted earnings per share growth rate target remains at 6% to 8% on an average annualized basis, with fluctuations in any given year that may be above or below that targeted range.
The company’s 2007 guidance is between $4.55 and $4.78 diluted earnings per share (includes discontinued operations), assuming normal weather for the 2007 calendar year, availability of generation units, and completion of asset management sales. The diluted earnings per share guidance reflects WPS Resources as a stand-alone company and does not take into consideration the merger with Peoples Energy Corporation. After the merger is completed, it is anticipated that Integrys Energy Group (“Integrys”), the name of the combined company after the pending merger, will provide information on future earnings guidance for Integrys. Additionally, the diluted earnings per share guidance does not include the impact of mark-to-market activity, except for certain mark-to-market activity related to business originating prior to 2007, which will be completed in 2007.
The projected guidance range for 2007 diluted earnings per share from continuing operations — adjusted is anticipated to be between $3.45 and $3.62 compared with $3.17 actual diluted earnings per share in 2006 from continuing operations — adjusted. Diluted earnings per share from continuing operations — adjusted guidance excludes certain items that are not comparable from one period to the next. Please see the attached “Diluted Earnings per Share Information — Non GAAP Financial Information” (page 2) for a reconciliation of diluted earnings per share from continuing operations to diluted earnings per share from continuing operations — adjusted.
CONFERENCE CALL
An earnings conference call is scheduled for 3:00 p.m. central time on Wednesday, January 31, 2007. Larry L. Weyers, WPS Resources’ Chairman, President, and Chief Executive Officer, will discuss 2006 fourth quarter and year-end financial results. To access the call, which is open to the public, call 888-690-9634 (toll free) 15 minutes prior to the scheduled start time. Callers will be required to supply EARNINGS as the passcode and MR. LARRY WEYERS as the leader. Callers will be placed on hold with music until the call begins. A replay of the conference call will be available through February 14, 2007 by dialing 866-428-3803 (toll free).
Investors may also listen to the conference live on the WPS Resources corporate website at http://www.wpsr.com/investor/presentations.asp . An archive of the webcast will be available on the company’s website until January 30, 2008.
FORWARD-LOOKING STATEMENTS
Financial results in this news release are unaudited. This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. You can identify these statements by the fact that they do not relate strictly to historical or current facts and often include words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” and other similar words. Although the company believes it has been prudent in its plans and assumptions, there can be no assurance that indicated results will be realized. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from those anticipated.
Forward-looking statements speak only as of the date on which they are made, and the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The company recommends that you consult any further disclosures it makes on related subjects in its 10-Q, 8-K, and 10-K reports to the Securities and Exchange Commission.
The following is a cautionary list of risks and uncertainties that may affect the assumptions, which form the basis of forward-looking statements relevant to the company’s business. These factors, and other factors not listed here, could cause actual results to differ materially from those contained in forward-looking statements.
— Timely and successful completion of the proposed merger of Peoples
Energy Corporation into WPS Resources (including receipt of acceptable
regulatory approvals, including but not limited to, approval by
Illinois Commerce Commission and Public Service Commission of
Wisconsin, and the ability of WPS Resources and Peoples Energy to
satisfy all of the other conditions precedent to the completion of the
merger) and the successful integration of operations;
— Unexpected costs and/or liabilities related to the merger, or the
effects of purchase accounting may be different from WPS Resources’ and
Peoples Energy’s expectations;
— The combined company of WPS Resources and Peoples Energy may be unable
to achieve the forecasted synergies or it may take longer or cost more
than expected to achieve these synergies;
— The credit ratings of the WPS Resources and Peoples Energy combined
company or its subsidiaries may be different from the current ratings
of WPS Resources or its subsidiaries;
— Resolution of pending and future rate cases and negotiations (including
the recovery of deferred costs) and other regulatory decisions
impacting WPS Resources’ regulated businesses;
— The impact of recent and future federal and state regulatory changes,
including legislative and regulatory initiatives regarding deregulation
and restructuring of the electric and natural gas utility industries,
changes in environmental, tax and other laws and regulations to which
WPS Resources and its subsidiaries are subject, as well as changes in
application of existing laws and regulations;
— Current and future litigation, regulatory investigations, proceedings
or inquiries, including but not limited to, manufactured gas plant site
cleanup, pending United States Environmental Protection Agency
investigations of Wisconsin Public Services Corporation’s generation
facilities, and the appeal of the decision in the contested case
proceeding regarding the Weston 4 air permit;
— Resolution of audits by the Internal Revenue Service and various state
and foreign revenue agencies;
— The effects, extent, and timing of additional competition or regulation
in the markets in which our subsidiaries operate;
— The impact of fluctuations in commodity prices, interest rates, and
customer demand;
— Available sources and costs of fuels and purchased power;
— Ability to control costs;
— Investment performance of employee benefit plan assets;
— Advances in technology;
— Effects of and changes in political, legal, and economic conditions and
developments in the United States and Canada;
— The performance of projects undertaken by nonregulated businesses and
the success of efforts to invest in and develop new opportunities;
— Potential business strategies, including mergers and acquisitions or
dispositions of assets or businesses, which cannot be assured to be
completed (such as the proposed merger with Peoples Energy,
construction of the Weston 4 power plant, and additional investment in
American Transmission Company related to construction of the Wausau,
Wisconsin, to Duluth, Minnesota, transmission line);
— The direct or indirect effect resulting from terrorist incidents,
natural disasters, or responses to such events;
— Financial market conditions and the results of financing efforts,
including credit ratings and risks associated with commodity prices (in
particular natural gas and electricity), interest rates, and
counterparty credit;
— Weather and other natural phenomena; and
— The effect of accounting pronouncements issued periodically by
standard-setting bodies.– Unaudited Financial Statements to Follow –
WPS RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Twelve Months Ended
December 31 December 31
(Millions, except per share
amounts) 2006 2005 2006 2005Nonregulated revenue $1,314.0 $1,912.4 $5,156.7 $5,301.3
Utility revenue 550.6 430.6 1,734.0 1,524.2
Total revenues 1,864.6 2,343.0 6,890.7 6,825.5Nonregulated cost of fuel, natural
gas, and purchased power 1,286.1 1,865.6 4,967.6 5,137.8
Utility cost of fuel, natural gas,
and purchased power 356.0 274.4 1,006.1 801.2
Operating and maintenance expense 136.2 160.2 503.7 535.4
Depreciation and decommissioning
expense 28.7 23.0 106.1 142.3
Taxes other than income 15.3 12.1 57.4 47.3
Operating income 42.3 7.7 249.8 161.5Miscellaneous income 7.9 23.4 42.2 86.2
Interest expense (29.4) (16.4) (99.2) (62.0)
Minority interest – 1.1 3.8 4.5
Other (expense) income (21.5) 8.1 (53.2) 28.7Income before taxes 20.8 15.8 196.6 190.2
Provision for income taxes (1.6) 1.3 45.0 39.6
Income from continuing operations 22.4 14.5 151.6 150.6Discontinued operations, net of tax (0.3) 7.3 7.3 11.5
Net income before cumulative
effect of change in
accounting principle 22.1 21.8 158.9 162.1Cumulative effect of change in
accounting principle, net of tax – (1.6) – (1.6)
Net income before preferred stock
dividends of subsidiary 22.1 20.2 158.9 160.5Preferred stock dividends of
subsidiary 0.8 0.8 3.1 3.1
Income available for common
shareholders $21.3 $19.4 $155.8 $157.4Average shares of common stock
Basic 43.5 39.1 42.3 38.3
Diluted 43.6 39.6 42.4 38.7Earnings (loss) per common share
(basic)
Income from continuing
operations $0.50 $0.35 $3.51 $3.85
Discontinued operations, net
of tax ($0.01) $0.19 $0.17 $0.30
Cumulative effect of change in
accounting principle, net of
tax – ($0.04) – ($0.04)
Earnings per common share
(basic) $0.49 $0.50 $3.68 $4.11Earnings (loss) per common share
(diluted)
Income from continuing
operations $0.50 $0.35 $3.50 $3.81
Discontinued operations, net
of tax ($0.01) $0.18 $0.17 $0.30
Cumulative effect of change in
accounting principle, net of
tax – ($0.04) – ($0.04)
Earnings per common share
(diluted) $0.49 $0.49 $3.67 $4.07Dividends per common share
declared $0.575 $0.565 $2.280 $2.240WPS RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
At December 31
(Millions) 2006 2005Assets
Cash and cash equivalents $23.2 $27.7
Restricted cash 22.0 –
Accounts receivable – net of reserves
of $17.0 and $12.7, respectively 1,037.3 1,005.6
Accrued unbilled revenues 184.8 151.3
Inventories 456.3 304.4
Current assets from risk management
activities 1,068.6 906.4
Deferred income taxes – 7.3
Assets held for sale 6.1 20.3
Other current assets 129.1 99.4
Current assets 2,927.4 2,522.4Property, plant, and equipment, net 2,534.8 2,044.0
Regulatory assets 417.8 272.0
Long-term assets from risk management
activities 308.2 226.5
Goodwill 303.9 36.8
Other 369.6 360.8
Total assets $6,861.7 $5,462.5Liabilities and Shareholders’ Equity
Short-term debt $722.8 $264.8
Current portion of long-term debt 26.5 4.0
Accounts payable 1,010.4 1,078.9
Current liabilities from risk
management activities 1,001.7 852.8
Deferred income taxes 3.1 –
Liabilities held for sale – 6.6
Other current liabilities 141.9 116.8
Current liabilities 2,906.4 2,323.9Long-term debt 1,287.2 867.1
Deferred income taxes 97.6 79.6
Deferred investment tax credits 13.6 14.5
Regulatory liabilities 301.7 373.2
Environmental remediation liabilities 95.8 67.4
Pension and postretirement benefit
obligations 188.6 82.1
Long-term liabilities from risk
management activities 264.7 188.4
Other 121.4 111.0
Long-term liabilities 2,370.6 1,783.3Commitments and contingencies
Preferred stock of subsidiary with no
mandatory redemption 51.1 51.1
Common stock equity 1,533.6 1,304.2
Total liabilities and shareholders’
equity $6,861.7 $5,462.5WPS RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Year Ended December 31
(Millions) 2006 2005 2004
Operating Activities
Net income before preferred stock
dividends of subsidiary $158.9 $160.5 $142.8
Adjustments to reconcile net income
to net cash provided by operating
activities
Discontinued operations, net of
tax (7.3) (11.5) 12.8
Depreciation and decommissioning 106.1 142.3 106.8
Amortization 18.0 14.6 38.8
Amortization of regulatory assets
and liabilities (16.4) 26.1 5.3
Realized gain on investments held
in trust, net of regulatory
deferral – (15.7) (5.5)
Unrealized (gains) losses on
nonregulated energy contracts 7.3 (39.2) (10.7)
Pension and postretirement
expense 51.6 50.5 39.8
Pension and postretirement
funding (43.2) (28.6) (17.8)
Deferred income taxes and
investment tax credit 12.4 9.0 (0.9)
Gain on sale of interest in
Guardian Pipeline, LLC (6.2) – –
Gain on sale of WPS ESI Gas
Storage, LLC (9.0) – –
Gain on sale of partial interest
in synthetic fuel operation (6.4) (7.1) (7.5)
Loss (gain) on sale of property,
plant, and equipment 1.3 (5.5) (12.0)
Gain on sale of emission
allowances – (0.4) –
Equity income, net of dividends 14.4 10.9 7.8
Deferral of Kewaunee outage costs – (49.2) (7.2)
Cumulative effect of change in
accounting principles, net of
tax – 1.6 –
Other (9.5) (61.0) (11.8)
Changes in working capital
Receivables, net (10.0) (499.8) (67.8)
Inventories (206.5) (112.9) (11.3)
Other current assets (30.6) (19.9) (0.9)
Accounts payable 14.7 487.3 44.9
Other current liabilities 33.3 25.4 (3.1)
Net cash provided by operating
activities 72.9 77.4 242.5Investing Activities
Capital expenditures (342.0) (413.9) (289.8)
Proceeds from the sale of property,
plant, and equipment 4.5 12.0 26.9
Purchase of emission allowances (3.9) – –
Proceeds from the sale of interst in
Guardian Pipeline, LLC 38.5 – –
Proceeds from the sale of WPS ESI Gas
Storage, LLC 19.9 – –
Proceeds from sale of Kewaunee power
plant – 112.5 –
Proceeds from sale of partial
interest in Weston 4 power plant – 95.1 –
Proceeds from liquidation of non-
qualified decommissioning trust – 127.1 –
Purchase of equity investments and
other acquisitions (60.1) (82.6) (52.3)
Purchases of nuclear decommissioning
trust investments – (18.6) (213.3)
Sales of nuclear decommissioning
trust investments – 18.6 213.3
Decommissioning funding – – (0.3)
Acquisition of natural gas operations
in Michigan and Minnesota, net of
liabilities assumed (659.3) – –
Restricted cash for repayment of
long-term debt (22.0) – –
Other (5.7) 1.0 3.1
Net cash used for investing
activities (1,030.1) (148.8) (312.4)Financing Activities
Short-term debt, net 458.0 (25.0) 251.2
Gas loans, net (68.4) (7.1) 1.6
Issuance of long-term debt 447.0 – –
Repayment of long-term debt, note to
preferred stock trust (4.0) (3.4) (105.1)
Payment of dividends
Preferred stock (3.1) (3.1) (3.1)
Common stock (96.0) (85.4) (81.3)
Issuance of common stock 164.6 127.3 26.3
Other (6.4) (3.3) (12.8)
Net cash provided by financing
activities 891.7 – 76.8
Change in cash and cash equivalents –
continuing operations (65.5) (71.4) 6.9
Change in cash and cash equivalents –
discontinued operations
Net cash provided by (used for)
operating activities 41.9 (15.0) (11.7)
Net cash provided by (used for)
investing activities 19.1 74.9 (2.6)
Net cash used for financing
activities – (0.8) (3.3)
Change in cash and cash equivalents (4.5) (12.3) (10.7)
Cash and cash equivalents at
beginning of year 27.7 40.0 50.7
Cash and cash equivalents at end of
year $23.2 $27.7 $40.0Diluted Earnings Per Share Information – Non-GAAP Financial Information
Non-GAAP Financial Information
WPS Resources prepares financial statements in accordance with accounting
principles generally accepted in the United States (GAAP). Along with
this information, we disclose and discuss diluted earnings per share (EPS)
from continuing operations – adjusted, which is a non-GAAP measure.
Management uses the measure in its internal performance reporting and for
reports to the Board of Directors. We disclose this measure in our
quarterly earnings releases, on investor conference calls, and during
investor conferences and related events. Management believes that diluted
EPS from continuing operations – adjusted is a useful measure for
providing investors with additional insight into our operating performance
because it eliminates the effects of certain items that are not comparable
from one period to the next. Therefore, this measure allows investors to
better compare our financial results from period to period. The
presentation of this additional information is not meant to be considered
in isolation or as a substitute for our results of operations prepared and
presented in conformance with GAAP.Actual Three Months and Year Ended December 31, 2006 and 2005
Three Months Ended Year Ended
December 31 December 31
2006 2005 2006 2005
Diluted EPS from
continuing operations $0.50 $0.35 $3.50 $3.81
Diluted EPS from
discontinued operations (0.01) 0.18 0.17 0.30
Diluted EPS from
cumulative effect of
change in accounting
principle 0.00 (0.04) 0.00 (0.04)
Total Diluted EPS $0.49 $0.49 $3.67 $4.07
Average Shares of
Common Stock – Diluted 43.6 39.6 42.4 38.7Information on Special Items:
Diluted earnings per share from continuing operations, as adjusted for
special items and their financial impact on diluted earnings per share
from continuing operations for the three months and year ended December
31, 2006 and 2005 are as follows:Diluted EPS from
continuing operations $0.50 $0.35 $3.50 $3.81Adjustments (net of taxes):
Asset Management:
Other asset sales
(gains)/losses 0.00 0.09 (0.22) 0.10
Land sales gains (0.01) (0.12) (0.03) (0.15)
Total asset management (0.01) (0.03) (0.25) (0.05)
MERC and MGUC results
(includes transition
costs) (0.11) 0.02 0.27 0.02
Write-off of Kewaunee
deferred 2004 outage
costs 0.00 0.12 0.00 0.12
ESI power contract in
Maine liquidated in 2005 0.01 (0.12) 0.09 (0.13)
Transition costs related
to Peoples merger 0.02 0.00 0.03 0.00
Synfuel – realized and
unrealized oil option
gains, taxcredits,
production costs, premium
amortization, deferred
gain recognition, and
royalties (0.03) 0.02 (0.47) (0.79)
Diluted EPS from
continuing operations –
adjusted $0.38 $0.36 $3.17 $2.98Weather impact – WPSC
(as compared to normal)
Electric impact –
favorable/(unfavorable) $(0.02) $0.02 $(0.05) $0.18
Gas impact –
favorable/(unfavorable) (0.04) (0.01) (0.13) (0.07)
Total weather impact $(0.06) $0.01 $(0.18) $0.11Diluted Earnings Per Share Information – Non-GAAP Financial Information
Actual 2006 and 2007 Forecast
Potential 2007 Diluted
EPS Ranges
Actual High Low
2006 Scenario Scenario
Diluted EPS from continuing operations $3.50 $4.45 $4.22
Diluted EPS from discontinued operations 0.17 0.33 0.33
Total Diluted EPS $3.67 $4.78 $4.55
Average Shares of Common Stock –
Diluted 42.4 45.4 45.4Information on Special Items:
Diluted earnings per share from continuing operations, as adjusted for
special items and their financial impact on the actual 2006 diluted
earnings per share from continuing operations and the 2007 diluted
earnings per share from continuing operations guidance are as follows:Diluted EPS from continuing operations $3.50 $4.45 $4.22
Adjustments (net of taxes):
Asset Management:
Other asset sales gains (0.22) (0.03) 0.00
Land sales gains (0.03) (0.10) (0.10)
Total asset management (0.25) (0.13) (0.10)
MERC and MGUC results (includes
transition costs) 0.27 (0.40) (0.37)
ESI power contract in Maine liquidated
in 2005 0.09 0.01 0.01
Transition costs related to Peoples
merger(1) 0.03 0.00 0.00
Synfuel – realized and unrealized oil
option gains, taxcredits, production
costs, premium amortization, deferred
gain recognition, and royalties (0.47) (0.31) (0.31)
Diluted EPS from continuing operations
– adjusted $3.17 $3.62 $3.45Weather impact – WPSC
(as compared to normal)(2)
Electric impact –
favorable/(unfavorable) $(0.05) $0.00 $0.00
Gas impact –
favorable/(unfavorable) (0.13) 0.00 0.00
Total weather impact $(0.18) $0.00 $0.00(1) The 2007 diluted earnings per share from continuing operations –
adjusted guidance does not include an estimate of transition costs
associated with the pending merger with Peoples Energy.
(2) The 2007 diluted earnings per share from continuing operations –
adjusted guidance assumes normal weather.WPS Resources Corporation
Supplemental Quarterly Financial Highlights
(millions, except per share amounts and ESI natural gas sales volumes)2005
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year EndedRegulated Electric Utility
Revenues $244.0 $240.2 $298.6 $254.3 $1,037.1
year-over-year change 9.5% 13.9% 24.9% 13.6% 15.7%
Fuel and purchased power
costs 80.7 79.2 150.0 134.3 444.2
Margins(1) 163.3 161.0 148.6 120.0 592.9
year-over-year change 8.6% 14.1% -9.6% -17.4% -1.4%
margins/revenues 66.9% 67.0% 49.8% 47.2% 57.2%Operating and maintenance
expense 90.2 90.5 73.5 108.1 362.3
Depreciation and
decommissioning expense(2) 22.1 59.1 16.4 15.8 113.4
Taxes other than income 9.7 9.6 9.3 9.9 38.5Operating Income 41.3 1.8 49.4 (13.8) 78.7
year-over-year change 21.5% -91.1% -8.7% N/M(3) -37.1%Income available for
common shareholders $23.5 $20.9 $28.0 $(8.2) $64.2Sales in kilowatt-hours 3,680.4 3,803.2 4,207.4 3,969.1 15,660.1
year-over-year change 1.2% 11.0% 12.8% 8.0% 8.3%
Residential 799.0 694.0 873.9 760.5 3,127.4
Commercial and
industrial 2,095.6 2,139.2 2,280.4 2,126.6 8,641.8
Resale 773.9 961.7 1,044.2 1,069.4 3,849.2
Other 11.9 8.3 8.9 12.6 41.7Notes:
(1) Fixed payment to Kewanee $- $- $21.0 $22.2 $43.2
(2) Decommissioning expense
(substantially offset in
other income) $2.4 $39.0 $- $- $41.4
(3) Not meaningfulRegulated Natural Gas
Utility
Revenues $174.6 $89.8 $71.8 $185.8 $522.0
year-over-year change 0.6% 29.0% 57.5% 40.7% 24.0%
Purchased gas costs 128.3 66.2 52.6 150.3 397.4
Margins 46.3 23.6 19.2 35.5 124.6
year-over-year change 2.2% 1.3% 14.3% 5.7% 4.7%
margins/revenues 26.5% 26.3% 26.7% 19.1% 23.9%Operating and maintenance
expense(4) 16.1 18.4 17.2 19.6 71.3
Depreciation and
decommissioning expense 4.2 4.3 4.4 4.5 17.4
Taxes other than income 1.5 1.5 1.5 1.6 6.1
Operating Income 24.5 (0.6) (3.9) 9.8 29.8
year-over-year change 0.4% N/M(3) -2.5% -31.5% -17.0%Income available for
common shareholders $14.0 $(1.9) $(3.5) $4.6 $13.2Throughput in therms(5) 308.7 162.5 128.6 227.4 827.2
year-over-year change -2.6% 8.3% 23.5% -1.3% 3.2%
Residential(5) 113.2 32.4 16.8 79.2 241.6
Commercial and
industrial(5) 63.2 16.4 11.9 43.2 134.7
Interruptible 9.4 8.8 9.8 8.1 36.1
Interdepartmental 10.2 28.4 25.1 7.1 70.8
Transport(5) 112.7 76.5 65.0 89.8 344.0Notes:
(4) External transition costs
associated with the
integration of MGUC
and MERC $- $- $- $1.0 $1.0
(5) Throughput in therms
related to MGUC and MERC – – – – –
Residential – – – – –
Commercial and
industrial – – – – –
Interruptible – – – – –
Transport – – – – –2006
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year EndedRegulated Electric Utility
Revenues $256.4 $262.4 $315.0 $265.6 $1,099.4
year-over-year change 5.1% 9.2% 5.5% 4.4% 6.0%
Fuel and purchased power
costs 125.7 118.8 163.5 143.0 551.0
Margins(1) 130.7 143.6 151.5 122.6 548.4
year-over-year change -20.0% -10.8% 2.0% 2.2% -7.5%
margins/revenues 51.0% 54.7% 48.1% 46.2% 49.9%Operating and maintenance
expense 72.4 72.8 66.5 65.5 277.2
Depreciation and
decommissioning expense(2) 16.4 16.5 16.5 16.6 66.0
Taxes other than income 10.5 10.3 10.2 10.6 41.6Operating Income 31.4 44.0 58.3 29.9 163.6
year-over-year change -24.0% N/M(3) 18.0% N/M(3) 107.9%Income available for
common shareholders $15.5 $23.4 $31.0 $15.6 $85.5Sales in kilowatt-hours 3,829.3 3,777.0 4,221.5 4,097.5 15,925.3
year-over-year change 4.0% -0.7% 0.3% 3.2% 1.7%
Residential 793.6 697.9 847.9 805.4 3,144.8
Commercial and
industrial 2,085.7 2,065.5 2,291.1 2,202.9 8,645.2
Resale 938.3 1,005.1 1,073.0 1,076.7 4,093.1
Other 11.7 8.5 9.5 12.5 42.2Notes:
(1) Fixed payment to Kewanee $24.0 $24.3 $24.5 $24.6 $97.4
(2) Decommissioning expense
(substantially offset in
other income) $- $- $- $- $-
(3) Not meaningfulRegulated Natural Gas
Utility
Revenues $193.0 $95.6 $91.1 $297.2 $676.9
year-over-year change 10.5% 6.5% 26.9% 60.0% 29.7%
Purchased gas costs 148.2 62.0 58.1 225.5 493.8
Margins 44.8 33.6 33.0 71.7 183.1
year-over-year change -3.2% 42.4% 71.9% 102.0% 47.0%
margins/revenues 23.2% 35.1% 36.2% 24.1% 27.0%Operating and maintenance
expense(4) 24.9 32.5 31.3 36.6 125.3
Depreciation and
decommissioning expense 4.6 6.5 8.7 8.9 28.7
Taxes other than income 1.7 2.7 4.1 3.3 11.8
Operating Income 13.6 (8.1) (11.1) 22.9 17.3
year-over-year change -44.5% N/M(3) 184.6% 133.7% -41.9%Income available for
common shareholders $6.7 $(7.5) $(11.0) $9.5 $(2.3)Throughput in therms(5) 266.9 194.9 275.0 530.5 1,267.3
year-over-year change -13.5% 19.9% 113.8% 133.3% 53.2%
Residential(5) 97.8 47.6 32.8 173.3 351.5
Commercial and
industrial(5) 58.5 21.5 22.8 87.8 190.6
Interruptible 6.3 7.0 7.5 19.3 40.1
Interdepartmental 4.5 4.4 8.9 9.8 27.6
Transport(5) 99.8 114.4 203.0 240.3 657.5Notes:
(4) External transition costs
associated with the
integration of MGUC
and MERC $4.1 $4.1 $2.3 $1.3 $11.8
(5) Throughput in therms
related to MGUC and MERC – 66.1 166.6 308.7 541.4
Residential – 17.6 17.8 99.1 134.5
Commercial and
industrial – 7.8 10.8 47.5 66.1
Interruptible – – 2.9 12.7 15.6
Transport – 40.7 135.1 149.4 325.2WPS Resources Corporation
Supplemental Quarterly Financial Highlights
(millions, except per share amounts and ESI natural gas sales volumes)2005
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year EndedNonregulated Segment –
ESI
Nonregulated revenues $1,049.1 $991.7 $1,358.9 $1,915.2 $5,314.9
year-over-year change 6.2% 27.9% 71.8% 83.1% 47.7%
Nonregulated cost of
fuel, natural gas, and
purchased power 1,007.4 959.3 1,312.3 1,867.9 5,146.9
Margins 41.7 32.4 46.6 47.3 168.0
year-over-year change 14.2% 45.3% 105.3% -2.1% 29.1%
Margins/Revenues 4.0% 3.3% 3.4% 2.5% 3.2%Margin Detail:
– Electric and other
margin 21.5 19.0 26.2 39.7 106.4
– Natural gas margin 20.2 13.4 20.4 7.6 61.6
41.7 32.4 46.6 47.3 168.0Operating and
maintenance expense 19.0 21.6 23.4 27.9 91.9
Depreciation and
decommissioning 2.9 2.8 2.8 2.7 11.2
Taxes other than income 0.5 0.7 0.7 0.5 2.4
Operating Income 19.3 7.3 19.7 16.2 62.5
year-over-year change 41.9% N/M(3) 535.5% -36.0% 57.8%Income available for
common shareholders $28.2 $3.6 $22.2 $20.1 $74.1Gross Volumes (includes
transactions both
physically and
financially settled)
– Wholesales electric
sales volumes in
kilowatt-hours 7,559.1 9,872.6 14,894.7 12,451.9 44,778.3
– Retail electric sales
volumes in kilowatt-
hours 2,047.0 2,009.2 2,163.0 1,801.8 8,021.0
– Wholesales natural
gas sales volumes in
billion cubic feet 67.4 74.1 95.2 101.4 338.1
– Retail natural gas
sales volumes in
billion cubic feet 83.9 65.5 59.5 67.7 276.6Physical Volumes
(includes only
transactions settled
physically)
– Wholesales electric
sales volumes in
kilowatt-hours 557.5 171.9 493.2 293.0 1,515.6
– Retail electric sales
volumes in kilowatt-
hours 1,754.5 1,641.2 1,746.5 1,452.3 6,594.5
– Wholesales natural
gas sales volumes in
billion cubic feet 64.5 70.9 92.9 99.5 327.8
– Retail natural gas
sales volumes in
billion cubic feet 71.2 52.5 44.7 59.3 227.72006
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year EndedNonregulated Segment –
ESI
Nonregulated revenues $1,557.8 $1,130.3 $1,161.0 $1,310.0 $5,159.1
year-over-year change 48.5% 14.0% -14.6% -31.6% -2.9%
Nonregulated cost of
fuel, natural gas,
and purchased power 1,478.0 1,075.7 1,138.9 1,284.1 4,976.7
Margins 79.8 54.6 22.1 25.9 182.4
year-over-year change 91.4% 68.5% -52.6% -45.2% 8.6%
Margins/Revenues 5.1% 4.8% 1.9% 2.0% 3.5%Margin Detail:
– Electric and other
margin 41.5 40.4 (9.4) (11.3) 61.2
– Natural gas margin 38.3 14.2 31.5 37.2 121.2
79.8 54.6 22.1 25.9 182.4Operating and
maintenance expense 22.0 17.5 17.3 28.2 85.0
Depreciation and
decommissioning 2.7 2.6 2.7 2.7 10.7
Taxes other than
income 0.8 0.7 0.9 1.3 3.7
Operating Income 54.3 33.8 1.2 (6.3) 83.0
year-over-year change 181.3% 363.0% -93.9% N/M(3) 32.8%Income available for
common shareholders $37.1 $13.4 $21.1 $0.7 $72.3Gross Volumes
(includes
transactions both
physically and
financially settled)
– Wholesales electric
sales volumes in
kilowatt-hours 13,345.7 12,206.6 15,476.7 17,765.9 58,794.9
– Retail electric
sales volumes in
kilowatt-hours 1,139.1 1,304.8 1,989.7 2,120.5 6,554.1
– Wholesales natural
gas sales volumes in
billion cubic feet 106.4 87.7 100.7 107.4 402.2
– Retail natural gas
sales volumes in
billion cubic feet 73.7 78.4 76.7 85.7 314.5Physical Volumes
(includes only
transactions settled
physically)
– Wholesales electric
sales volumes in
kilowatt-hours 264.7 200.2 207.7 295.6 968.2
– Retail electric
sales volumes in
kilowatt-hours 931.6 1,035.2 1,266.0 1,332.8 4,565.6
– Wholesales natural
gas sales volumes in
billion cubic feet 100.9 81.9 95.9 94.8 373.5
– Retail natural gas
sales volumes in
billion cubic feet 69.5 61.8 61.2 71.5 264.0WPS Resources Corporation
Supplemental Quarterly Financial Highlights
(millions, except per share amounts and ESI natural gas sales volumes)2005
Year
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr EndedOther information:
Heating and Cooling Degree Days –
WPSC
Heating Degree Days – Actual 3,736 882 114 2,669 7,401
year-over-year change -1.6% -14.5% -43.3% 6.1% -1.9%
compared with normal 0.5% -11.0% -53.3% -2.8% -3.8%
Heating Degree Days – Normal 3,716 991 244 2,745 7,696Cooling Degree Days – Actual – 207 411 31 649
year-over-year change N/M(3) 245.0% 53.4% N/M(3) 97.9%
compared with normal N/M(3) 58.0% 17.8% N/M(3) 35.2%
Cooling Degree Days – Normal – 131 349 – 480Heating Degree Days – MGUC
Heating Degree Days – Actual N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)
Heating Degree Days – Normal N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)
compared with normal N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)Heating Degree Days – MERC
Heating Degree Days – Actual
(northern service territory) N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)
Heating Degree Days – Normal
(northern service territory) N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)
compared with normal N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)Heating Degree Days – Actual
(southern service territory) N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)
Heating Degree Days – Normal
(southern service territory) N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)
compared with normal N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)Diluted Earnings per Share Impact
– favorable/(unfavorable) – WPSC
Heating compared with prior year
Electric impact $(0.01) $- $- $0.01 $-
Gas impact (0.01) (0.03) – 0.02 (0.02)
Heating compared with normal –
Electric impact – (0.01) – (0.01) (0.02)
Gas impact – (0.05) (0.01) (0.01) (0.07)
Cooling compared with prior year –
Electric impact – 0.16 0.16 0.03 0.35
Gas Impact – – – – –
Cooling compared with normal –
Electric impact – 0.10 0.07 0.03 0.20
Gas impact – – – – –Diluted Earnings per Share Impact
– favorable/(unfavorable) – MGUCHeating compared with normal –
gas impact N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)Diluted Earnings per Share Impact
– favorable/(unfavorable) – MERCHeating compared with normal –
gas impact N/A(6) N/A(6) N/A(6) N/A(6) N/A(6)2006
Year
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr EndedOther information:
Heating and Cooling Degree Days
– WPSC
Heating Degree Days – Actual 3,322 779 244 2,440 6,785
year-over-year change -11.1% -11.7% 114.0% -8.6% -8.3%
compared with normal -10.3% -21.6% 3.4% -10.6% -11.5%
Heating Degree Days – Normal 3,705 994 236 2,728 7,663Cooling Degree Days – Actual – 123 395 3 521
year-over-year change N/M(3) -40.6% -3.9% -90.3% -19.7%
compared with normal N/M(3) -4.7% 14.8% N/M(3) 10.1%
Cooling Degree Days – Normal – 129 344 – 473Heating Degree Days – MGUC
Heating Degree Days – Actual N/A(6) 668 162 2,093 2,923
Heating Degree Days – Normal N/A(6) 886 227 2,282 3,395
compared with normal N/A(6) -24.6% -28.6% -8.3% -13.9%Heating Degree Days – MERC
Heating Degree Days – Actual
(northern service territory) N/A(6) N/A(6) 169 3,033 3,202
Heating Degree Days – Normal
(northern service territory) N/A(6) N/A(6) 259 3,026 3,285
compared with normal N/A(6) N/A(6) -34.7% 0.2% -2.5%Heating Degree Days – Actual
(southern service territory) N/A(6) N/A(6) 378 3,213 3,591
Heating Degree Days – Normal
(southern service territory) N/A(6) N/A(6) 480 3,563 4,043
compared with normal N/A(6) N/A(6) -21.3% -9.8% -11.2%Diluted Earnings per Share Impact
– favorable/(unfavorable) – WPSC
Heating compared with prior
year
Electric impact $(0.03) $(0.01) $- $(0.01) $(0.05)
Gas impact (0.05) (0.02) 0.02 (0.02) (0.07)
Heating compared with normal
Electric impact (0.03) (0.02) – (0.02) (0.07)
Gas impact (0.05) (0.04) – (0.04) (0.13)
Cooling compared with prior
year
Electric impact – (0.11) (0.02) (0.02) (0.15)
Gas Impact – – – – –
Cooling compared with normal
Electric impact – (0.02) 0.04 – 0.02
Gas impact – – – – –Diluted Earnings per Share Impact
– favorable/(unfavorable) – MGUCHeating compared with normal –
gas impact N/A(6) $(0.01) $- $(0.01) (0.02)Diluted Earnings per Share Impact
– favorable/(unfavorable) – MERCHeating compared with normal –
gas impact N/A(6) N/A(6) $(0.01) $(0.02) $(0.03)Notes:
(6) Not applicable at MGUC and MERC acquired natural gas utility
operations from Aquila on April 1, 2006 and July 1, 2006,
respectively.
(7) Note that UPPCO weather information was not included in the above
table as it did not have a significant impact on financial resultsWPS Resources Corporation
Supplemental Quarterly Financial Highlights
(millions, except per share amounts and ESI natural gas sales volumes)2005
Year
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr EndedOther information:
Capital Expenditures
Weston 4 $27.5 $52.7 $40.1 $45.3 $165.6
Other regulated utility
expenditures 31.0 74.6 64.8 74.5 244.9
Nonregulated 1.6 1.0 0.4 1.0 4.0American Transmission Company (ATC)
Equity contributions to ATC
related to the Wausau, WI to
Duluth MN, transmission line $8.8 $12.7 $13.9 $21.6 $57.0
Other equity contributions to ATC $- $- $- $8.1 $8.1
Percent ownership interest in ATC 24.7% 26.2% 28.2% 31.0% 31.0%
After-tax equity earnings
recognized from the investment
in ATC $3.1 $3.5 $4.0 $4.5 $15.1Impact of Synthetic Fuel Activities
on Results of OperationsNonregulated revenue:
Mark-to-market gains (losses) on
2005 oil options $2.1 $(1.9) $5.1 $(5.3) $-
Net realized (losses) gains on
2005 oil options – (1.5) 0.9 0.9 0.3
Mark-to-market gains (losses) on
2006 oil options 0.4 2.7 2.6 (1.7) 4.0
Net realized gains on 2006 oil
options – – – – –
Mark-to-market gains (losses) on
2007 oil options 0.3 1.8 2.3 – 4.4Miscellaneous income
Operating losses – synthetic fuel
facility (4.2) (4.2) (3.8) (4.6) (16.8)
Variable payments recognized 0.9 1.0 0.9 0.8 3.6
Royalty income recognized – – – 3.5 3.5
Deferred gain recognized 0.6 0.5 0.6 0.6 2.3
Interest recognized on fixed note
receivable 0.4 0.3 0.3 0.2 1.2Minority Interest 1.1 1.3 1.1 1.2 4.7
Income (loss) before taxes and
tax credits related to
synthetic fuel activities 1.6 – 10.0 (4.4) 7.2
Estimated provision (benefit) for
income taxes (40%) 0.6 – 4.0 (1.8) 2.8
Income (loss) before tax credits
related to synthetic fuel
activities 1.0 – 6.0 (2.6) 4.4
Section 29/45K federal tax credits
recognized 12.8 5.8 5.5 2.0 26.1Total impact on income available
for common shareholders $13.8 $5.8 $11.5 $(0.6) $30.52006
Year
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr EndedOther information:
Capital Expenditures
Weston 4 $35.2 $41.7 $44.0 $26.0 $146.9
Other regulated utility
expenditures 28.7 45.3 54.9 60.7 189.6
Nonregulated 1.1 2.2 2.2 – 5.5American Transmission Company (ATC)
Equity contributions to ATC
related to the Wausau, WI to
Duluth MN, transmission line $16.1 $6.3 $- $- $22.4
Other equity contributions to ATC $4.5 $4.7 $4.9 $- $14.1
Percent ownership interest in ATC 32.8% 32.7% 31.6% 30.7% 30.7%
After-tax equity earnings
recognized from the investment
in ATC $5.3 $5.9 $6.1 $6.1 $23.4Impact of Synthetic Fuel Activities
on Results of OperationsNonregulated revenue:
Mark-to-market gains (losses) on
2005 oil options $- $- $- $- $-
Net realized (losses) gains on
2005 oil options – – – – –
Mark-to-market gains (losses) on
2006 oil options 6.0 11.7 (15.8) (5.9) (4.0)
Net realized gains on 2006 oil
options 2.0 – – 0.1 2.1
Mark-to-market gains (losses) on
2007 oil options 2.4 2.6 (2.2) (3.3) (0.5)Miscellaneous income
Operating losses – synthetic fuel
facility (4.7) (8.2) (5.7) (5.3) (23.9)
Variable payments recognized 0.9 1.0 1.3 – 3.2
Royalty income recognized – – – – –
Deferred gain recognized 0.6 0.5 0.6 0.6 2.3
Interest recognized on fixed note
receivable 0.3 0.2 0.2 0.2 0.9Minority Interest 1.2 1.2 1.4 – 3.8
Income (loss) before taxes and
tax credits related to
synthetic fuel activities 8.7 9.0 (20.2) (13.6) (16.1)
Estimated provision (benefit) for
income taxes (40%) 3.5 3.6 (8.1) (5.4) (6.4)
Income (loss) before tax credits
related to synthetic fuel
activities 5.2 5.4 (12.1) (8.2) (9.7)
Section 29/45K federal tax credits
recognized 4.5 3.1 12.4 9.5 29.5Total impact on income available
for common shareholders $9.7 $8.5 $0.3 $1.3 $19.8
