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Cleco Corp. Posts 2009 Third-Quarter Earnings of $59.8 Million

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  Published in Business and Finance on Monday, November 2nd 2009 at 3:07 GMT by Market Wire
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PINEVILLE, LA--(Marketwire - November 2, 2009) - Cleco Corp. (NYSE: [ CNL ])

 Consolidated Earnings - Reconciliation of GAAP to Non-GAAP Measures Diluted EPS Three months ended Nine months ended Sept. 30, Sept. 30, -------------------------------------- Subsidiary 2009 2008 2009 2008 --------- -------- -------- -------- Cleco Power LLC $ 0.66 $ 0.53 $ 1.47 $ 1.51 Cleco Midstream Resources LLC(1) 0.14 0.08 (0.08) (0.05) Corporate and Other(1,2) 0.13 0.03 0.13 0.03 --------- -------- -------- -------- Operational earnings per share (Non-GAAP) 0.93 0.64 1.52 1.49 Adjustments(3) 0.06 (0.02) 0.03 (0.02) --------- -------- -------- -------- Earnings per share applicable to common stock $ 0.99 $ 0.62 $ 1.55 $ 1.47 GAAP refers to United States generally accepted accounting principles (1) Includes affiliate interest charges/interest income on affiliate debt related to Cleco's investment in Acadia ($0.01 per share for the quarters ended September 30, 2009 and 2008; $0.04 per share and $0.05 per share for the nine months ended September 30, 2009 and 2008, respectively) (2) Includes dividends on preferred stock (3) Refer to "Operational Earnings Adjustments" on page 5 of this news release 

"The numbers speak for themselves. We had a strong third quarter," said Mike Madison, president and chief executive officer of Cleco Corp. "In just the past three weeks, we've seen results from the execution of our strategy which will bring lasting shareholder value. We've received approval to implement our new retail rate plan, a plan that is expected to increase the earnings of Cleco while at the same time decreasing bills for our retail customers. That plan will go into effect when Rodemacher Unit 3 begins commercial operation later this year. However, we didn't stop there. Last week we announced that Acadia Power Partners reached an agreement with Entergy Louisiana to sell them the remaining 50 percent of the Acadia plant and further reduce our risk to the merchant power market. Once again, we are doing what we said we would do."

Recent Developments:

 -- The Louisiana Public Service Commission (LPSC) approved Cleco Power's new retail rate plan on October 14, 2009. -- Construction of Rodemacher Unit 3 is effectively complete; tuning and testing are in progress. -- Definitive agreements have been executed for Entergy Louisiana to purchase the remaining 50 percent of the Acadia power station; the completion of this transaction is subject to regulatory approval. -- The LPSC approved the Acadia/Cleco Power bridge tolling agreement covering 50 percent of the Acadia power station on October 14, 2009. -- Construction has begun on the Acadiana Load Pocket transmission project. 

Financial Highlights:

Third Quarter 2009

 -- Reports third quarter earnings applicable to common stock of $59.8 million, or $0.99 per share, compared to $37.1 million, or $0.62 per share for the third quarter of 2008. 

Year-to-date 2009

 -- Reports earnings applicable to common stock for the first nine months of 2009 of $93.5 million, or $1.55 per share, compared to $88.6 million, or $1.47 per share for the first nine months of last year. 

Earnings Guidance

 -- Reaffirming 2009 earnings target in the range of $1.62 to $1.72 per share. Those targets assume normal weather for the remainder of the year and the continuation of the current rate plan through the in-service date of Rodemacher Unit 3, which is expected in late December 2009. -- Midstream's earnings estimate assumes continued performance by Evangeline's tolling counterparty and is based on assumptions about Acadia's plant operations and meeting the obligations under third-party forward sales agreements. 

Quarter-Over-Quarter Operational EPS Reconciliation:

 $ 0.64 2008 Third-Quarter Diluted Operational EPS 0.02 Non-fuel revenue 0.05 Energy hedging, net 0.10 Income taxes (0.05) Other expenses, net 0.01 AFUDC (allowance for funds used during construction) --------- 0.13 Cleco Power results 0.06 Cleco Midstream results 0.10 Corporate results --------- 0.93 2009 Third-Quarter Diluted Operational EPS 0.06 Adjustments(1) --------- $ 0.99 Reported GAAP earnings per share (1) Refer to "Operational Earnings Adjustments" on page 5 of this news release 

Cleco Power

 -- Non-fuel revenue increased $0.02 per share compared to the third quarter of 2008 primarily due to higher residential usage per customer, new service to a wholesale customer that began in April 2009, and the absence of hurricane-related outages. Partially offsetting these increases were lower sales to industrial customers which was largely the result of decreased production at one of Cleco Power's largest industrial customers and the start of a large industrial customer cogenerating a portion of its electricity requirements. Lower miscellaneous revenue also contributed to the decreases. -- Net realized and mark-to-market gains on energy hedging positions tied to a fixed-price wholesale contract increased earnings by $0.05 per share compared to the third quarter of 2008. -- Income taxes increased earnings by $0.10 per share compared to the third quarter of 2008 as a result of an additional state tax benefit from a change in accounting method received on the 2008 tax returns which were filed in 2009, and a decrease in the annual projected effective tax rate mainly due to an increase in equity AFUDC as a percent of total income. -- Other expenses were $0.05 per share higher compared to the third quarter of 2008 primarily due to higher general liability expense, higher employee benefit costs and administrative expenses, and higher capacity payments and other net miscellaneous expenses. -- The debt portion of AFUDC, primarily associated with the Rodemacher Unit 3 project, contributed an additional $0.01 per share as compared to the third quarter of 2008. 

Cleco Midstream Resources

 -- Evangeline was up $0.05 per share compared to the third quarter of 2008 primarily due to lower maintenance expenses and the absence of replacement power purchases. -- Acadia was up $0.01 per share compared to the third quarter of 2008 primarily due to higher net revenue from Acadia's short-term tolling agreement with Cleco Power and lower depreciation expense. 

Corporate and Other

 -- Income taxes increased earnings by $0.05 per share compared to the third quarter of 2008 due to a decrease in the annual projected effective consolidated tax rate mainly due to an increase in equity AFUDC as a percent of total income. -- Interest expense decreased $0.04 per share compared to the third quarter of 2008 primarily due to the favorable settlement of a franchise tax lawsuit. -- Lower other miscellaneous expenses, net increased earnings by $0.01 per share. 

Year-Over-Year Operational EPS Reconciliation:

 $ 1.49 Nine Months ended Sept. 30, 2008 Diluted Operational EPS (0.03) Non-fuel revenue (0.02) Energy hedging, net (0.14) Interest expense 0.08 Income taxes (0.08) Other expenses, net 0.15 AFUDC --------- (0.04) Cleco Power results (0.03) Cleco Midstream results 0.10 Corporate results --------- 1.52 Nine Months ended Sept. 30, 2009 Diluted Operational EPS 0.03 Adjustments(1) --------- $ 1.55 Reported GAAP earnings per share (1) Refer to "Operational Earnings Adjustments" on page 5 of this news release 

Cleco Power

 -- Although industrial sales were lower, overall base revenue was essentially the same in the year-to-year comparison. Lower industrial sales were the result of decreased production at one of Cleco Power's large industrial customers and the start of a large industrial customer cogenerating a portion of its electricity requirements. Heating-degree days for the period were 9 percent below 2008 levels while cooling-degree days were 2 percent above 2008 levels. Contributing to the $0.03 per share decrease in non-fuel revenue for the year was lower miscellaneous revenue. -- Mark-to-market and realized losses on energy hedging positions tied to a fixed-price wholesale contract increased $0.02 per share year over year. -- Interest expense increased $0.14 per share compared to the first nine months of 2008 primarily due to the issuances of senior notes, Gulf Opportunity Zone bonds, senior secured storm recovery bonds, and solid- waste disposal bonds. -- Income taxes increased earnings by $0.08 per share year over year as a result of an additional state tax benefit from a change in accounting method received on the 2008 tax returns which were filed in 2009, and a decrease in the annual projected effective tax rate mainly due to an increase in equity AFUDC as a percent of total income. -- Other expenses, net increased $0.08 per share year over year primarily due to higher general liability expense, higher employee benefit costs and administrative expenses, and higher other net miscellaneous expenses. -- AFUDC, primarily associated with the Rodemacher Unit 3 project, contributed an additional $0.15 per share as compared to the first nine months of 2008. The equity portion of AFUDC associated with the Rodemacher Unit 3 project was up $0.10 per share, while the debt portion of AFUDC contributed $0.05 per share more than in the first nine months of 2008. 

Cleco Midstream Resources

 -- Evangeline was up $0.01 per share compared to the same period last year primarily due to the absence of replacement power purchases resulting from Evangeline's 2008 unplanned outage and lower gas tax expenses and interest charges. Partially offsetting these increases were higher maintenance expenses resulting from the outage at the facility during 2009. -- Acadia was down $0.03 per share compared to the same period of 2008. Of that, $0.05 per share was due to higher expenses from an unplanned outage at the facility and $0.01 per share was due to higher legal fees. These decreases were partially offset by $0.02 per share of net revenue from Acadia's short-term tolling agreement with Cleco Power and $0.01 per share of lower depreciation expense. -- Other miscellaneous items reduced Midstream's results by $0.01 per share year over year. 

Corporate and Other

 -- Lower interest charges resulting from the repayment of $100 million of senior notes in May 2008 and the favorable settlement of a franchise tax lawsuit increased results by $0.07 per share and lower other net expenses increased results by $0.03 per share compared to the first nine months of last year. 

Operational Earnings Adjustments:

Cleco's management uses operational earnings per share to evaluate the operations of Cleco and to establish goals for management and employees. Management believes this presentation is appropriate and enables investors to more accurately compare Cleco's operational financial performance over the periods presented. Operational earnings as presented here may not be comparable to similarly titled measures used by other companies. The following table provides a reconciliation of operational earnings per share to reported GAAP earnings per share.

 Reconciliation of Operational EPS to Reported GAAP EPS Three months ended Nine months ended Sept. 30, Sept. 30, -------------------------------------- 2009 2008 2009 2008 --------- -------- --------- -------- Operational earnings per share $ 0.93 $ 0.64 $ 1.52 $ 1.49 Tax levelization 0.04 (0.01) - - Company/trust-owned life insurance policy adjustments 0.02 (0.01) 0.03 (0.02) --------- -------- --------- -------- Reported GAAP earnings per share $ 0.99 $ 0.62 $ 1.55 $ 1.47 

Reconciling adjustments from operational earnings to GAAP earnings are as follows:

Tax Levelization

Generally accepted accounting principles require companies to apply an effective tax rate to interim periods that is consistent with a company's estimated annual effective tax rate. As a result, quarterly, Cleco projects the effective tax rate for the year and then raises or lowers the tax expense recorded in that quarter to reflect the projected annual tax rate. The resulting incremental adjustment to bring the taxes in line with the expected annual tax rate increased earnings by $0.04 per share for the third quarter of 2009 and decreased earnings by $0.01 per share for the third quarter of 2008. While this adjustment has no impact on Cleco's annual earnings, the interim impact is greater in the current year as the projected increased income from equity AFUDC for Rodemacher Unit 3, as a percentage of total book income, has a significant impact on Cleco's projected annual effective tax rate. This incremental adjustment is not related to the third quarter operational results because it reflects the effect of the change in tax rates on operational earnings for the entire year.

COLI/TOLI Adjustments

Cleco has both Company-Owned Life Insurance and Trust-Owned Life Insurance (COLI/TOLI) policies covering certain members of management. These policies are payable to Cleco upon death of the insured. COLI/TOLI assets are acquired at fair value, and adjusted for changes in market value and any payments/redemptions of cash surrender values. The resulting adjustments for these items increased earnings by $0.02 per share for the third quarter of 2009 and decreased earnings by $0.01 per share for the third quarter of 2008. The adjustments increased earnings by $0.03 per share for the first nine months of 2009 and decreased earnings by $0.02 per share for the same period last year. Cleco is unable to predict changes in the market values and amounts of cash surrender values of these policies. As a result, management does not consider these adjustments to be a component of operational earnings.

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Cleco management will discuss the company's third-quarter 2009 results during a conference call scheduled for 4:30 p.m. Eastern time (3:30 p.m. Central time) Monday, Nov. 2, 2009. The call will be webcast live on the Internet. A replay will be available for 12 months. Investors may access the webcast through the company's Web site at [ www.cleco.com ] by selecting "For Investors" and then "Cleco Corporation Third-Quarter 2009 Earnings Conference Call."

Cleco Corp. is a regional energy company headquartered in Pineville, La. It operates a regulated electric utility company that serves approximately 276,000 customers across Louisiana. Cleco also operates a wholesale energy business with approximately 1,350 megawatts of nameplate generating capacity. For more information about Cleco, visit [ www.cleco.com ].

Financial tables follow:

 For the three months ended Sept. 30, -------------------------------------------------------- (million kWh) (thousands) -------------------------- -------------------------- 2009 2008 Change 2009 2008 Change -------- -------- ------ -------- -------- ------ Electric Sales Residential 1,207 1,144 5.5 % $ 53,970 $ 51,490 4.8 % Commercial 743 721 3.1 % 25,802 25,195 2.4 % Industrial 577 762 (24.3)% 12,912 14,585 (11.5)% Other retail 36 36 - 1,491 1,469 1.5 % Storm surcharge - - - 5,054 5,455 (7.4)% -------- -------- -------- -------- Total retail 2,563 2,663 (3.8)% 99,229 98,194 1.1 % Sales for resale 199 153 30.1 % 7,435 5,759 29.1 % Unbilled (95) (134) 29.1 % (3,466) (4,863) 28.7 % -------- -------- -------- -------- Total retail and wholesale customer sales 2,667 2,682 (0.6)% $103,198 $ 99,090 4.1 % For the nine months ended Sept. 30, -------------------------------------------------------- (million kWh) (thousands) -------------------------- -------------------------- 2009 2008 Change 2009 2008 Change -------- -------- ------ -------- -------- ------ Electric Sales Residential 2,814 2,789 0.9 % $122,486 $121,236 1.0 % Commercial 1,882 1,874 0.4 % 71,871 71,258 0.9 % Industrial 1,633 2,177 (25.0)% 38,046 41,580 (8.5)% Other retail 103 101 2.0 % 4,288 4,205 2.0 % Storm surcharge - - - 14,674 15,641 (6.2)% -------- -------- ------ -------- -------- ------ Total retail 6,432 6,941 (7.3)% 251,365 253,920 (1.0)% Sales for resale 432 327 32.1 % 16,034 15,430 3.9 % Unbilled 98 12 716.7 % 3,538 1,583 123.5 % -------- -------- ------ -------- -------- ------ Total retail and wholesale customer sales 6,962 7,280 (4.4)% $270,937 $270,933 - CLECO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Thousands, except share and per share amounts) (UNAUDITED) For the three months ended Sept. 30, 2009 2008 ---------- ---------- Operating revenue Electric operations $ 228,952 $ 333,936 Other operations 9,859 7,004 Affiliate revenue 2,689 2,735 ---------- ---------- Total operating revenue 241,500 343,675 Operating expenses Fuel used for electric generation 74,585 93,717 Power purchased for utility customers 61,943 150,502 Other operations 26,667 24,822 Maintenance 10,452 10,754 Depreciation 19,620 19,283 Taxes other than income taxes 7,479 9,033 Loss on sale of assets 77 - ---------- ---------- Total operating expenses 200,823 308,111 ---------- ---------- Operating income 40,677 35,564 Interest income 369 1,669 Allowance for other funds used during construction 17,813 17,786 Equity income from investees 15,587 9,662 Other income 2,079 937 Other expense (849) (2,276) Interest charges Interest charges, including amortization of debt expenses, premium and discount, net of capitalized interest 17,361 20,619 Allowance for borrowed funds used during construction (6,523) (4,923) ---------- ---------- Total interest charges 10,838 15,696 ---------- ---------- Income before income taxes 64,838 47,646 Federal and state income tax expense 4,983 10,513 ---------- ---------- Net income 59,855 37,133 Preferred dividends requirements, net of tax 12 12 ---------- ---------- Net income applicable to common stock $ 59,843 $ 37,121 ========== ========== Average shares of common stock outstanding Basic 60,234,243 60,031,962 Diluted 60,556,768 60,291,616 Basic earnings per share From continuing operations $ 0.99 $ 0.62 Net income applicable to common stock $ 0.99 $ 0.62 Diluted earnings per share From continuing operations $ 0.99 $ 0.62 Net income applicable to common stock $ 0.99 $ 0.62 Cash dividends paid per share of common stock $ 0.225 $ 0.225 CLECO CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Thousands, except share and per share amounts) (UNAUDITED) For the nine months ended Sept. 30, 2009 2008 ---------- ---------- Operating revenue Electric operations $ 627,469 $ 803,397 Other operations 25,680 29,826 Affiliate revenue 8,513 7,790 ---------- ---------- Total operating revenue 661,662 841,013 Operating expenses Fuel used for electric generation 213,213 162,140 Power purchased for utility customers 164,209 392,245 Other operations 77,557 69,958 Maintenance 35,777 35,456 Depreciation 58,233 57,970 Taxes other than income taxes 22,812 27,320 Loss (gain) on sales of assets 77 (99) ---------- ---------- Total operating expenses 571,878 744,990 ---------- ---------- Operating income 89,784 96,023 Interest income 1,051 4,544 Allowance for other funds used during construction 52,341 46,462 Equity income from investees 710 2,723 Other income 4,753 1,094 Other expense (2,181) (4,322) Interest charges Interest charges, including amortization of debt expenses, premium and discount, net of capitalized interest 58,827 49,884 Allowance for borrowed funds used during construction (19,157) (14,526) ---------- ---------- Total interest charges 39,670 35,358 ---------- ---------- Income before income taxes 106,788 111,166 Federal and state income tax expense 13,258 22,573 ---------- ---------- Net income 93,530 88,593 Preferred dividends requirements, net of tax 35 35 ---------- ---------- Net income applicable to common stock $ 93,495 $ 88,558 ========== ========== Average shares of common stock outstanding Basic 60,167,644 59,975,190 Diluted 60,390,454 60,146,501 Basic earnings per share 1.48 From continuing operations $ 1.55 $ 1.48 Net income applicable to common stock $ 1.55 $ 1.48 Diluted earnings per share From continuing operations $ 1.55 $ 1.47 Net income applicable to common stock $ 1.55 $ 1.47 Cash dividends paid per share of common stock $ 0.675 $ 0.675 CLECO CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands) (UNAUDITED) At Sept. At Dec. 30, 2009 31, 2008 ---------- ---------- Assets Current Assets Cash and cash equivalents $ 49,283 $ 97,483 Accounts receivable, net 78,963 78,314 Other current assets 266,636 290,582 ---------- ---------- Total Current Assets 394,882 466,379 Property, plant and equipment, net 2,208,553 2,045,286 Equity investment in investees 262,472 249,144 Prepayments, deferred charges and other 663,311 580,395 ---------- ---------- Total Assets $3,529,218 $3,341,204 ---------- ---------- Liabilities Current Liabilities Long-term debt due within one year $ 11,478 $ 63,546 Accounts payable 81,969 138,300 Other current liabilities 166,223 158,987 ---------- ---------- Total Current Liabilities 259,670 360,833 Deferred credits and other liabilities 914,214 812,687 Long-term debt, net 1,238,238 1,106,819 ---------- ---------- Total Liabilities 2,412,122 2,280,339 ---------- ---------- Shareholders' Equity Preferred stock 1,029 1,029 Common shareholders' equity 1,126,531 1,069,669 Accumulated other comprehensive loss (10,464) (9,833) ---------- ---------- Total Shareholders' Equity 1,117,096 1,060,865 ---------- ---------- Total Liabilities and Shareholders' Equity $3,529,218 $3,341,204 ========== ========== 

Please note: In addition to historical financial information, this news release contains forward-looking statements about future results and circumstances, including, without limitation, statements regarding the Rodemacher Unit 3 project. There are many risks and uncertainties with respect to such forward-looking statements, including the weather and other natural phenomena, state and federal legislative and regulatory initiatives, the timing and extent of changes in commodity prices and interest rates, the operating performance of Cleco Power's and Cleco Midstream's facilities, the financial condition of the company's tolling agreement counterparty, the performance of the tolling agreement by such counterparty, construction and operational startup of Rodemacher Unit 3, the results of Cleco Power's 2007 long-term RFP, the completion of the Acadiana Load Pocket project, the completion of the Acadia/Cleco Power and Acadia/Entergy Louisiana transactions, the impact of the global financial crisis, and other risks and uncertainties more fully described in the company's latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Actual results may differ materially from those indicated in such forward-looking statements.