10-QPeriod: Q3 FY2013

CENTERPOINT ENERGY INC Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 6, 2013For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a significant increase in net income for the three months ended September 30, 2013, reaching $151 million ($0.35 per diluted share) compared to $10 million ($0.02 per diluted share) in the prior year period. This improvement was driven primarily by a substantial increase in operating income across its segments, particularly in Electric Transmission & Distribution and a notable increase in equity earnings from unconsolidated affiliates, largely due to the recent formation of Enable Midstream Partners, LP. However, for the nine months ended September 30, 2013, net income decreased to $198 million ($0.46 per diluted share) from $283 million ($0.66 per diluted share) in the comparable 2012 period. This decline is largely attributable to a significant increase in income tax expense, primarily related to the formation of Enable, and a large step acquisition gain recognized in the prior year. Investors should note the ongoing integration and financial impact of the Enable Midstream Partners formation, which has reshaped the company's midstream operations and reporting segments.

Financial Highlights

45 data points
Beta

Revenue

$1.64B

Net Income

$151.00M

9.2% Net Margin

EPS (Diluted)

$0.35

Total Assets

$21.57B

Cash & Equivalents

$219.00M

Free Cash Flow

$342.00M

Financial Statements
Beta
Revenue$1.64B
Operating Expenses$1.40B
Operating Income$244.00M
Net Income$151.00M
EPS (Basic)$0.35
EPS (Diluted)$0.35
Shares Outstanding (Basic)428.63M
Shares Outstanding (Diluted)430.87M

Key Highlights

  • 1Net income for the three months ended September 30, 2013, surged to $151 million, a significant improvement from $10 million in the same period of 2012.
  • 2Diluted Earnings Per Share (EPS) for the three-month period was $0.35, up from $0.02 in the prior year.
  • 3The formation of Enable Midstream Partners, LP, a joint venture involving CenterPoint's midstream assets, was completed on May 1, 2013, and is now accounted for under the Midstream Investments segment using the equity method.
  • 4Operating income for the nine months ended September 30, 2013, increased to $799 million from $728 million in the prior year, indicating operational strength in core segments.
  • 5Despite operational improvements, net income for the nine months ended September 30, 2013, decreased to $198 million from $283 million in the prior year, largely due to increased income tax expense related to the Enable formation.
  • 6The company's credit facilities were amended to extend maturity dates and adjust financial covenants, providing continued access to capital.
  • 7Significant capital expenditures are planned for infrastructure development in electric and natural gas transmission and distribution.

Frequently Asked Questions

The substantial increase in net income for the three months ended September 30, 2013, was primarily driven by a significant increase in operating income across the company's business segments, a considerable rise in equity earnings from unconsolidated affiliates (largely due to the new Midstream Investments segment following the formation of Enable Midstream Partners), and a reduction in income tax expense compared to the prior year period.

The decrease in net income for the nine-month period was primarily due to a substantial increase in income tax expense, significantly impacted by the formation of Enable Midstream Partners and the associated book-to-tax basis difference. Additionally, the prior year's nine-month results included a $136 million step acquisition gain, which did not recur in the current period.

The formation of Enable Midstream Partners (Enable) on May 1, 2013, resulted in CenterPoint Energy no longer reporting its former Interstate Pipelines and Field Services business segments directly. Instead, CenterPoint Energy's investment in Enable and its retained interest in SESH are now reported under the 'Midstream Investments' segment using the equity method of accounting. This significantly impacts the company's segment reporting and equity in earnings figures.

Key risks include regulatory actions affecting business operations and rates, environmental regulations, construction delays and cost overruns on capital projects, commodity price volatility, weather variations, cyber-attacks, facility outages, creditworthiness of counterparties and customers, and the ability of retail electric providers (REPs) to meet payment obligations. The filing also specifically highlights concentration risk with large REPs as a significant factor for CenterPoint Houston.