10-QPeriod: Q2 FY2014

CENTERPOINT ENERGY INC Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 6, 2014For Securities:CNP

Summary

CenterPoint Energy, Inc. (CNP) reported a net income of $107 million for the three months ended June 30, 2014, a significant improvement from a net loss of $100 million in the same period last year. This turnaround was largely driven by a substantial decrease in income tax expense, coupled with increased gains on marketable securities and higher equity earnings from unconsolidated affiliates. For the six months ended June 30, 2014, net income rose to $292 million from $47 million in the prior year, also benefiting from lower tax expenses, improved affiliate earnings, and reduced losses on indexed debt securities. Operationally, the company saw a slight decrease in revenues for the three-month period but an increase for the six-month period. While operating income declined year-over-year for both periods, primarily due to a decrease in the Electric Transmission & Distribution segment's performance, the overall profitability was bolstered by the significant tax adjustments and financial market gains. The company's investment in Enable Midstream Partners, LP remains a key component, with equity earnings from this venture showing strong growth. Management anticipates sufficient liquidity for the remainder of 2014, supported by operational cash flows, credit facilities, and expected distributions from Enable.

Financial Highlights

44 data points
Beta

Revenue

$1.88B

Net Income

$107.00M

5.7% Net Margin

EPS (Diluted)

$0.25

Total Assets

$21.92B

Cash & Equivalents

$206.00M

Free Cash Flow

$332.00M

Financial Statements
Beta
Revenue$1.88B
Operating Expenses$1.70B
Operating Income$186.00M
Net Income$107.00M
EPS (Basic)$0.25
EPS (Diluted)$0.25
Shares Outstanding (Basic)429.77M
Shares Outstanding (Diluted)431.41M

Key Highlights

  • 1Reported net income of $107 million for Q2 2014, a strong turnaround from a $100 million net loss in Q2 2013.
  • 2Six-month net income increased to $292 million in 2014 from $47 million in 2013, driven by lower tax expenses and improved affiliate earnings.
  • 3Operating income for the three and six months ended June 30, 2014, decreased year-over-year, primarily impacted by the Electric Transmission & Distribution segment.
  • 4Equity in earnings from unconsolidated affiliates, notably Enable Midstream Partners, LP, increased significantly in both periods.
  • 5Enable Midstream Partners, LP completed its IPO on April 16, 2014, and CenterPoint Energy contributed its interest in Southeast Supply Header, LLC (SESH) to Enable on May 30, 2014.
  • 6The company experienced a substantial decrease in income tax expense in both comparative periods.
  • 7Management expects sufficient liquidity for the remainder of 2014, with expected capital expenditures of approximately $745 million for the second half of the year.

Frequently Asked Questions

The primary driver was a substantial decrease in income tax expense, which amounted to $159 million less in the first six months of 2014. This was supplemented by a $120 million increase in equity earnings from unconsolidated affiliates, a $71 million decrease in losses on indexed debt securities, and a $19 million decrease in interest expense. These positive factors more than offset a $74 million decrease in operating income.

CenterPoint Energy's equity in earnings from unconsolidated affiliates, primarily Enable, saw a significant increase. For the three months ended June 30, 2014, this was $71 million, up from $37 million in 2013. For the six months, it rose to $162 million from $42 million in the prior year. This reflects the growing contribution of Enable to CenterPoint Energy's profitability.

Management expects that existing cash, borrowings under credit facilities, commercial paper, operational cash flows, and distributions from Enable will be sufficient to meet anticipated cash needs for the remainder of 2014. Key cash requirements include approximately $745 million for capital expenditures, $165 million for scheduled principal payments on transition and system restoration bonds, and contributions to pension plans.

Several regulatory matters are ongoing. For CenterPoint Houston, a decision from the Texas Supreme Court has led to proceedings to determine recovery of $7.5 million in performance bonuses for energy efficiency programs. Also, CenterPoint Houston filed for an interim update of its Transmission Cost of Service (TCOS), which was approved and became effective May 12, 2014. For Gas Operations, a rate case in Minnesota resulted in an approved rate increase of $33 million, with final rates expected in Q4 2014. A pilot revenue decoupling mechanism is also planned for July 2015.