10-QPeriod: Q3 FY2007

EVERSOURCE ENERGY Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 8, 2007For Securities:ES

Summary

Eversource Energy (ES), formerly Northeast Utilities, reported a net income of $50.2 million for the third quarter of 2007, or $0.32 per share, a decrease from $111.5 million, or $0.72 per share, in the same period of 2006. This decline is largely attributable to a one-time $74 million tax benefit recorded in Q3 2006 by The Connecticut Light and Power Company (CL&P) distribution segment. Excluding this benefit, non-GAAP net income increased by $13 million. For the first nine months of 2007, net income was $173.8 million, or $1.12 per share, compared to $123.6 million, or $0.80 per share, in the prior year, also impacted by the tax benefit. The company raised its full-year 2007 earnings guidance and projected strong earnings growth for 2008, supported by significant planned capital expenditures in transmission infrastructure. Liquidity remained robust, supported by proceeds from asset sales and debt issuance, though cash on hand decreased due to tax payments related to prior asset sales.

Key Highlights

  • 1Third quarter 2007 net income was $50.2 million ($0.32/share), down from $111.5 million ($0.72/share) in Q3 2006, primarily due to a one-time tax benefit in the prior year.
  • 2Nine-month 2007 net income was $173.8 million ($1.12/share), up from $123.6 million ($0.80/share) in the same period of 2006, with the prior year benefiting from a significant tax adjustment.
  • 3The company raised its 2007 full-year earnings per share guidance to $1.45-$1.60.
  • 4Projected consolidated earnings for 2008 are expected to be between $1.65 and $1.95 per share.
  • 5Eversource Energy plans approximately $6 billion in capital expenditures from 2008-2012, focusing on transmission infrastructure, which is expected to drive rate base growth.
  • 6Consolidated operating cash flows for the first nine months of 2007 were $68.2 million, down from $380.3 million in 2006, largely due to significant tax payments related to prior asset sales.

Frequently Asked Questions

The primary driver for the decrease in net income was a one-time $74 million income tax reduction recognized by The Connecticut Light and Power Company (CL&P) distribution segment in the third quarter of 2006. Excluding this item, the company's non-GAAP net income actually increased.

Eversource Energy raised its 2007 earnings per share guidance to $1.45-$1.60 and projects consolidated earnings per share of $1.65-$1.95 for 2008. The company anticipates average compounded annual EPS growth of 10-14% from 2008 through 2012.

The company plans significant capital expenditures primarily in transmission infrastructure. Funding is expected to come from operating cash flows, debt issuances, and an anticipated equity issuance of approximately $0.5 billion between 2008 and 2012.

Consolidated operating cash flows were significantly impacted by federal and state income tax payments totaling $398.5 million made in the first quarter of 2007, largely related to the prior sale of competitive generation assets. These payments caused a substantial decrease in cash from operations compared to the prior year, when such payments were not yet made.