01—Abstract
Summary
Summary of the 10-K filed February 25, 2011. Cited figures are marked; the original filing is the authoritative source.
Wisconsin Energy Corporation reported 2010 net income of $456.5 milliona, or $3.86 diluted earnings per share, up from $382.4 million, or $3.24 per diluted share, in 2009.
Income from continuing operations was $454.4 millionb, compared with $375.7 million in 2009. Total operating revenues were $4,202.5 million, and operating income rose to $810.4 million from $660.3 million. The utility energy segment contributed $564.0 million of operating income, while the non-utility energy segment, driven by the Power the Future (PTF) generating units, contributed $252.4 million, up from $120.1 million.
Oak Creek expansion Unit 1 entered service in February 2010 and Unit 2 entered service on January 12, 2011. The company expects 2011 non-utility operating income of $340 million to $350 millionc. The company's near-term investor considerations center on capital spending and financing.
Total capital expenditures were $798.2 milliond in 2010 and are estimated at $951.2 million for 2011. Commercial paper stood at $657.9 million at year-end, and the company issued $420 million of long-term debt in January 2011 to repay short-term borrowings used for Oak Creek Unit 2. Net working capital was negative by about $390.0 million at December 31, 2010.
The filing estimates the final Oak Creek expansion cost at about $191 million, or 8.7%, above the amount initially approved by the PSCW, of which the company's share is $162 million, and it expects to seek PSCW recovery of those costs. The board approved a new dividend policy targeting a 50% to 55% payout ratio, raised the quarterly dividend to $0.52 per share (pre-split) in January 2011, and declared a two-for-one stock split distributed March 1, 2011. The filing also discloses pending matters, including a lawsuit against the company's cash balance pension plan, EPA air-emission activity under a Consent Decree, and greenhouse gas regulation, which management says it cannot yet quantify.
02—Key points
Key Highlights
- Net income of $456.5 million ($3.86 diluted EPS) in 2010, up from $382.4 million ($3.24) in 2009.
- Total operating revenues of $4,202.5 million and operating income of $810.4 million in 2010, versus $4,100.9 million and $660.3 million in 2009.
- Non-utility energy segment operating income rose to $252.4 million from $120.1 million, reflecting the Oak Creek expansion Unit 1 entering service in February 2010; 2011 is expected at $340 million to $350 million.
- Cash provided by operating activities was $810.4 million, up from $628.9 million, mainly because no qualified benefit plan contributions were made in 2010 versus $289.3 million in 2009.
- Capital expenditures were $798.2 million in 2010, with $951.2 million estimated for 2011.
- Dividend policy changed to a 50% to 55% payout ratio; quarterly dividend raised to $0.52 pre-split and a two-for-one stock split was declared.
- Oak Creek expansion final cost is estimated about $191 million (8.7%) over PSCW-approved amount, with the company's share at $162 million, subject to PSCW recovery review.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 25, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Operating Income | $810.40M$660.30M | +22.7% |
| Interest Expense | $206.40M$156.70M | +31.7% |
| Net Income | $456.50M$382.40M | +19.4% |
| EPS (Basic) | $1.95$1.64 | +18.9% |
| EPS (Diluted) | $1.93$1.62 | +19.1% |
| Shares Outstanding (Basic) | 233.80M233.80M | 0.0% |
| Shares Outstanding (Diluted) | 236.70M235.90M | +0.3% |
05—Questions
Frequently Asked Questions
How did Wisconsin Energy perform financially in 2010?
Net income rose to $456.5 million, or $3.86 per diluted share, from $382.4 million, or $3.24 per diluted share, in 2009. Operating income increased to $810.4 million from $660.3 million on operating revenues of $4,202.5 million, compared with $4,100.9 million in 2009.
What drove the increase in non-utility energy results?
The non-utility energy segment, which consists primarily of the Power the Future generating units leased to Wisconsin Electric, contributed $252.4 million of operating income in 2010 versus $120.1 million in 2009. The filing attributes the increase to Oak Creek expansion Unit 1 entering service in February 2010, and expects higher operating income in 2011 after Unit 2 entered service on January 12, 2011.
How is the company funding its capital program and what is its debt position?
The company estimates 2011 capital expenditures of $951.2 million. It issued $420 million of long-term debt in January 2011 and used the proceeds to repay short-term borrowings incurred for Oak Creek Unit 2. Commercial paper outstanding was $657.9 million at December 31, 2010, and the ratio of debt to total capitalization was 56.9% on an actual basis.
What changes did the board make to dividends and shares?
In December 2010 the board adopted a dividend policy targeting a payout ratio of 50% to 55% of earnings for 2011 and later years. On January 20, 2011 it raised the quarterly dividend to $0.52 per share and approved a two-for-one stock split, with additional shares distributed March 1, 2011.
What cost and regulatory risks does the filing identify for the Oak Creek expansion?
The filing estimates the final cost of the Oak Creek expansion at about $191 million, or 8.7%, above the amount initially approved by the PSCW, of which the company's share is $162 million. Costs above a 5% cap are not recoverable absent a PSCW prudence finding, and the company expects to request authorization to recover all costs and relief from liquidated damages. If the PSCW does not allow these recoveries, results of operations could be adversely affected.
06—Continue