01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
Wisconsin Energy Corporation reported 2011 net income of $526.2 milliona, or $2.24 diluted earnings per share, up from $456.5 million ($1.93 per diluted share) in 2010.
Income from continuing operations was $512.8 millionb versus $454.4 million. Total operating revenues rose to $4,486.4 million from $4,202.5 million. The utility energy segment's operating income declined to $544.8 million from $564.0 million, mainly due to higher other operation and maintenance expense and unfavorable weather, while the non-utility energy segment (the Power the Future plants) grew operating income to $348.9 million from $252.4 million as Oak Creek expansion Unit 2 entered service in January 2011.
Cash from operations rose to $993.4 millionc, though the company contributed $277.4 million to qualified benefit plans in 2011 versus none in 2010. Capital expenditures were $830.8 million. Total assets were $13.86 billion and long-term debt including current maturities was $4.65 billion.
The debt-to-total-capitalization ratio was 57.1% on an actual basis and 54.4% on an adjusted basis that treats the $500 milliond Junior Notes as partly equity. The company also repurchased shares under a $300 million program authorized in May 2011 and, in January 2012, raised its quarterly dividend to $0.30 per share with a target payout ratio trending toward 60% in 2014. Key risks flagged in the filing include regulatory outcomes on Oak Creek expansion cost recovery (estimated final cost about $181 million, or 8.3%, over the amount approved by the PSCW), environmental compliance costs (the Consent Decree is estimated at about $1.1 billion through 2013), possible reclassification of coal combustion products as hazardous waste, greenhouse gas regulation, and the October 2011 bluff collapse at the Oak Creek Power Plant, for which the WDNR had not yet released findings.
02—Key points
Key Highlights
- Net income rose to $526.2 million ($2.24 diluted EPS) in 2011 from $456.5 million ($1.93) in 2010.
- Total operating revenues increased to $4,486.4 million from $4,202.5 million.
- Non-utility energy segment operating income rose to $348.9 million from $252.4 million, driven by Oak Creek expansion Unit 2 entering service in January 2011.
- Utility energy segment operating income fell to $544.8 million from $564.0 million, citing higher other operation and maintenance expense and unfavorable weather.
- Cash provided by operating activities was $993.4 million, despite $277.4 million of qualified benefit plan contributions.
- Dividend policy changed in January 2012: quarterly dividend raised to $0.30 per share and payout ratio targeted to trend toward 60% by 2014.
- Oak Creek expansion final cost estimated at about $181 million (8.3%) above PSCW-approved amount, with cost recovery subject to PSCW review.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $4.49B— | — |
| Operating Income | $887.30M$810.40M | +9.5% |
| Interest Expense | $235.80M$206.40M | +14.2% |
| Net Income | $526.20M$456.50M | +15.3% |
| EPS (Basic) | $2.26$1.95 | +15.9% |
| EPS (Diluted) | $2.24$1.93 | +16.1% |
| Shares Outstanding (Basic) | 232.60M233.80M | −0.5% |
| Shares Outstanding (Diluted) | 235.40M236.70M | −0.5% |
05—Questions
Frequently Asked Questions
How did earnings change in 2011?
Net income was $526.2 million, or $2.24 per diluted share, compared with $456.5 million, or $1.93 per diluted share, in 2010. Income from continuing operations was $512.8 million versus $454.4 million, and the effective tax rate fell to 34.0% from 35.5%.
What drove the mix between the utility and non-utility segments?
Utility energy segment operating income declined to $544.8 million from $564.0 million because of higher other operation and maintenance expense and unfavorable weather, partly offset by wholesale pricing and electric sales growth. Non-utility segment operating income increased to $348.9 million from $252.4 million as the Oak Creek expansion units were placed in service and generated lease revenue.
How leveraged is the company and how is it managing its capital structure?
Debt to total capitalization was 57.1% on an actual GAAP basis at December 31, 2011, and 54.4% on an adjusted basis that counts $250 million of the $500 million Junior Notes as equity. Total debt was $5.32 billion. The company repurchased about 3.2 million shares for $100.0 million under a $300 million program authorized in May 2011.
What are the main financial risks identified in the filing?
Key risks include regulatory recovery of Oak Creek expansion costs above the PSCW-approved amount, environmental compliance expenditures (the Consent Decree is estimated at about $1.1 billion through 2013), possible hazardous waste classification of coal combustion products, greenhouse gas regulation, and potential liabilities from the October 31, 2011 bluff collapse at the Oak Creek Power Plant.
What is the outlook for dividends and 2012 earnings?
The board raised the quarterly dividend to $0.30 per share effective with the first-quarter 2012 payment, implying annual dividends of $1.20 per share, and targets a payout ratio trending toward 60% in 2014. For 2012, the company expects non-utility segment operating income of $345 million to $350 million and an effective tax rate between 36% and 37%.
06—Continue