01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
WEC Energy Group, Inc. (formerly Wisconsin Energy Corporation, which acquired Integrys on June 29, 2015 and changed its name) reported 2015 operating revenues of $5,926.1 milliona, up from $4,997.1 million in 2014, and net income attributed to common shareholders of $638.5 million, compared with $588.3 million in 2014.
Diluted EPS was $2.34b, versus $2.59 in 2014. The Integrys acquisition, financed with about 90.2 million shares, $1.2 billion of long-term debt and $300.0 million of commercial paper, drove a large expansion of the balance sheet: total assets rose to $29,355.2 million from $14,905.0 million, and long-term debt (excluding current portion) rose to $9,124.1 million from $4,170.7 million. Management attributes the earnings increase in part to a $20.8 million pre-tax gain on the sale of Minergy LLC, while acquisition costs of $107.6 million weighed on results.
Capital spending rose to $1,266.2 millionc in 2015 from $761.2 million, and management estimates total capital expenditures of $1,510.4 million in 2016. The filing reports a ratio of debt to total capitalization of 54.4% at year-end 2015, and the board raised the quarterly dividend to $0.4950 per share, targeting a payout ratio of 65–70% of earnings. Key regulatory and environmental matters include the EPA Clean Power Plan (stayed by the Supreme Court on February 9, 2016), the ICC investigations into PGL's AMRP program, and FERC complaints that could lower ATC's base ROE.
Retail electric sales were slightly declining on a weather-normalized basis in 2015, and the owner of two Michigan iron ore mines plans to shut one in 2017. The filing also notes that Gale E.
Klappa will retire as CEO effective May 1, 2016, and Allen L. Leverett has been appointed to succeed him.
02—Key points
Key Highlights
- Operating revenues rose to $5,926.1 million in 2015 from $4,997.1 million in 2014, reflecting the Integrys acquisition closed June 29, 2015.
- Net income attributed to common shareholders was $638.5 million ($2.34 diluted EPS) versus $588.3 million ($2.59 diluted EPS) in 2014.
- Total assets increased to $29,355.2 million from $14,905.0 million, and goodwill reached $3,023.5 million, of which $2,581.6 million relates to the Integrys acquisition.
- Long-term debt (excluding current portion) rose to $9,124.1 million from $4,170.7 million; the debt-to-total-capitalization ratio was 54.4% at year-end 2015.
- Capital expenditures were $1,266.2 million in 2015, and estimated capital expenditures total $1,510.4 million for 2016.
- The quarterly dividend was increased to $0.4950 per share, which equates to $1.98 annually, with a target payout ratio of 65–70% of earnings.
- CEO Gale E. Klappa will retire effective May 1, 2016, and Allen L. Leverett will succeed him as CEO.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Wec Energy Group kept $0.11.
- Revenue$5.93B100.0%
- Cost of revenue−$2.24B37.8%
- Gross profit$3.69B62.2%
- Operating costs−$2.44B41.1%
- Operating income$1.25B21.1%
- Interest, other & tax−$612.0M10.3%
- Net income$638.5M10.8%
Where FY2015 revenue went
$5.93B- Operating costs: $2.44B, 41% of revenue
- Cost of revenue: $2.24B, 38% of revenue
- Net income: $638.5M, 11% of revenue
- Interest, other & tax: $612.0M, 10% of revenue
Kept 11% as net incomeNet income $638.5M · 11%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $5.93B$5.00B | +18.6% |
| Cost of Revenue | $2.24B$2.26B | −0.9% |
| Gross Profit | $3.69B$2.74B | +34.6% |
| Operating Expenses | $4.68B$3.88B | +20.4% |
| Operating Income | $1.25B$1.11B | +12.4% |
| Interest Expense | $331.40M$240.30M | +37.9% |
| Net Income | $638.50M$589.50M | +8.3% |
| EPS (Basic) | $2.36$2.61 | −9.6% |
| EPS (Diluted) | $2.34$2.59 | −9.7% |
| Shares Outstanding (Basic) | 271.10M225.60M | +20.2% |
| Shares Outstanding (Diluted) | 272.70M227.50M | +19.9% |
05—Questions
Frequently Asked Questions
What drove the increase in earnings and revenue in 2015?
The inclusion of Integrys results from June 29, 2015 was the main driver, contributing a $30.1 million net increase in earnings, partially offset by acquisition costs. A $20.8 million pre-tax gain from the sale of Minergy LLC also contributed. Wisconsin segment operating income excluding WPS decreased $8.8 million, largely due to warmer weather reducing natural gas margins.
How was the Integrys acquisition financed?
The filing states the acquisition was financed through the issuance of approximately 90.2 million shares of Wisconsin Energy Corporation common stock, $1.2 billion of long-term debt, and $300.0 million of commercial paper. Total purchase price was $5,583.1 million.
What are the main regulatory and environmental risks disclosed?
Key risks include the EPA Clean Power Plan, which the Supreme Court stayed on February 9, 2016 pending litigation, and the Wisconsin Governor's Executive Order 186 prohibiting state agencies from developing a state plan. Other risks include ICC and Illinois Attorney General investigations into PGL's AMRP, and FERC complaints that could lower ATC's base ROE from 12.2%, with the company believing refunds are probable.
What is the company's dividend policy after the acquisition?
On January 21, 2016, the board increased the quarterly dividend to $0.4950 per share, or $1.98 annually, and affirmed a policy targeting a dividend payout ratio of 65–70% of earnings. Dividends per share were $1.74 in 2015 versus $1.56 in 2014.
What is the outlook for electric sales?
Weather-normalized retail electric sales slightly declined in 2015. The company forecasts retail electric sales excluding the two iron ore mines to grow at a compound annual rate of between flat and 0.5% over the next five years, assuming normal weather. The owner of the mines has announced it will shut down one mine in 2017, a loss estimated at approximately 2% of annual total retail electric sales.
06—Continue