Piedmont Natural Gas Reports Third Quarter 2016 Results

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Sep 07, 2016, 04:14 ET

CHARLOTTE, N.C., Sept. 7, 2016 /PRNewswire/ -- Piedmont Natural Gas (NYSE: PNY) today announced results for its third fiscal quarter ended July 31, 2016. For the quarter, the Company reported a seasonal loss of $6.7 million, or $(0.08) per diluted share, compared to a seasonal loss of $8.3 million, or $(0.10) per diluted share, for the same period in 2015. Adjusted for merger-related expenses incurred during the Company's third quarter, the net loss was $5.7 million, or $(0.07) per diluted share.

For the nine months ended July 31, 2016, net income was $154.5 million and diluted earnings per share were $1.90, compared with net income of $151.1 million and diluted earnings per share of $1.91 for the same period in 2015. Adjusted for merger-related expenses incurred during the Company's nine months ended July 31, 2016, net income was $163.4 million, or $2.01 per diluted share.

Piedmont Natural Gas Chairman, President, and CEO, Thomas E. Skains, commented on the results, "We continue to be pleased with our operating performance and financial results through the first nine months of our fiscal year. Our focus on the strategic directives and operating fundamentals that guide our business, even as we prepare for the close and integration of our acquisition by Duke Energy, is impressive. And, we continue to drive solid customer growth in our residential and commercial markets where total gross customer additions thus far in 2016 are 3% higher than the same period in 2015. The affordability and stability of wholesale natural gas costs continue to favorably position natural gas relative to other energy sources."

Margin for the quarter was $114.8 million, an increase of $3.2 million from the same period in 2015. The increase is primarily attributable to integrity management rider (IMR) rate adjustments in North Carolina and Tennessee and customer growth, partially offset by lower margin from industrial customers. Margin for the nine months ended July 31, 2016 increased by $18.1 million from the same period in 2015 to $625.4 million. The increase is primarily attributable to IMR rate adjustments in North Carolina and Tennessee and customer growth, partially offset by lower margin sales from secondary market activity.

Operation and maintenance (O&M) expenses totaled $68.9 million during the third quarter of 2016, a decrease of $0.7 million from the same quarter in 2015. O&M expenses totaled $215.7 million during the nine months ended July 31, 2016, an increase of $8.5 million from the same period in 2015. The decrease in O&M expenses for the quarter is primarily due to decreases in vehicle transportation expenses and employee expenses, partially offset by increases in payroll and acquisition and integration expenses. The increase for the nine month period is primarily due to increases in payroll and $5.6 million incremental expense from the acceleration and payment of certain equity incentive awards in connection with the proposed Duke Energy acquisition (Acquisition) and $2.6 million integration expenses related to the Acquisition, partially offset by lower vehicle transportation expenses and employee expenses.

Pre-tax income from Piedmont's joint ventures decreased 26.9% for the quarter compared to the same period in 2015 due to Constitution suspending the recording of capitalized interest costs as income and expensing project development costs after the New York State Department of Environmental Conservation's denial of Constitution's application for a necessary water application certification for the New York portion of the Constitution pipeline. This was partially offset by an increase in SouthStar's pre-tax income due to a higher value of hedged derivatives and lower operating expenses. Pre-tax income from Piedmont's joint ventures decreased 6.3% for the nine months ended July 31, 2016 compared to the same period in 2015 due to Constitution having no capitalized interest costs as discussed above, partially offset primarily by ACP's higher capitalized interest costs.

Utility interest charges for the quarter were $15.7 million compared to $16.7 million for the same period in 2015. Utility interest charges for the nine months ended July 31, 2016 were $49.4 million compared to $52.5 million for the same period in 2015. The decreases in utility interest charges for both periods is primarily due to recording interest income on net amounts due from customers compared with interest expense on amounts due to customers in the prior periods and increased capitalized interest from higher capitalized expenditures, partially offset by additional interest from an increase in short-term and long-term debt outstanding in 2016.

DIVIDEND DECLARED

At the Company's regular quarterly meeting of its Board of Directors held September 7, 2016, a quarterly dividend on Common Stock of $0.34 per share was declared, payable on the earlier of the effective date of the Acquisition and October 14, 2016 to holders of record at the close of business on the earlier of the business day immediately preceding the effective date of the Acquisition and September 23, 2016.

Additionally, on September 7, 2016, the Board of Directors declared a special contingent dividend on common stock of $0.34 per share. This special dividend is contingent on the effective date of the Acquisition occurring after September 23, 2016 and is intended to cover the period, if any, between September 23, 2016 (the regular record date of the regular third quarter dividend) and completion of the Acquisition and will be prorated accordingly. The special contingent dividend will be payable to shareholders of record at the close of business on the earlier of the business day immediately preceding the effective date of the Acquisition and December 23, 2016 and will be payable on the earlier of the effective date of the Acquisition and January 13, 2017. This special contingent dividend is in addition to Piedmont's regular third quarter dividend of $0.34 per share of common stock. In the event that the effective date of the Acquisition occurs after December 23, 2016, this special contingent dividend will constitute the regular fourth quarter dividend.

FISCAL 2016 EARNINGS GUIDANCE REAFFIRMED

Piedmont Natural Gas reaffirms its fiscal year 2016 earnings guidance of $1.90 to $1.95 per diluted share before any merger-related expenses.

Summary of Operations
(in thousands except per share amounts and degree days)

Three Months Ended		July 31				% Increase (Decrease)
		2016		2015
	(Unaudited)
Operating Revenues		$	157,806	$	158,266	—%
Cost of Gas		43,035		46,694		(8)%
Margin		114,771		111,572		3%
Operations and Maintenance Expenses		68,867		69,587		(1)%
Depreciation		34,485		32,317		7%
General Taxes		11,103		11,532		(4)%
Utility Income Taxes		(6,339)		(7,097)		11%
Operating Income		6,655		5,233		27%
Other Income (Expense), net		2,336		3,181		(27)%
Utility Interest Charges		15,721		16,674		(6)%
Net Income (Loss)		(6,730)		(8,260)		19%

Average Shares of Common Stock:
Basic		81,214		79,039		3%
Diluted		81,214		79,039		3%

Earnings (Loss) Per Share of Common Stock:
Basic		$	(0.08)	$	(0.10)	20%
Diluted		$	(0.08)	$	(0.10)	20%

System Throughput - Dekatherms		105,978		104,914		1%
Gas Customers Billed in July		1,030		1,014		2%
System Average Degree Days – Actual		49		12		308%
System Average Degree Days – Normal		46		47		(2)%
Percent Normal Degree Days		7%		(74)%		n/a

Nine Months Ended		July 31				% Increase (Decrease)
		2016		2015

Operating Revenues		$	969,329	$	1,190,462	(19)%
Cost of Gas		343,944		583,199		(41)%
Margin		625,385		607,263		3%
Operations and Maintenance Expenses		215,675		207,162		4%
Depreciation		102,215		95,900		7%
General Taxes		31,908		32,504		(2)%
Utility Income Taxes		87,660		85,583		2%
Operating Income		187,927		186,114		1%
Other Income (Expense), net		15,937		17,472		(9)%
Utility Interest Charges		49,372		52,466		(6)%
Net Income		154,492		151,120		2%

Average Shares of Common Stock:
Basic		81,095		78,826		3%
Diluted		81,392		79,175		3%

Earnings Per Share of Common Stock:
Basic		$	1.91	$	1.92	(1)%
Diluted		1.90		$	1.91	(1)%

System Throughput - Dekatherms		380,729		370,834		3%
Gas Customers Billed in July		1,030		1,014		2%
System Average Degree Days - Actual		2,512		3,279		(23)%
System Average Degree Days - Normal		3,069		3,062		—%
Percent Normal Degree Days		(18)%		7%		n/a

Non-GAAP Reconciliation of Merger-Related Expenses
$ in thousands except per share amounts

	Three Months Ended July 31, 2016		Nine Months Ended July 31, 2016
GAAP net income (loss)	$	(6,730)	$	154,492

Merger & integration related expenses:
Related expenses	$	1,687	$	9,226
Associated income tax benefit (expense)	$	657	$	343
After-tax merger and integration-related expenses	$	1,030	$	8,883

Adjusted net income (loss)	$	(5,700)	$	163,375
Average basic shares outstanding (in thousands)	81,214		81,095
Average diluted shares outstanding (in thousands)	81,214		81,392
Adjusted basic EPS	$	(0.07)	$	2.01
Adjusted diluted EPS	$	(0.07)	$	2.01

Forward-Looking Statements

This press release contains forward-looking statements. These statements are based on management's current expectations and information currently available and are believed to be reasonable and are made in good faith. However, the forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the statements. Factors that may make the actual results differ materially from anticipated results include, but are not limited to, weather conditions, rate of customer growth, the cost and availability of natural gas, competition from other energy providers, new legislation and regulations and application of existing laws and regulations, economic and capital market conditions, operational interruptions to our gas distribution and transmission activities, change in number of outstanding shares, cybersecurity breaches or failure of technology systems, inability to complete necessary or desirable pipeline expansion or infrastructure projects, costs of providing pension benefits, the cost and availability of labor and materials and other uncertainties, all of which are difficult to predict and some of which are beyond our control. For these reasons, you should not place undue reliance on these forward-looking statements when making investment decisions. The words "expect," "believe," "project," "anticipate," "intend," "may," "should," "could," "assume," "estimate," "forecast," "future," "indicate," "outlook," "plan," "predict," "seek," "target," "would," "guidance," and variations of such words and similar expressions are intended to identify forward-looking statements. Forward-looking statements are only as of the date they are made and we do not undertake any obligation to update publicly any forward-looking statement, either as a result of new information, future events or otherwise. More information about the risks and uncertainties relating to these forward-looking statements may be found in Piedmont's latest Forms 10-K and 10-Q, which are available on the SEC's website at http://www.sec.gov.

About Piedmont Natural Gas

Piedmont Natural Gas is an energy services company primarily engaged in the distribution of natural gas to more than one million residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee, including customers served by municipalities who are wholesale customers. Our subsidiaries are invested in joint venture, energy-related businesses, including unregulated retail natural gas marketing, regulated interstate natural gas transportation and storage, and regulated intrastate natural gas transportation businesses. More information about Piedmont Natural Gas is available on the Internet at http://www.piedmontng.com/.

CONTACT: Investor Relations, Nick Giaimo, +1-704-731-4952, [email protected]

SOURCE Piedmont Natural Gas