PPL Corporation Reports First-Quarter 2020 Earnings
ALLENTOWN, Pa., May 8, 2020 /PRNewswire/ -- PPL Corporation (NYSE: PPL) on Friday (5/8) announced first-quarter 2020 reported earnings (GAAP) of $554 million, or $0.72 per share, compared with first-quarter 2019 reported earnings of $466 million, or $0.64 per share.
Adjusting for special items, first-quarter 2020 earnings from ongoing operations (non-GAAP) were $514 million, or $0.67 per share, compared to $508 million, or $0.70 per share, a year ago. The decrease was driven largely by share dilution and lower sales volumes primarily due to weather in the U.S., partially offset by additional returns on the company's capital investments and other factors.
"As the world confronts the COVID-19 pandemic, the service we provide has never been more important," said William H. Spence, PPL's chairman and chief executive officer. "Across PPL, we are taking comprehensive measures to protect our employees and the public, we continue to deliver electricity and gas safely and reliably, we are well-positioned to manage the economic downturn, and we are as committed as ever to delivering for our customers and shareowners," said Spence.
Spence said aggressive social distancing, substantial work-from-home measures and other steps taken across the company have minimized the impact of COVID-19 on PPL's workforce. At the same time, prior investments in grid resilience, technology and automation have provided the company greater flexibility to operate safely and reliably under current circumstances. Further, PPL said it has been successful in getting critical suppliers on the lists of companies permitted to operate and, as a result, has not experienced significant supply chain issues to date.
Financially, PPL said it has a strong liquidity profile, manageable near-term debt maturities, confidence in its ability to refinance debt when needed, a flexible capital plan with no major project risks, and no material equity needs through 2021. The company said it remains confident in its ability to pay its quarterly dividend going forward.
Through the end of the first quarter, PPL remained on track to achieve its 2020 earnings forecast of $2.40 to $2.60 per share. PPL said it's too soon to predict clearly the pandemic's full scope, duration and economic impact. As a result, the company has not changed its forecast range. PPL maintained its 2021 guidance range of $2.40 to $2.60 per share. The company will discuss financial risks and sensitivities related to COVID-19 during its first-quarter earnings webcast today.
As the company works to sustain operational excellence and to ensure reliability during the pandemic, PPL said it is also committed to supporting those who are struggling financially through difficult times.
PPL's companies and foundations have pledged more than $1.6 million in donations to coronavirus relief funds and programs that help customers with financial hardships. In addition, its U.S. utilities have suspended disconnections and new late fees and worked to reconnect service for customers recently disconnected. The companies continue to offer payment assistance programs and other services to help customers manage their energy bills.
First-Quarter 2020 Earnings Details
As discussed in this news release, reported earnings are calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP). "Earnings from ongoing operations" is a non-GAAP financial measure that is adjusted for special items. See the tables at the end of this news release for a reconciliation of reported earnings to earnings from ongoing operations, including an itemization of special items.
(Dollars
in
millions,
except
for
per-
share
amounts)
1st Quarter
2020 2019 Change
Reported earnings $
554 $
466 19
%
Reported earnings per share $
0.72 $
0.64 13
%
1st Quarter
2020 2019 Change
Earnings from ongoing operations $
514 $
508 1
%
Earnings from ongoing operations per share $
0.67 $
0.70 (4)
%
First-Quarter 2020 Earnings by Segment
1st Quarter
Per
share 2020 2019
Reported
earnings
U.K.
Regulated $
0.44 $
0.36
Kentucky
Regulated 0.16 0.16
Pennsylvania
Regulated 0.16 0.17
Corporate
and
Other (0.04) (0.05)
Total $
0.72 $
0.64
1st Quarter
2020 2019
Special
items
(expense)
benefit
U.K.
Regulated $
0.05 $
(0.06)
Kentucky
Regulated
Pennsylvania
Regulated
Corporate
and
Other
Total $
0.05 $
(0.06)
1st Quarter
2020 2019
Earnings
from
ongoing
operations
U.K.
Regulated $
0.39 $
0.42
Kentucky
Regulated 0.16 0.16
Pennsylvania
Regulated 0.16 0.17
Corporate
and
Other (0.04) (0.05)
Total $
0.67 $
0.70
Key Factors Impacting Earnings
In addition to the segment drivers outlined below, PPL's reported earnings for the first quarter of 2020 included net special-item after-tax benefits of $40 million, or $0.05 per share, primarily from unrealized gains on foreign currency economic hedges. Reported earnings for the first quarter of 2019 included net special-item after-tax charges of $42 million or $0.06 per share, primarily from unrealized losses on foreign currency economic hedges.
U.K. Regulated Segment
PPL's U.K. Regulated segment consists of the regulated electricity delivery operations of Western Power Distribution (WPD), which serves Southwest and Central England and South Wales.
Reported earnings in the first quarter of 2020 increased by $0.08 per share compared with a year ago. Earnings from ongoing operations in the first quarter of 2020 decreased by $0.03 per share compared with a year ago. Factors impacting U.K. Regulated segment earnings results included $0.02 per share from the effect of dilution. Excluding dilution, factors driving earnings results included lower pension income and higher operation and maintenance expense, largely offset by higher prices.
Kentucky Regulated Segment
PPL's Kentucky Regulated segment primarily consists of the regulated electricity and natural gas operations of Louisville Gas and Electric Company and the regulated electricity operations of Kentucky Utilities Company.
Reported earnings and earnings from ongoing operations in the first quarter of 2020 were consistent compared with a year ago. Factors impacting Kentucky Regulated segment earnings results included $0.01 per share from the effect of dilution. Excluding dilution, factors driving earnings results included higher retail rates effective May 1, 2019, partially offset by lower sales volumes primarily due to weather.
Pennsylvania Regulated Segment
PPL's Pennsylvania Regulated segment consists of the regulated electricity delivery operations of PPL Electric Utilities.
Reported earnings and earnings from ongoing operations in the first quarter of 2020 decreased by $0.01 per share compared with a year ago. Factors impacting Pennsylvania Regulated segment earnings results included $0.01 per share from the effect of dilution. Excluding dilution, factors driving earnings results included returns on additional capital investments in transmission, largely offset by lower distribution sales volumes primarily due to weather.
Corporate and Other
PPL's Corporate and Other category primarily includes unallocated corporate-level financing and other costs.
Reported earnings and earnings from ongoing operations in the first quarter of 2020 increased by $0.01 per share compared with a year ago, driven by a number of factors, none of which were significant individually.
2020 Earnings Forecast
In February, PPL announced its 2020 earnings from ongoing operations forecast range of $2.40 to $2.60 per share, with a midpoint of $2.50 per share. At this time, it's too soon to predict clearly the pandemic's full scope, duration and economic impact. As a result, the company has not changed its forecast range. The company continues to evaluate this forecast in light of the COVID-19 pandemic and will discuss financial risks and sensitivities related to COVID-19 during its first-quarter earnings webcast.
Earnings from ongoing operations is a non-GAAP measure that could differ from reported earnings due to special items that are, in management's view, non-recurring or otherwise not reflective of the company's ongoing operations. PPL management is not able to forecast whether any of these factors will occur or whether any amounts will be reported for future periods. Therefore, PPL is not able to provide an equivalent GAAP measure for earnings guidance.
See the table at the end of this news release for a complete reconciliation of the earnings forecast announced in February.
Headquartered in Allentown, Pennsylvania, PPL Corporation (NYSE: PPL) is one of the largest companies in the U.S. utility sector. PPL's seven high-performing, award-winning utilities serve more than 10 million customers in the U.S. and U.K. With more than 12,000 employees, the company is dedicated to providing exceptional customer service and reliability and delivering superior value for shareowners. To learn more, visit www.pplweb.com.
(Note: All references to earnings per share in the text and tables of this news release are stated in terms of diluted earnings per share unless otherwise noted.)
Conference Call and Webcast
PPL invites interested parties to listen to a live Internet webcast of management's teleconference with financial analysts about first-quarter 2020 financial results at 11 a.m. Eastern time on Friday, May 8. The call will be webcast live, in audio format, together with slides of the presentation. Slides will include information concerning the impact to PPL of the COVID-19 pandemic. For those who are unable to listen to the live webcast, a replay with slides will be accessible at www.pplweb.com/investors for 90 days after the call. Interested individuals can access the live conference call via telephone at 1-888-346-8683. International participants should call 1-412-902-4270. Participants will need to enter the following "Elite Entry" number to join the conference: 9971005. Callers can access the webcast link at www.pplweb.com/investors under "Events."
Management utilizes "Earnings from Ongoing Operations" as a non-GAAP financial measure that should not be considered as an alternative to reported earnings, or net income, an indicator of operating performance determined in accordance with GAAP. PPL believes that Earnings from Ongoing Operations is useful and meaningful to investors because it provides management's view of PPL's earnings performance as another criterion in making investment decisions. In addition, PPL's management uses Earnings from Ongoing Operations in measuring achievement of certain corporate performance goals, including targets for certain executive incentive compensation. Other companies may use different measures to present financial performance.
Earnings from Ongoing Operations is adjusted for the impact of special items. Special items are presented in the financial tables on an after-tax basis with the related income taxes on special items separately disclosed. Income taxes on special items, when applicable, are calculated based on the statutory tax rate of the entity where the activity is recorded. Special items may include items such as:
-- Unrealized gains or losses on foreign currency economic hedges (as
discussed below).
-- Gains and losses on sales of assets not in the ordinary course of
business.
-- Impairment charges.
-- Significant workforce reduction and other restructuring effects.
-- Acquisition and divestiture-related adjustments.
-- Other charges or credits that are, in management's view, non-recurring
or otherwise not reflective of the company's ongoing operations.
Unrealized gains or losses on foreign currency economic hedges include the changes in fair value of foreign currency contracts used to hedge British-pound-sterling-denominated anticipated earnings. The changes in fair value of these contracts are recognized immediately within GAAP earnings. Management believes that excluding these amounts from Earnings from Ongoing Operations until settlement of the contracts provides a better matching of the financial impacts of those contracts with the economic value of PPL's underlying hedged earnings.
Statements contained in this news release, including statements with respect to future earnings, cash flows, dividends, financing, regulation and corporate strategy, are "forward-looking statements" within the meaning of the federal securities laws. Although PPL Corporation believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results discussed in the statements. The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: the novel coronavirus pandemic or other pandemic health events or other catastrophic events and their effect on financial markets, economic conditions and our businesses; market demand for energy in our U.S. service territories; weather conditions affecting customer energy usage and operating costs; the effect of any business or industry restructuring; the profitability and liquidity of PPL Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of our facilities; the length of scheduled and unscheduled outages at our generating plants; environmental conditions and requirements and the related costs of compliance; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures; asset or business acquisitions and dispositions; any impact of severe weather on our business; receipt of necessary government permits, approvals, rate relief and regulatory cost recovery; capital market conditions and decisions regarding capital structure; the impact of state, federal or foreign investigations applicable to PPL Corporation and its subsidiaries; the outcome of litigation against PPL Corporation and its subsidiaries; stock price performance; the market prices of equity securities and the impact on pension income and resultant cash funding requirements for defined benefit pension plans; the securities and credit ratings of PPL Corporation and its subsidiaries; political, regulatory or economic conditions in states, regions or countries where PPL Corporation or its subsidiaries conduct business, including any potential effects of threatened or actual cyberattack, terrorism, or war or other hostilities; British pound sterling to U.S. dollar exchange rates; new state, federal or foreign legislation, including new tax legislation; and the commitments and liabilities of PPL Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such important factors and in conjunction with factors and other matters discussed in PPL Corporation's Form 10-K and other reports on file with the Securities and Exchange Commission.
Note to Editors: Visit our media website at www.pplnewsroom.com for additional news and background about PPL Corporation.
PPL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (1)
Condensed Consolidated Balance Sheets (Unaudited)
(Millions of Dollars)
March 31, December 31,
2020 2019
---
Assets
Cash and cash equivalents $
915 $
815
Accounts receivable 837 792
Unbilled revenues 434 504
Fuel, materials and supplies 320 332
Current price risk management assets 193 147
Other current assets 257 177
Property, Plant and Equipment
Regulated utility plant 43,109 42,709
Less: Accumulated depreciation - regulated utility plant 8,212 8,055
Regulated utility plant, net 34,897 34,654
Non-regulated property, plant and equipment 380 357
Less: Accumulated depreciation - non-regulated property, plant and equipment 87 109
Non-regulated property, plant and equipment, net 293 248
Construction work in progress 1,645 1,580
Property, Plant and Equipment, net 36,835 36,482
Noncurrent regulatory assets 1,477 1,492
Goodwill and other intangibles 3,926 3,940
Pension benefit asset 603 464
Noncurrent price risk management assets 166 149
Other noncurrent assets 365 386
Total Assets $
46,328 $
45,680
Liabilities and Equity
Short-term debt $
1,696 $
1,151
Long-term debt due within one year 1,170 1,172
Accounts payable 833 956
Other current liabilities 1,623 1,621
Long-term debt 20,670 20,721
Deferred income taxes and investment tax credits 3,340 3,212
Accrued pension obligations 500 587
Asset retirement obligations 217 212
Noncurrent regulatory liabilities 2,557 2,572
Other deferred credits and noncurrent liabilities 481 485
Common stock and additional paid-in capital 12,247 12,222
Earnings reinvested 5,360 5,127
Accumulated other comprehensive loss (4,366) (4,358)
Total Liabilities and Equity $
46,328 $
45,680
(1) The Financial Statements in this
news release have been condensed
and summarized for purposes of
this presentation. Please refer
to PPL Corporation's periodic
filings with the Securities and
Exchange Commission for full
financial statements, including
note disclosure.
PPL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(Millions of Dollars, except share data)
Three Months Ended March 31,
2020 2019
Operating Revenues $
2,054 $
2,079
Operating Expenses
Operation
Fuel 163 194
Energy purchases 201 250
Other operation and maintenance 476 490
Depreciation 317 284
Taxes, other than income 80 80
Total Operating Expenses 1,237 1,298
Operating Income 817 781
Other Income (Expense) - net 125 52
Interest Expense 248 241
Income Before Income Taxes 694 592
Income Taxes 140 126
Net Income $
554 $
466
Earnings Per Share of Common Stock:
Net Income Available to PPL Common Shareowners:
Basic $
0.72 $
0.65
Diluted $
0.72 $
0.64
Weighted-Average Shares of Common Stock Outstanding (in thousands)
Basic 767,948 721,023
Diluted 768,738 729,953
PPL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Millions of Dollars)
Three Months Ended March 31,
2020 2019
---
Cash Flows from Operating Activities
Net income $
554 $
466
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 317 284
Amortization 12 22
Defined benefit plans - (income) expense (52) (66)
Deferred income taxes and investment tax credits 106 89
Unrealized (gains) losses on derivatives, and other hedging activities (57) 53
Other 23 11
Change in current assets and current liabilities
Accounts receivable (35) (57)
Accounts payable (63) (94)
Prepayments (76) (86)
Accrued interest 59 48
Unbilled revenues 68 48
Regulatory assets and liabilities, net (25) (25)
Other (58) (62)
Other operating activities
Defined benefit plans - funding (125) (127)
Other 44 (30)
Net cash provided by operating activities 692 474
Cash Flows from Investing Activities
Expenditures for property, plant and equipment (826) (729)
Purchase of investments (55)
Proceeds from the sale of investments 57
Other investing activities (7) 5
Net cash used in investing activities (833) (722)
Cash Flows from Financing Activities
Issuance of common stock 20 22
Payment of common stock dividends (317) (296)
Issuance of term loan 200
Net increase (decrease) in short-term debt 345 424
Other financing activities (8) (8)
Net cash provided by financing activities 240 142
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash 1 3
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 100 (103)
Cash, Cash Equivalents and Restricted Cash at Beginning of Period 836 643
Cash, Cash Equivalents and Restricted Cash at End of Period $
936 $
540
Supplemental Disclosures of Cash Flow Information
Significant non-cash transactions:
Accrued expenditures for property, plant and equipment at March 31 $
282 $
322
Accrued expenditures for intangible assets at March 31 $
87 $
64
Key Indicators (Unaudited)
Twelve Months Ended
March 31
Financial 2020 2019
Dividends declared per share of common stock $
1.6525 $
1.6425
Book value per share (1)(2) $
17.23 $
16.87
Market price per share (1) $
24.68 $
31.74
Dividend yield 6.7 5.2
% %
Dividend payout ratio (3) 67.4 64.2
% %
Dividend payout ratio - earnings from ongoing operations (3)(4) 68.3 69.6
% %
Return on common equity 14.4 15.9
% %
Return on common equity - earnings from ongoing operations (4) 14.3 14.6
% %
Spot rate of U.S. dollar per British pound sterling for Balance Sheet translation (5) $
1.28 $
1.29
Average rate of U.S. dollar per British pound sterling for Statement of Income translation (6) $
1.33 $
1.34
(1)
End of period.
(2)
Based on 768,266 and 721,371 shares of common stock outstanding (in thousands) at March 31, 2020, and March 31, 2019.
(3)
Based on diluted earnings per share.
(4)
Calculated using earnings from ongoing operations, which is a non-GAAP financial measure that includes adjustments
described in the text and tables of this news release.
(5)
As of February 29, 2020, and November 30, 2019, as WPD is consolidated on a one-month lag.
(6)
Represents a year-to-date average and includes the impact of foreign exchange hedges.
Operating - Domestic & International Electricity Sales (Unaudited)
Three Months Ended March
31,
Percent
(GWh) 2020 2019 Change
---
PA Regulated Segment
Retail 9,446 10,118 (6.6)
Delivered
%
KY Regulated Segment
Retail 7,228 7,611 (5.0)
Delivered
%
Wholesale (1) 126 542 (76.8)
%
Total 7,354 8,153 (9.8)
%
Total U.S. 16,800 18,271 (8.1)
%
U.K. Regulated Segment
Delivered 19,898 19,982 (0.4)
%
(1) Represents FERC-regulated municipal and unregulated off-system sales.
Reconciliation of Segment Reported Earnings to Earnings from Ongoing Operations
(After-Tax)
(Unaudited)
Year-to-Date March 31, 2020
(millions of dollars)
U.K.
KY
PA Corp.
Reg. Reg. Reg. & Other Total
---
Reported Earnings $
340 $
127 $
118 $
(31) $
554
Less: Special Items (expense) benefit:
Foreign currency economic hedges, net of tax of ($11) 42 42
Talen litigation costs, net of tax of $1 - (2) (2)
Total Special Items 42 (2) 40
Earning from Ongoing Operations $
298 $
127 $
118 $
(29) $
514
(per share - diluted)
U.K.
KY
PA Corp.
Reg. Reg. Reg. & Other Total
---
Reported Earnings $
0.44 $
0.16 $
0.16 $
(0.04) $
0.72
Less: Special Items (expense) benefit:
Foreign currency economic hedges 0.05 0.05
Total Special Items 0.05 0.05
Earnings from Ongoing Operations $
0.39 $
0.16 $
0.16 $
(0.04) $
0.67
Reconciliation of Segment Reported Earnings to Earnings from Ongoing Operations
(After-Tax)
(Unaudited)
Year-to-Date March 31, 2019
(millions of dollars)
U.K.
KY
PA Corp.
Reg. Reg. Reg. & Other Total
---
Reported Earnings $
264 $
117 $
121 $
(36) $
466
Less: Special Items (expense) benefit:
Foreign currency economic hedges, net of tax of $11 (40) (40)
Talen litigation costs, net of tax of $0 - (2) (2)
Total Special Items (40) (2) (42)
Earnings from Ongoing Operations $
304 $
117 $
121 $
(34) $
508
(per share - diluted)
U.K.
KY
PA Corp.
Reg. Reg. Reg. & Other Total
---
Reported Earnings $
0.36 $
0.16 $
0.17 $
(0.05) $
0.64
Less: Special Items (expense) benefit:
Foreign currency economic hedges (0.06) (0.06)
Total Special Items (0.06) (0.06)
Earnings from Ongoing Operations $
0.42 $
0.16 $
0.17 $
(0.05) $
0.70
Reconciliation of PPL's Earnings Forecast
After-tax (Unaudited)
(per share - diluted)
2020 Forecast Range
Midpoint High Low
Estimate of Reported Earnings $
2.55 $
2.65 $
2.45
Less: Special Items (expense) benefit:(1)
Foreign currency economic hedges 0.05 0.05 0.05
Total Special Items 0.05 0.05 0.05
Forecast of Earnings from Ongoing Operations $
2.50 $
2.60 $
2.40
(1) Reflects only special items
recorded through March 31,
2020. PPL is not able to
forecast
special items for future
periods.
Contacts: For news media - Ryan
Hill, 610-774-5997
For financial analysts
- Andy Ludwig,
610-774-3389
View original content:http://www.prnewswire.com/news-releases/ppl-corporation-reports-first-quarter-2020-earnings-301055703.html
SOURCE PPL Corporation
