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UniSource Energy Corp. Reports Operating Results (10-Q)

October 27, 2010 | About:

UniSource Energy Corp. (UNS) filed Quarterly Report for the period ended 2010-09-30.

Unisource Energy Corp. has a market cap of $1.25 billion; its shares were traded at around $34.6 with a P/E ratio of 11.6 and P/S ratio of 0.9. The dividend yield of Unisource Energy Corp. stocks is 4.5%. Unisource Energy Corp. had an annual average earning growth of 0.2% over the past 10 years.UNS is in the portfolios of Robert Bruce of Bruce & Co., Inc., Mario Gabelli of GAMCO Investors, George Soros of Soros Fund Management LLC, First Pacific Advisors of First Pacific Advisors, LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

In the first nine months of 2010, net cash flows from operating activities were $13 million lower than the same period last year due to: an $8 million increase in total taxes paid in the first nine months of 2010 compared with the same period last year; a $4 million decrease in interest received in the first nine months of 2010 due in part to lower balances of investments in lease debt by TEP; and $17 million of income tax refunds received in 2009; partially offset by a $16 million increase in proceeds from the operation of Springerville Units 3 and 4.

Net cash flows used for investing activities decreased by $21 million in the first nine months of 2010 compared with the same period last year. The decrease resulted primarily from a $13 million increase in lease debt principal received and a $4 million decrease in insurance proceeds in the first nine months of 2010 compared with the same period last year and activities that took place in the first nine months of 2009 including: a $31 million investment in lease debt; and $5 million in proceeds from the sale of an interest in a Millennium investment.

In the first nine months of 2010, UniSource Energys capital expenditures, including the purchase of Sundt Unit 4 by TEP, were $252 million, a $15 million increase compared with the first nine months of 2009. Excluding TEPs purchase of Sundt Unit 4, UniSource Energys capital expenditures were $37 million below the first nine months of 2009 due primarily to a decline in customer growth in our utility service areas resulting from regional economic weakness. The purchase of Sundt Unit 4 is included in our estimated capital expenditures for 2010.

Net cash flows used for financing activities were $26 million higher in the first nine months of 2010 compared with the same period last year due primarily to: a $32 million increase in payments on TEPs capital lease obligations; an $11 million increase in dividends paid to shareholders; and a $7 million decrease in debt proceeds, net of debt repayments and issuances or retirement costs. Those activities were partially offset by an increase in revolving credit facility borrowings of $14 million, net of repayments, and a $7 million increase in proceeds from exercised stock options.

The UniSource Credit Agreement, which expires in August 2011, consists of a $30 million amortizing term loan facility and a $70 million revolving credit facility. Principal payments of $1.5 million on the outstanding term loan are due quarterly, with the balance due at maturity. At September 30, 2010, there was $5 million outstanding under the term loan facility and $29 million outstanding under the UniSource Energy revolving credit facility at a weighted average interest rate of 1.51%. We have the option of paying interest on the term loan and on borrowings under the revolving credit facility at adjusted LIBOR plus 1.25% or the sum of the greater of the federal funds rate plus 0.5% or the agent banks reference rate and 0.25%.

UniSource Energy has outstanding $150 million of 4.50% Convertible Senior Notes due 2035. Each $1,000 of Convertible Senior Notes is convertible into 27.95 shares of our Common Stock at any time, representing a conversion price of $35.78 per share of our Common Stock, subject to adjustments. The closing price of UniSource Energys Common Stock was $34.27 on October 15, 2010.

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