EXHIBIT 99
Media: |
| Elizabeth Castro |
| (312) 240-4567 |
Investor Relations: |
| Jim Chiti |
| (312) 240-4730 |
| |
130 E. Randolph Dr. |
Chicago, Illinois 60601 |
For Immediate Release
January 28, 2005
Peoples Energy Reports Fiscal 2005 First Quarter Results
Results reflect $0.18 restructuring charge, warmer than normal weather
CHICAGO - Peoples Energy (NYSE: PGL) today reported fiscal 2005 first quarter net income of $22.5 million, or $0.59 per diluted share. Operating income for the quarter totaled $46.4 million. Consistent with previous estimates, first quarter results included a non-cash, pension-related charge of $11.2 million, or $0.18 per diluted share after taxes, associated with the company's recent organizational restructuring.
First quarter ongoing net income (non-GAAP), defined as GAAP net income adjusted to exclude the effects of the restructuring-related pension charge, was $29.2 million, or $0.77 per diluted share, and ongoing operating income (non-GAAP), which also excludes the restructuring charge, was $57.6 million. Net income for the prior year first quarter was $31.4 million, or $0.85 per diluted share, and operating income was $60.2 million. Management believes that ongoing net income (non-GAAP) and ongoing operating income (non-GAAP) are useful for year over year comparisons since restructuring related charges of this magnitude are infrequent and affect the comparability of operating results. Ongoing net income and ongoing operating income are used internally to measure performance against budget and in reports for management and the board of directors.
"The primary cause for the decline in quarterly earnings was the charge related to our recent organizational restructuring." said Thomas M. Patrick, chairman, president and CEO. "However, we are encouraged by the early results of that action, with approximately $5 million of labor-related savings generated in the first quarter. Ongoing operating income was slightly lower than a year ago. The largest factor was lower Gas Distribution deliveries, due to a combination of warmer than normal weather and lower weather normalized demand."
The table and discussion below summarize first quarter operating results for Peoples Energy's business segments:
| | Three Months Ended December 31* |
| | Before
Restructuring (non-
GAAP) | | Restructuring-
Related
Charges | |
As Reported
(GAAP)
|
Operating Income (Loss) (millions) | 2004 | | 2003 | | 2004 | | 2003 | | 2004 | | 2003 |
Gas Distribution | | $47.7 | | $51.5 | | | | | | $47.7 | | $51.5 |
Oil and Gas Production | | 8.6 | | 9.4 | | | | | | 8.6 | | 9.4 |
Power Generation | | (1.0) | | (1.3) | | | | | | (1.0) | | (1.3) |
Midstream Services | | 2.5 | | 3.5 | | | | | | 2.5 | | 3.5 |
Retail Energy Services | | 3.3 | | 3.1 | | | | | | 3.3 | | 3.1 |
Corporate and Other | | (3.5) | | (6.2) | | (11.2) | | | | (14.7) | | (6.2) |
Total Operating Income (Loss) | | $57.6 | | $60.2 | | $(11.2) | | - | | $46.4 | | $60.2 |
| | | | | | | | | | | | |
Net Income (Loss) (millions) | | $29.2 | | $31.4 | | $ (6.8) | | - | | $22.5 | | $31.4 |
| | | | | | | | | | | | |
Net Income (Loss) per diluted share | $0.77 | | $0.85 | | $(0.18) | | - | | $0.59 | | $0.85 |
* Numbers may not sum due to rounding
Gas Distribution.Operating income was $47.7 million for the first quarter, compared to $51.5 million in the year-ago period. Operating results were negatively impacted by lower deliveries, which declined 4 Bcf from a year ago. Weather was 9% or 196 degree days warmer than normal and 2% or 32 degree days warmer than the same period last year. The company accrued $1.1 million of weather insurance recoveries, which partially offset the impact of warmer than normal weather. Direct labor costs declined $2.2 million in the quarter, essentially offsetting increases in other non-labor related expenses.
Oil and Gas Production.Operating income declined $0.8 million to $8.6 million. Higher net realized commodity prices were offset by lower than expected production due primarily to timing delays associated with the company's drilling program, well performance and curtailments. Higher operating expenses and production taxes also negatively impacted operating income compared to the prior year period. Offsetting these negatives were lower exploration expense and higher equity investment income due primarily to a gain on the sale of certain properties at its EnerVest partnership.
The following table summarizes production and price statistics for the Oil and Gas Production segment. Current hedge positions for the company's remaining expected fiscal 2005 production are included in the attached financial pages.
| | Three Months Ended
December 31, |
| |
2004
| |
2003
| | %
Change |
Average daily production: | | | | | | |
Gas (MMCFD) | | 62.5 | | 66.2 | | (5.6)% |
Oil (MBD) | | 1.4 | | 1.5 | | (6.7)% |
Gas equivalent (MMCFED) | | 70.7 | | 75.1 | | (5.9)% |
Net realized price: | | | | | | |
Gas (MCF) | | $ 4.42 | | $ 4.14 | | 6.8% |
Oil (BBL) | | $30.03 | | $24.93 | | 20.5% |
Gas equivalent (MCFE) | | $ 4.49 | | $ 4.14 | | 8.5% |
Percentage hedged | | | | | | |
Gas | | 96% | | 79% | | |
Oil | | 83% | | 65% | | |
Power Generation.Operating income (loss) in the first quarter was $(1.0) million, compared to $(1.3) million in the year-ago period. Most of the capacity revenues in the Power Generation segment are recognized in the June to September period, resulting in seasonal operating losses for this segment during the first two fiscal quarters.
Midstream Services.Operating income fell to $2.5 million, a decrease of approximately $1 million from last year. The decline was driven by lower operating results from wholesale marketing due to a combination of timing of sales and unfavorable basis differentials, partially offset by improved performance from hub and NGL activity.
Retail Energy Services.Operating income was slightly higher than the year-ago quarter. Gas and electric sales volumes increased approximately 6% and 32%, respectively, partially offset by declines in average margins.
Corporate and Other.Absent the $11.2 million pension-related restructuring charge discussed earlier, corporate and other expenses totaled $3.5 million. Corporate and other costs in the year-ago period were $6.2 million. Results for the segment were favorably impacted by lower labor-related expenses related to last fall's restructuring.
Financial.
Interest expense for the quarter was up slightly compared to the year-ago period due primarily to higher interest rates, partially offset by lower average seasonal borrowing balances. Higher average shares outstanding reduced diluted earnings per share by approximately $0.02 compared to last year's first quarter. At December 31, 2004, the ratio of total debt to total debt plus equity was 55%, down from 56% a year ago and reflecting peak seasonal working capital requirements in the Gas Distribution, Midstream, and Retail Energy Services segments. All three major rating agencies recently reaffirmed their credit ratings for Peoples Energy and its utility affiliates. In addition, Moody's improved its outlook from negative to stable.
Capital expenditures for the first quarter totaled $31 million, compared to about $70 million in last year's first quarter, which included a $35 million oil and gas acquisition. The company's capital spending plan for fiscal 2005 is unchanged at approximately $160 million, including $85 million for gas distribution and $70 million for oil and gas production.
Outlook
"A significant portion of our heating season remains; however natural gas prices have stayed very high and it now appears that January weather will be nearly 100 degree days warmer than normal, reducing the likelihood of making up lost ground in Gas Distribution deliveries." said Patrick. "Our Midwest-based diversified businesses are on track to meet expectations. In addition, production volumes in our Oil and Gas segment should increase steadily as our drilling program accelerates in the three remaining quarters. We are also meeting and may exceed our goals for utility and corporate cost reductions related to the organizational restructuring. Despite these positives, absent a notable turnaround in Gas Distribution deliveries, earnings for the full fiscal year will likely be at the low end of the range of $2.75 to $2.90 per share that we provided last fall."
Earnings Conference Call
Peoples Energy will hold a conference call to discuss financial results for the first quarter of fiscal 2005 on Friday, January 28, 2005, at 9:00 a.m. Central (10:00 a.m. Eastern). To listen to the webcast live or in replay visit the "Investors" section of the Peoples Energy website at www.PeoplesEnergy.com and select the Live Webcast icon on the Corporate Overview page. A replay of the call can also be accessed by dialing 1-800-642-1687, reference number 2990791. The telephone replay will be available approximately two hours after completion of the call through February 1, 2005. The webcast replay will be available through January 2006.
Peoples Energy, a member of the S&P 500, is a diversified energy company comprised of five primary business segments: Gas Distribution, Oil and Gas Production, Midstream Services, Retail Energy Services, and Power Generation. The Gas Distribution business serves about 1 million retail customers in Chicago and northeastern Illinois. Visit the Peoples Energy web site at PeoplesEnergy.com.
Forward-Looking Information. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Generally, the words "may", "could", "project", "believe", "anticipate", "estimate", "plan", "forecast", "will be", and similar words identify forward-looking statements. Actual results could differ materially from such expectations because of many uncertainties, including, but not limited to: adverse decisions in proceedings before the Illinois Commerce Commission concerning the prudence review of the utility subsidiaries' gas purchases; the future health of the United States and Illinois economies; the timing and extent of changes in interest rates and energy commodity prices, including but not limited to the effect of gas prices on cost of gas supplies, accounts receivable and the provision for uncollectible accounts, interest expense and earnings from the oil an d gas production segment; adverse resolution of material litigation; effectiveness of the Company's risk management policies and the creditworthiness of customers and counterparties; regulatory developments in the United States, Illinois and other states where the Company does business; changes in the nature of the Company's competition resulting from industry consolidation, legislative change, regulatory change and other factors, as well as action taken by particular competitors; operational factors affecting the Company's gas distribution, power generation and oil and gas production segments; Aquila Inc.'s financial ability to perform under its power sales agreements with Elwood Energy LLC; drilling risks and the inherent uncertainty of oil and gas reserve estimates; weather related energy demand; the Company's ability to replace through new hires and outsourcing certain open salaried positions resulting from the voluntary severance offer made in connection with the recent management restructuring; and ter rorist activities. Also, projections to future periods of the effectiveness of internal control over financial reporting are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Some of the uncertainties that may affect future results are discussed in more detail in Peoples Energy's most recent Form 10-K filed with the SEC under Item 1 - Business and Item 7 - Management's Discussion and Analysis, as such information may be updated by subsequent filings under the Securities Exchange Act of 1934. All forward-looking statements included in this press release are based upon information presently available, and Peoples Energy assumes no obligation to update any forward-looking statements.
(Financial Tables Follow)
# # # #
| | | | | | | | Preliminary |
| PEOPLES ENERGY CORPORATION |
| FINANCIAL HIGHLIGHTS |
| (Unaudited) |
| | | | | | | | |
| Financial Data | | | | | |
| | | | | | Three Months Ended December 31, |
| (In Thousands, Except Per-Share Amounts) | | | | | 2004 | | 2003 |
| | | | | | | | |
| Revenues | | | | | $737,411 | | $604,884 |
| | | | | | | | |
| Equity Investment Income (Loss) | | | | | $888 | | ($245) |
| | | | | | | | |
| Operating Income | | | | | $46,413 | | $60,152 |
| | | | | | | | |
| Net Income | | | | | $22,476 | | $31,351 |
| | | | | | | | |
| Earnings Per Share - Basic | | | | | $0.59 | | $0.85 |
| | | | | | | | |
| Earnings Per Share - Diluted | | | | | $0.59 | | $0.85 |
| | | | | | | | |
| Average Shares Outstanding - Basic | | | | | 37,816 | | 36,814 |
| | | | | | | | |
| Average Shares Outstanding - Diluted | | | | | 37,993 | | 36,976 |
| | | | | | | | |
| | | | | | | | |
| Reconciliation of 2004 GAAP and Non-GAAP Earnings | | | | | |
| | | | | | | | |
| (In Thousands, Except Per-Share Amounts) | | | | | Three Months Ended December 31, |
| | | | | | Ongoing | | |
| | | | | | (Non- | Restructuring | |
| | | | | | GAAP) | Charge | GAAP |
| Operating Income (Loss) | | | | | $57,620 | ($11,207) | $46,413 |
| Net Income (Loss) | | | | | $29,229 | ($6,753) | $22,476 |
| Earnings (Loss) Per Share - Diluted | | | | | $0.77 | ($0.18) | $0.59 |
| | | | | | | | |
| Common Stock Data | | | | | | | |
| | | | | | December 31, |
| | | | | | 2004 | | 2003 |
| Annualized dividend rate | | | | | $2.16 | | $2.12 |
| Dividend yield | | | | | 4.9% | | 5.0% |
| Book value per share | | | | | $23.34 | | $23.32 |
| Market price | | | | | $43.95 | | $42.04 |
| Market price as a percent of book value | | | | | 188% | | 180% |
| Peoples Energy Corporation | | | | Preliminary |
| | | | | | |
| Summary of Selected Operating Data (Unaudited) | | | | | |
| | | | | | |
| | | | Three Months Ended |
| | | | December 31, |
| | | | 2004 | | 2003 |
| | | | | | |
| Gas Distribution Margin(in thousands) | | | | | |
| Total Gas Distribution revenues | | | $ 517,780 | | $ 438,411 |
| Less: Gas costs | | | 329,604 | | 254,987 |
| Gross margin(1) | | | 188,176 | | 183,424 |
| Less: Revenue taxes | | | 45,964 | | 41,335 |
| Environmental costs recovered | | | 8,982 | | 4,788 |
| Net margin(1) | | | $ 133,230 | | $ 137,301 |
| | | | | | |
| | | | | | |
| Gas Distribution Deliveries (MDth) | | | | | |
| Gas sales | | | | | |
| - Residential | | | 35,037 | | 37,215 |
| - Commercial | | | 5,793 | | 6,313 |
| - Industrial | | | 1,146 | | 1,055 |
| Transportation | | | 24,868 | | 26,308 |
| Total Gas Distribution Deliveries | | | 66,844 | | 70,891 |
| | | | | | |
| | | | | | |
| Weather | | | | | |
| Heating degree days - actual | | | 2,083 | | 2,115 |
| Heating degree days - percent colder (warmer) than normal | | | -8.6% | | -7.2% |
| | | | | | |
| | | | | | |
| Number of Gas Distribution Customers (average) | | | | | |
| Gas sales | | | | | |
| - Residential | | | 877,841 | | 881,533 |
| - Commercial | | | 45,282 | | 44,009 |
| - Industrial | | | 2,834 | | 2,846 |
| Transportation | | | 24,074 | | 24,424 |
| Total Gas Distribution Customers | | | 950,031 | | 952,812 |
| | | | | | |
| | | | | | |
| Retail Energy Gas and Electric Customers (at December31) | 26,617 | | 26,122 |
| | | | | | |
| | | | | | |
| Employees (at December31) | | | | | |
| Gas Distribution | | | 1,693 | | 1,847 |
| Diversified Businesses | | | 129 | | 124 |
| Corporate Support | | | 318 | | 401 |
| Total Employees | | | 2,140 | | 2,372 |
| | | | | | |
| | | | | | |
| Megawatt Capacity (at December 31) | | | 805 | | 805 |
| | | | | | |
| | | | | | |
| (1) As used above, net margin is not a financial measure computed under GAAP. Gross margin is the GAAP measure most closely related to net margin. Management believes net margin to be useful in understanding the Gas Distribution segment's operations because the utility subsidiaries are allowed, under their tariffs, to recover gas costs, revenue taxes and environmental costs from their customers on a dollar-for-dollar basis. |
| Peoples Energy Corporation | | | | | | | Preliminary |
| | | | | | | | | |
| Summary of Selected Operating Data (Unaudited) (continued) | | | |
| | | | | | | | | |
| | | | | Three Months Ended |
| | | | | December 31, |
| | | | | | | 2004 | | 2003 |
| | | | | | | | | |
| Oil and Gas Production | | | | | | | | |
| Average daily production: | | | | | | | | |
| Gas (MMCFD) | | | | | | 62.5 | | 66.2 |
| Oil (MBD) | | | | | | 1.4 | | 1.5 |
| Gas equivalent (MMCFED) | | | | | | 70.7 | | 75.1 |
| | | | | | | | | |
| Average index price: | | | | | | | | |
| Gas ($/MMBTU) - Henry Hub | | | | | | $ 7.07 | | $ 4.58 |
| Oil ($/BBL) | | | | | | $ 48.28 | | $ 31.18 |
| | | | | | | | | |
| Average hedge price: | | | | | | | | |
| Gas ($/MMBTU) | | | | | | $ 4.84 | | $ 3.98 |
| Oil ($/BBL) | | | | | | $ 25.95 | | $ 24.99 |
| | | | | | | | | |
| Percentage hedged: | | | | | | | | |
| Gas | | | | | | 96% | | 79% |
| Oil | | | | | | 83% | | 65% |
| | | | | | | | | |
| Net realized price: | | | | | | | | |
| Gas ($/MCF) | | | | | | $ 4.42 | | $ 4.14 |
| Oil ($/BBL) | | | | | | $ 30.03 | | $ 24.93 |
| Gas Equivalent (MCFE) | | | | | | $ 4.49 | | $ 4.14 |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Oil & Gas Production | | | | | | | | |
| Remaining FY 2005 Hedge Position (January - September) | | | |
| | | Volume Hedged
(MMBTU)/(MBO) | | Wtd. Avg. Prices
($MMBTU)/($BBL) |
| Gas(1) | | | | | | | | |
| Swaps (40%) | | 6,893,750 | | $4.36 |
| Collars (60%) | | 10,169,250 | | $4.51 - $5.45 |
| | | 17,063,000(2) | | $4.45 - $5.01 |
| Oil(1) | | | | |
| Swaps | | 338(3) | | $28.26 |
| | | | | | | | | |
| (1) As of January 26, 2005. | | | | | | | | |
| (2) Approximately 75-80% based on estimated 2005 production. | | | |
| (3) Approximately 80-85% based on estimated 2005 production. | | | |
| Peoples Energy Corporation | | | | | Preliminary |
| | | | | | |
| Consolidated Statements of Income (Unaudited) | | | | | |
| | | | | | |
| | | | Three Months Ended |
| | | | December 31, |
| (In Thousands, Except Per-Share Amounts) | | | 2004 | | 2003 |
| | | | | | |
| Revenues | | | $ 737,411 | | $ 604,884 |
| | | | | | |
| Operating Expenses: | | | | | |
| Cost of energy sold | | | 508,892 | | 380,560 |
| Operation and maintenance, excluding restructuring charge | | | 88,325 | | 87,310 |
| Restructuring charge | | | 11,207 | | - |
| Depreciation, depletion and amortization | | | 30,344 | | 28,921 |
| Taxes, other than income taxes | | | 53,046 | | 47,696 |
| Losses on property sales | | | 72 | | - |
| Total Operating Expenses | | | 691,886 | | 544,487 |
| | | | | | |
| Equity investment income (loss) | | | 888 | | (245) |
| | | | | | |
| Operating Income | | | 46,413 | | 60,152 |
| | | | | | |
| Other income and expense - net | | | 913 | | 605 |
| | | | | | |
| Interest expense | | | 12,510 | | 12,281 |
| | | | | | |
| Income Before Income Taxes | | | 34,816 | | 48,476 |
| | | | | | |
| Income tax expense | | | 12,340 | | 17,125 |
| | | | | | |
| Net Income | | | $ 22,476 | | $ 31,351 |
| | | | | | |
| Average Shares of Common Stock Outstanding | | | | | |
| Basic | | | 37,816 | | 36,814 |
| Diluted | | | 37,993 | | 36,976 |
| Earnings Per Share of Common Stock | | | | | |
| Basic | | | $ 0.59 | | $ 0.85 |
| Diluted | | | $ 0.59 | | $ 0.85 |
| Peoples Energy Corporation | | | | | | Preliminary |
| | | | | | | |
| Consolidated Balance Sheets (Unaudited) | | | | | | |
| | | | | | | |
| | | | | December 31, | | December 31, |
| (In Thousands) | | | | 2004 | | 2003 |
| | | | | | | |
| Assets | | | | | | |
| Capital Investments: | | | | | | |
| Property, plant and equipment | | | | $ 3,150,362 | | $ 3,036,996 |
| Less - Accumulated depreciation, depletion | | | | | | |
| and amortization | | | | 1,247,190 | | 1,148,780 |
| Net property, plant and equipment | | | | 1,903,172 | | 1,888,216 |
| Investments in equity investees | | | | 124,633 | | 132,005 |
| Other investments | | | | 24,288 | | 21,843 |
| | | | | | | |
| Total Capital Investments - Net | | | | 2,052,093 | | 2,042,064 |
| | | | | | | |
| Customer Accounts Receivable - net of reserves | | | | 480,371 | | 403,377 |
| Other Current Assets | | | | 320,174 | | 298,720 |
| Other Assets | | | | 467,654 | | 440,568 |
| | | | | | | |
| Total Assets | | | | $ 3,320,292 | | $ 3,184,729 |
| | | | | | | |
| Capitalization and Liabilities | | | | | | |
| Common Stockholders' Equity: | | | | | | |
| Common stock | | | | $ 392,911 | | $ 357,626 |
| Treasury stock | | | | (6,677) | | (6,760) |
| Retained earnings | | | | 556,456 | | 561,806 |
| Accumulated other comprehensive income (loss) | | | | (58,897) | | (50,088) |
| | | | | | | |
| Total Common Stockholders' Equity | | | | 883,793 | | 862,584 |
| Long-Term Debt | | | | 897,207 | | 846,330 |
| | | | | | | |
| Total Capitalization | | | | 1,781,000 | | 1,708,914 |
| | | | | | | |
| Current Liabilities | | | | | | |
| Commercial paper | | | | 172,049 | | 192,921 |
| Short-term debt | | | | - | | 50,000 |
| Other | | | | 543,381 | | 501,414 |
| Total Current Liabilities | | | | 715,430 | | 744,335 |
| | | | | | | |
| Deferred Credits and Other Liabilities | | | | 823,862 | | 731,480 |
| | | | | | | |
| Total Capitalization and Liabilities | | | | $ 3,320,292 | | $ 3,184,729 |
| | | | | | | | | | Preliminary |
| Peoples Energy Corporation |
| | | | | | | | | | | |
| Business Segments (Unaudited) | | | | | | | |
| | | | | | | | Retail | | | |
| | | | Gas | Oil and Gas | Power | Midstream | Energy | | Corporate and | |
| (In Thousands) | | | Distribution | Production | Generation | Services | Services | Other | Adjustments | Total |
| Three Months Ended December 31, 2004 | | | | | | | |
| Revenues | | | $ 517,780 | $ 29,200 | $ - | $ 108,682 | $ 112,967 | $ - | $ (31,218) | $ 737,411 |
| Depreciation, depletion and amortization | | | 16,992 | 12,586 | - | 112 | 405 | 35 | 214 | 30,344 |
| Equity investment income (loss) | | | - | 1,086 | (460) | - | - | 262 | - | 888 |
| Operating income (loss) | | | 47,739 | 8,591 | (965) | 2,469 | 3,263 | (213) | (14,471) | 46,413 |
| Three Months Ended December 31, 2003 | | | | | | | |
| Revenues | | | $ 438,411 | $ 28,621 | $ - | $ 65,201 | $ 83,126 | $ 81 | $ (10,556) | $ 604,884 |
| Depreciation, depletion and amortization | | | 16,508 | 11,734 | 31 | 111 | 430 | 4 | 103 | 28,921 |
| Equity investment income (loss) | | | - | 23 | (214) | - | - | (54) | - | (245) |
| Operating income (loss) | | | 51,538 | 9,415 | (1,290) | 3,544 | 3,149 | (219) | (5,985) | 60,152 |
