Exhibit 99.1
FOR IMMEDIATE RELEASE | | CONTACT: (937) 224-5940 |
DPL REPORTS THIRD QUARTER EARNINGS
DAYTON, OHIO, October 27, 2005 – DPL Inc. (NYSE: DPL) today reported basic 2005 third quarter earnings per share of $0.21 versus $0.70 in the third quarter of 2004. The $0.49 per share decrease was primarily related to the inclusion in 2004 earnings of $83.3 million of pre-tax investment income from its private equity portfolio. DPL has since sold the private equity portfolio and received in excess of $1 billion in cash since June 30, 2004. For the nine months ended September 30, 2005, DPL reported basic earnings per share of $1.01 versus $1.58 per share in 2004.
Significant events for the third quarter of 2005 included a $45.2 million increase in revenue, a $6.3 million reduction in operation and maintenance expense, and a $23.4 million gain on the sale of public securities. In addition, the Company incurred a charge for the early redemption of debt of $59.1 million and experienced increased fuel and purchased power costs of $42.2 million.
“While sales were strong due to the return of hot weather, margins were negatively impacted by significantly higher fuel costs,” said Jim Mahoney, DPL President and Chief Executive Officer. “However, a sharp focus on the cost side of the business, particularly operation and maintenance expenses, enabled us to produce a $4.5 million increase in operating income.”
DPL’s reported basic earnings per share from continuing operations were $0.21 for the third quarter of 2005 compared to $0.28 for the third quarter of 2004.
Third Quarter Financial Results
Electric revenues increased to $354.9 million in the third quarter of 2005 compared to $309.7 million for the third quarter of 2004 reflecting higher sales volume for retail and higher average rates for wholesale revenues as well as ancillary revenues associated with participation in PJM. The Company did not participate in PJM for the same period for 2004. These increases were offset by lower wholesale sales volume. Cooling degree-days were up 59% for the third quarter of 2005 compared to the same period in 2004.
For the nine months ended September 30, 2005, electric revenues increased to $950.2 million compared to $891.7 million for the nine months ended September 30, 2004.
Net electric margin (electric revenues minus fuel and purchased power) of $216.1 million in the third quarter of 2005 increased by $3.0 million from $213.1
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million in the third quarter of 2004. As a percentage of total electric revenues, net electric margin decreased by 7.9% to 60.9%. This decline in net electric margin is mainly driven by increased fuel and purchased power costs.
Fuel costs increased by $34.7 million in the third quarter of 2005 compared to the same period in 2004 resulting from higher average fuel costs of $26.2 million and increased volume of $8.5 million due to increased generation.
Purchased power costs increased by $7.5 million in the third quarter of 2005 compared to the same period in 2004 reflecting charges of $13.0 million associated with moving power across PJM and $10.2 million related to higher average market prices, partially offset by $15.7 million related to lower purchased power volume. DPL did not participate in PJM for the same period for 2004.
For the nine months ended September 30, 2005, net electric margin of $595.4 million decreased by $22.5 million from $617.9 million for the same period of 2004.
Operation and maintenance expense decreased $6.3 million for the third quarter of 2005 compared to the same period in 2004 attributed mostly to a $2.8 million decrease in legal costs and a $2.8 million reduction in Director and Officer Liability insurance costs.
For the nine months ended September 30, 2005, operation and maintenance expense decreased $1.6 million compared to the same period of the prior year.
Investment income increased by $32.8 million in the third quarter of 2005 compared to the third quarter of 2004 primarily due to a $23.4 million gain on the sale of public investments and approximately $9.0 million in increased interest income. Proceeds are included in cash, cash equivalents and short-term investments available for sale on the balance sheet.
For the nine months ended September 30, 2005, investment income increased $38.4 million compared to the same period of the prior year.
Interest expense decreased $4.3 million in the third quarter of 2005 compared to the third quarter of 2004 driven mostly by the refinancing and early redemption of debt. For the nine months ended September 30, 2005, interest expense decreased $9.6 million compared to the nine months ended September 30, 2004.
Other income for the third quarter of 2005 decreased $1.2 million compared to the third quarter of 2004. This decrease was primarily the result of gains realized from the sale of pollution control emission allowances in the third quarter of 2004 that did not occur in the third quarter of 2005.
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For the nine months ended September 30, 2005, other income of $12.8 million increased $9.3 million compared to the same period of the prior year.
Income Taxes
On September 1, 2005, the Internal Revenue Service (IRS) issued an examination report for the tax years 1998 through 2003 that shows proposed changes to the Company’s federal income tax liability for each of those years. The proposed changes result in a total tax deficiency, penalties and interest of approximately $23.4 million as of October 15, 2005. The Company is currently reviewing the examination report and intends to file a formal written protest to certain proposed changes with the IRS Office of Appeals by November 1, 2005. The Company believes it has adequate reserves for any tax deficiency, penalties and interest resulting from the proposed changes, and as a result, the proposed changes did not adversely affect the Company’s results from operations for the three months ended September 30, 2005.
Debt Reduction and Refinancing, Stock Buy Back
During the third quarter, DPL repurchased and redeemed $407.6 million of DPL debt securities and completed the refinancing of $214.4 million of air and water pollution control bonds. The Company recorded a $59.1 million charge resulting from premiums paid for the early redemption of debt.
For the nine months ended September 30, 2005, the accumulated charge resulting from premiums paid for early redemption of debt was $61.2 million. The Company will save approximately $35 million in interest in the first full year as a result of the debt reduction and refinancing. In addition, the DPL Board authorized the Company to repurchase up to $400 million of DPL common stock. No stock has been repurchased under the current authorization.
Liquidity and Cash Flow
DPL’s cash, cash equivalents, and short-term investments available for sale totaled $653.7 million at September 30, 2005, compared to $176.2 million at September 30, 2004. This increase was primarily attributed to $868 million of net proceeds received from the sale of the private equity funds in the financial asset portfolio.
Construction additions were $128 million and $66 million for the nine months ended September 30, 2005 and 2004, respectively, and are expected to approximate $195 million in 2005. DPL expects to finance its construction additions in 2005 with internally-generated funds. Over the next four years, DPL is projecting to spend an estimated $930 million in capital projects, approximately $515 million of which is to meet changing environmental standards.
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Future Outlook
DPL expects its 2005 coal and net emission allowance costs to exceed its 2004 coal and net emission allowance costs by approximately 20%, assuming comparable volumes. Previously, the Company expected these costs to increase 17%. Despite this increase, the Company confirmed its previous earnings guidance of $0.95 to $1.05 earnings per share from continuing operations.
Conference Call/Webcast
DPL will conduct a webcast conference call with financial analysts Friday, October 28, 2005, at 9:00 a.m. Eastern Time to discuss third quarter 2005 results. Interested parties, including investors and the media, can access the webcast conference call real-time on DPL’s website at www.dplinc.com in the Company’s investor relations section. Please go to the website at least fifteen minutes prior to the start of the event to register, download and install any necessary audio software to listen to the webcast. For those who are unable to listen to the live webcast, it will be archived on the DPL Inc. website.
About DPL
DPL Inc. (NYSE: DPL) is a regional electric energy and utility company. DPL’s principal subsidiaries include The Dayton Power and Light Company (DP&L); DPL Energy, LLC (DPLE); and DPL Energy Resources, Inc. (DPLER). DP&L, a regulated electric utility, provides service to over 500,000 retail customers in West Central Ohio; DPLE engages in the operation of merchant peaking generation facilities; and DPLER is a competitive retail electric supplier in Ohio, selling to major industrial and commercial customers. DPL, through its subsidiaries, owns and operates approximately 4,400 megawatts of generation capacity, of which 2,800 megawatts are low cost coal-fired units and 1,600 megawatts are natural gas fired peaking units. Further information can be found at www.dplinc.com.
Certain statements contained in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Matters presented which relate to events or developments that are expected to occur in the future, including management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters constitute forward-looking statements. Forward-looking statements are based on management’s beliefs, assumptions and expectation of the Company’s future economic performance, taking into account the information currently available to management. These statements are not statements of historical fact. Such forward-looking statements are subject to risks and uncertainties and investors are cautioned that outcomes and results may vary materially from those projected due to many factors beyond DPL’s control. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates
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or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based.
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DPL Inc.
CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
$ in millions except per share amounts | | 2005 | | 2004 | | 2005 | | 2004 | |
| | (unaudited) | | (unaudited) | |
Revenues | | | | | | | | | |
Electric revenues | | $ | 354.9 | | $ | 309.7 | | $ | 950.2 | | $ | 891.7 | |
Other revenues, net of fuel costs | | 2.5 | | 2.5 | | 7.7 | | 7.7 | |
| | | | | | | | | |
Total revenues | | 357.4 | | 312.2 | | 957.9 | | 899.4 | |
| | | | | | | | | |
Operating Expenses | | | | | | | | | |
Fuel | | 101.4 | | 66.7 | | 251.1 | | 192.0 | |
Purchased power | | 37.4 | | 29.9 | | 103.7 | | 81.8 | |
Operation and maintenance | | 52.0 | | 58.3 | | 164.6 | | 166.2 | |
Depreciation and amortization | | 37.6 | | 35.4 | | 110.4 | | 104.4 | |
General taxes | | 28.8 | | 26.7 | | 82.8 | | 79.5 | |
Amortization of regulatory assets, net | | 0.6 | | 0.1 | | 1.5 | | 0.3 | |
| | | | | | | | | |
Total operating expenses | | 257.8 | | 217.1 | | 714.1 | | 624.2 | |
| | | | | | | | | |
Operating Income | | 99.6 | | 95.1 | | 243.8 | | 275.2 | |
| | | | | | | | | |
Investment income | | 33.2 | | 0.4 | | 43.4 | | 5.0 | |
Charge for early redemption of debt | | (59.1 | ) | — | | (61.2 | ) | — | |
Other income | | 1.0 | | 2.2 | | 12.8 | | 3.5 | |
| | | | | | | | | |
Income Before Interest Charges | | 74.7 | | 97.7 | | 238.8 | | 283.7 | |
| | | | | | | | | |
Interest expense | | 34.1 | | 38.4 | | 110.5 | | 120.1 | |
| | | | | | | | | |
Income From Continuing Operations Before Income Tax | | 40.6 | | 59.3 | | 128.3 | | 163.6 | |
| | | | | | | | | |
Income tax expense | | 14.9 | | 25.6 | | 49.8 | | 65.2 | |
| | | | | | | | | |
Income From Continuing Operations | | 25.7 | | 33.7 | | 78.5 | | 98.4 | |
| | | | | | | | | |
Discontinued Operations | | | | | | | | | |
(Loss) Income from discontinued operations | | (1.6 | ) | 83.3 | | 32.3 | | 152.5 | |
(Loss) Gain on disposal of discontinued operations | | (0.1 | ) | — | | 40.6 | | — | |
Income tax (benefit) expense | | (1.9 | ) | 33.3 | | 29.9 | | 61.1 | |
| | | | | | | | | |
Income from discontinued operations | | 0.2 | | 50.0 | | 43.0 | | 91.4 | |
| | | | | | | | | |
Net Income | | $ | 25.9 | | $ | 83.7 | | $ | 121.5 | | $ | 189.8 | |
| | | | | | | | | |
| | | | | | | | | |
Average Number of Common Shares
Outstanding (millions) | | | | | | | | | |
Basic | | 121.2 | | 120.1 | | 120.8 | | 120.1 | |
Diluted | | 130.7 | | 121.4 | | 129.1 | | 121.4 | |
| | | | | | | | | |
Earnings Per Share of Common Stock | | | | | | | | | |
Basic: | | | | | | | | | |
Income from continuing operations | | $ | 0.21 | | $ | 0.28 | | $ | 0.65 | | $ | 0.82 | |
Income from discontinued operations | | 0.00 | | 0.42 | | 0.36 | | 0.76 | |
Total Basic | | $ | 0.21 | | $ | 0.70 | | $ | 1.01 | | $ | 1.58 | |
| | | | | | | | | |
Diluted: | | | | | | | | | |
Income from continuing operations | | $ | 0.20 | | $ | 0.28 | | $ | 0.61 | | $ | 0.81 | |
Income from discontinued operations | | 0.00 | | 0.41 | | 0.33 | | 0.75 | |
Total Diluted | | $ | 0.20 | | $ | 0.69 | | $ | 0.94 | | $ | 1.56 | |
| | | | | | | | | |
Dividends Paid Per Share of Common Stock | | $ | 0.240 | | $ | — | | $ | 0.720 | | $ | 0.240 | |
| | | | | | | | | |
Book Value Per Share | | $ | 8.69 | | $ | 9.03 | | $ | 8.69 | | $ | 9.03 | |
DPL Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
| | Nine Months Ended | |
| | September 30, | |
$ in millions | | 2005 | | 2004 | |
| | (unaudited) | |
Operating Activities: | | | | | |
Net income | | $ | 121.5 | | $ | 189.8 | |
Less: Income from discontinued operations | | (43.0 | ) | (91.4 | ) |
Income from continuing operations | | 78.5 | | 98.4 | |
| | | | | |
Adjustments: | | | | | |
Depreciation and amortization | | 110.4 | | 104.4 | |
Amortization of regulatory assets, net | | 1.5 | | 0.3 | |
Deferred income taxes | | (6.7 | ) | 29.4 | |
Charge for early redemption of debt | | 61.2 | | — | |
Shareholder litigation settlement | | — | | (70.0 | ) |
Captive insurance provision | | 3.8 | | 4.0 | |
Gain on sale of other investments | | (28.2 | ) | (3.3 | ) |
Changes in working capital | | (67.6 | ) | (91.9 | ) |
Deferred compensation assets | | 3.1 | | 8.2 | |
Deferred compensation obligations | | 7.9 | | 1.1 | |
Other | | 16.0 | | (4.9 | ) |
Net Cash Provided by Operating Activities | | 179.9 | | 75.7 | |
| | | | | |
Investing Activities: | | | | | |
Capital expenditures | | (138.2 | ) | (66.5 | ) |
Purchases of short-term investments and securities | | (215.6 | ) | (21.1 | ) |
Sales of short-term investments and securities | | 294.5 | | 82.8 | |
Net Cash Used for Investing Activities | | (59.3 | ) | (4.8 | ) |
| | | | | |
Financing Activities: | | | | | |
Issuance of long-term debt, net of issue costs | | 211.2 | | 174.7 | |
Exercise of stock options | | 18.7 | | — | |
Retirement of long-term debt | | (673.8 | ) | (510.4 | ) |
Premiums paid for early redemption of debt | | (54.7 | ) | — | |
Dividends paid on common stock | | (86.3 | ) | (28.7 | ) |
Retirement of preferred securities | | (0.1 | ) | — | |
Net Cash Used for Financing Activities | | (585.0 | ) | (364.4 | ) |
| | | | | |
Cash and Cash Investments: | | | | | |
Cash flow from continuing operations | | (464.4 | ) | (293.5 | ) |
Cash flow from discontinued operations | | 868.4 | | 132.1 | |
Balance at beginning of period | | 202.1 | | 337.6 | |
| | | | | |
Balance at end of period | | $ | 606.1 | | $ | 176.2 | |
| | | | | |
Cash Paid During the Period for: | | | | | |
Interest | | $ | 127.9 | | $ | 140.3 | |
Income taxes | | $ | 55.3 | | $ | 73.8 | |
DPL Inc.
CONSOLIDATED BALANCE SHEET
| | At | | At | |
| | September 30, | | December 31, | |
$ in millions | | 2005 | | 2004 | |
| | (unaudited) | | | |
Assets | | | | | |
Property | | | | | |
Property, plant and equipment | | $ | 4,614.0 | | $ | 4,495.0 | |
Less: Accumulated depreciation and amortization | | (2,059.7 | ) | (1,964.9 | ) |
Net property | | 2,554.3 | | 2,530.1 | |
| | | | | |
Current assets | | | | | |
Cash and cash equivalents | | 606.1 | | 202.1 | |
Short-term investments available for sale | | 47.6 | | — | |
Accounts receivable, less provision for uncollectible accounts of $1.0 and $1.1, respectively | | 184.4 | | 175.7 | |
Inventories, at average cost | | 81.8 | | 72.1 | |
Prepaid taxes | | 11.6 | | 46.4 | |
Other | | 25.8 | | 34.3 | |
Total current assets | | 957.3 | | 530.6 | |
| | | | | |
Other assets | | | | | |
Financial assets | | — | | 913.2 | |
Income taxes recoverable through future revenues | | 31.4 | | 32.5 | |
Other regulatory assets | | 53.1 | | 41.5 | |
Other | | 108.3 | | 117.6 | |
Total other assets | | 192.8 | | 1,104.8 | |
| | | | | |
Total Assets | | $ | 3,704.4 | | $ | 4,165.5 | |
| | | | | |
Capitalization and Liabilities | | | | | |
Capitalization | | | | | |
Common shareholders’ equity | | | | | |
Common stock | | $ | 1.3 | | $ | 1.3 | |
Other paid-in capital, net of treasury stock | | 30.3 | | 15.8 | |
Warrants | | 50.0 | | 50.0 | |
Common stock held by employee plans | | (86.1 | ) | (85.7 | ) |
Accumulated other comprehensive income | | 21.2 | | 65.5 | |
Earnings reinvested in the business | | 1,038.2 | | 997.1 | |
Total common shareholders’ equity | | 1,054.9 | | 1,044.0 | |
| | | | | |
Preferred stock | | 22.9 | | 23.0 | |
| | | | | |
Long-term debt | | | | | |
First mortgage bonds | | 682.9 | | 572.8 | |
Other long-term obligations | | 994.3 | | 1,544.5 | |
Total long-term debt | | 1,677.2 | | 2,117.3 | |
Total capitalization | | 2,755.0 | | 3,184.3 | |
| | | | | |
Current Liabilities | | | | | |
Current portion - long-term debt | | 0.9 | | 13.5 | |
Accounts payable | | 101.1 | | 113.4 | |
Accrued taxes | | 113.1 | | 137.2 | |
Accrued interest | | 21.0 | | 42.1 | |
Other | | 24.1 | | 20.7 | |
Total current liabilities | | 260.2 | | 326.9 | |
| | | | | |
Deferred Credits and Other | | | | | |
Deferred taxes | | 361.1 | | 384.8 | |
Unamortized investment tax credit | | 47.1 | | 49.3 | |
Insurance and claims costs | | 28.7 | | 24.9 | |
Other | | 252.3 | | 195.3 | |
Total deferred credits and other | | 689.2 | | 654.3 | |
| | | | | |
Total Capitalization and Liabilities | | $ | 3,704.4 | | $ | 4,165.5 | |
DPL Inc.
OPERATING STATISTICS
(unaudited)
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Electric Sales (millions of kWh): | | | | | | | | | |
Residential | | 1,546 | | 1,301 | | 4,182 | | 3,922 | |
Commercial | | 1,086 | | 1,016 | | 2,937 | | 2,856 | |
Industrial | | 1,174 | | 1,161 | | 3,281 | | 3,338 | |
Other retail | | 381 | | 365 | | 1,078 | | 1,055 | |
Other miscellaneous revenues | | — | | — | | — | | — | |
Total retail | | 4,187 | | 3,843 | | 11,478 | | 11,171 | |
| | | | | | | | | |
Wholesale | | 719 | | 957 | | 1,913 | | 2,978 | |
| | | | | | | | | |
Total sales | | 4,906 | | 4,800 | | 13,391 | | 14,149 | |
| | | | | | | | | |
Electric Revenues (thousands of dollars): | | | | | | | | | |
Residential | | $ | 136,337 | | $ | 117,277 | | $ | 362,294 | | $ | 341,856 | |
Commercial | | 72,655 | | 70,042 | | 205,947 | | 199,978 | |
Industrial | | 59,495 | | 60,153 | | 168,075 | | 169,128 | |
Other retail | | 20,934 | | 20,623 | | 60,645 | | 59,958 | |
Other miscellaneous revenues | | 2,734 | | 4,717 | | 7,718 | | 12,860 | |
Total retail | | 292,155 | | 272,812 | | 804,679 | | 783,780 | |
| | | | | | | | | |
Wholesale | | 40,509 | | 36,851 | | 90,304 | | 107,901 | |
| | | | | | | | | |
RTO ancillary revenues | | 22,239 | | — | | 55,191 | | — | |
| | | | | | | | | |
Total revenues | | $ | 354,903 | | $ | 309,663 | | $ | 950,174 | | $ | 891,681 | |
| | | | | | | | | |
Other Statistics: | | | | | | | | | |
Average price per kWh - retail (cents) | | 6.91 | | 6.98 | | 6.94 | | 6.90 | |
Fuel cost per net kWh generated (cents) | | 2.10 | | 1.55 | | 1.94 | | 1.51 | |
Electric customers - end of period | | 511,948 | | 507,669 | | 511,948 | | 507,669 | |
Average kWh use per residential customer | | 3,399 | | 2,881 | | 9,197 | | 8,680 | |
Peak demand - maximum one-hour use (mw) | | 3,243 | | 2,896 | | 3,243 | | 2,896 | |
| | | | | | | | | |
Degree Days | | | | | | | | | |
Heating | | 23 | | 73 | | 3,538 | | 3,506 | |
Cooling | | 772 | | 487 | | 1,050 | | 767 | |
Inquiries concerning this report should be directed to:
Arthur Meyer
Vice President
Telephone (937) 259-7208
The information contained herein is submitted for general information
and not in connection with any sale or offer for sale of,
or solicitation of any offer to buy, any securities.
DPL Inc.
FINANCIAL DATA
(Unaudited)
(in millions, except per share amounts)
| | Three Months Ended | |
| | September 30, | |
| | 2005 | | 2004 | |
Earnings Per Share of Common Stock - Basic: | | | | | |
—From Continuing Operations | | $ | 0.21 | | $ | 0.28 | |
—From Discontinued Operations | | $ | — | | $ | 0.42 | |
Total | | $ | 0.21 | | $ | 0.70 | |
| | | | | |
Earnings Per Share of Common Stock - Diluted: | | | | | |
—From Continuing Operations | | $ | 0.20 | | $ | 0.28 | |
—From Discontinued Operations | | $ | — | | $ | 0.41 | |
Total | | $ | 0.20 | | $ | 0.69 | |
| | | | | |
Earnings | | | | | |
—From Continuing Operations | | $ | 25.7 | | $ | 33.7 | |
—From Discontinued Operations | | $ | 0.2 | | $ | 50.0 | |
Total | | $ | 25.9 | | $ | 83.7 | |
| | | | | |
Average Number of Common Stocks Outstanding: | | | | | |
Basic | | 121.2 | | 120.1 | |
Diluted | | 130.7 | | 121.4 | |
| | Nine Months Ended | |
| | September 30, | |
| | 2005 | | 2004 | |
Earnings Per Share of Common Stock - Basic: | | | | | |
—From Continuing Operations | | $ | 0.65 | | $ | 0.82 | |
—From Discontinued Operations | | $ | 0.36 | | $ | 0.76 | |
Total | | $ | 1.01 | | $ | 1.58 | |
| | | | | |
Earnings Per Share of Common Stock - Diluted: | | | | | |
—From Continuing Operations | | $ | 0.61 | | $ | 0.81 | |
—From Discontinued Operations | | $ | 0.33 | | $ | 0.75 | |
Total | | $ | 0.94 | | $ | 1.56 | |
| | | | | |
Earnings | | | | | |
—From Continuing Operations | | $ | 78.5 | | $ | 98.4 | |
—From Discontinued Operations | | $ | 43.0 | | $ | 91.4 | |
Total | | $ | 121.5 | | $ | 189.8 | |
| | | | | |
Average Number of Common Stocks Outstanding: | | | | | |
Basic | | 120.8 | | 120.1 | |
Diluted | | 129.1 | | 121.4 | |
