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| NEWS RELEASE | Cinergy Corp. 139 East Fourth Street P.O. Box 960 Cincinnati, OH 45201-0960 |
| News contact: | Steve Brash 513-287-2226 (w) 513-231-6895 (h) Angeline Protogere 317-838-1338 (w) 317-298-3090 (h) | |
Investor contact: | Steve Schrader 513-287-1083 | |
Website: | www.cinergy.com |
FOR IMMEDIATE RELEASE—January 23, 2003
CINERGY REPORTS EARNINGS FOR 2002
CINCINNATI—Cinergy Corp. (NYSE:CIN) today reported 2002 earnings of $2.68 per share on a diluted basis, before one-time charges totaling $0.55 for early retirement and other employee severance programs, charges related to certain investments, and a cumulative change in accounting principle. This compares with earnings of $2.75 per share on a diluted basis in 2001. Including one-time charges, 2002 earnings were $2.13 per share on a diluted basis.
In the fourth quarter 2002, Cinergy reported earnings of $0.78 per share before one-time charges of $0.20, compared with $0.69 per share in the same quarter 2001. The one-time charges reflect the costs of the employee programs as well as charges related to certain assets and investments in technology and equipment. Fourth quarter earnings including one-time charges were $0.58 per share.
"We had a solid year of delivering value to all our stakeholders," said James E. Rogers, chairman, president and chief executive officer. "Despite the uncertainties in the energy industry in 2002, we successfully executed on our plan of focusing on our core businesses, strengthening our balance sheet and instituting leading corporate governance practices. As a result of this performance coupled with our favorable outlook for 2003, we announced last week a 2.2% increase in the common stock dividend to $1.84 per share."
Fourth quarter earnings from the Regulated Operations segment were $0.57 per share before one-time charges of $0.02 per share, an increase of $0.25 per share over last year's fourth quarter results. Gross margins were higher as a result of colder weather as well as rate increases related to the company's natural gas distribution business and environmental compliance construction projects. Increased wholesale transmission revenues also contributed to the earnings increase.
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Page 2. Cinergy reports 2002 earnings
The Energy Merchant segment's earnings for the quarter were $0.26 per share before one-time charges of $0.14 per share, compared with $0.39 per share for the fourth quarter last year. The decrease was primarily the result of increased operations and maintenance, depreciation, property taxes and financing costs.
The Power Technology and Infrastructure Services segment lost $0.05 per share before one-time charges of $0.04 per share, down $0.03 per share from the prior year.
In December, the Indiana Utility Regulatory Commission approved the transfer of the Madison and Henry County generating stations to PSI Energy from an unregulated affiliate. PSI is permitted to acquire the two plants at a price based on the December 1, 2002 net book value. In addition, PSI is allowed to defer depreciation and carrying costs associated with the plants until the cost of the plants is fully reflected in PSI's base rates in 2004. Additionally, Federal Energy Regulatory Commission approval is required to complete the transaction.
In late December, PSI Energy applied to the IURC for an increase in rates of approximately $225 million. The proposed increase would reflect in rates major construction projects related to environmental compliance, growing power demands of its customers and transmission and distribution system improvements to maintain reliable service. If approved by state regulators, the increase is expected to be effective in early 2004.
Major achievements in 2002 included:
- •
- Successful completion of reviews by all three major credit ratings agencies resulting in a stable outlook
- •
- Approval of base rate increases for natural gas service in Ohio and Kentucky, along with a tracking mechanism to recover costs associated with a major gas main replacement program
- •
- Issuance of $200 million of common stock at the Cinergy Corp. level and $500 million of senior unsecured debentures due in 2012 with a coupon of 5.7 percent by The Cincinnati Gas & Electric Co.
- •
- Record electric system peak of 11,305 megawatts on August 1, 2002
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Page 3. Cinergy reports 2002 earnings
- •
- Completion of construction and testing of nitrogen oxide control systems on four generating units
- •
- Enactment of a series of corporate governance measures and a decision to begin expensing stock options in 2003
Cinergy Corp. has a balanced, integrated portfolio consisting of two core businesses: regulated operations and energy merchant. Cinergy owns regulated delivery operations in Ohio, Indiana, and Kentucky that serve 1.5 million electric customers and about 500,000 gas customers. In addition, its Indiana regulated operations own 6,000 megawatts of generation. Cinergy's energy merchant business is a Midwest leader in low-cost generation owning 7,000 megawatts of capacity with a profitable balance of stable existing customer portfolios, new customer origination, marketing and trading, and industrial-site cogeneration. The "into Cinergy" power-trading hub is the most liquid trading hub in the nation.
This document includes 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. Forward-looking statements are based on management's beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as "anticipate", "believe", "intend", "estimate", "expect", "continue", "should", "could", "may", "plan", "project", "predict", "will", and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to, unanticipated weather conditions; unscheduled generation outages; unusual maintenance or repairs; unanticipated changes in costs; environmental incidents, including costs of compliance with existing and future environmental requirements; electric transmission or gas pipeline system constraints; legislative and regulatory initiatives; additional competition in electric or gas markets and continued industry consolidation; financial or regulatory accounting principles; political, legal, and economic conditions and developments in the countries in which we have a presence; changing market conditions and other factors related to physical energy and financial trading activities; the performance of projects undertaken by our non-regulated businesses and the success of efforts to invest in and develop new opportunities; availability of, or cost of, capital; employee workforce factors; delays and other obstacles associated with mergers, acquisitions, and investments in joint ventures; and costs and effects of legal and administrative proceedings, settlements, investigations, and claims. Please refer to the company's SEC filings for additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to update the information contained herein.
###
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Periods Ended December 31, 2002
(unaudited)
(in thousands, except per share amounts)
| | Quarter Ended | Year To Date | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2002 | 2001 | 2002 | 2001 | |||||||||||
| Operating Revenues | |||||||||||||||
| Electric | $ | 1,755,017 | $ | 1,445,295 | $ | 6,912,349 | $ | 8,255,847 | |||||||
| Gas | 1,620,924 | 825,970 | 4,916,919 | 4,662,916 | |||||||||||
| Other | 41,522 | 16,602 | 130,813 | 78,246 | |||||||||||
| 3,417,463 | 2,287,867 | 11,960,081 | 12,997,009 | ||||||||||||
| Operating Expenses | |||||||||||||||
| Fuel used in electric production | 206,325 | 185,906 | 865,066 | 779,297 | |||||||||||
| Gas purchased | 1,529,607 | 764,296 | 4,668,941 | 4,431,899 | |||||||||||
| Purchased and exchanged power | 961,085 | 701,485 | 3,646,825 | 5,226,506 | |||||||||||
| Other operation | 289,320 | 200,366 | 1,094,602 | 811,052 | |||||||||||
| Maintenance | 42,100 | 45,542 | 203,796 | 202,274 | |||||||||||
| Depreciation | 112,807 | 99,246 | 414,004 | 374,399 | |||||||||||
| Taxes other than income taxes | 61,443 | 51,826 | 263,002 | 227,652 | |||||||||||
| 3,202,687 | 2,048,667 | 11,156,236 | 12,053,079 | ||||||||||||
| Operating Income | 214,776 | 239,200 | 803,845 | 943,930 | |||||||||||
| Other Income and (Expenses)—Net | |||||||||||||||
| Allowance for equity funds used during construction | 4,059 | 3,465 | 12,861 | 8,628 | |||||||||||
| Equity in earnings of unconsolidated subsidiaries | 7,905 | 5,589 | 15,261 | 1,494 | |||||||||||
| Other—net | 6,624 | 24,546 | (573 | ) | 31,044 | ||||||||||
| 18,588 | 33,600 | 27,549 | 41,166 | ||||||||||||
| Interest and Other Charges | |||||||||||||||
| Interest on long-term debt | 66,042 | 63,155 | 246,727 | 218,939 | |||||||||||
| Other interest | 2,991 | 8,860 | 22,003 | 60,807 | |||||||||||
| Allowance for borrowed funds used during construction | (4,811 | ) | (4,578 | ) | (18,824 | ) | (13,954 | ) | |||||||
| 64,222 | 67,437 | 249,906 | 265,792 | ||||||||||||
| Preferred Trust | |||||||||||||||
| Preferred dividend requirement of subsidiary trust | 5,985 | 1,067 | 23,832 | 1,067 | |||||||||||
| Income Before Taxes | 163,157 | 204,296 | 557,656 | 718,237 | |||||||||||
| Income Taxes | 36,965 | 77,389 | 157,320 | 255,978 | |||||||||||
| Preferred dividend requirements of subsidiaries | 858 | 858 | 3,433 | 3,433 | |||||||||||
| Income Before Discontinued Operations and Cumulative Effect of a Change in Accounting Principle | $ | 125,334 | $ | 126,049 | $ | 396,903 | $ | 458,826 | |||||||
| Discontinued Operations, net of tax | (25,138 | ) | (15,455 | ) | (25,428 | ) | (16,547 | ) | |||||||
| Cumulative Effect of a Change in Accounting Principle, net of tax(1) | — | — | (10,899 | ) | — | ||||||||||
| Net Income | $ | 100,196 | $ | 110,594 | $ | 360,576 | $ | 442,279 | |||||||
| Other comprehensive income, net of tax | (8,076 | ) | (2,386 | ) | (12,871 | ) | (6,034 | ) | |||||||
| Comprehensive Income | $ | 92,120 | $ | 108,208 | $ | 347,705 | $ | 436,245 | |||||||
| Average Common Shares Outstanding | 168,538 | 159,291 | 167,047 | 159,110 | |||||||||||
| Earnings Per Common Share | |||||||||||||||
| Income Before Discontinued Operations and Cumulative Effect of a Change in Accounting Principle | $ | 0.74 | $ | 0.80 | $ | 2.37 | $ | 2.88 | |||||||
| Discontinued Operations, net of tax | (0.15 | ) | (0.10 | ) | (0.15 | ) | (0.10 | ) | |||||||
| Cumulative Effect of a Change in Accounting Principle, net of tax(1) | — | — | (0.06 | ) | — | ||||||||||
| Net Income | $ | 0.59 | $ | 0.70 | $ | 2.16 | $ | 2.78 | |||||||
| Earnings Per Common Share—Assuming Dilution | |||||||||||||||
| Income Before Discontinued Operations and Cumulative Effect of a Change in Accounting Principle | $ | 0.73 | $ | 0.79 | $ | 2.34 | $ | 2.85 | |||||||
| Discontinued Operations, net of tax | (0.15 | ) | (0.10 | ) | (0.15 | ) | (0.10 | ) | |||||||
| Cumulative Effect of a Change in Accounting Principle, net of tax (1) | — | — | (0.06 | ) | — | ||||||||||
| Net Income | $ | 0.58 | $ | 0.69 | $ | 2.13 | $ | 2.75 | |||||||
| Dividends Declared Per Common Share | $ | 0.45 | $ | 0.45 | $ | 1.80 | $ | 1.80 | |||||||
- (1)
- This accounting change reflects the impairment of certain goodwill assets under the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. The amount was quantified during the 4th quarter as allowed by Statement 142 but is effective as of January 1, 2002. As a result, year-to-date Net Income and Earnings Per Share reflect the effect of this adjustment but the 4th quarter results do not.
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
| | December 31 2002 | December 31 2001 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash and temporary cash investments | $ | 221,083 | $ | 111,067 | ||||||
| Restricted deposits | 8,116 | 8,055 | ||||||||
| Notes receivable | 135,873 | 31,173 | ||||||||
| Accounts receivable less accumulated provision for doubtful accounts of $16,374 at December 31, 2002, and $34,110 at December 31, 2001 | 1,292,410 | 1,116,225 | ||||||||
| Materials, supplies and fuel—at average cost | 319,456 | 239,648 | ||||||||
| Prepayments and other | 118,208 | 110,102 | ||||||||
| Energy risk management current assets | 464,028 | 449,397 | ||||||||
| Total current assets | 2,559,174 | 2,065,667 | ||||||||
Property, Plant, and Equipment—at Cost | ||||||||||
| Utility plant in service | 8,641,351 | 8,089,961 | ||||||||
| Construction work in progress | 469,300 | 464,560 | ||||||||
| Total utility plant | 9,110,651 | 8,554,521 | ||||||||
| Non-regulated property, plant, and equipment | 4,704,904 | 4,478,087 | ||||||||
| Accumulated depreciation | 5,166,881 | 4,840,757 | ||||||||
| Net property, plant, and equipment | 8,648,674 | 8,191,851 | ||||||||
Other Assets | ||||||||||
| Regulatory assets | 1,022,696 | 1,015,863 | ||||||||
| Investments in unconsolidated subsidiaries | 417,188 | 332,027 | ||||||||
| Energy risk management non-current assets | 162,773 | 134,445 | ||||||||
| Other investments | 163,851 | 164,155 | ||||||||
| Other | 331,552 | 333,851 | ||||||||
| Total other assets | 2,098,060 | 1,980,341 | ||||||||
Assets of Discontinued Operations | 1,120 | 61,954 | ||||||||
Total Assets | $ | 13,307,028 | $ | 12,299,813 | ||||||
LIABILITIES AND EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable | $ | 1,321,968 | $ | 1,024,412 | ||||||
| Accrued taxes | 254,823 | 195,976 | ||||||||
| Accrued interest | 64,340 | 56,216 | ||||||||
| Notes payable and other short-term obligations | 667,973 | 1,144,955 | ||||||||
| Long-term debt due within one year | 91,454 | 148,431 | ||||||||
| Energy risk management current liabilities | 407,710 | 429,794 | ||||||||
| Other | 108,056 | 125,436 | ||||||||
| Total current liabilities | 2,916,324 | 3,125,220 | ||||||||
Non-current Liabilities | ||||||||||
| Long-term debt | 4,180,768 | 3,596,730 | ||||||||
| Deferred income taxes | 1,471,872 | 1,302,042 | ||||||||
| Unamortized investment tax credits | 118,095 | 127,385 | ||||||||
| Accrued pension and other post-retirement benefit costs | 626,167 | 498,801 | ||||||||
| Energy risk management non-current liabilities | 143,991 | 135,619 | ||||||||
| Other | 183,613 | 187,760 | ||||||||
| �� | Total non-current liabilities | 6,724,506 | 5,848,337 | |||||||
Liabilities of Discontinued Operations | 1,707 | 15,637 | ||||||||
Total Liabilities | 9,642,537 | 8,989,194 | ||||||||
Preferred Trust Securities | ||||||||||
| Company obligated mandatorily redeemable preferred trust securities of subsidiary holding solely debt securities of the company | 308,187 | 306,327 | ||||||||
Cumulative Preferred Stock of Subsidiaries | ||||||||||
| Not subject to mandatory redemption | 62,828 | 62,833 | ||||||||
Common Stock Equity | ||||||||||
| Common stock—$0.01 par value; authorized shares—600,000,000; outstanding shares—168,663,115 at December 31, 2002, and 159,402,839 at December 31, 2001 | 1,687 | 1,594 | ||||||||
| Paid-in capital | 1,918,136 | 1,619,659 | ||||||||
| Retained earnings | 1,403,453 | 1,337,135 | ||||||||
| Accumulated other comprehensive income | (29,800 | ) | (16,929 | ) | ||||||
| Total common stock equity | 3,293,476 | 2,941,459 | ||||||||
Total Liabilities and Equity | $ | 13,307,028 | $ | 12,299,813 | ||||||
Note: Prior year's data has been reclassified to conform with current year's presentation.
CINERGY CORP.
BUSINESS SEGMENT SUMMARY INFORMATION
For the Quarter Ended December 31
(unaudited)
(dollars in thousands, except per share amounts)
| | 2002 | 2001 | |||||
|---|---|---|---|---|---|---|---|
| Energy Merchant | |||||||
Earnings Before Interest and Taxes (EBIT) | $ | 40,004 | $ | 126,858 | |||
Net Income | $ | 21,824 | $ | 63,315 | |||
Earnings Per Share—diluted | $ | 0.12 | $ | 0.39 | |||
Electricity Trading Volumes (Mwhs) | 39,126,610 | 24,622,133 | |||||
| Physical and Financial Gas Trading Volumes (Bcf/d) | 50.6 | 51.2 | |||||
Regulated Operations | |||||||
Earnings Before Interest and Taxes (EBIT) | $ | 183,546 | $ | 132,246 | |||
Net Income | $ | 93,045 | $ | 50,863 | |||
Earnings Per Share—diluted | $ | 0.55 | $ | 0.32 | |||
Electric Retail MWH Sales and Transportation | 12,477,528 | 11,743,189 | |||||
| Gas Retail MCF Sales and Transportation | 30,724,445 | 25,557,592 | |||||
| Electric Customers (End of Period) | 1,531,848 | 1,509,743 | |||||
| Gas Customers (End of Period) | 503,900 | 495,986 | |||||
Power Technology & Infrastructure Services | |||||||
Earnings Before Interest and Taxes (EBIT) | $ | (15,324 | ) | $ | (1,759 | ) | |
Net Income | $ | (14,673 | ) | $ | (3,584 | ) | |
Earnings Per Share—diluted | $ | (0.09 | ) | $ | (0.02 | ) | |
2001 has been reclassified to reflect all international results in Energy Merchant.
Electric trading volumes revised per new FERC directive, order 2001 issued 4/25/02
CINERGY CORP.
BUSINESS SEGMENT EARNINGS ANALYSIS SUMMARY
For the Quarter Ended December 31, 2002
(unaudited)
| Energy Merchant | |||||
Earnings Per Share—diluted—2001 | $ | 0.39 | |||
Gross margins from regulated retail contracts | (0.03 | ) | |||
| Financing, depreciation, and property taxes costs | (0.06 | ) | |||
| O&M costs | (0.07 | ) | |||
| Other—net | 0.03 | ||||
| Employee retirement/severance and other one-time charges | (0.14 | ) | |||
Earnings Per Share—diluted—2002 | $ | 0.12 | |||
Regulated Operations | |||||
Earnings Per Share—diluted—2001 | $ | 0.32 | |||
Gross margins | 0.29 | ||||
| Financing, depreciation, and property taxes costs | (0.02 | ) | |||
| O&M costs | (0.01 | ) | |||
| Other—net | (0.01 | ) | |||
| Employee retirement/severance and other one-time charges | (0.02 | ) | |||
Earnings Per Share—diluted—2002 | $ | 0.55 | |||
Power Technology & Infrastructure Services | |||||
Earnings Per Share—diluted—2001 | $ | (0.02 | ) | ||
Operating results of investments | (0.01 | ) | |||
| Mark-to-market valuation of technology investments | (0.02 | ) | |||
| Employee retirement/severance and other one-time charges | (0.04 | ) | |||
Earnings Per Share—diluted—2002 | $ | (0.09 | ) | ||
2001 has been reclassified to reflect all international results in Energy Merchant.
CINERGY CORP.
BUSINESS SEGMENT SUMMARY INFORMATION
For the Year to Date December 31
(unaudited)
(dollars in thousands, except per share amounts)
| | 2002 | 2001 | |||||
|---|---|---|---|---|---|---|---|
| Energy Merchant | |||||||
| Earnings Before Interest and Taxes (EBIT) | $ | 274,142 | $ | 402,166 | |||
| Net Income | $ | 126,083 | $ | 194,637 | |||
| Earnings Per Share—diluted | $ | 0.74 | $ | 1.21 | |||
| Electricity Trading Volumes (Mwhs) | 125,111,979 | 116,496,617 | |||||
| Physical and Financial Gas Trading Volumes (Bcf/d) | 58.1 | 46.4 | |||||
Regulated Operations | |||||||
| Earnings Before Interest and Taxes (EBIT) | $ | 556,740 | $ | 580,497 | |||
| Net Income | $ | 269,922 | $ | 266,423 | |||
| Earnings Per Share—diluted | $ | 1.60 | $ | 1.66 | |||
| Electric Retail MWH Sales and Transportation | 52,125,169 | 49,755,165 | |||||
| Gas Retail MCF Sales and Transportation | 91,740,279 | 89,886,977 | |||||
| Electric Customers (End of Period) | 1,531,848 | 1,509,743 | |||||
| Gas Customers (End of Period) | 503,900 | 495,986 | |||||
Power Technology & Infrastructure Services | |||||||
| Earnings Before Interest and Taxes (EBIT) | $ | (35,815 | ) | $ | (14,114 | ) | |
| Net Income | $ | (35,429 | ) | $ | (18,781 | ) | |
| Earnings Per Share—diluted | $ | (0.21 | ) | $ | (0.12 | ) | |
2001 has been reclassified to reflect all international results in Energy Merchant.
Electric trading volumes revised per new FERC directive, order 2001 issued 4/25/02
CINERGY CORP.
BUSINESS SEGMENT EARNINGS ANALYSIS SUMMARY
For the Year to Date December 31, 2002
(unaudited)
| Energy Merchant | | ||||
|---|---|---|---|---|---|
Earnings Per Share—diluted—2001 | $ | 1.21 | |||
| Origination, marketing and trading | 0.08 | ||||
| Gross margins from regulated retail contracts | (0.01 | ) | |||
| Fuel costs | 0.06 | ||||
| Financing, depreciation, and property taxes costs | (0.18 | ) | |||
| O&M costs | (0.10 | ) | |||
| Other—net | (0.02 | ) | |||
| Employee retirement/severance and other one-time charges | (0.30 | ) | |||
Earnings Per Share—diluted—2002 | $ | 0.74 | |||
Regulated Operations | |||||
Earnings Per Share—diluted—2001 | $ | 1.66 | |||
Gross margins | 0.28 | ||||
| Financing, depreciation, and property taxes costs | (0.09 | ) | |||
| O&M costs | (0.05 | ) | |||
| Other—net | (0.02 | ) | |||
| Employee retirement/severance and other one-time charges | (0.18 | ) | |||
Earnings Per Share—diluted—2002 | $ | 1.60 | |||
Power Technology & Infrastructure Services | |||||
Earnings Per Share—diluted—2001 | $ | (0.12 | ) | ||
Operating results of investments | 0.02 | ||||
| Mark-to-market valuation of technology investments | (0.4 | ) | |||
| Employee retirement/severance and other one-time charges | (0.07 | ) | |||
Earnings Per Share—diluted—2002 | $ | (0.21 | ) | ||
2001 has been reclassified to reflect all international results in Energy Merchant.
CINERGY CORP. BUSINESS SEGMENT EARNINGS ANALYSIS SUMMARY For the Quarter Ended December 31, 2002 (unaudited)