Nicor Inc.
Form 8-K
Exhibit 99.1
FOR IMMEDIATE RELEASE FOR MORE INFORMATION
July 29, 2005 Financial Contact: Mark Knox, re: N-940
630 388-2529
Media Contact: Don Ingle
630 388-2939
NICOR ANNOUNCES SECOND QUARTER EARNINGS
Naperville, IL - Nicor Inc. (NYSE: GAS) today reported second quarter 2005 net
income, operating income and a diluted earnings per common share of $33.4
million, $58.0 million and $.75, respectively. This compares to second quarter
2004 net income, operating income and diluted earnings per common share of $19.5
million, $33.1 million and $.44, respectively.
The second quarter 2005 financial results included a Directors and Officers
(D&O) insurance recovery, including earnings thereon, related to the company's
previously announced securities class action and shareholder derivative
settlements, that had a positive pretax impact on earnings of approximately
$29.4 million, or about $.40 per share after-tax (absent this impact, the
second quarter 2005 results would have been $.35 per share).
Earnings for the 2005 second quarter increased as a result of the aforementioned
D&O insurance recovery. Second quarter 2005 earnings also reflect lower
operating results in the company's gas distribution business and other
energy-related ventures, which more than offset improved operating results in
the company's shipping business.
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For the six months ended June 30, 2005, net income, operating income and diluted
earnings per common share were $77.1 million, $127.8 million and $1.74,
respectively. This compares to net income, operating income and diluted earnings
per common share for the same period in 2004 of $39.0 million, $67.4 million and
$0.88, respectively.
Both year-to-date periods were impacted by noteworthy items. 2005 financial
results for the six-month period include the effects of D&O insurance
recoveries, including earnings thereon, net of a shareholder derivative
settlement announced on January 25, 2005. These items totaled approximately
$29.9 million pretax, $.41 per share after-tax. Absent this impact, 2005
six-month results would have been $1.33 per share. 2004 financial results for
the six-month period included a $38.5 million pretax litigation charge ($.52
per share after-tax) relating to a settlement of securities class action
(absent this charge, 2004 six-months results would have been $1.40 per share).
Earnings for the 2005 six-month period were increased as a result of the
aforementioned D&O insurance recoveries, net of the shareholder derivative
settlement; and the absence of last year's litigation settlement charge. 2005
earnings for the six-month period also reflect lower operating results in the
company's gas distribution business and other energy-related ventures, which
more than offset improved operating results in the company's shipping business.
"Overall, 2005 results continue to be in-line with our full year expectations,"
said Russ M. Strobel, Nicor's president and chief executive officer. "Our
shipping business continues to perform very well. Our gas distribution business,
however, continues to be negatively impacted by the cost pressures that led to
last year's filing for rate relief. As we have stated in the past, this pressure
on the utility's earnings is expected to continue until reasonable rate relief
is granted."
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Details regarding 2005 second quarter and six months ended financial results
compared to 2004 follow:
o Gas distribution operating income in the second quarter decreased to $13.1
million from $22.1 million in 2004. The quarter decline is due primarily to:
- Higher operating and maintenance costs ($4.0 million), including the
impact of higher bad debt costs, increased costs of natural gas to operate
company equipment and facilities, and higher labor and employee benefit-
related costs;
- Lower property sale gains ($5.4 million); and
- Higher depreciation ($1.2 million).
For the six months ended June 30, 2005, gas distribution operating income
decreased to $71.5 million from $89.3 million in 2004. The year-to-date
decline is due primarily to:
- Higher operating and maintenance costs ($9.0 million) including the impact
of higher bad debt, labor and benefit-related costs, higher general claims
and increased natural gas costs to operate company equipment and
facilities, partially offset by lower legal costs;
- Lower property sale gains ($5.4 million); and
- Higher depreciation ($2.7 million).
o Shipping operating income increased in the second quarter to $10.3 million
from $6.9 million in 2004. For the six months ended June 30, 2005, shipping
operating income increased to $22.5 million from $11.1 million in 2004.
Improvements for both the quarter and six-month periods in 2005 were due
primarily to increased volumes shipped and higher average rates.
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o Operating income for the company's other energy ventures in the second
quarter decreased to $4.7 million from $5.4 million in 2004 due primarily to
lower operating results in the company's retail energy-related products and
services businesses. For the six months ended June 30, 2005, other energy
ventures operating income decreased to $3.1 million from $8.3 million in 2004
due primarily to lower operating results in the company's wholesale natural
gas marketing business, partially offset by higher operating results in the
company's retail energy-related products and services businesses.
Lower operating results in the company's wholesale natural gas marketing
business for the year-to-date period are due in large part to the negative
impacts of required fair value accounting adjustments for derivatives used to
mitigate commodity price risk in order to substantially lock-in the profit
margin that will ultimately be realized from the sale of natural gas in
storage. Earnings at the wholesale natural gas marketing business can be
subject to volatility as the fair value of derivatives change, even when the
underlying expected profit margin is largely unchanged.
o A D&O insurance recovery, including earnings thereon, recorded in the second
quarter 2005 related to a securities class action and shareholder derivative
settlement announced in April 2004 and January 2005, respectively, had a
positive impact on pretax earnings of approximately $29.4 million, or about
$.40 per share after-tax. 2005 six-month financial results included the
second quarter D&O insurance recovery, including earnings thereon, and the
impact of a first quarter D&O insurance recovery ($4 million pretax), net of
a related shareholder derivative settlement ($3.5 million pretax), of
approximately $0.5 million pretax. Combined, these items had a net positive
pretax impact on 2005 earnings of approximately $29.9 million, or about $.41
per share after-tax.
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o A $38.5 million pretax charge ($.52 per share after-tax) recorded in the
first quarter 2004 associated with an agreement to settle securities class
action litigation announced in April 2004 significantly reduced the company's
2004 six-month reported operating income and net income.
2005 Earnings Guidance
- ----------------------
The company also announced that its estimate for 2005 diluted earnings per
common share is in the range of $2.30 to $2.50. This estimate remains unchanged
from earlier guidance of $1.90 to $2.10 per share given at the end of the first
quarter and at the beginning of the year, except for the adjustment to reflect
the second quarter 2005 D&O insurance recovery discussed above. The estimate
excludes, among other things: rate relief, which, if granted, could impact the
fourth quarter; additional variability in earnings due to fair value accounting
adjustments in the wholesale natural gas marketing business that could occur
because of volatility in the natural gas markets; potential benefits, if any,
due to the American Jobs Creation Act of 2004; and any future impacts associated
with the Illinois Commerce Commission's performance-based rate plan/purchased
gas adjustment review or other contingencies. While these items could materially
affect 2005 earnings, they are not currently estimable. The company's 2005
estimate assumes normal weather for the remainder of the year.
The company will only provide updates to annual earnings guidance as part of its
quarterly and annual earnings releases.
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Conference Call
- ---------------
As previously announced, the company will hold a conference call to discuss its
second quarter financial results and 2005 outlook. The conference call will be
held this morning, Friday, July 29, 2005 at 8:30 a.m. central, 9:30 a.m. eastern
time. To hear the conference call live, please logon to Nicor's corporate Web
site at www.nicor.com, choose "Investor" and then select the webcast icon on the
Overview page. A replay of the call will be available until 5:00 p.m. central
time, Friday, August 12, 2005. To access the recording, call 1-888-286-8010, or
617-801-6888 for callers outside the United States, and enter reservation number
84165165. The call will also be archived on Nicor's corporate Web site for 90
days.
Nicor Inc. (NYSE: GAS) is a holding company and is a member of the S&P 500. Its
principal businesses are Nicor Gas, one of the nation's largest natural gas
distribution companies, and Tropical Shipping, a containerized shipping business
serving the Caribbean region and the Bahamas. Nicor also owns and has an equity
interest in several energy-related businesses. For more information, visit the
Nicor Web site at www.nicor.com.
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Caution Concerning Forward-Looking Statements
- ---------------------------------------------
This document includes certain forward-looking statements about the expectations
of Nicor and its subsidiaries and affiliates. Although Nicor believes these
statements are based on reasonable assumptions, actual results may vary
materially from stated expectations. Such forward-looking statements may be
identified by the use of forward-looking words or phrases such as "anticipate,"
"believe," "expect," "intend," "may," "planned," "potential," "should," "will,"
"would," "project," "estimate," or similar phrases. Actual results may differ
materially from those indicated in the company's forward-looking statements due
to the direct or indirect effects of legal contingencies (including litigation)
and the resolution of those issues, including the effects of an Illinois
Commerce Commission (ICC) review and Securities and Exchange Commission (SEC)
and U.S. Attorney inquiries, and undue reliance should not be placed on such
statements. Other factors that could cause materially different results include,
but are not limited to, weather conditions; natural gas and other fuel prices;
fair value accounting adjustments; inventory valuation; health care costs;
insurance costs or recoveries; legal costs; borrowing needs; interest rates;
credit conditions; economic and market conditions; tourism and construction in
the Bahamas and Caribbean region; energy conservation; legislative and
regulatory actions; tax rulings or audit results; asset sales; significant
unplanned capital needs; future mercury-related charges or credits; changes in
accounting principles, interpretations, methods, judgments or estimates;
performance of major suppliers and contractors; labor relations; and acts of
terrorism.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of this date. Nicor undertakes no obligation to
publicly release any revision to these forward-looking statements to reflect
events or circumstances after the date of this filing.
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Nicor Inc.
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------
Unaudited (millions, except per share data)
Three months ended Six months ended
June 30 June 30
------------------ ----------------------
2005 2004 2005 2004
-------- -------- ---------- ----------
Operating revenues $ 484.4 $ 429.5 $ 1,664.2 $ 1,545.2
-------- -------- ---------- ----------
Operating expenses
Gas distribution
Cost of gas 230.6 200.5 1,067.4 992.7
Operating and maintenance 58.6 54.6 127.5 118.5
Depreciation 38.6 37.4 77.3 74.6
Taxes, other than income taxes 31.4 29.1 107.4 103.8
Mercury-related costs, net - .2 .1 .1
Property sale gains (.1) (5.5) (.1) (5.5)
Shipping 82.0 65.5 160.3 129.1
Other energy ventures 29.1 28.1 77.4 76.9
Litigation charges
(recoveries), net (29.4) - (29.9) 38.5
Other corporate expenses
and eliminations (14.4) (13.5) (51.0) (50.9)
-------- -------- ---------- ----------
426.4 396.4 1,536.4 1,477.8
-------- -------- ---------- ----------
Operating income 58.0 33.1 127.8 67.4
Interest expense, net of amounts
capitalized 9.9 8.3 22.1 19.5
Equity investment income, net 1.9 1.7 3.9 2.9
Other income (expense), net 2.1 .9 3.1 1.3
-------- -------- ---------- ----------
Income before income taxes 52.1 27.4 112.7 52.1
Income tax expense 18.7 7.9 35.6 13.1
-------- -------- ---------- ----------
Net income 33.4 19.5 77.1 39.0
Dividends on preferred stock - - - -
-------- -------- ---------- ----------
Earnings applicable to common
stock $ 33.4 $ 19.5 $ 77.1 $ 39.0
======== ======== ========== ==========
Average shares of common stock
outstanding
Basic 44.1 44.1 44.1 44.0
Diluted 44.4 44.3 44.4 44.2
Earnings per average share of common
stock
Basic $ .76 $ .44 $ 1.75 $ .89
Diluted $ .75 $ .44 $ 1.74 $ .88
Nicor Inc.
PRELIMINARY FINANCIAL HIGHLIGHTS
- --------------------------------
Unaudited (millions, except per share data)
Three months ended Six months ended
June 30 June 30
------------------ ----------------------
2005 2004 2005 2004
-------- -------- ---------- ----------
Operating revenues
Gas distribution $ 372.2 $ 338.4 $ 1,451.1 $ 1,373.5
Shipping 92.3 72.4 182.8 140.2
Other energy ventures 33.8 33.5 80.5 85.2
Corporate and eliminations (13.9) (14.8) (50.2) (53.7)
-------- -------- ---------- ----------
$ 484.4 $ 429.5 $ 1,664.2 $ 1,545.2
======== ======== ========== ==========
Operating income (loss)
Gas distribution $ 13.1 $ 22.1 $ 71.5 $ 89.3
Shipping 10.3 6.9 22.5 11.1
Other energy ventures 4.7 5.4 3.1 8.3
Corporate and eliminations 29.9 (1.3) 30.7 (41.3)
-------- -------- ---------- ----------
$ 58.0 $ 33.1 $ 127.8 $ 67.4
======== ======== ========== ==========
Net income applicable to common
stock $ 33.4 $ 19.5 $ 77.1 $ 39.0
======== ======== ========== ==========
Average shares of common stock
outstanding
Basic 44.1 44.1 44.1 44.0
Diluted 44.4 44.3 44.4 44.2
Earnings per average share of common
stock
Basic $ .76 $ .44 $ 1.75 $ .89
Diluted $ .75 $ .44 $ 1.74 $ .88