Exhibit 99 - Press release issued August 5, 2003
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SEMCO ENERGY, INC. NEWS RELEASE
28470 13 Mile Road Suite 300
Farmington Hills, MI 48334
FOR IMMEDIATE RELEASE
ANALYSTS CONTACT: THOMAS CONNELLY
Director of Investor Relations
Phone: 248-702-6000 Ext. 6240
MEDIA CONTACT: FRANCIS R. LIEDER
Director of Corporate Communications
Phone: 810-987-2200 Ext. 4186
FAX: 810-989-4098
E-mail: francis.lieder@semcoenergy.com
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SEMCO ENERGY REPORTS SECOND QUARTER 2003 RESULTS
Farmington Hills, MI, August 5, 2003 - SEMCO ENERGY, INC. (NYSE: SEN)
today reported a net loss of $20.6 million, or $1.09 per share, for the second
quarter of 2003 compared to net income of $45,000, or breakeven on a per share
basis, for the second quarter of 2002. The most significant item contributing
to the decrease in earnings was $24.0 million of debt exchange and
extinguishments costs, which after adjusting for income taxes, decreased net
income by approximately $15.6 million, or $0.82 per share. These costs
primarily represent premiums and other expenses the Company was required to pay
in order to retire certain debt obligations. The remainder of the decrease in
earnings is due to an increase in interest expense and a decrease in operating
income. The increase in interest expense was due primarily to an increase in
debt levels and the mix of long and short-term debt outstanding. During the
second quarter of 2003, when compared to the second quarter of 2002, a larger
portion of the Company's outstanding debt was long-term, which has a higher rate
of interest than the Company's short-term debt.
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Marcus Jackson, Chairman, President and Chief Executive Officer, said, "The
Company's construction business continues to experience intense competition as
many companies aggressively bid to secure contracts. This segment incurred an
operating loss of $1.9 million for the second quarter of 2003 compared to
operating income of $1.9 million for the second quarter of last year. During
the second quarter of last year, the southern division of our construction
business experienced an acceleration of work on projects that had been scheduled
for the second half of 2002, which caused a significant increase in workloads
and profits during that quarter. We did not see similar work levels during the
second quarter of this year." Mr. Jackson also said, "The underground gas
distribution construction industry continues to produce weak results due to
generally suppressed economic conditions and intense competition. Despite these
short-term issues, we continue to believe that over the long term our
construction business is positioned to realize increased profitability and
market share as the activity in this sector returns to more normal levels."
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Mr. Jackson went on to say, "The Company's gas distribution business had
operating income of $6.1 million during the second quarter of 2003, compared to
$8.5 million for the second quarter of 2002. The decrease was due primarily to
an increase in operating expenses and a decrease in gas sales margin due in part
to warmer temperatures during this past quarter compared to the second quarter
of last year."
Mr. Jackson concluded by saying, "Two key accomplishments occurred during
the second quarter. First, the Company settled its rate case with the Michigan
Public Service Commission (MPSC) and we expect the new authorized customer
rates, which became effective May 3, 2003, to increase annual revenues by $3.4
million and decrease annual depreciation expense by $1.4 million. The new rates
were structured in a way that helps reduce the impact to the Company and its
customers of colder or warmer than normal weather. The Company also completed a
$300 million debt issuance with favorable interest terms. The majority of the
proceeds were used to refinance and repurchase a portion of the Company's
long-term debt and to repay short-term debt."
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For the six months ended June 30, 2003, the Company had a net loss of $10.0
million, or $0.53 per share, compared to net income of $11.4 million, or $0.62
per share, for the six months ended June 30, 2002. The decrease in results was
due primarily to the same items that contributed to the decrease in quarterly
results.
For the twelve months ended June 30, 2003, the Company had a net loss of
$12.4 million, or $0.66 per share, compared to a net loss of $.7 million, or
$0.04 per share, for the twelve months ended June 30, 2002. Results for the
twelve months ended June 30, 2003, include debt exchange and extinguishments
costs, which reduced net income by $15.6 million. Results for the twelve months
ended June 30, 2002, include losses from discontinued operations, restructuring
charges, asset impairments and other unusual items, which amounted to $10.8
million. A significant decrease in operating results for the Company's
construction business contributed to the reduction in earnings for the twelve
months ended June 30, 2003, when compared to the same period of the prior year.
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Temperatures during the three and six-month periods ended June 30, 2003
were warmer than normal in Alaska and colder than normal in Michigan. The
Company has estimated that the impact of the warmer than normal temperatures
in Alaska and the colder than normal temperatures in Michigan offset one
another and thus had little impact on net income for the three months and six
months ended June 30, 2003. By comparison, during the second quarter of 2002,
temperatures were colder than normal in both Alaska and Michigan. During the
first six months of 2002, temperatures were slightly colder than normal in
Alaska and warmer than normal in Michigan. The Company has estimated that
variations from normal temperatures in Alaska and Michigan combined increased
net income by approximately $.8 million during the second quarter of 2002 and
decreased net income by approximately $1.5 million during the six months ended
June 30, 2002.
BUSINESS SEGMENT RESULTS
GAS DISTRIBUTION
The Gas Distribution Business reported operating income of $6.1 million
during the second quarter of 2003 compared to $8.5 million during the second
quarter of 2002. The decrease was due primarily to increases in commercial
insurance costs and employee benefit costs, including health care expense,
pension expense and retiree medical expense. In addition, gas sales margin
decreased, when compared to the second quarter of 2002, due primarily to warmer
temperatures during the second quarter of 2003, a decrease in gas cost savings
realized, and the impact of a reduction in customer rates at ENSTAR effective in
September 2002. These items were partially offset by the impact of an increase
in customer rates for the Company's MPSC customers in Michigan effective in May
2003 and the addition of new customers.
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Operating income for the six months ended June 30, 2003 was $36.6 million
compared to $38.7 million during the six months ended June 30, 2002. The items
discussed above that contributed to the decrease in quarterly results also
contributed to the decrease in six-month results, with the exception of
temperatures, which were colder during the six months ended June 30, 2003 and,
therefore, partially offset the other items that contributed to the decrease in
operating income.
The Gas Distribution Business had 384,980 customers at June 30, 2003
compared to 377,480 at June 30, 2002. The volume of gas sold and transported
during the three months ended June 30, 2003 and 2002 was 20.5 Bcf and 22.6 Bcf,
respectively. During the six months ended June 30, 2003 and 2002, the volume of
gas sold and transported was 63.1 Bcf and 61.2 Bcf, respectively.
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CONSTRUCTION SERVICES
The Construction Services Business reported an operating loss of $1.9
million for the second quarter of 2003 compared to operating income of $1.9
million for the second quarter of 2002. Operating revenue for the second quarter
of 2003 and 2002 was $19.9 million and $36.5 million, respectively. The
decrease in revenues and operating results is due primarily to a significant
reduction in work levels when compared to last year. During the second quarter
of last year, the southern division of the construction business experienced an
acceleration of work on projects that had been scheduled for the second half of
2002, which caused a significant increase in workloads and profits during the
second quarter. The Company did not see similar work levels during the second
quarter of this year. In addition, the construction services business has bid
on numerous projects in 2003 but has not experienced the expected level of
success in being awarded these projects due to the intense competition in the
industry. The southern division also experienced unprecedented rainfall during
the second quarter of 2003, which interrupted work execution for extended
periods of time.
The Construction Services Business reported an operating loss of $5.5
million for the first six months of 2003 compared to operating income of $.6
million for the six months ended June 30, 2002. Operating revenue for the first
six months of 2003 and 2002 was $35.0 million and $62.1 million, respectively.
The factors contributing to the decrease in second quarter results were also the
primary contributor to the decrease in the six-month results. In addition,
temperatures were colder than normal in the northern regions of the United
States during the first quarter of 2003. As a result, frost conditions
inhibited construction activity during the entire first quarter of 2003, which
also contributed to the decrease in operating results during the six months
ended June 30, 2003.
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The decrease in operating revenue was due primarily to the reduction in
projects in the southern division and the ceasing of construction operations in
certain regions of the northern division.
INFORMATION TECHNOLOGY
The operating income of the Information Technology Services Business for
the second quarter of 2003 was $.2 million, which was essentially unchanged from
the second quarter of 2002. Operating income for the first six months of 2003
and 2002 was $.4 million and $.3 million, respectively. The increase in
operating income was due primarily to reductions in overhead and marketing
costs.
Operating revenue was $2.3 million during the second quarter of 2003 and
during the second quarter of 2002. Operating revenue for the first six months
of 2003 and 2002 was $4.4 million and $4.6 million, respectively.
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PROPANE, PIPELINES AND STORAGE
The Propane, Pipelines and Storage Business reported operating income of
$.3 million for the second quarter of 2003 compared to $.4 million for the
second quarter of 2002. Operating income for the six months ended June 30, 2003
was $1.2 million compared to $1.0 million for the six months ended June 30,
2002. The increase was due primarily to colder temperatures, which increased
propane sales and margins, and a decrease in operating expenses and business
taxes.
Operating revenue was $1.4 million for the three months ended June 30, 2003
and the three months ended June 30, 2002. Operating revenue during the first
six months of 2003 and 2002 was $4.2 million and $3.7 million, respectively.
SEMCO ENERGY, Inc. is a diversified energy and infrastructure company that
distributes natural gas to approximately 385,000 customers in Michigan and
Alaska. It also owns and operates businesses involved in natural gas pipeline
construction services, propane distribution and intrastate pipelines and natural
gas storage in various regions of the United States. In addition, it provides
information technology and outsourcing services, specializing in the mid-range
computer market.
The following is a "Safe-Harbor" statement under the Private Securities
Litigation Reform Act of 1995. This release contains forward-looking statements
that involve risks and uncertainties. Statements that are not historic facts,
including statements about the Company's outlook, beliefs, plans, goals and
expectations, are forward-looking statements. Factors that may impact
forward-looking statement include, but are not limited to, the effects of
weather, the economic climate, competition, commodity prices, changing
conditions in the capital markets, regulatory approval processes, success in
obtaining new business and other risks detailed from time to time in the
company's Securities and Exchange Commission filings.
# # #
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SEMCO ENERGY, INC.
NEWS RELEASE STATISTICS (UNAUDITED)
(in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
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2003 2002 2003 2002 2003 2002
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FINANCIAL SUMMARY
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Operating revenues . . . . . . . . . . . . . . . . . . $ 99,525 $106,100 $306,629 $262,011 $525,583 $471,344
Restructuring and impairment charges . . . . . . . . . - - - - - 6,103
Other operating expenses . . . . . . . . . . . . . . . 95,738 95,759 275,363 223,051 476,568 412,901
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Operating income . . . . . . . . . . . . . . . . . . . 3,787 10,341 31,266 38,960 49,015 52,340
Other income and (deductions)
Interest expense . . . . . . . . . . . . . . . . . . (9,052) (7,477) (17,009) (15,151) (33,126) (31,216)
Debt exchange and extinguishment costs . . . . . . . (24,030) - (24,030) - (24,030) -
Other. . . . . . . . . . . . . . . . . . . . . . . . 781 709 1,479 1,034 2,683 2,003
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Total other income and (deductions). . . . . . . . (32,301) (6,768) (39,560) (14,117) (54,473) (29,213)
Income tax expense . . . . . . . . . . . . . . . . . . (10,033) 1,378 (2,637) 9,168 (1,666) 9,521
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Income before dividends on trust preferred securities
and discontinued operations. . . . . . . . . . . . . (18,481) 2,195 (5,657) 15,675 (3,792) 13,606
Dividends on trust preferred securities,
net of income taxes. . . . . . . . . . . . . . . . . (2,150) (2,150) (4,300) (4,300) (8,601) (8,603)
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Income from continuing operations. . . . . . . . . . . (20,631) 45 (9,957) 11,375 (12,393) 5,003
Income (loss) from discontinued operations,
net of income taxes. . . . . . . . . . . . . . . . . - - - - 10 (5,706)
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Net income (loss) available to common shareholders . . $(20,631) $ 45 $ (9,957) $ 11,375 $(12,383) $ (703)
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Earnings per share - basic
Net income from continuing operations. . . . . . . . $ (1.09) $ 0.00 $ (0.53) $ 0.62 $ (0.66) $ 0.27
Net income (loss) available to common shareholders . $ (1.09) $ 0.00 $ (0.53) $ 0.62 $ (0.66) $ (0.04)
Earnings per share - diluted
Net income from continuing operations. . . . . . . . $ (1.09) $ 0.00 $ (0.53) $ 0.62 $ (0.66) $ 0.27
Net income (loss) available to common shareholders . $ (1.09) $ 0.00 $ (0.53) $ 0.62 $ (0.66) $ (0.04)
Cash dividends per share . . . . . . . . . . . . . . . $ 0.125 $ 0.125 $ 0.250 $ 0.335 $ 0.500 $ 0.755
Average number of common shares outstanding
Basic. . . . . . . . . . . . . . . . . . . . . . . . 18,988 18,431 18,884 18,374 18,726 18,261
Diluted. . . . . . . . . . . . . . . . . . . . . . . 18,988 18,472 18,884 18,400 18,726 18,261
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SEMCO ENERGY, INC.
NEWS RELEASE STATISTICS (UNAUDITED)
(dollars in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
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2003 2002 2003 2002 2003 2002
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BUSINESS SEGMENT INFORMATION
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Operating revenues
Gas Distribution . . . . . . . . . . . . . . . . . . . . $ 80,122 $ 70,355 $270,934 $201,807 $433,838 $340,746
Construction Services. . . . . . . . . . . . . . . . . . 19,864 36,524 34,976 62,105 92,125 136,313
Information Technology Services. . . . . . . . . . . . . 2,268 2,317 4,422 4,578 9,462 9,705
Propane,Pipelines and Storage. . . . . . . . . . . . . . 1,414 1,416 4,241 3,654 7,645 6,979
Corporate and Other (includes intercompany eliminations) (4,143) (4,512) (7,944) (10,133) (17,487) (22,399)
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Total operating revenues . . . . . . . . . . . . . . . $ 99,525 $106,100 $306,629 $262,011 $525,583 $471,344
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Operating income (loss) (a)
Gas Distribution . . . . . . . . . . . . . . . . . . . . $ 6,068 $ 8,535 $ 36,601 $ 38,727 $ 56,950 $ 56,219
Construction Services. . . . . . . . . . . . . . . . . . (1,881) 1,939 (5,521) 629 (8,149) 252
Information Technology Services. . . . . . . . . . . . . 157 143 377 319 660 513
Propane, Pipelines and Storage . . . . . . . . . . . . . 323 381 1,221 990 2,177 1,779
Corporate and Other (includes intercompany eliminations) (880) (657) (1,412) (1,705) (2,623) (6,423)
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Total operating income . . . . . . . . . . . . . . . . $ 3,787 $ 10,341 $ 31,266 $ 38,960 $ 49,015 $ 52,340
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OPERATING STATISTICS
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Gas distribution:
Volumes sold (MMcf). . . . . . . . . . . . . . . . . . . 10,785 11,645 40,545 38,207 67,395 64,573
Volumes transported (MMcf). . . . . . . . . . . . . . . 9,682 10,939 22,598 22,990 44,529 44,133
Number of customers at end of period . . . . . . . . . . 384,980 377,480 384,980 377,480 384,980 377,480
Weather statistics:
Degree days
Alaska . . . . . . . . . . . . . . . . . . . . . . . 1,545 1,863 4,976 5,672 8,696 10,650
Michigan . . . . . . . . . . . . . . . . . . . . . . 1,041 1,039 4,647 4,043 7,272 6,232
Percent colder (warmer) than normal
Alaska . . . . . . . . . . . . . . . . . . . . . . . (3.5)% 15.1% (10.9)% 1.0% (14.3)% 3.8%
Michigan . . . . . . . . . . . . . . . . . . . . . . 9.8% 10.6% 10.6% (3.8)% 8.2% (8.1)%
Construction:
Feet of pipe installed (in thousands). . . . . . . . . . 976 1,189 1,427 2,244 4,381 6,983
Propane Distribution:
Gallons sold (in thousands). . . . . . . . . . . . . . . 717 783 2,662 2,386 4,769 4,342
<FN>
(a) Results for the twelve months ended June 30, 2002 include restructuring charges, impairments and other unusual items.
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