NEWS
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KeySpan Corporation For Immediate Release
Contacts: Investors Media
Michael J. Taunton Robert J. Mahony
(718) 403-3265 (718) 403-2503
KEYSPAN ANNOUNCES SECOND QUARTER EARNINGS
Brooklyn, New York, July 26, 2001 -- KeySpan Corporation (NYSE: KSE) reported
earnings of $22.1 million, or $0.16 per share for the quarter, excluding a
special charge announced last week of $30.1 million after tax, or $0.22 per
share, compared to $47.1 million, or $0.35 per share earned for the same period
a year ago.
For the six-months ended June 30, 2001, earnings were $245.4 million, or $1.79
per share, excluding the special charge, compared to $210.6 million, or $1.57
per share for the same period last year -- an increase of $34.8 million, or
$0.22 per share. The primary drivers of this increase are growth in our core gas
distribution business, including the newly acquired New England gas companies,
and our gas exploration and production activities.
Earnings for the quarter were adversely affected by the special charge in the
unregulated Energy Services segment as the result of the operations of the Roy
Kay companies. Including this special charge, earnings were a loss of $8.0
million, or $0.06 per share, for the second quarter, and a profit of $215.3
million, or $1.57 per share, for the year to date. Year to date diluted earnings
were $1.55 per share.
"Although we are disappointed with the need to take a special charge, we are
pleased with the results of our operations and the implementation of our growth
strategy. Except for the Roy Kay companies, our Energy Services acquisitions are
on target. The performance of our gas distribution business continues to excel
as we successfully integrate the operations of our gas distribution acquisitions
and achieve our synergy-savings targets. Our gas exploration and production
segment has increased production by approximately 20% this year, and the segment
continues to provide significant value to shareholders. We have a strong
position in the New York electric market, and our energy investments are
providing a significant contribution. Based on this platform for continued
growth and our strong first-half results, we are confident that we will continue
to deliver strong earnings in the future."
Major highlights of the second quarter and year-to-date results reported as
Earnings Before Interest and Taxes (EBIT) are as follows:
o The Gas Distribution segment had EBIT in the second quarter of $18.9
million, compared to $25.2 million in the second quarter last year. Second
quarter earnings were adversely impacted by the anticipated seasonal loss
recorded by our New England companies, which were not included in last
year's results. For the six-month period, this business segment had EBIT of
$350.5 million, up 45% from $242.1 million last year. The improved
performance, on a year to date basis, reflects the winter heating sales as
a result of the acquisition of the New England gas companies, and the
continued significant gas-sales growth resulting from the high level of
conversions from oil to gas in New York and on Long Island. This year, we
have completed approximately 20,000 gas installations, adding $25 million
in new gross profit margin-more than a 20% increase over last year.
o The Electric Services segment had EBIT in the second quarter of $56.2
million, compared to $59.9 million for the same period last year. Year to
date, EBIT was $114.3 million compared to $132.0 million last year. The
decrease of $17.7 million on a year to date basis is due, primarily, to
lower revenues from the provision of ancillary services and, to a lesser
extent, lower New York City electricity volumes and prices.
o Energy Services had EBIT of $8.1 million for the quarter, and $10.1 million
year to date, excluding the special charge, compared to EBIT of $32.8 for
the quarter, and $31.2 million for the year to date in 2000. The decrease
for both the quarter and year to date was due to the operations of the Roy
Kay companies, as well as lower revenues from KeySpan Energy Supply, Inc.,
which provides intercompany energy procurement and fuel management services
to our electric generating business. Including the charge, Energy Services
had a loss of $45.5 million for the quarter, and a loss of $43.5 million
year to date.
o The Energy Investments segment, which includes our gas exploration &
production operations, as well as our gas processing & pipeline
investments, had quarterly EBIT results of $59.7 million, as compared to
$26.6 million for the same quarter last year. EBIT results for the
six-month period were $137.7 million, as compared to $47.4 million for the
same period last year.
o Gas exploration and production operations, primarily from our 68% ownership
in The Houston Exploration Company, contributed quarterly EBIT of $44.0
million, compared to $22.6 million for the quarter last year. Year-to-date,
exploration and production contributed $109.5 million in EBIT versus $36.3
million in 2000. Year to date, our gas exploration and production
activities benefited significantly from a 20% increase in production
volumes and an 87% increase in natural-gas commodity prices. Houston
Exploration has hedged up to 70% of this year's production.
o KeySpan's other energy investments, including Canadian mid-stream gas
processing plants, gas pipelines, and an in-land barge business,
contributed $15.7 million to EBIT in the quarter as compared to $4.0
million in the same period last year. For the six-month period, these
investments contributed EBIT of $28.2 million as opposed to $11.1 million
last year, as a result of improved operations and the contribution from the
in-land barge business.
Earnings Outlook
For 2001, excluding the special charge incurred in our Energy Services segment,
the Company has revised its earnings forecast to a range of $2.50 to $2.60 per
share, and expects to be toward the middle of this range. Due to the seasonal
nature of our gas business, we expect to report a small loss in the third
quarter, with the balance of earnings to be achieved in the fourth quarter.
Based on these strong earnings, we fully intend to maintain our dividend at the
current annual rate of $1.78 per share.
Looking to the future, Mr. Catell said, "Our strategies to grow our Company are
working. We focus on our customers, and have enhanced our competitive advantage
by developing innovative ways to serve them. The increased demand for natural
gas is a big plus for all our business segments, from gas conversions, to
gas-fired electric generation. As part of our overall strategy to grow our
electric-generating business, we have recently announced plans to install two
LM6000 generating units at our Glenwood facility that will provide 79 megawatts
of electricity on Long Island next year. We also plan to build two 250-megawatt
plants, one in New York City and one on Long Island, expected to be on line in
2003 and 2004, respectively. The fundamentals of our business are in place; our
focus is the growth of our Company and further demonstrating our commitment to
increasing shareholder value."
A member of the Standard & Poor's 500 index, KeySpan Corporation (NYSE: KSE) is
the largest distributor of natural gas in the Northeast, with 2.5 million gas
customers and more than 13,000 employees. KeySpan is also the largest
investor-owned electric generator in New York State and operates Long Island's
electric system under contract with the Long Island Power Authority for its 1.1
million customers. With headquarters in Brooklyn, Boston and Long Island,
KeySpan also manages a dynamic portfolio of service companies. They include:
KeySpan Energy Delivery, the group of regulated natural gas utilities; KeySpan
Home Energy Services, a group of energy product, repair and services companies
for residential and small commercial business customers; and KeySpan Business
Solutions, a full-service group of energy product, repair and services companies
for larger business customers. KeySpan also has strategic investments in
natural-gas exploration and production, pipeline transportation, distribution
and storage, Canadian gas processing and fiber-optic cable. For more information
about the company, visit KeySpan's Web site at: http://www.keyspanenergy.com
Certain statements contained herein are forward-looking statements, which
reflect numerous assumptions and involve a number of risks and uncertainties.
Actual results may differ materially from those discussed in such statements.
Among the factors that could cause actual results to differ materially are:
general economic trends; fluctuations in gas and electric prices; available
sources and costs of fuel; State and Federal regulatory initiatives that
increase competition, threaten cost and investment recovery, and impact rate
structures; the ability of the company to successfully reduce its cost
structure; the ability of the company to successfully integrate acquired
operations; the degree to which the company develops non-regulated business
ventures; the effect of inflationary trends and increases in interest rates; and
risks detailed from time to time in reports and other documents filed by the
company with the Securities and Exchange Commission.
Earnings Conference Call: Investors are invited to participate in the
KeySpan Corporation 2001 Second Quarter Earnings Conference Call on
Thursday, July 26, at 11:30 a.m. (EST)
Dial Number: 888-552-7850
Replay Number: 800-642-1687
Access Code: 1178572
AudioCast: http://investor.keyspanenergy.com
For more information, contact:
Media - (718) 403-2503
Investors - (718) 403-3265
KeySpan Corporation
(In Thousands of Dollars, Except Per Share Amounts)
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Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
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Revenues
Gas Distribution $ 620,685 $ 361,540 $ 2,374,478 $ 1,166,243
Electric Services 357,904 388,695 701,276 723,099
Energy Services 232,771 137,895 551,944 264,375
Energy Investments 211,657 59,458 436,954 110,484
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Total Revenues 1,423,017 947,588 4,064,652 2,264,201
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Operating Expenses
Purchased gas for resale 348,349 167,736 1,545,707 576,783
Fuel & purchased power 146,357 102,414 289,657 172,991
Operations & maintenance 585,539 378,986 1,144,219 734,465
Depreciation, depletion
& Amortization 127,415 73,810 264,798 143,391
Operating taxes 103,621 91,118 248,880 206,541
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Total Operating Expenses 1,311,281 814,064 3,493,261 1,834,171
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Operating Income 111,736 133,524 571,391 430,030
Other Income & (Deductions) (16,597) 2,697 (8,393) 14,632
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Income Before Interest
Charges & Income Taxes 95,139 136,221 562,998 444,662
Interest Charges 94,487 36,930 191,439 81,055
Income Taxes 7,177 45,925 153,309 137,997
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Net Income (Loss) (6,525) 53,366 218,250 225,610
Preferred stock
dividend requirements 1,476 6,286 2,952 14,977
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Earnings (Loss)
for Common Stock $ (8,001)$ 47,080 $ 215,298 $ 210,633
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Basic Earnings (Loss)
Per Common Share $ (0.06)$ 0.35 $ 1.57 $ 1.57
Diluted Earnings (Loss)
Per Common Share $ (0.06)$ 0.35 $ 1.55 $ 1.57
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Average Common Shares
Outstanding (000) 137,916 133,889 137,438 133,881
Average Common Shares
Outstanding - Diluted (000) 139,361 134,482 138,872 134,480
KeySpan Corporation
Segment Information
Three Months Ended June 30 , 2001
(In Thousands of Dollars)
Energy Investments
-----------------------------------
Gas Distribution Electric Gas Exploration Other Energy Total Operating Recon- Total Consoli-
Services & Production Investments Services Segments ciliations dation
Revenues
Unaffiliated Revenuse 620,685 357,904 119,659 91,998 232,771 1,423,017 - 1,423,017
Intersegment Revenues - - - - 12,508 12,508 (12,508) -
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620,685 357,904 119,659 91,998 245,279 1,435,525 (12,508) 1,423,017
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Operation Expenses
Purchased Gas 328,487 - - - 19,862 348,349 - 348,349
Purchased Fuel - 74,327 - - 72,030 146,357 - 146,357
Operations & Maintenance 158,356 178,571 10,959 66,334 195,602 609,822 (24,283) 585,539
Depreciation, Depletion &
Amortizations 62,753 12,716 33,419 10,108 3,518 122,514 4,901 127,415
Operating Taxes 57,325 38,365 2,323 3,908 186 102,107 1,514 103,621
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Total Operating Expenses 606,921 303,979 46,701 80,350 291,198 1,329,149 (17,868) 1,311,281
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Operating Income 13,764 53,925 72,958 11,648 (45,919) 106,376 5,360 111,736
Other Income &
(Deductions) 5,160 2,225 (29,001) 4,085 429 (17,102) 505 (16,597)
Income Before Interest
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Charges & Income Taxes 18,924 56,150 43,957 15,733 (45,490) 89,274 5,865 95,139
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KeySpan Corporation
Segment Information
Three Months Ended June 30 , 2000
(In Thousands of Dollars)
Energy Investments
-------------------------------------
Gas Distribution Electric Gas Exploration Other Energy Total Operating Recon- Total Consoli-
Services & Production Investments Services Segments ciliations dation
Revenues
Unaffiliated Revenuse 361,540 388,695 57,842 1,490 137,895 947,462 126 947,588
Intersegment Revenues - - - - 32,158 32,158 (32,158) -
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361,540 388,695 57,842 1,490 170,053 979,620 (32,032) 947,588
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Operation Expenses
Purchased Gas 155,997 - - - 11,739 167,736 - 167,736
Purchased Fuel - 72,772 - - 29,642 102,414 - 102,414
Operations & Maintenance 104,188 201,913 10,169 3,197 92,687 412,154 (33,168) 378,986
Depreciation, Depletion &
Amortizations 30,072 12,296 22,246 624 2,399 67,637 6,173 73,810
Operating Taxes 48,994 37,695 254 187 - 87,130 3,988 91,118
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Total Operating Expenses 339,251 324,676 32,669 4,008 136,467 837,071 (23,007) 814,064
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Operating Income 22,289 64,019 25,173 (2,518) 33,586 142,549 (9,025) 133,524
Other Income &
(Deductions) 2,874 (4,106) (2,582) 6,572 (799) 1,959 738 2,697
Income Before Interest
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Charges& Income Taxes 25,163 59,913 22,591 4,054 32,787 144,508 (8,287) 136,221
=====================================================================================================
KeySpan Corporation
Segment Information
Six Months Ended June 30 , 2001
(In Thousands of Dollars)
Energy Investments
-----------------------------------
Gas Distribution Electric Gas Exploration Other Energy Total Operating Recon- Total Consoli-
Services & Production Investments Services Segments ciliations dation
Revenues
Unaffiliated Revenues 2,374,478 701,276 250,365 186,589 551,944 4,064,652 - 4,064,652
Intersegment Revenues - - - - 21,388 21,388 (21,388) -
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2,374,478 701,276 250,365 186,589 573,332 4,086,040 (21,388) 4,064,652
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Operation Expenses
Purchased Gas 1,433,796 - - 2,739 109,172 1,545,707 - 1,545,707
Purchased Fuel - 153,654 - - 136,003 289,657 - 289,657
Operations & Maintenance 320,127 331,536 29,882 137,627 356,001 1,175,173 (30,954) 1,144,219
Depreciation, Depletion &
Amortization 130,213 25,283 67,052 20,080 12,845 255,473 9,325 264,798
Operating Taxes 149,124 81,669 2,562 6,726 3,799 243,880 5,000 248,880
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Total Operating Expenses 2,033,260 592,142 99,496 167,172 617,820 3,509,890 (16,629) 3,493,261
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Operating Income 341,218 109,134 150,869 19,417 (44,488) 576,150 (4,759) 571,391
Other Income and
(Deductions) 9,312 5,196 (41,394) 8,793 957 (17,136) 8,743 (8,393)
Income Before Interest
Charges
Income Before Interest
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Charges & Income Taxes 350,530 114,330 109,475 28,210 (43,531) 559,014 3,984 562,998
=========================================================================================================
KeySpan Corporation
Segment Information
Six Months Ended June 30 , 2000
(In Thousands of Dollars)
Energy Investments
-------------------------------
Gas Distribution Electric Gas Exploration Other Energy Total Operating Recon- Total Consoli-
Services & Production Investments Services Segments ciliations dation
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Revenues
Unaffiliated Revenues 1,166,243 723,099 107,218 3,001 264,375 2,263,936 265 2,264,201
Intersegment Revenues - - - - 32,158 32,158 (32,158) -
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1,166,243 723,099 107,218 3,001 296,533 2,296,094 (31,893) 2,264,201
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Operation Expenses
Purchased Gas 530,629 - - - 46,154 576,783 - 576,783
Purchased Fuel - 140,649 - - 32,342 172,991 - 172,991
Operations & Maintenance 218,492 345,291 21,648 4,854 181,412 771,697 (37,232) 734,465
Depreciation, Depletion &
Amortization 57,368 24,561 43,249 1,008 4,585 130,771 12,620 143,391
Operating Taxes 124,490 77,185 792 192 - 202,659 3,882 206,541
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Total Operating Expenses 930,979 587,686 65,689 6,054 264,493 1,854,901 (20,730) 1,834,171
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Operating Income 235,264 135,413 41,529 (3,053) 32,040 441,193 (11,163) 430,030
Other Income &
(Deductions) 6,832 (3,373) (5,195) 14,086 (816) 11,534 3,098 14,632
Income Before Interest
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Charges & Income Taxes 242,096 132,040 36,334 11,033 31,224 452,727 (8,065) 444,662
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