Exhibit 99.1
KeySpan 2002 Third Quarter Earnings on Target
-- New Electric Generation Units Contribute to Strong Performance --
-- Company Reaffirms 2002 Earnings Guidance --
Brooklyn, New York, October 24, 2002 - KeySpan Corporation (NYSE: KSE) reported
third quarter earnings in line with Company expectations driven by strong
electric business results. KeySpan's third quarter consolidated earnings from
continuing operations, less preferred stock dividends, were $3.6 million, or
$0.03 per share, compared to a loss of $38.9 million, or $0.28 per share, for
the same period last year. For the nine-months ended September 30, 2002, KeySpan
reported consolidated earnings from continuing operations, less preferred stock
dividends, of $244.5 million, or $1.74 per share, as compared to earnings of
$171.8 million, or $1.25 per share, for the same period last year. Excluding
2001 special items, 2001 earnings from continuing operations, less preferred
stock dividends, for the third quarter were a loss of $2.4 million, or $0.02 per
share, and earnings of $243.9 million, or $1.77 per share, for the nine-months
ended September 30.
The main driver of the third quarter earnings was the continued solid
performance of the core electric business during its summer peak period. The
electric results benefited from the installation of 158 megawatts of electric
generating peaking units under contract to the Long Island Power Authority, as
well as the hot weather experienced during the summer. In addition, results
continue to benefit from lower interest costs, and the elimination of the
amortization of goodwill expense.
"We continue to implement our focused core business strategy, highlighted by our
electric business results this quarter," said Robert B. Catell, Chairman and
Chief Executive Officer. "Our electric performance benefited from the more than
97% availability of our New York and Long Island generation plants and the new
peaking units. We successfully addressed the electric needs of New York and Long
Island during a summer that experienced much hotter weather than normal.
Moreover, our core gas distribution business is well positioned to address the
natural gas supply needs of our existing and potential customers, specifically
on Long Island and New England, where the Company continues to add thousands of
new customers."
KeySpan's 2002 third quarter consolidated earnings available for common
shareholders of $3.6 million, or $0.03 per share, compared to a loss of $36.6
million, or $0.26 per share, which includes discontinued operations from Midland
Enterprises, for the same period last year. For the nine-months ended September
30, 2002, KeySpan reported consolidated earnings available for common
shareholders, including discontinued operations, of $224.8 million, or $1.60 per
share, as compared to earnings of $178.7 million, or $1.30 per share, in the
same period last year.
Segment Highlights
Major highlights from continuing operations in 2002 and 2001 are reported on an
Earnings Before Interest and Taxes (EBIT) basis as follows:
- ------------------------------------------------- --------------- --------------- --------------- -----------------
EBIT ($ millions) 3rd Quarter 3rd Quarter Year-to-Date Year-to-Date
----------------- ------------ ------------ ------------- ------------
2002 2001 2002 2001
---- ---- ---- ----
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Gas Distribution ($38.9) ($31.0) $320.0 $318.6
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Electric Services $113.3 $96.5 $243.7 $229.8
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Energy Services (1) ($4.5) ($69.6) ($23.9) ($133.0)
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Energy Investments
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Exploration & Production $21.3 $26.8 $60.5 $136.3
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Other Energy Investments $10.9 $2.4 $17.1 $18.8
----- ---- ----- -----
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Total Operating Segments $102.1 $25.1 $617.4 $570.5
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Other (2) ($15.9) $24.7 ($12.8) $26.6
------- ----- ------- -----
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Total EBIT $86.3 $49.8 $604.6 $597.1
- ------------------------------------------------- --------------- --------------- --------------- -----------------
Note: As previously reported, (1) 2001 Energy Services EBIT includes special
charges of $72.6 million and $133.7 million, for the third quarter and
nine-months ended, respectively, associated with operations of the former Roy
Kay companies. (2) 2001 Other EBIT includes a benefit of $22.0 million, for the
third quarter and nine-months ended, associated with a favorable appellate court
decision.
Key EBIT Drivers by Segment
o The Gas Distribution segment serving New York City, Long Island and New
England recorded an anticipated seasonal loss in the third quarter.
Quarterly results were impacted, in part, by the timing of operation and
maintenance expenses. On a year to date basis, the gas distribution segment
achieved higher EBIT than last year, despite the extraordinarily warm
winter, due to gas customer growth and the elimination of the amortization
of goodwill. Thus far in 2002, KeySpan has completed more than 35,000 gas
installations that should add approximately $40 million in new annual gross
profit margin.
o The Electric Services segment consists of a focused generation portfolio
with revenues provided by the long-term contracts with the Long Island
Power Authority and electric capacity and energy sales from our Ravenswood
Plant in New York City. The Electric Services segment reported third
quarter results of $16.8 million ahead of last year. The main drivers of
this performance were contributions from our new Long Island electric
generating peaking units and stronger energy sales due to the hotter than
normal summer weather.
o The Energy Services segment reported a $4.5 million EBIT loss during the
third quarter. The results consisted of a positive contribution from our
Business Solutions segment, which continues to show improvement and is near
target, offset by a loss at Home Energy Services as a result of fewer
on-demand service requests due to the economy, and the cost to close out a
service operation.
o The Energy Investments segment includes the Company's gas exploration and
production operations -- primarily from the Company's 67% ownership of The
Houston Exploration Company (NYSE: THX) -- as well as pipeline and other
investments. The Energy Investments segment realized a third quarter EBIT
increase of $3.0 million compared to last year and a $77.5 million decline
for the nine-months ended September 30, 2002, primarily due to lower gas
prices. E&P production in the quarter totaled 26.9 Bcfe, a 16% increase
from 23.3 Bcfe in 2001, offset by a 10% decrease in average realized prices
from $3.50 per Mcf in 2001 to $3.14 per Mcf in 2002. Given the potential
volatility of the gas commodity market, THX has hedged approximately 65% of
2002 production at a weighted average floor price of $3.40 per MMBtu and
weighted average ceiling price of $4.83 per MMBtu, and based on current
year's estimated production, approximately 65% of 2003 at a weighted
average floor price of $3.40 per MMBtu and weighted average ceiling price
of $4.55 per MMBtu.
Financial Update
In October, consistent with our long-range plans, KeySpan monetized a portion of
the assets related to its joint venture drilling program entered into with The
Houston Exploration Company in 1999. KeySpan received $26.5 million in cash for
18.6 Bcfe of estimated proved and probable reserves. The proceeds will be used
to pay down short term debt and there is no impact on earnings.
In 2002, the Company has benefited from lower interest expense attributable to
lower interest rates on commercial paper, and the benefit of interest rate swaps
used to optimize the Company's mix of fixed and variable debt. In addition,
results benefited from the adoption of FAS 142, which resulted in the
elimination of the amortization of goodwill in the amounts of $12.0 million and
$36.9 million for the three and nine months ended September 30, 2002,
respectively.
During the quarter, KeySpan's Board of Directors reviewed the Company's
governance policies and determined that current corporate practices are in
general conformance with new statutory and regulatory requirements. In an effort
to ensure transparency for shareholders, the Company has decided to expense
stock options starting in 2003 to reflect all compensation costs in earnings.
Based on current estimates, expensing the options is not expected to have a
significant impact on the Company's reported earnings in 2003.
2002 Earnings Outlook
Given the Company's year to date results, KeySpan is reaffirming its 2002
earnings guidance of $2.60 to $2.75 per share, which includes earnings from
continuing core operations of approximately $2.40 to $2.45 per share, and
earnings from E&P operations of approximately $0.20 to $0.30 per share. The
Company's earnings forecasts may vary significantly during the year due to,
among other things, changing energy market conditions. KeySpan is once again
reaffirming its commitment to maintaining the dividend at the current annual
rate of $1.78 per share.
"We continue to implement our strategy toward becoming the premier energy
company in the Northeast," said Mr. Catell. "Our year to date performance
reflects the strength of our core gas and electric businesses. We have a solid
balance sheet and strong financial fundamentals in place, and we are pleased to
reaffirm our 2002 earnings forecast of $2.60 to $2.75 per share and solid
dividend of $1.78 per share."
- --------------------------------------------------------------------------------
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 approximately 12,000 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, and fiber-optic cable. For more information, visit KeySpan's web
site at: http://www.keyspanenergy.com.
Certain statements contained herein are forward-looking statements, which
reflect numerous assumptions and estimates and involve a number of risks and
uncertainties. For these statements, we claim the protection of the safe harbor
for forward-looking statements provided by the Private Securities Litigation
Reform Act of 1995. There are possible developments that could cause our actual
results to differ materially from those forecast or implied in the
forward-looking statements. You are cautioned not to place undue reliance on
these forward-looking statements, which are current only as of the date of this
filing. We disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Among the factors that could cause actual results to differ
materially are: general economic conditions, especially in the Northeast United
States; available sources and costs of fuel; volatility of energy prices in a
deregulated market environment as well as in the source of natural gas and fuel
used to generate electricity; potential write-down of our investment in natural
gas properties when natural gas prices are depressed or if we have significant
downward revisions in our estimated proved gas reserves; federal and state
regulatory initiatives that increase competition, threaten cost and investment
recovery and impact rate structure; our ability to successfully reduce our cost
structures; implementation of new accounting standards; the degree to which we
develop unregulated business ventures, as well as federal and state regulatory
policies affecting our ability to retain and operate those business ventures;
our ability to identify and make complementary acquisitions, as well as the
successful integration of those acquisitions; inflationary trends and interest
rates; and risks detailed from time to time in reports and other documents filed
by us with the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
Earnings Conference Call: Investors are invited to participate in the KeySpan
Corporation 2002 Third Quarter Earnings Conference Call on:
Thursday, October 24, 2002, at 4:00 PM (EST)
Dial Number: 888-552-7850
International Dial Number: (706) 645-9166
Replay Number: 800-642-1687
International Replay Number: (706) 645-9291
Access Code: 5656138
Audio webcast available at http://investor.keyspanenergy.com
KeySpan Corporation
Consolidated Summary of Earnings
(In Thousands of Dollars, Except Per Share Amounts)
-------------------------------------------------------------------------------------------------------------------------
3 Months 3 Months 9 Months 9 Months
Ended Ended Ended Ended
9/30/02 9/30/01 9/30/02 9/30/01
-------------------------------------------------------------------------------------------------------------------------
Revenues
Gas Distribution $337,785 $346,703 $2,082,577 $2,721,032
Electric Services 414,868 387,881 1,084,309 1,089,156
Energy Services 217,104 263,047 687,975 814,911
Gas Exploration and Production 86,464 82,362 249,452 318,093
Energy Investments 23,599 22,436 62,784 73,627
-------------------------------------------------------------------------------------------------------------------------
Total Revenues 1,079,820 1,102,429 4,167,097 5,016,819
-------------------------------------------------------------------------------------------------------------------------
Operating Expenses
Purchased gas for resale 138,607 148,893 1,037,907 1,694,591
Fuel and purchased power 139,538 164,555 317,253 454,212
Operations and maintenance 485,157 507,113 1,531,394 1,544,799
Depreciation, depletion
& amortization 127,301 135,937 380,758 388,679
Operating taxes 96,298 94,909 304,076 337,734
-------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 986,901 1,051,407 3,571,388 4,420,015
-------------------------------------------------------------------------------------------------------------------------
Operating Income 92,919 51,022 595,709 596,804
Other Income & (Deductions) (6,646) (1,230) 8,901 316
-------------------------------------------------------------------------------------------------------------------------
Income Before Interest Charges
& Income Taxes 86,273 49,792 604,610 597,120
Interest Charges 79,937 78,735 222,594 263,967
Income Taxes 1,372 8,484 133,249 156,884
-------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) From
Continuing Operations 4,964 (37,427) 248,767 176,269
-------------------------------------------------------------------------------------------------------------------------
Income (Loss) From Discontinued Operations - 2,253 (19,662) 6,806
-------------------------------------------------------------------------------------------------------------------------
Net Income 4,964 (35,174) 229,105 183,075
Preferred Stock Dividends 1,335 1,473 4,287 4,425
-------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) For Common Stock $3,629 $ (36,647) $224,818 $178,650
-------------------------------------------------------------------------------------------------------------------------
Basic Earnings (Loss) Per Share:
Continuing Operations 0.04 (0.27) 1.77 1.28
Discontinued Operations - 0.02 (0.14) 0.05
Preferred Stock (0.01) (0.01) (0.03) (0.03)
-------------------------------------------------------------------------------------------------------------------------
Basic Earnings (Loss) Per Share 0.03 (0.26) 1.60 1.30
-------------------------------------------------------------------------------------------------------------------------
Diluted Earnings (Loss) Per Share:
Continuing Operations 0.03 (0.27) 1.75 1.26
Discontinued Operations - 0.02 (0.14) 0.05
Preferred Stock (0.01) (0.01) (0.03) (0.03)
-------------------------------------------------------------------------------------------------------------------------
Diluted Earnings (Loss) Per Share 0.02 (0.26) 1.58 1.28
-------------------------------------------------------------------------------------------------------------------------
Average Common Shares
Outstanding (000) 141,686 138,693 140,929 137,856
Average Common Shares
Outstanding - Diluted (000) 142,359 139,508 141,760 138,921
PRELIMINARY
KeySpan Corporation
Segment Information
Three Months Ended September 30, 2002
(In Thousands of Dollars)
Energy Investments
--------------------------
Gas Total
Gas Electric Exploration Other Energy Operating Recon- Total
Distribution Services & Production Investments Services Segments ciliations Consolidated
---------------------------------------------------------------------------------------------------------
Unaffliated Revenues 337,785 414,868 86,464 23,599 217,104 1,079,820 1,079,820
Intersegment Revenues 25 194 219 (219) -
---------------------------------------------------------------------------------------------------------
Revenues 337,785 414,893 86,464 23,793 217,104 1,080,039 (219) 1,079,820
Operation Expenses
Purchased Gas 130,698 - - - 7,909 138,607 138,607
Purchased Fuel - 101,572 - 66 37,900 139,538 139,538
Operations and
Maintenance 147,023 149,682 12,234 10,849 173,393 493,181 (8,024) 485,157
Depreciation, Depletion
& Amortizations 56,174 16,176 44,880 3,875 2,430 123,535 3,766 127,301
Operating Taxes 45,972 40,809 2,996 758 306 90,841 5,457 96,298
---------------------------------------------------------------------------------------------------------
Total Operating
Expenses 379,867 308,239 60,110 15,548 221,938 985,702 1,199 986,901
---------------------------------------------------------------------------------------------------------
Operating Income (42,082) 106,654 26,354 8,245 (4,834) 94,337 (1,418) 92,919
Other Income and
(Deductions) 3,204 6,624 (5,079) 2,690 379 7,818 (14,464) (6,646)
Income Before Interest ---------------------------------------------------------------------------------------------------------
Charges & Income Taxes (38,878) 113,278 21,275 10,935 (4,455) 102,155 (15,882) 86,273
=========================================================================================================
KeySpan Corporation
Segment Information
Nine Months Ended September 30, 2002
(In Thousands of Dollars)
Energy Investments
-------------------------
Gas Total
Gas Electric Exploration Other Energy Operating Recon- Total
Distribution Services & Production Investments Services Segments ciliations Consolidated
----------------------------------------------------------------------------------------------------------
Unaffliated Revenues 2,082,577 1,084,309 249,452 62,784 687,975 4,167,097 4,167,097
Intersegment Revenues 75 582 657 (657) -
----------------------------------------------------------------------------------------------------------
Revenues 2,082,577 1,084,384 249,452 63,366 687,975 4,167,754 (657) 4,167,097
Operation Expenses
Purchased Gas 980,638 - - - 57,269 1,037,907 - 1,037,907
Purchased Fuel - 216,712 - 116 100,425 317,253 - 317,253
Operations and
Maintenance 445,330 481,732 35,183 44,633 547,695 1,554,573 (23,179) 1,531,394
Depreciation, Depletion
& Amortizations 177,312 43,835 130,766 10,791 6,726 369,430 11,328 380,758
Operating Taxes 170,078 114,449 7,870 2,414 916 295,727 8,349 304,076
----------------------------------------------------------------------------------------------------------
Total Operating
Expenses 1,773,358 856,728 173,819 57,954 713,031 3,574,890 (3,502) 3,571,388
----------------------------------------------------------------------------------------------------------
Operating Income 309,219 227,656 75,633 5,412 (25,056) 592,864 2,845 595,709
Other Income and
(Deductions) 10,797 15,995 (15,091) 11,677 1,155 24,533 (15,632) 8,901
Income Before Interest ----------------------------------------------------------------------------------------------------------
Charges & Income Taxes 320,016 243,651 60,542 17,089 (23,901) 617,397 (12,787) 604,610
==========================================================================================================
PRELIMINARY
KeySpan Corporation
Segment Information
Three Months Ended September 30, 2001
(In Thousands of Dollars)
Energy Investments
--------------------------
Gas Total
Gas Electric Exploration Other Energy Operating Recon- Total
Distribution Services & Production Investments Services Segments ciliations Consolidated
---------------------------------------------------------------------------------------------------------
Unaffliated Revenues 346,703 387,881 82,362 22,436 263,047 1,102,429 1,102,429
Intersegment Revenues 25 25 (25) -
-------------------------------------------------------------------------------------------------------
Revenues 346,703 387,906 82,362 22,436 263,047 1,102,454 (25) 1,102,429
Operation Expenses
Purchased Gas 144,279 - - - 4,614 148,893 - 148,893
Purchased Fuel - 87,401 - - 77,154 164,555 - 164,555
Operations and
Maintenance 125,276 153,881 10,459 18,562 232,697 540,875 (33,762) 507,113
Depreciation, Depletion
& Amortizations 60,341 13,200 35,697 3,816 18,199 131,253 4,684 135,937
Operating Taxes 50,530 38,931 2,012 670 278 92,421 2,488 94,909
-------------------------------------------------------------------------------------------------------
Total Operating
Expenses 380,426 293,413 48,168 23,048 332,942 1,077,997 (26,590) 1,051,407
-------------------------------------------------------------------------------------------------------
Operating Income (33,723) 94,493 34,194 (612) (69,895) 24,457 26,565 51,022
Other Income &
(Deductions) 2,714 2,026 (7,407) 3,030 301 664 (1,894) (1,230)
Income Before Interest -------------------------------------------------------------------------------------------------------
Charges and Income Taxes (31,009) 96,519 26,787 2,418 (69,594) 25,121 24,671 49,792
=======================================================================================================
KeySpan Corporation
Segment Information
Nine Months Ended September 30, 2001
(In Thousands of Dollars)
Energy Investments
-------------------------
Gas Total
Gas Electric Exploration Other Energy Operating Recon- Total
Distribution Services & Production Investments Services Segments ciliations Consolidated
------------------------------------------------------------------------------------------------------
Unaffliated Revenues 2,721,032 1,089,156 318,093 73,627 814,911 5,016,819 5,016,819
Intersegment Revenues 75 75 (75) -
------------------------------------------------------------------------------------------------------
Revenues 2,721,032 1,089,231 318,093 73,627 814,911 5,016,894 (75) 5,016,819
Operation Expenses
Purchased Gas 1,578,074 - - 2,731 113,786 1,694,591 - 1,694,591
Purchased Fuel - 241,055 - - 213,157 454,212 - 454,212
Operations and
Maintenance 442,504 465,787 40,341 48,967 591,159 1,588,758 (43,959) 1,544,799
Depreciation, Depletion
& Amortizations 191,677 38,490 102,749 11,337 30,038 374,291 14,388 388,679
Operating Taxes 202,310 120,600 4,574 931 836 329,251 8,483 337,734
------------------------------------------------------------------------------------------------------
Total Operating
Expenses 2,414,565 865,932 147,664 63,966 948,976 4,441,103 (21,088) 4,420,015
------------------------------------------------------------------------------------------------------
Operating Income 306,467 223,299 170,429 9,661 (134,065) 575,791 21,013 596,804
Other Income &
(Deductions) 12,129 6,526 (34,169) 9,158 1,052 (5,304) 5,620 316
Income Before Interest ------------------------------------------------------------------------------------------------------
Charges and Income Taxes 318,596 229,825 136,260 18,819 (133,013) 570,487 26,633 597,120
======================================================================================================