Exhibit 99.1
NEWS
- --------------------------------------------------------------------------------
KeySpan Corporation For Immediate Release
Contacts: Investors Media Relations
George Laskaris Andrea Staub
718.403.2526 516.545.5052
516.824.1241 (pager)
KeySpan Achieves Strong 1st Quarter Results - Up 8% over Last Year
------------------------------------------------------------------
Solid Growth in Core Businesses Drive Earnings
Brooklyn, New York, April 30, 2004 - KeySpan Corporation (NYSE: KSE) announced
strong first quarter results that exceeded expectations and last year's results.
Consolidated earnings from continuing operations, less preferred stock
dividends, for the three months ended March 31, 2004 were $246.2 million or
$1.54 per share as compared to $222.8 million or $1.42 per share for the same
period last year, a per share increase of approximately 8%. These results
exclude last year's first quarter gain from the partial sale of the Houston
Exploration Company. Including this gain, first quarter 2003 results were $241.8
million or $1.54 per share.
Operating income for the quarter was up 7% over last year. The solid performance
of the gas distribution business was the main driver of these results,
benefiting from new gas load growth and the recently approved Boston Gas rate
increase. In addition, the electric services and gas exploration and production
segments contributed to these positive results through lower electric generation
maintenance costs and higher natural gas production levels and prices.
"We are extremely pleased with our strong first quarter results as we continue
to execute our focused strategy of growing our core businesses. At the same
time, we are managing our expenses and strengthening our financial position,"
said Robert B. Catell, Chairman and Chief Executive Officer. "Our gas
distribution system performed very reliably during one of the coldest January
months on record. We are off to a strong start in achieving our 2004 goal of
adding $55 million in gross profit margin as gas conversions, and new customer
additions are already 20% ahead of last year. In our electric operations, we
have prepared our generation portfolio to meet the demands of the upcoming
summer cooling season. And we begin the summer with the addition of our new 250
MW unit at the Ravenswood site, the first new major baseload plant in New York
City in over 30 years."
Segment Highlights
The results from continuing operations for the first quarter of 2004 and 2003
are reported on an Operating Income basis as follows:
- ------------------------------------------------------------------- ------------------ -------------------
Operating Income ($ millions) 1st Quarter 1st Quarter
2004 2003
- ------------------------------------------------------------------- ------------------ -------------------
Gas Distribution 379.7 364.9
- ------------------------------------------------------------------- ------------------ -------------------
Electric Services 47.2 39.6
- ------------------------------------------------------------------- ------------------ -------------------
Energy Investments
- ------------------------------------------------------------------- ------------------ -------------------
Exploration & Production 62.1 55.6
- ------------------------------------------------------------------- ------------------ -------------------
Other Energy Investments 12.9 10.1
---- ----
- ------------------------------------------------------------------- ------------------ -------------------
Sub-Total Energy Investments 75.0 65.7
- ------------------------------------------------------------------- ------------------ -------------------
Energy Services (18.5) (9.1)
- ------------------------------------------------------------------- ------------------ -------------------
Total Operating Segments 483.4 461.1
----- -----
- ------------------------------------------------------------------- ------------------ -------------------
Other 3.2 (4.5)
- ------------------------------------------------------------------- ------------------ -------------------
Total Operating Income 486.7 456.7
- ------------------------------------------------------------------- ------------------ -------------------
Notes:
- - Reported Operating Income includes Equity Income from Investments.
- - Energy Investments Operating Income represents 100% of the Company's gas
exploration and production and Canadian subsidiaries' results.
Key Operating Income Drivers by Segment
o Our Gas Distribution segment, which serves New York City, Long Island and
New England, reported operating income of $380 million, exceeding 2003
results by approximately $15 million, or 4%. These results benefited from
new load growth, as well as from a rate increase in the New England service
territory. During the quarter, KeySpan completed more than 10,300 gas
installations, which should add approximately $10.5 million in new gross
profit margin in the future. The rate increase for the former Boston Gas
Company, which became effective last November, contributed approximately
$11 million to net margins. Weather for the quarter was approximately 7%
colder than normal but 2% warmer than last year. Positive year to date
results were offset by an increase in operating expenses of approximately
$12 million, primarily attributable to higher pension and other
post-retirement benefit costs, a larger provision for uncollectible
accounts mainly driven by higher gas prices, and higher depreciation
expense resulting from the continued expansion of the gas distribution
system.
o The Electric Services segment owns and operates generation in the New York
City and Long Island "load pockets" and manages the Long Island Power
Authority's transmission and distribution system under long-term contracts.
Operating income for the first quarter was approximately $47 million, which
was $7.5 million or 19% higher than the same period last year,
predominantly attributable to a decrease in operating expenses. This
decrease in operating expenses was primarily the result of lower repair and
maintenance costs on the electric generating units, the sequencing of
certain projects related to the LIPA agreements, and the impact of
recording the Ravenswood facility lease on the balance sheet as debt under
the implementation of FASB's Financial Interpretation Number 46.
2
o The Energy Investments segment includes the Company's gas exploration and
production operations -- primarily its 55% ownership of The Houston
Exploration Company (NYSE: THX) -- as well as pipeline and other
investments. This segment realized a 14% increase in operating income for
the first quarter, largely due to higher production volumes and a slight
increase in gas commodity prices in the Company's gas exploration and
production operations.
o The Energy Services segment reported an operating loss that was $9.4
million higher than last year. During the quarter, in the Home Energy
Services division, operating expenses increased, principally as a result of
the determination that certain accounts receivable and contract revenues
were uncollectible, and inventory adjustments. In the Business Solutions
Division, gross profit margin increased, primarily attributable to BR+A, a
company that was acquired in the third quarter of 2003. The backlog of
awarded contracts at quarter end increased to $508 million, as compared to
$479 million at March 31, 2003, due to the BR+A acquisition. Overall,
however, these results continue to be below expectations, and management
continues to evaluate this segment and the profitability of its components,
and will make the necessary changes as appropriate.
Financial Update
The Company continues to move ahead with its commitment to monetize its non-core
businesses and strengthen its balance sheet. On April 1, 2004, KeySpan completed
the sale of an additional 36% of its ownership interest in KeySpan Canada,
reducing its holdings from 61% to 25%. KeySpan's interest was monetized through
a Canadian income trust and yielded net proceeds of approximately $140 million.
A pre-tax gain of approximately $20 million is expected to be reflected in
second quarter results. The Company will continue to pursue opportunities for
the sale of its remaining non-core assets, including its ownership interest in
The Houston Exploration Company.
At the end of the first quarter, the Company's debt to total capitalization
ratio, as calculated by the Company's credit facilities, improved to 56.1%, as
compared to 58.2% at year end 2003. On a GAAP basis, the debt to total
capitalization ratio was 59.8% at the end of the quarter, as compared to 61.9%
at year-end.
The Company expects to finance the construction of the new 250 MW Ravenswood
unit by replacing outstanding commercial paper with the proceeds from a proposed
sale/leaseback transaction anticipated to be completed in the second quarter of
2004. This transaction will be accounted for as an operating lease in accordance
with SFAS 98. The benefits of this lease transaction are lower cost of financing
and reduced leverage.
The Company declared a quarterly common stock dividend of $0.445 per share,
payable May 1, 2004, to shareholders of record as of April 16, 2004. This is the
Company's 24th consecutive quarter of paying a dividend, and builds upon its
long-standing commitment of dividend payments to its shareholders. The $1.78 per
share annual dividend, supported by strong cash flows, provides a current yield
to shareholders of approximately 5%.
3
2004 Earnings Outlook
KeySpan's 2004 earnings guidance remains at $2.55 to $2.75 per share, as
announced in December 2003. The Company's earnings guidance includes earnings
from continuing core operations of approximately $2.20 to $2.30 per share, and
from exploration and production operations of approximately $0.35 to $0.45 per
share. The Company's earnings forecasts may vary significantly during the year
due to, among other things, changing energy market conditions and weather. The
Company once again reaffirms its dividend at the current annual rate of $1.78
per share.
"Our strong performance in the first quarter demonstrates the effectiveness of
our growth strategy and establishes the foundation for achieving our earnings
objectives in 2004," said Mr. Catell. "Our core businesses continue to grow
through natural gas conversions and the addition of generation to our portfolio.
The new Ravenswood unit will contribute to both New York City's generation needs
for the upcoming summer cooling season and to our earnings in 2004 and beyond.
We are continuing to assess our options with respect to the monetization of our
remaining non-core assets, as exemplified by the recent 36% monetization of
KeySpan Canada. The growth of our core businesses and the dividend yield will
continue to provide value to our shareholders."
- --------------------------------------------------------------------------------
Investors are invited to listen to the KeySpan Corporation 2003 Year End
Earnings Conference Call on:
Friday, April 30, 2004, at 10:30 AM (EST)
Dial-In Number: 888-552-7850
International Dial Number: (706) 645-9166
Conference ID # 4885686
Replay will begin two hours after completion of the call until 5/7/04
Replay Number: 800-642-1687
International Replay Number: (706) 645-9291
Access Code: 7293456
Audio webcast available at http://investor.keyspanenergy.com
- --------------------------------------------------------------------------------
A member of the Standard & Poor's 500 Index, KeySpan Corporation (NYSE:KSE) is
the fifth largest distributor of natural gas in the United States and the
largest in the Northeast, operating regulated gas utilities in New York,
Massachusetts and New Hampshire, serving 2.5 million customers. These
customer-focused businesses are complemented by a portfolio of service companies
which offer energy-related products, services and solutions to homes and
businesses. KeySpan is also the largest electric generator in New York State. We
own approximately 6,600 megawatts of generating capacity, providing power to 1.1
million customers of the Long Island Power Authority on Long Island and
supplying approximately 25 percent of New York City's capacity needs. In
addition to these assets, KeySpan has strategic investments in natural gas
exploration, production, pipeline transportation, distribution and storage, and
Canadian gas processing. KeySpan has headquarters in Brooklyn, New England and
Long Island. For more information, visit KeySpan's web site at
www.keyspanenergy.com.
4
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.
5
KeySpan Corporation
Consolidated Summary of Earnings
(In Thousands of Dollars, Except Per Share Amounts)
- ---------------------------------------------------------------------------------------------------------------------------
Quarter Ended March 31
2004 2003
- ---------------------------------------------------------------------------------------------------------------------------
Revenues
Gas Distribution $ 1,927,779 $ 1,832,701
Electric Services 359,136 397,700
Energy Services 129,059 129,065
Gas Exploration and Production 152,419 127,847
Energy Investments 27,180 25,212
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenues 2,595,573 2,512,525
- ---------------------------------------------------------------------------------------------------------------------------
Operating Expenses
Purchased gas for resale 1,226,573 1,196,165
Fuel and purchased power 101,612 97,522
Operations and maintenance 492,466 498,189
Depreciation, depletion and amortization 171,684 144,971
Operating taxes 122,279 124,713
- ---------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 2,114,614 2,061,560
- ---------------------------------------------------------------------------------------------------------------------------
Income from equity investments 5,717 5,729
- ---------------------------------------------------------------------------------------------------------------------------
Operating Income 486,676 456,694
- ---------------------------------------------------------------------------------------------------------------------------
Other Income and (Deductions)
Interest charges (84,066) (68,939)
Minority interest (20,293) (18,054)
Cost of debt redemption - (18,194)
Gain of sale of subsidiary stock - 19,020
Other 2,761 15,397
- ---------------------------------------------------------------------------------------------------------------------------
Total Other Income (Deductions) (101,598) (70,770)
- ---------------------------------------------------------------------------------------------------------------------------
Income Taxes
Current 147,702 129,575
Deferred (10,320) 13,258
- ---------------------------------------------------------------------------------------------------------------------------
Total Income Taxes 137,382 142,833
- ---------------------------------------------------------------------------------------------------------------------------
Earnings before Effect of Change in Accounting Principle 247,696 243,091
Cumulative Effect of Change in Accounting Principle - 174
- ---------------------------------------------------------------------------------------------------------------------------
Net Income 247,696 243,265
Preferred Stock Dividend Requirements 1,461 1,461
- -------------------------------------------------------------------
Earnings for Common Stock $ 246,235 $ 241,804
- -------------------------------------------------------------------
Basic Earnings Per Share:
Before Change in Accounting Principle,
less preferred stock dividends $1.54 $1.54
Change in Accounting Principle - -
- -------------------------------------------------------------------
Basic Earnings Per Share $1.54 $1.54
- -------------------------------------------------------------------
Diluted Earnings Per Share:
Before Change in Accounting Principle, $1.53 $1.53
less preferred stock dividends
Change in Accounting Principle - -
- -------------------------------------------------------------------
Diluted Earnings Per Share $1.53 $1.53
- -------------------------------------------------------------------
Average Shares Outstanding (000) 159,892 156,886
Average Shares Outstanding - Diluted (000) 161,164 158,045
6
KeySpan Corporation
Segment Information
Three Months Ended March 31, 2004
(In Thousands of Dollars)
Energy Investments
-------------------------
Gas Total
Gas Electric Exploration Other Energy Operating Reconcil- Total
Distribution Services & Production Investments Services Segments iations Consolidation
Unaffiliated Revenues 1,927,779 359,136 152,419 27,180 129,059 2,595,573 2,595,573
Intersegment Revenues - 1,265 3,436 4,701 (4,701) -
--------------------------------------------------------------------------------------------------------
1,927,779 359,136 152,419 28,445 132,495 2,600,274 (4,701) 2,595,573
--------------------------------------------------------------------------------------------------------
Operation Expenses
Purchased Gas 1,226,573 - - - 1,226,573 - 1,226,573
- -
Purchased Fuel - 101,489 - 123 - 101,612 - 101,612
- -
Operations and Maintenance 172,399 147,185 25,151 15,388 148,083 508,206 (15,740) 492,466
- -
Depreciation, Depletion
and Amortization 76,940 21,605 61,921 4,981 2,485 167,932 3,752 171,684
- - -
Operating Taxes 72,214 41,657 3,239 748 401 118,259 4,020 122,279
-
--------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,548,126 311,936 90,311 21,240 150,969 2,122,582 (7,968) 2,114,614
--------------------------------------------------------------------------------------------------------
Earnings from equity
investments - - - 5,717 - 5,717 - 5,717
--------------------------------------------------------------------------------------------------------
Operating Income 379,653 47,200 62,108 12,922 (18,474) 483,409 3,267 486,676
========================================================================================================
7
KeySpan Corporation
Segment Information
Three Months Ended March 31, 2003
(In Thousands of Dollars)
Energy Investments
-------------------------
Gas Total
Gas Electric Exploration Other Energy Operating Reconcil- Total
Distribution Services & Production Investments Services Segments iations Consolidation
Unaffiliated Revenues 1,832,701 397,700 127,847 25,212 129,065 2,512,525 2,512,525
Intersegment Revenues 25 1,252 1,426 2,703 (2,703) -
---------------------------------------------------------------------------------------------------------
1,832,701 397,725 127,847 26,464 130,491 2,515,228 (2,703) 2,512,525
---------------------------------------------------------------------------------------------------------
Operation Expenses
Purchased Gas 1,154,132 42,033 - - - 1,196,165 - 1,196,165
- -
Purchased Fuel - 97,388 - 134 - 97,522 - 97,522
- -
Operations and Maintenance 166,090 164,401 20,106 16,644 137,178 504,419 (6,230) 498,189
-
Depreciation, Depletion
and Amortization 70,817 16,620 47,443 4,471 2,114 141,465 3,506 144,971
-
Operating Taxes 76,725 37,639 4,708 748 321 120,141 4,572 124,713
---------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,467,764 358,081 72,257 21,997 139,613 2,059,712 1,848 2,061,560
---------------------------------------------------------------------------------------------------------
Earnings from equity
investments - - - 5,657 - 5,657 72 5,729
---------------------------------------------------------------------------------------------------------
Operating Income 364,937 39,644 55,590 10,124 (9,122) 461,173 (4,479) 456,694
=========================================================================================================
8