EX 99-1
Vectren Corporation
P.O. Box 209
Evansville, IN 47702-0209
FOR IMMEDIATE RELEASE
January 28, 2004
Vectren Corporation
Reports Fiscal 2003 Results
Evansville, Indiana - Vectren Corporation (NYSE:VVC) today reported net income
of $111.2 million, or $1.58 per share, for the year ended December 31, 2003,
compared to net income of $114.0 million, or $1.69 per share, in 2002. Weighted
average shares for calendar 2003 were 70.6 million, an increase of 3.0 million
shares, or approximately 4.5%, from December 31, 2002, as the result of the
August 2003 equity offering of approximately 7.4 million shares.
Net income for the fourth quarter ended December 31, 2003, was $44.1 million, or
$0.59 per share, compared to net income of $42.4 million, or $0.63 per share,
for the same period last year. Results for the fourth quarter and year were
consistent with the Wall Street consensus estimates.
Said Niel C. Ellerbrook, Chairman, President and CEO, "Overall, fiscal 2003 was
a good year for Vectren. We strengthened the balance sheet, began to see the
positive impact of the recovery of environmental expenditures in our electric
operations, and made progress in narrowing our focus of our nonregulated
operations to those businesses that will continue to enhance earnings growth
going forward. We are targeting consolidated earnings growth in the 5% range for
2004 and even greater improvement in 2005, as we expect to see the impact of
rate relief in our gas distribution operations and continued growth in
nonregulated contributions. Our improved financial position and the positive
outlook for our businesses going forward led the Board of Directors to approve a
3.6% increase in our dividend during the fourth quarter."
Utility Group
Utility Group earnings for the fourth quarter 2003 were $34.5 million, as
compared to $37.4 million for the same quarter last year. The $2.9 million
decline was primarily due to mild heating weather, partially offset by the
effects of an Ohio regulatory order allowing the company to defer for future
recovery bad debt expense in excess of the amount provided in base rates.
Earnings for the year ended December 31, 2003, were $85.6 million as compared to
$97.1 million in 2002. The $11.5 million decrease was primarily due to increased
operating expenses and the write off of the investment in an entity that
processed fly ash into building materials, BABB International. The decrease was
partially offset by increased nonfirm wholesale power margins and retail
electric rate recovery related to NOx compliance expenditures and related
operating expenses.
Gas margins for the fourth quarter were $100.9 million as compared to $108.8
million for the same quarter last year. The decrease was primarily attributable
to an estimated $5.0 million impact for weather that was 15% warmer than the
prior period. Gas margins for the year ended December 31, 2003, were $349.8
million as compared to $337.8 million in 2002. The increase was primarily
attributable to weather near normal in 2003 yet 6% colder than 2002 with an
estimated year-over-year impact of $7.6 million.
The remaining increase was primarily attributable to higher utility receipts and
excise taxes on higher gas costs and volumes sold, and the recovery of Ohio
customer choice implementation costs.
Electric margins for the fourth quarter were $57.5 million as compared to $54.1
million for the same quarter last year. The increase was primarily due to the
recovery of incremental NOx expenditures and related operating expenses, which
added margin of $2.8 million. Unfavorable weather decreased margin for the
quarter by an estimated $1.7 million, as compared to the prior year. Margin from
industrial and other large customers increased $1.2 million. Electric margins
for the year ended December 31, 2003 were $233.0 million, as compared to $230.2
million in 2002. Electric margins increased $7.1 million due to the recovery of
NOx expenditures and related operating expenses and increased nonfirm wholesale
margins of $5.6 million. These increases were partially offset by the effect of
cooling weather 19% milder than normal and 34% milder than last year, which
decreased margin an estimated $8.2 million.
The company adopted EITF 03-11 in the fourth quarter of 2003. Prior to October
1, 2003, Vectren had reported revenues and costs associated with nonfirm
wholesale sales on a gross basis in the statement of income. Effective October
1, 2003, Vectren began reporting transactions on a net basis, which more clearly
reflects the margins delivered from wholesale power asset optimization efforts.
Other operating expenses increased $10.4 million for the twelve months ended
December 31, 2003, as compared to 2002. The increase is primarily attributable
to increases in distribution and transmission expenses, power plant maintenance,
and expansion of customer service initiatives. The fourth quarter includes the
favorable effect of an Ohio regulatory order allowing the company to defer for
future recovery its actual bad debt expense in excess of the amount provided in
base rates.
Depreciation and amortization for the twelve months ended December 31, 2003
increased $7.2 million primarily due to significant additions of utility plant,
including a new gas-fired peaker unit and system upgrades.
Taxes other than income for the twelve months ended December 31, 2003 increased
$5.9 million. Of the annual increase, $4.5 million was due to higher utility
receipts and excise taxes as a result of higher gas prices and increased volumes
sold. The remaining increase is primarily attributable to higher property taxes.
Other income (expense)-net for the twelve months ended December 31, 2003,
decreased $2.4 million as the result of the first quarter 2003 write off of the
BABB investment, totaling $3.9 million.
Interest expense for the twelve months ended December 31, 2003, decreased $3.0
million as a result of the permanent financing completed in the third quarter of
2003 and lower short-term borrowing rates throughout 2003.
Income tax expense for the twelve months ended December 31, 2003, increased $6.0
million primarily due to an increase in the Indiana state income tax rate from
4.5% to 8.5% and other changes in the effective tax rate in 2002.
Nonregulated Group (all amounts following in this section are after tax)
Nonregulated earnings for the fourth quarter 2003 were $10.0 million, as
compared to $4.4 million for the same quarter last year. Earnings for the year
ended December 31, 2003, were $27.6 million, as compared to $19.0 million in
2002.
Energy Marketing and Services is comprised of the Company's gas marketing and
performance contracting operations and held the Company's investment in
Genscape, which was sold in the third quarter of 2003 at a gain of $2.6 million.
This group's net income for the fourth quarter was $6.2 million, as compared to
$3.9 million for the same quarter last year. Net income for the year ended
December 31, 2003, was $20.7 million, as compared to $15.0 million in 2002. Gas
marketing operations, performed through the Company's investment in ProLiance,
completed their 8th consecutive successful year, contributing $15.3 million for
the year, an increase of $0.7 million over 2002. The increase was principally
attributable to increased storage capacity coupled with more volatile gas
prices. The performance contracting operations, Energy Systems Group (ESG),
contributed $3.0 million in 2003, an increase of $2.3 million over 2002. ESG has
achieved 9 consecutive years of profitability.
The Coal Mining group mines and sells coal to the Company's utility operations
and to other third parties. The group also generates IRS Code Section 29
investment tax credits relating to the production of coal-based synthetic fuels
through its 8.3% ownership interest in Pace Carbon Synfuels, LP (Pace Carbon).
This group's net income for the fourth quarter was $3.6 million, as compared to
$3.3 million for the same quarter last year. Net income for the year ended
December 31, 2003, was $13.8 million, as compared to $12.2 million in 2002. The
increase is principally due to increased synfuels-related fees and production,
offset by poor mining conditions resulting in lower yields and increased
amortization of mine development costs. Mining conditions improved late in the
fourth quarter, and updated pricing arrangements became effective in 2004 for a
portion of the sales to the company's generation units.
Utility Infrastructure Services provides underground construction and repair to
gas, water, electric and telecommunications companies primarily through its
investment in Miller Pipeline. For the twelve months ended December 31, 2003,
this group's loss was $0.8 million, primarily due to cutbacks of underground
construction and repair projects by gas distribution customers. In the second
half of 2003, Miller returned to profitability due to an increase in
construction and repair projects as utilities began to return to historical
expenditure levels.
Broadband invests in communication services, such as cable television,
high-speed Internet, and advanced local and long distance phone services. For
the twelve months ended December 31, 2003, losses were $1.0 million. This
reflects the impact of a $1.2 million loss on the sale of the Company's
investment in First Mile, a small broadband operation in Indianapolis, Indiana.
The company's remaining broadband investment, SIGECOM, located in Evansville,
Indiana, provides service to over 29,000 customers, averaging nearly 3 revenue
generating units per customer, and continues to increase its positive EBITDA.
The Other Businesses Group includes a variety of wholly owned operations and
investments. For the twelve months ended December 31, 2003, the Other Businesses
Group losses, including operating expenses, were $5.1 million, as compared to
losses of $7.4 million in 2002. In the fourth quarter of 2003, the Company sold
IEIFS, a debt collection subsidiary, as part of a continued plan to narrow the
nonregulated portfolio. The sale resulted in a gain of $1.2 million. Vectren's
retail group (Source) began operations in 2001 and provides natural gas and
other related products and services primarily in Ohio, serving over 70,000
customers opting for choice among energy providers. Source's losses for the year
ended December 31, 2003 were $1.9 million, as compared to $2.6 million in 2002.
Source expects to be profitable in late 2004.
Corporate
Corporate and other expenses were $2.0 million. Vectren provided over $1.7
million to various community and civic organizations in 2003.
Regulatory Approvals Received
As previously mentioned, in response to the impact of high gas costs, The Public
Utilities Commission of Ohio authorized the recovery of bad debt expense in
excess of the amount provided in base rates.
Financial
As a result of the long-term debt and equity financings completed in 2003, total
long-term debt to permanent capitalization improved to 50.7% at December 31,
2003, as compared to 54.0% at December 31, 2002. In addition, short-term debt
decreased to $273 million at December 31, 2003, as compared to $399 million at
December 31, 2002. Vectren remains committed to improving its balance sheet and
maintaining strong investment grade ratings. Vectren's utility debt is currently
rated A- and Baa1 by Standard & Poor's and Moody's, respectively.
Dividends
Vectren's Board of Directors authorized a $0.285 dividend payable March 1, 2004,
to shareholders of record at the close of business on February 13, 2004. In
October, Vectren's Board of Directors approved a 3.6% increase in the quarterly
dividend rate to $0.285 per share, a new indicated annual dividend rate of $1.14
per share. Vectren and predecessor companies have now increased its dividend for
44 consecutive years.
2004 Earnings Guidance
As previously announced, fiscal 2004 earnings are expected to be in the range of
$1.60 to $1.75 per share. The targeted range is based on several factors,
including normal weather conditions, continued growth from the Company's
complementary nonregulated businesses, managed cost control measures and
securing rate relief at the company's regulated gas distribution operations.
Please SEE ATTACHED unaudited schedules for additional financial information
Live Webcast on January 29, 2004
Vectren Corporation officers will discuss fiscal year 2003 earnings results and
provide an outlook for 2004 during a conference call for analysts scheduled at
2:30 p.m. EST (1:30 CST), Thursday, January 29, 2004. You are invited to listen
to the live Webcast and view the supporting slides by accessing the Investor
Relations link on Vectren's Web site at www.Vectren.com. Interested parties may
also view the slide presentation and listen to the Webcast replay via Vectren's
Web site beginning two hours after the completion of the Webcast.
About Vectren
Vectren Corporation is an energy and applied technology holding company
headquartered in Evansville, Indiana. Vectren's energy delivery subsidiaries
provide gas and/or electricity to over one million customers in adjoining
service territories that cover nearly two-thirds of Indiana and west central
Ohio. Vectren's non-regulated subsidiaries and affiliates currently offer
energy-related products and services to customers throughout the surrounding
region. These services include energy marketing; coal mining; utility
infrastructure services; and broadband communication services. To learn more
about Vectren, visit www.vectren.com.
Safe Harbor for Forward Looking Statements
This document contains forward-looking statements, which are based on
management's beliefs and assumptions that derive from information currently
known by management. Vectren wishes to caution readers that actual results could
differ materially from those contained in this document. Additional detailed
information concerning a number of factors that could cause actual results to
differ materially from the information that is provided to you is readily
available in our report Form 10-K as amended on Form 10-K/A filed with the
Securities and Exchange Commission on June 18, 2003.
Investor Contact Steven M. Schein, (812) 491-4209, sschein@vectren.com
-------------------
Media Contact Jeffrey W. Whiteside, (812) 491-4205, jwhiteside@vectren.com
----------------------
###
VECTREN CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except for share amounts)
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
-------------------------------------------------------
2003 2002 2003 2002
----------------------- --------------------------
OPERATING REVENUE:
Gas utility $ 323,584 $ 322,051 $ 1,112,313 $ 907,958
Electric utility 81,498 79,716 335,694 328,621
Energy services and other 48,874 34,186 139,703 287,191
--------- --------- ----------- ----------
Total operating revenues 453,956 435,953 1,587,710 1,523,770
--------- --------- ----------- ----------
OPERATING EXPENSES:
Cost of gas sold 222,595 213,232 762,464 570,147
Fuel for electric generation 20,223 21,867 86,477 81,560
Purchased electric energy 3,686 3,712 16,172 16,831
Cost of energy services and other 37,176 26,270 103,737 249,417
Other operating 53,172 54,625 232,567 222,948
Depreciation and amortization 31,914 31,458 128,656 119,631
Taxes other than income taxes 14,952 13,535 57,007 51,902
--------- --------- ----------- ----------
Total operating expenses 383,718 364,699 1,387,080 1,312,436
--------- --------- ----------- ----------
OPERATING INCOME 70,238 71,254 200,630 211,334
OTHER INCOME:
Equity in earnings of unconsolidated
affiliates 5,719 582 12,169 9,082
Other - net 6,772 2,505 12,946 11,522
--------- --------- ----------- ----------
Total other income 12,491 3,087 25,115 20,604
--------- --------- ----------- ----------
INTEREST EXPENSE 18,892 19,693 75,586 78,481
--------- ------------ ----------- ----------
INCOME BEFORE INCOME TAXES 63,837 54,648 150,159 153,457
INCOME TAXES 19,673 11,861 38,831 38,883
MINORITY INTEREST IN SUBSIDIARY 12 386 66 514
PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 5 7 23 32
--------- --------- ----------- ----------
NET INCOME $ 44,147 $ 42,394 $ 111,239 $ 114,028
========= ========= =========== ==========
AVERAGE COMMON SHARES OUTSTANDING 75,344 67,533 70,623 67,582
DILUTED COMMON SHARES OUTSTANDING 75,578 67,806 70,820 67,842
EARNINGS PER SHARE OF COMMON STOCK
BASIC:
EARNINGS PER SHARE OF COMMON STOCK $ 0.59 $ 0.63 $ 1.58 $ 1.69
========= ========= =========== ==========
DILUTED:
EARNINGS PER SHARE OF COMMON STOCK $ 0.58 $ 0.63 $ 1.57 $ 1.68
========= ========= =========== ==========
VECTREN UTILITY HOLDINGS
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except for share amounts)
(Unaudited)
Three Months Twelve Months
Ended December 31 Ended December 31
--------------------------------------------------
2003 2002 2003 2002
---------------------- ------------------------
OPERATING REVENUE:
Gas utility $ 323,584 $ 322,051 $1,112,313 $ 907,958
Electric utility 81,498 79,716 335,694 328,621
Other 198 79 793 288
--------- --------- ---------- ----------
Total operating revenues 405,280 401,846 1,448,800 1,236,867
--------- --------- ---------- ----------
OPERATING EXPENSES:
Cost of gas sold 222,595 213,232 762,464 570,764
Fuel for electric generation 20,223 21,867 86,477 81,560
Purchased electric energy 3,686 3,712 16,172 16,831
Other operating 47,072 49,454 208,936 198,545
Depreciation and amortization 29,149 29,760 117,948 110,686
Taxes other than income taxes 14,844 13,163 56,626 50,737
--------- --------- ---------- ----------
Total operating expenses 337,569 331,188 1,248,623 1,029,123
--------- --------- ---------- ----------
OPERATING INCOME 67,711 70,658 200,177 207,744
OTHER INCOME (EXPENSE):
Equity in earnings (losses) of
unconsolidated affiliates (20) (928) (473) (1,859)
Other - net 3,806 603 4,762 7,142
--------- --------- ---------- ----------
Total other income (expense) 3,786 (325) 4,289 5,283
--------- --------- ---------- ----------
INTEREST EXPENSE 16,676 17,395 66,135 69,118
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES 54,821 52,938 138,331 143,909
INCOME TAXES 20,316 15,530 52,744 46,772
PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 5 7 23 32
--------- --------- ---------- ----------
NET INCOME $ 34,500 $ 37,401 $ 85,564 $ 97,105
========= ========= ========== ==========
VECTREN CORPORATION 3 Months 12 Months
HIGHLIGHTS Ended December 31 Ended December 31
---------------------------------------
(millions, except per share amounts) ---------------------------------------
(Unaudited) 2003 2002 2003 2002
- -------------------------------------------------------------------------------
Reported Earnings:
Utility Group $ 34.5 $ 37.4 $ 85.6 $ 97.1
Non-regulated Group
Energy Marketing and Services 6.2 3.9 20.7 15.0
Mining - 0.5 - 3.2
Synfuels related 3.6 2.8 13.8 9.0
------ ------ ------ ------
Total Coal Mining 3.6 3.3 13.8 12.2
Utility Infrastructure Services 0.2 (0.8) (0.8) (1.2)
Broadband 0.1 0.1 (1.0) 0.4
Other Businesses (0.1) (2.1) (5.1) (7.4)
------ ------ ------ ------
Total Non-regulated Group 10.0 4.4 27.6 19.0
Corporate and Other (0.4) 0.6 (2.0) (2.1)
------ ------ ------ ------
Vectren Consolidated $ 44.1 $ 42.4 $111.2 $114.0
====== ====== ====== ======
Vectren Selected Highlights
12 months 12 months
Ended Ended
December 31 December 31
2003 2002
----------- -----------
Dividends Paid (per common share, 12 months) $ 1.11 $ 1.07
Annualized Dividend $ 1.14 $ 1.10
Dividend Yield (at close) 4.6% 4.8%
Dividend Payout Ratio 70.3% 63.3%
Dividend to Book Value 8.0% 8.6%
Return on Average Shareholders' Equity 11.5% 13.4%
Book Value Per Share $14.17 $12.81
Market to Book Value (at close) 174% 180%
Common Stock Prices (VVC - NYSE)
High $26.13 $26.10
Low $19.70 $17.95
Close $24.65 $23.00
Price/Earnings Ratio (trailing) 15.6 13.6
Ratio of Total Debt to Total Capitalization 56% 62%
Percent Internally Generated Funds - Utility Group 66% 75%
Ratio of Earnings to Fixed Charges - SEC Method
Consolidated 3.0 2.9
Utility Group 3.1 3.1
VECTREN CORPORATION
SELECTED GAS DISTRIBUTION 3 Months 12 Months
OPERATING STATISTICS Ended December 31 Ended December 31
----------------------- ------------------------
2003 2002 2003 2002
---------- ---------- ----------- ---------
(Unaudited)
- -----------------------------------
GAS OPERATING REVENUES (Thousands):
Residential $ 221,082 $ 216,340 $ 742,563 $ 607,106
Commercial 79,099 75,599 276,177 211,602
Contract 20,329 25,626 84,648 81,960
Miscellaneous Revenue 3,074 4,486 8,925 7,289
--------- --------- ----------- ---------
$ 323,584 $ 322,051 $ 1,112,313 $ 907,958
========= ========= =========== =========
GAS MARGIN (Thousands):
Operating Revenues $ 323,584 $ 322,051 $ 1,112,313 $ 907,958
Cost of Gas 222,595 213,232 762,464 570,147
--------- --------- ----------- ---------
Margin $ 100,989 $ 108,819 $ 349,849 $ 337,811
========= ========= =========== =========
GAS SOLD & TRANSPORTED (MDth):
Residential 24,559 29,174 83,210 80,726
Commercial 9,570 11,018 33,363 31,011
Contract 25,827 27,195 92,771 95,956
--------- --------- ----------- ---------
59,956 67,387 209,344 207,693
========= ========= =========== =========
YEAR END GAS CUSTOMERS
Residential 887,891 882,151
Commercial 80,292 80,483
Contract 4,047 4,127
--------- ---------
972,230 966,761
========= =========
WEATHER AS A PERCENT OF NORMAL:
Heating Degree Days 89% 105% 100% 94%
VECTREN CORPORATION
SELECTED ELECTRIC 3 Months 12 Months
OPERATING STATISTICS Ended December 31 Ended December 31
--------------------- -----------------------
2003 2002 2003 2002
--------- --------- ---------- ----------
(Unaudited)
- ----------------------------------------
ELECTRIC OPERATING REVENUES (Thousands):
Residential $ 22,884 $ 21,493 $ 105,381 $ 108,123
Commercial 21,259 19,329 82,268 80,620
Industrial 24,417 23,639 92,746 90,370
Municipals 5,493 4,973 21,534 21,199
Miscellaneous Revenue 2,463 847 7,185 4,981
--------- --------- ---------- ----------
Total Retail 76,516 70,281 309,114 305,293
Net Wholesale Revenues 4,982 9,435 26,580 23,328
--------- --------- ---------- ----------
$ 81,498 $ 79,716 $ 335,694 $ 328,621
========= ========= ========== ==========
ELECTRIC MARGIN (Thousands):
Operating Revenues $ 81,498 $ 79,716 $ 335,694 $ 328,621
Cost of Fuel & Purchased Power 23,909 25,579 102,649 98,391
--------- --------- ---------- ----------
Margin $ 57,589 $ 54,137 $ 233,045 $ 230,230
========= ========= ========== ==========
ELECTRICITY SOLD (MWh):
Residential 297,497 302,621 1,441,706 1,567,215
Commercial 346,036 332,703 1,422,127 1,467,780
Industrial 564,979 644,094 2,416,885 2,516,335
Municipals 151,362 141,452 600,924 617,685
Miscellaneous Sales 4,319 5,383 17,210 18,117
--------- --------- ---------- ----------
Total Retail 1,364,193 1,426,253 5,898,852 6,187,132
Wholesale 1,265,952 2,414,193 4,305,190 10,711,614
--------- --------- ---------- ----------
2,630,145 3,840,446 10,204,042 16,898,746
========= ========= ========== ==========
YEAR END ELECTRIC CUSTOMERS
Residential 117,868 116,979
Commercial 17,054 16,881
Industrial 155 174
All Others 21 23
--------- ---------
135,098 134,057
========= =========
WEATHER AS A PERCENT OF NORMAL:
Heating Degree Days 89% 105% 100% 94%
Cooling Degree Days 50% 143% 81% 123%