EX 99-1
News
Release
Vectren Corporation P.O. Box 209
Evansville, IN 47702-0209
FOR IMMEDIATE RELEASE
April 27, 2004
Vectren Corporation
Reports First Quarter 2004 Results
Evansville, Indiana - Vectren Corporation (NYSE:VVC) today reported first
quarter 2004 net income of $54.8 million, compared to net income of $55.7
million for the three months ended March 31, 2003. The slight decline in net
income was primarily the result of weather 10% warmer than the prior year,
partially offset by continued growth in the Company's nonregulated businesses.
Earnings per share were $0.73 for the quarter ended March 31, 2004 compared to
$0.82 per share a year ago. Of the reduction in earnings per share, $0.01 per
share was due to the decline in net income and $0.08 per share was attributable
to an increase of 7.7 million in weighted average shares outstanding resulting
from the equity offering in August 2003.
Said Niel C. Ellerbrook, Chairman, President and CEO, "We are pleased with our
first quarter results, despite the warmer than normal weather impacting our heat
sensitive throughput. Electric sales to large volume customers were up,
suggesting the beginning of economic recovery in our service territory, and our
nonregulated group has continued to grow its contribution to consolidated
earnings. The decline in earnings per share was the expected result of the very
successful common stock offering completed last August, which helped strengthen
the balance sheet and credit ratings."
Specific Highlights for the Quarter
o Milder weather negatively impacted the Utility Group results in the first
quarter of 2004, compared to the same quarter last year, by an estimated
$5.0 million after tax. The weather impact was partially offset by
increased margin from the recovery of NOx related expenditures and
increased large electric customer margins, signaling some economic recovery
in the region.
o The Nonregulated Group performed well during the quarter compared to last
year due largely to a strong performance in the Mining Group and the gain
from the harvesting of an energy related investment, offset largely by a
write down of its investment in certain broadband investments.
Discussion of Results: Utility Group
Utility Group earnings for the first quarter 2004 were $44.7 million as compared
to $47.3 million for the same quarter last year. The $2.6 million decline was
primarily due to mild heating weather, approximately 10% warmer in 2004 compared
to 2003, which decreased results approximately $5.0 million after tax. The
impact of the unfavorable weather was partially offset by increased recovery of
NOx expenditures and related operating expenses. The 2003 first quarter included
the $1.2 million after tax write down of the Company's investment in BABB
International.
Gas utility margin for the first quarter was $139.5 million as compared to
$144.4 million for the same quarter last year. The $4.9 million decrease was
primarily due to an estimated $7.7 million impact for warmer weather, partially
offset by customer growth and increasing consumption.
Electric utility margin for the first quarter was $61.5 million as compared to
$58.2 million for the same quarter last year. The recovery of incremental NOx
expenditures and related operating expenses added margin of $3.6 million.
Margins from large customers increased $2.1 million quarter over quarter,
reflecting some economic recovery. Offsetting those increases, warmer than
normal weather negatively impacted electric heating load in the quarter,
compared to last year, by an estimated $0.7 million. Net wholesale margin from
marketing generation capacity in excess of that needed to serve native load and
firm wholesale customers was $7.0 million, a decrease of $1.1 million due
largely to market conditions and price volatility this quarter, compared to the
same quarter last year.
Other operating expenses and depreciation expense for the first quarter
increased $3.5 million and $0.8 million, respectively, compared to 2003. The
increases resulted from greater operating expenses associated with the NOx
equipment, other operating expenses such as labor and benefit costs and
depreciation expense on plant additions. Other income (expense) increased $2.2
million compared to 2003, attributable primarily to the $2.0 million pre-tax
charge taken against the Company's investment in BABB in the first quarter of
2003.
Discussion of Results: Nonregulated Group (all amounts following in this section
are after tax)
Nonregulated earnings for the first quarter 2004 were $10.6 million as compared
to $8.5 million for the same quarter last year. The $2.1 million increase was
principally due to increased operating results from Coal Mining and the $5.3
million after tax gain resulting from the sale of an investment held by one of
the Company's equity method investments, offset largely by the $4.5 million
after tax charge related to the write down of the company's investments in
certain broadband investments.
Energy Marketing and Services generated net income of $7.0 million for the first
quarter 2004 as compared to $8.1 million in 2003. Gas marketing operations,
performed through ProLiance Energy, LLC, contributed $6.9 million in 2004 as
compared to $8.5 million in 2003. While a strong first quarter 2004 performance,
the year over year decrease was principally due to higher earnings in 2003
resulting from unprecedented volatility in 2003 gas prices. The performance
contracting operations, performed through Energy Systems Group, LLC, had net
losses of $0.5 million in 2004, compared to break even results in 2003. The
decrease was principally due to timing of projects year over year, and ESG has
now replaced nearly 200% of the backlog utilized in the quarter. Vectren Source
contributed $0.6 million in 2004, an increase of $0.7 million over 2003, due to
increased customers and margins per unit of throughput. Source has grown its
customer count to almost 100,000, nearly double over the same period in 2003.
Coal Mining net income for the three months ended March 31, 2004, was $3.6
million, as compared to $2.3 million in 2003. Synfuel-related results, which
include earnings from Pace Carbon and synfuel processing fees, contributed $2.9
million in earnings in 2004, as compared to $2.3 million in 2003, due to greater
volumes. Mining operations increased from breakeven in 2003 to $0.7 million in
2004 due to improved pricing and better mining conditions.
Utility Infrastructure Services provides underground construction and repair to
gas, water, electric, and telecommunications companies primarily through its
investment in Miller Pipeline. Infrastructure's loss for the quarter was $0.6
million, an improvement of $0.4 million from 2003. The group returned to
profitability in late 2003, but first quarter results are often negatively
impacted by the seasonality of construction activities.
The Company is a minority investor in SIGECOM Holdings, Inc., located in
Evansville, Indiana. SIGECOM provides broadband service to over 29,000
customers, averaging nearly 3 revenue generating units per customer and
continues to increase its positive EBITDA. In the Company's continued evaluation
of the industry and the strategic alternatives for its broadband investments,
the Company performed a valuation of its SIGECOM investment. Additionally, while
franchises are still in place for the Indianapolis, Indiana and Dayton, Ohio
markets and both markets are excellent broadband prospects, it is unlikely that
Vectren would be involved in future expansion of those markets. As a result, the
Company recorded impairment charges for its investment in SIGECOM and its
franchises in the Indianapolis and Dayton markets, totaling $3.6 million after
tax. The Company also wrote down its investment in inventory by $0.9 million
after tax at Vectren Communications Services as a result of current expectations
about realizability in today's market. Vectren Communications Services results
are reported in Other Businesses.
The Other Business Group reported net income of $4.0 million in 2004, as
compared to losses of $0.9 million in 2003. In March 2004, a component of the
Other Business group, Haddington Energy Partners, an equity method investment,
sold their investment in SAGO Energy, LLC for cash. SAGO is an independent, full
service, midstream company providing natural gas producers with processing,
gathering, marketing, and other related services, with assets in Texas and
Louisiana. The Company recognized its portion of the pretax gain totaling $9.0
million, or $5.3 million after tax.
Financial
At March 31, 2004, total long-term debt to permanent capitalization improved to
49%, as compared to 52% at March 31, 2003. In addition, short-term debt
decreased to $129 million at March 31, 2004, as compared to $380 million at
March 31, 2003. 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.
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, continued 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 April 29, 2004
Vectren Corporation officers will discuss First Quarter 2004 earnings results
and provide an outlook for 2004 during a conference call for analysts scheduled
at 2:30 p.m. EDT (1:30 CDT), Thursday, April 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 midwest and
southeast. These include gas marketing and related services; coal production and
sales; 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 filed with the Securities and Exchange
Commission on February 26, 2004.
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 March 31 Ended March 31
--------------------------------------------
2004 2003 2004 2003
-------------------- ----------------------
OPERATING REVENUE:
Gas utility $ 505,156 $ 509,191 $1,108,278 $1,059,314
Electric utility 88,797 83,541 340,950 341,605
Energy services and other 51,407 33,601 157,509 175,273
--------- --------- ---------- ----------
Total operating revenues 645,360 626,333 1,606,737 1,576,192
--------- --------- ---------- ----------
OPERATING EXPENSES:
Cost of gas sold 365,636 364,776 763,324 704,988
Fuel for electric generation 22,860 20,752 88,585 84,524
Purchased electric energy 4,456 4,580 16,048 17,902
Cost of energy services and other 40,004 25,535 118,206 140,169
Other operating 68,607 62,572 239,764 227,943
Depreciation and amortization 32,512 31,402 129,766 122,007
Taxes other than income taxes 22,660 22,035 57,632 55,605
--------- --------- ---------- ----------
Total operating expenses 556,735 531,652 1,413,325 1,353,138
--------- --------- ---------- ----------
OPERATING INCOME 88,625 94,681 193,412 223,054
OTHER INCOME:
Equity in earnings of unconsolidated
affiliates 16,881 8,806 20,244 14,824
Other - net (5,641) (1,148) 8,453 8,184
--------- --------- ---------- ----------
Total other income 11,240 7,658 28,697 23,008
--------- --------- ---------- ----------
INTEREST EXPENSE 19,342 18,876 76,052 77,513
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES 80,523 83,463 146,057 168,549
INCOME TAXES 25,670 27,727 35,612 43,612
MINORITY INTEREST IN SUBSIDIARY 7 27 46 750
PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 6 9 20 34
--------- --------- ---------- ----------
NET INCOME $ 54,840 $ 55,700 $ 110,379 $ 124,153
========= ========= ========== ==========
AVERAGE COMMON SHARES OUTSTANDING 75,472 67,695 72,549 67,621
DILUTED COMMON SHARES OUTSTANDING 75,847 67,842 72,846 67,888
EARNINGS PER SHARE OF COMMON STOCK
BASIC:
EARNINGS PER SHARE OF COMMON STOCK $ 0.73 $ 0.82 $ 1.52 $ 1.84
========= ========= ========== ==========
EARNINGS PER SHARE OF COMMON STOCK $ 0.72 $ 0.82 $ 1.52 $ 1.83
========= ========= ========== ==========
VECTREN UTILITY HOLDINGS
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except for share amounts)
(Unaudited)
Three Months Twelve Months
Ended March 31 Ended March 31
-----------------------------------------------
2004 2003 2004 2003
--------------------- -----------------------
OPERATING REVENUE:
Gas utility $ 505,156 $ 509,191 $1,108,278 $1,059,314
Electric utility 88,797 83,541 340,950 341,605
Other 281 198 876 436
--------- --------- ---------- ----------
Total operating revenues 594,234 592,930 1,450,104 1,401,355
--------- --------- ---------- ----------
OPERATING EXPENSES:
Cost of gas sold 365,636 364,776 763,324 705,291
Fuel for electric generation 22,860 20,752 88,585 84,524
Purchased electric energy 4,456 4,580 16,048 17,902
Other operating 60,098 56,603 213,593 203,891
Depreciation and amortization 29,611 28,762 118,797 112,677
Taxes other than income taxes 22,343 21,718 57,251 54,395
--------- --------- ---------- ----------
Total operating expenses 505,004 497,191 1,257,598 1,178,680
--------- --------- ---------- ----------
OPERATING INCOME 89,230 95,739 192,506 222,675
OTHER INCOME (EXPENSE):
Equity in earnings (losses) of unconsolidated
affiliates 168 (504) 199 (2,251)
Other - net (43) (1,507) 6,226 3,551
--------- --------- ---------- ----------
Total other income (expense) 125 (2,011) 6,425 1,300
--------- --------- ---------- ----------
INTEREST EXPENSE 16,959 16,516 66,578 68,087
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES 72,396 77,212 132,353 155,888
INCOME TAXES 27,733 29,895 49,420 53,478
PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 6 9 20 34
--------- --------- ---------- ----------
NET INCOME $ 44,657 $ 47,308 $ 82,913 $ 102,376
========= ========= ========== ==========
VECTREN CORPORATION 3 Months 12 Months
HIGHLIGHTS Ended March 31 Ended March 31
-------------------------------------------
(millions, except per share amounts)
-------------------------------------------
(Unaudited) 2004 2003 2004 2003
- -----------------------------------------------------------------------------------------
Reported Earnings:
Utility Group $ 44.7 $ 47.3 $ 83.0 $ 102.4
Non-regulated Group
Energy Marketing and Services 7.0 8.1 14.2 15.9
Mining 0.7 - 0.3 2.2
Synfuels related 2.9 2.3 14.0 9.7
------ ------ ------ -------
Total Coal Mining 3.6 2.3 14.3 11.9
Utility Infrastructure Services (0.6) (1.0) (0.4) (1.8)
Broadband (3.4) - (4.5) 0.3
Other Businesses 4.0 (0.9) 6.2 (3.3)
------ ------ ------ -------
Total Non-regulated Group 10.6 8.5 29.8 23.0
Corporate and Other (0.5) (0.1) (2.4) (1.3)
------ ------ ------ -------
Vectren Consolidated $ 54.8 $ 55.7 $110.4 $ 124.1
====== ====== ====== =======
Vectren Selected Highlights
12 months 12 months
Ended Ended
March 31 March 31
2004 2003
-------- ----------
Dividends Paid (per common share, 12 months) $ 1.12 $ 1.08
Annualized Dividend $ 1.14 $ 1.10
Dividend Yield (at close) 4.5% 5.1%
Dividend Payout Ratio 73.7% 58.7%
Dividend to Book Value 7.8% 8.2%
Return on Average Shareholders' Equity 10.9% 13.9%
Book Value Per Share $14.63 $13.47
Market to Book Value (at close) 169% 160%
Common Stock Prices (VVC - NYSE)
High $26.13 $26.10
Low $21.05 $17.95
Close $24.67 $21.51
Price/Earnings Ratio (trailing) 16.2 11.7
Ratio of Total Debt to Total Capitalization 53% 60%
Percent Internally Generated Funds -
Utility Group 58% 78%
Ratio of Earnings to Fixed Charges -
SEC Method
Consolidated 2.9 3.0
Utility Group 3.0 3.3
VECTREN CORPORATION 3 Months 12 Months
SELECTED GAS DISTRIBUTION Ended March 31 Ended March 31
OPERATING STATISTICS ---------------------- -------------------------
2004 2003 2004 2003
(Unaudited) --------- --------- ---------- -----------
- -----------------------------------
GAS OPERATING REVENUES (Thousands):
Residential $ 341,092 $ 345,617 $ 738,038 $ 705,409
Commercial 126,456 127,218 275,415 256,722
Contract 32,966 33,761 83,853 88,367
Miscellaneous Revenue 4,642 2,595 10,972 8,816
--------- --------- ---------- -----------
$ 505,156 $ 509,191 $1,108,278 $ 1,059,314
========= ========= ========== ===========
GAS MARGIN (Thousands):
Residential $ 90,368 $ 94,688 $ 221,145 $ 227,084
Commercial 28,111 29,725 63,290 70,645
Contract 18,050 18,511 51,859 51,831
Miscellaneous 2,991 1,491 8,660 4,766
--------- --------- ---------- -----------
$ 139,520 $ 144,415 $ 344,954 $ 354,326
========= ========= ========== ===========
GAS SOLD & TRANSPORTED (MDth):
Residential 41,362 44,556 80,016 88,923
Commercial 15,880 17,218 32,025 34,894
Contract 29,221 30,324 91,668 97,379
--------- --------- ---------- -----------
86,463 92,098 203,709 221,196
========= ========= ========== ===========
AVERAGE GAS CUSTOMERS
Residential 891,153 885,084 875,621 871,183
Commercial 80,453 80,675 79,256 79,541
Contract 4,065 4,134 4,057 4,143
--------- --------- ---------- -----------
975,671 969,893 958,934 954,867
========= ========= ========== ===========
WEATHER AS A PERCENT OF NORMAL:
Heating Degree Days 96% 107% 94% 105%
VECTREN CORPORATION
SELECTED ELECTRIC 3 Months 12 Months
OPERATING STATISTICS Ended March 31 Ended March 31
----------------------- -----------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
(Unaudited)
- ----------------------------------------
ELECTRIC OPERATING REVENUES (Thousands):
Residential $ 27,494 $ 25,996 $ 106,879 $ 110,959
Commercial 20,136 18,765 83,639 81,747
Industrial 25,518 21,051 97,213 91,272
Municipals 5,439 4,823 22,150 21,378
Miscellaneous Revenue 1,465 1,487 7,163 5,535
---------- ---------- ---------- ----------
Total Retail 80,052 72,122 317,044 310,891
Net Wholesale Revenues 8,745 11,419 23,906 30,714
---------- ---------- ---------- ----------
$ 88,797 $ 83,541 $ 340,950 $ 341,605
========== ========== ========== ==========
ELECTRIC MARGIN (Thousands):
Residential $ 21,055 $ 19,781 $ 83,224 $ 87,117
Commercial 14,409 13,513 60,006 59,923
Industrial 14,446 12,335 55,644 54,696
Municipals 3,102 3,014 13,203 12,359
Miscellaneous 1,430 1,428 7,062 5,350
---------- ---------- ---------- ----------
Total Retail 54,442 50,071 219,139 219,445
---------- ---------- ---------- ----------
Net Wholesale Margin 7,039 8,138 17,178 19,734
---------- ---------- ---------- ----------
$ 61,481 $ 58,209 $ 236,317 $ 239,179
========== ========== ========== ==========
ELECTRICITY SOLD (MWh):
Residential 377,550 394,815 1,424,441 1,608,791
Commercial 330,943 333,846 1,419,224 1,479,789
Industrial 635,269 553,911 2,498,243 2,489,555
Municipals 152,227 133,812 619,339 616,712
Miscellaneous Sales 3,661 5,114 15,757 18,424
---------- ---------- ---------- ----------
Total Retail 1,499,650 1,421,498 5,977,004 6,213,271
Wholesale 511,314 1,448,350 3,368,154 9,692,145
---------- ---------- ---------- ----------
2,010,964 2,869,848 9,345,158 15,905,416
========== ========== ========== ==========
AVERAGE ELECTRIC CUSTOMERS
Residential 118,248 117,057 117,378 116,449
Commercial 17,040 16,934 17,009 17,030
Industrial 155 176 163 175
All Others 21 22 21 23
---------- ---------- ---------- ----------
135,464 134,189 134,571 133,677
========== ========== ========== ==========
WEATHER AS A PERCENT OF NORMAL:
Heating Degree Days 96% 107% 94% 105%
Cooling Degree Days 81% 123%