Cinergy Reports Second Quarter Earnings.Business Editors CINCINNATI--(BUSINESS WIRE)--July 24, 2003 Cinergy Cinergy Corp. was an energy company based in Cincinnati, Ohio. Cinergy was created on October 24, 1994, from the merger of the Cincinnati Gas & Electric Company (CG&E) with PSI Energy and later included Union Light, Heat & Power (ULH&P) as well. Corp. (NYSE NYSE See: New York Stock Exchange :CIN CIN cervical intraepithelial neoplasia. Cervical intraepithelial neoplasia (CIN) A term used to categorize degrees of dysplasia arising in the epithelium, or outer layer, of the cervix. ) today reported second quarter 2003 earnings of $0.47 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis compared with earnings of $0.26 per share on a diluted basis in 2002. Reported earnings for 2003 included $0.04 in charges for voluntary early retirement and severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when programs primarily focused on the corporate administrative areas and a write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of a technology investment. In addition, discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. contributed $0.05 per share in the quarter. Second quarter 2002 results included charges of $0.25 per share pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to an overall corporate voluntary early retirement and severance program as well as write-offs of certain investments. Assuming normal weather the remainder of the year, the Company reaffirms its 2003 earnings range provided in January January: see month. of $2.55-$2.70. The Energy Merchant segment's second quarter earnings were $0.36 per share in 2003 compared with $0.13 per share for the second quarter in 2002. Excluding the $0.13 per share variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality between periods related to the charges for voluntary early retirement programs, investment write-offs in 2002, and discontinued operations results, the segment earnings increased $0.10 per share. Marketing, trading and origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real results added $0.03 per share while decreased financing and other expenses accounted for a positive contribution of $0.03. Generation and supply contracts added $0.04 per share primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to $0.07 per share from the company's synfuel syn·fu·el n. A liquid or gaseous fuel derived from coal, shale, or tar sand, or obtained by fermentation of certain substances, such as grain. [syn(thetic) + fuel.] project that was acquired in July July: see month. 2002 offset by lower capacity sales and below normal weather from supplying generation to Cincinnati Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. Gas & Electric. In fact, the system peak load did not exceed 10,000 megawatts on any day this quarter compared with seven days above this level for the same period last year. The Regulated reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. Operations segment's second quarter earnings were $0.14 per share in 2003 compared with $0.17 per share for the second quarter in 2002. Excluding the $0.12 per share variance related to the charges from voluntary early retirement programs, the segment earnings decreased $0.15 per share. Mild weather, evidenced by a 47 percent reduction in cooling degree-days, reduced earnings $0.06 per share. The sluggish economy Sluggish Economy A state in the economy in which the growth is slow, flat or declining. The term can refer to the economy as a whole or a component of the economy, such as weak housing starts. caused industrial sales to fall by 3.2 percent from the same quarter last year, lowering earnings by $0.02 per share. Financing and depreciation expenses were $0.04 higher than last year primarily related to the transfer of the Madison Madison, cities, United States Madison. 1 City (1990 pop. 12,006), seat of Jefferson co., SE Ind., on the Ohio River; settled c.1806, inc. 1838. It is a port of entry and a tobacco marketing center. and Henry County gas peaking facilities from the Energy Merchant segment to the Regulated Operations segment earlier this year. Operating, administrative and other expenses reduced earnings by $0.03 per share. The Power Technology and Infrastructure Services segment lost $0.03 per share in the second quarter 2003 compared to a loss of $0.04 per share in 2002. Excluding the $0.01 per share related to investment write-offs, results were comparable to last year. In June June: see month. , hearings began at the Indiana Indiana, state, United States Indiana, midwestern state in the N central United States. It is bordered by Lake Michigan and the state of Michigan (N), Ohio (E), Kentucky, across the Ohio R. (S), and Illinois (W). Utility Regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. Commission on PSI Energy, Inc.'s rate application seeking an increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 15 percent in base rates. The new rates, when approved by the Commission, are expected to take effect in early 2004 and will reflect investment in new generating capacity, additional environmental control equipment and system reliability. PSI Energy also dedicated the Noblesville, Ind IND Investigational new drug Therapeutics A status assigned by the FDA to a drug before allowing its use in humans, exempting it from premarketing approval requirements so that experimental clinical trials may be conducted. See Phase 1.2, 3 studies, Sponsorship. . repowering project in the second quarter, converting a 90-megawatt coal-fired Adj. 1. coal-fired - fueled by burning coal; "a coal-fired ship" coal-burning fueled - heated, driven, or produced by burning fuel plant into a 300 megawatt meg·a·watt n. Abbr. MW One million watts. meg  a·watt combined cycle A combined cycle is characteristic of a power producing engine or plant that employs more than one thermodynamic cycle. Heat engines are only able to use a portion of the energy their fuel generates (usually less than 50%). The remaining heat from combustion is generally wasted. natural gas-fired gas-fired adj → de gasgas-fired adj → au gaz gas-fired adj (heater etc) → Gas- facility. In addition to increasing the electric supply available to meet customer demands, the $200 million conversion also will result in significantly reduced emissions emissions npl → émissions fpl emissions npl → Emissionen pl to the environment. Cinergy Corp. has a balanced, integrated portfolio consisting of two core businesses: regulated operations and energy merchant. Cinergy's regulated delivery operations in Ohio, Indiana, and Kentucky Kentucky, state, United States Kentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. serve 1.5 million electric customers and about 500,000 gas customers. In addition, its Indiana regulated operations own 7,000 megawatts of generation. Cinergy's energy merchant business is a Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians leader in low-cost generation owning 6,300 megawatts of capacity with a profitable balance of stable existing customer portfolios, new customer origination, marketing and trading, and industrial-site cogeneration cogeneration In power systems, use of steam for both power generation and heating. High-temperature, high-pressure steam from a boiler and superheater first passes through a turbine to produce power. . The "into Cinergy" power-trading hub is the most liquid trading hub in the nation. This document includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management's beliefs and assumptions. These forward-looking statements are identified by terms and phrases such as "anticipate", "believe", "intend", "estimate", "expect", "continue", "should", "could", "may", "plan", "project", "predict", "will", and similar expressions. Forward-looking statements involve risks and uncertainties that may cause actual results to be materially different from the results predicted. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to, unanticipated weather conditions; unscheduled unscheduled Adjective not planned or intended Adj. 1. unscheduled - not scheduled or not on a regular schedule; "an unscheduled meeting"; "the plane made an unscheduled stop at Gander for refueling" generation outages; unusual maintenance or repairs; unanticipated changes in costs; environmental incidents, including costs of compliance with existing and future environmental requirements; electric transmission or gas pipeline system constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. ; legislative and regulatory initiatives; additional competition in electric or gas markets and continued industry consolidation; financial or regulatory accounting principles; political, legal, and economic conditions and developments in the countries in which we have a presence; changing market conditions and other factors related to physical energy and financial trading activities; the performance of projects undertaken by our non-regulated businesses and the success of efforts to invest in and develop new opportunities; availability of, or cost of, capital; employee workforce factors; delays and other obstacles associated with mergers, acquisitions, and investments in joint ventures; and costs and effects of legal and administrative proceedings An administrative proceeding is a non-judicial determination of fault or guilt and may include in some cases penalties of various forms. A "Captain's Mast", held by a commanding officer of a warship is one such proceeding. , settlements, investigations, and claims. Please refer to the company's SEC filings for additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements. The Company undertakes no obligation to update the information contained herein. Following are summaries of Cinergy's unaudited consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: and segmented financial information for the second quarter and first six months of 2003.
CINERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Periods Ended June 30, 2003
(unaudited)
(in thousands, except per share amounts)
----------------------------------------------------------------------
Quarter Ended Year To Date
------------------- -----------------------
2003 2002 2003 2002
--------- --------- ----------- -----------
Operating Revenues
Electric $769,258 $804,463 $1,592,316 $1,565,848
Gas 114,932 80,208 513,845 270,272
Other 49,733 22,624 95,719 39,561
--------- --------- ----------- -----------
933,923 907,295 2,201,880 1,875,681
Operating Expenses
Fuel used in electric
production 219,157 205,371 459,436 409,493
Gas purchased 53,319 29,562 289,314 139,442
Purchased and exchanged
power 21,313 36,315 50,899 49,999
Other operation 263,883 280,380 531,436 484,525
Maintenance 66,123 57,926 123,732 114,393
Depreciation 105,228 97,979 208,863 194,295
Taxes other than income
taxes 66,958 64,247 144,707 136,669
--------- --------- ----------- -----------
795,981 771,780 1,808,387 1,528,816
Operating Income 137,942 135,515 393,493 346,865
Other Income and (Expenses)
- Net
Allowance for equity
funds used during
construction 2,612 4,317 6,191 7,167
Equity in earnings of
unconsolidated
subsidiaries 6,104 (581) 6,696 4,108
Other - net 5,155 (7,380) 9,191 (11,615)
--------- --------- ----------- -----------
13,871 (3,644) 22,078 (340)
Interest and Other Charges
Interest on long-term
debt 67,222 58,526 130,591 115,492
Other interest 164 6,060 2,079 12,852
Allowance for borrowed
funds used during
construction (6,992) (6,155) (13,122) (10,740)
--------- --------- ----------- -----------
60,394 58,431 119,548 117,604
Preferred Trust
Preferred dividend
requirement of
subsidiary trust 5,970 5,968 11,940 11,881
Income Before Taxes 85,449 67,472 284,083 217,040
Income Taxes 8,983 21,298 66,966 75,842
Preferred dividend
requirements of
subsidiaries 858 858 1,716 1,716
Income Before Discontinued
Operations and Cumulative Effect
of a Change in Accounting
Principles $75,608 $45,316 $215,401 $139,482
Discontinued Operations,
net of tax 9,045 (333) 8,875 1,229
Cumulative Effect of
a Change in
Accounting Principles,
net of tax - - 26,462 (10,899)
--------- --------- ----------- -----------
Net Income $84,653 $44,983 $250,738 $129,812
Other comprehensive
income, net of tax 4,590 14,401 5,377 12,142
--------- --------- ----------- -----------
Comprehensive Income $89,243 $59,384 $256,115 $141,954
Average Common Shares
Outstanding 176,645 167,330 175,025 165,821
Earnings Per Common Share
Income Before Discontinued
Operations and Cumulative
Effect of a Change in
Accounting Principles $0.42 $0.27 $1.23 $0.84
Discontinued
Operations,
net of tax 0.05 - 0.05 0.01
Cumulative Effect of a
Change in Accounting
Principles, net of
tax - - 0.15 (0.06)
--------- --------- ----------- -----------
Net Income $0.47 $0.27 $1.43 $0.79
Earnings Per Common Share -
Assuming Dilution
Income Before Discontinued
Operations and Cumulative
Effect of a Change in
Accounting Principles $0.42 $0.26 $1.22 $0.83
Discontinued
Operations,
net of tax 0.05 - 0.05 0.01
Cumulative Effect of a
Change in Accounting
Principles, net of
tax - - 0.15 (0.06)
--------- --------- ----------- -----------
Net Income $0.47 $0.26 $1.42 $0.78
Dividends Declared Per
Common Share $0.46 $0.45 $0.92 $0.90
Note: Prior year's data has been reclassified to conform with
current year's presentation.
CINERGY CORP.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
----------------------------------------------------------------------
June 30 December 31
2003 2002
------------ ------------
ASSETS
Current Assets
Cash and temporary cash investments $249,016 $200,112
Restricted deposits 3,609 3,092
Notes receivable 78,112 135,873
Accounts receivable less accumulated
provision for doubtful accounts
of $11,447 at June 30, 2003,
and $16,368 at December 31, 2002 1,163,652 1,280,810
Materials, supplies and fuel - at
average cost 321,247 319,454
Prepayments and other 121,168 107,086
Energy risk management current assets 401,054 464,028
------------ ------------
Total current assets 2,337,858 2,510,455
Property, Plant, and Equipment - at Cost
Utility plant in service 9,374,785 8,641,351
Construction work in progress 349,212 469,300
------------ ------------
Total utility plant 9,723,997 9,110,651
Non-regulated property, plant, and
equipment 4,310,498 4,616,754
Accumulated depreciation 5,246,376 5,157,040
------------ ------------
Net property, plant, and
equipment 8,788,119 8,570,365
Other Assets
Regulatory assets 1,015,024 1,022,696
Investments in unconsolidated
subsidiaries 453,906 417,188
Energy risk management non-current
assets 151,159 162,773
Other investments 173,203 163,851
Other 361,902 312,435
------------ ------------
Total other assets 2,155,194 2,078,943
Assets of Discontinued Operations 7,187 147,265
Total Assets $13,288,358 $13,307,028
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $1,102,251 $1,318,379
Accrued taxes 191,864 258,613
Accrued interest 69,767 62,244
Notes payable and other short-term
obligations 409,269 667,973
Long-term debt due within one year 387,038 176,000
Energy risk management current
liabilities 384,885 407,710
Other 130,165 105,026
------------ ------------
Total current liabilities 2,675,239 2,995,945
Non-current Liabilities
Long-term debt 3,977,446 4,011,568
Deferred income taxes 1,508,123 1,458,171
Unamortized investment tax credits 113,489 118,095
Accrued pension and other post-
retirement benefit costs 660,922 626,167
Energy risk management non-current
liabilities 156,946 143,991
Other 206,466 179,767
------------ ------------
Total non-current liabilities 6,623,392 6,537,759
Liabilities of Discontinued Operations 8,877 108,833
Total Liabilities 9,307,508 9,642,537
Preferred Trust Securities
Company obligated mandatorily
redeemable preferred
trust securities of subsidiary
holding solely debt securities
of the company 309,216 308,187
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 62,818 62,828
Common Stock Equity
Common stock - $0.01 par value;
authorized shares - 600,000,000;
outstanding shares -
176,947,118 at June 30, 2003,
and 168,663,115 at
December 31, 2002 1,769 1,687
Paid-in capital 2,135,968 1,918,136
Retained earnings 1,495,502 1,403,453
Accumulated other comprehensive income (24,423) (29,800)
------------ ------------
Total common stock equity 3,608,816 3,293,476
Total Liabilities and Equity $13,288,358 $13,307,028
Note: Prior year's data has been reclassified to conform with
current year's presentation.
CINERGY CORP.
BUSINESS SEGMENT SUMMARY INFORMATION
For the Quarter Ended June 30
(unaudited)
(dollars in thousands, except per share amounts)
----------------------------------------------------------------------
2003 2002
----------- -----------
Energy Merchant
---------------
Net Income $64,332 $23,505
Earnings Per Share - diluted $0.36 $0.13
Electricity Trading Volumes (Mwhs) 33,909,209 20,130,095
Physical and Financial Gas Trading Volumes
(Bcf/d) 52.2 56.5
Regulated Operations
--------------------
Net Income $26,105 $29,141
Earnings Per Share - diluted $0.14 $0.17
Electric Retail MWH Sales and Transportation 11,885,720 12,444,284
Gas Retail MCF Sales and Transportation 13,243,924 14,242,507
Electric Customers (End of Period) 1,532,430 1,514,694
Gas Customers (End of Period) 503,616 497,171
Power Technology & Infrastructure Services
------------------------------------------
Net Income $(5,784) $(7,663)
Earnings Per Share - diluted $(0.03) $(0.04)
2002 has been reclassified to reflect Vestar's move from PTIS to
Energy Merchant
CINERGY CORP.
BUSINESS SEGMENT EARNINGS DRIVER ANALYSIS
For the Quarter Ended June 30, 2003
(unaudited)
----------------------------------------------------------------------
Energy Merchant
---------------
Earnings Per Share - diluted - 2002 $0.13
Employee retirement/severance and other charges 0.08
Discontinued operations 0.05
Marketing, trading, and origination 0.03
Generation and supply contracts 0.04
Financing 0.01
Other - net 0.02
Earnings Per Share - diluted - 2003 $0.36
Regulated Operations
--------------------
Earnings Per Share - diluted - 2002 $0.17
Employee retirement/severance and other charges 0.12
Weather (0.06)
Industrial sales - economy (0.02)
Operating and administrative expenses (0.02)
Financing and depreciation (0.04)
Other - net (0.01)
Earnings Per Share - diluted - 2003 $0.14
Power Technology & Infrastructure Services
------------------------------------------
Earnings Per Share - diluted - 2002 $(0.04)
Employee retirement/severance and other charges 0.01
Earnings Per Share - diluted - 2003 $(0.03)
2002 has been reclassified to reflect Vestar's move from PTIS to
Energy Merchant
CINERGY CORP.
BUSINESS SEGMENT SUMMARY INFORMATION
For the Year to Date June 30
(unaudited)
(dollars in thousands, except per share amounts)
----------------------------------------------------------------------
2003 2002
----------- -----------
Energy Merchant
---------------
Net Income $161,437 $40,143
Earnings Per Share - diluted $0.91 $0.24
Electricity Trading Volumes (Mwhs) 67,306,592 41,754,297
Physical and Financial Gas Trading Volumes
(Bcf/d) 58.1 57.7
Regulated Operations
--------------------
Net Income $100,174 $101,938
Earnings Per Share - diluted $0.57 $0.61
Electric Retail MWH Sales and Transportation 25,060,301 24,812,718
Gas Retail MCF Sales and Transportation 58,086,816 51,354,071
Electric Customers (End of Period) 1,532,430 1,514,694
Gas Customers (End of Period) 503,616 497,171
Power Technology & Infrastructure Services
------------------------------------------
Net Income $(10,873) $(12,269)
Earnings Per Share - diluted $(0.06) $(0.07)
2002 has been reclassified to reflect Vestar's move from PTIS to
Energy Merchant
CINERGY CORP.
BUSINESS SEGMENT EARNINGS DRIVER ANALYSIS
For the Year to Date June 30, 2003
(unaudited)
----------------------------------------------------------------------
Energy Merchant
---------------
Earnings Per Share - diluted - 2002 $0.24
Cumulative effect of a change in accounting principles 0.21
Employee retirement/severance and other charges 0.08
Discontinued operations 0.04
Marketing, trading, and origination 0.21
Generation and supply contracts 0.14
Operating and administrative expenses (0.03)
Financing (0.01)
Other - net 0.03
Earnings Per Share - diluted - 2003 $0.91
Regulated Operations
--------------------
Earnings Per Share - diluted - 2002 $0.61
Employee retirement/severance and other charges 0.14
Weather 0.03
Industrial sales - economy (0.01)
Other revenue 0.02
Operating and administrative expenses (0.08)
Financing and depreciation (0.09)
Other - net (0.05)
Earnings Per Share - diluted - 2003 $0.57
Power Technology & Infrastructure Services
------------------------------------------
Earnings Per Share - diluted - 2002 $(0.07)
Employee retirement/severance and other charges 0.01
Earnings Per Share - diluted - 2003 $(0.06)
2002 has been reclassified to reflect Vestar's move from PTIS to
Energy Merchant
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