TECO Energy Reports 1998 Net Income of $1.57 Per Share
TAMPA, January 15, 1999
TECO Energy, Inc. (NYSE/TE) today reported earnings of $1.57 per share, compared to $1.54 per share last year. Reported earnings include the results of discontinued operations, which added 5 cents per share in 1998 and reduced 1997 earnings by 8 cents per share. Earnings from continuing operations in 1998, which included one-time charges for asset adjustments and regulatory actions, were $1.52 compared to $1.62 in 1997, which included merger-related costs. Earnings from continuing operations excluding these one-time charges were $1.68 in 1998 compared to $1.66 in 1997.
Chairman and Chief Executive Officer Girard F. Anderson said, "While we reported only modest gains in earnings for the year, we made very significant progress throughout 1998 in positioning the company for sustainable, long-term growth. We refined our strategic objectives early in the year and took significant actions to implement that plan as the year progressed."
In the regulated businesses, the company's continued focus on quality growth and expansion in 1998 yielded very favorable results; Tampa Electric continued its record of solid customer growth, and Peoples Gas expanded into new markets and continued to increase its customer base. In the diversified businesses, a number of domestic acquisitions were completed in 1998; the company moved into international electric distribution, and unregulated generation activities were expanded significantly.
Gordon L. Gillette, Chief Financial Officer, said, "Looking beyond the one-time charges that we took, you can see the underlying strengths of our businesses. Despite adverse weather and market conditions, earnings from continuing operations grew in 1998. In addition, immediate financing costs were incurred for initiatives that will produce earnings benefits in future years."
Full Year 1998 Results
Tampa Electric reported operating income of $279.7 million and net income of $130.8 million for the year, compared with operating income of $271.5 million and net income of $134.9 million in 1997. 1998 net income for Tampa Electric included a first quarter after-tax charge of $5.9 million associated with actions to mitigate the effects of a 1997 Florida Public Service Commission (FPSC) ruling that separated certain wholesale power sales contracts from the retail jurisdiction. Net income for 1998 also reflected a one-time, after-tax charge of $4.5 million in the fourth quarter to record the impact of a ruling by the FPSC denying certain quality price adjustments for coal purchases since 1993.
Retail energy sales growth of 6.2 percent was driven by strong expansion of the local economy, with customer growth of 2.3 percent, and extreme summer weather. Higher operations and maintenance costs and depreciation expense partially offset the revenue growth.
Tampa Electric revenues for 1998 included recognition of previously deferred revenues of $38.3 million, compared with $30.5 million in 1997. 1998 revenues were net of a temporary base rate reduction of $21 million in effect through the end of 1998, compared to 1997 which included an effective base rate reduction of $4 million, also associated with the rate and earnings stipulation in effect.
Peoples Gas System reported operating income of $35.8 million, compared with $33.6 million last year. Base revenues increased as the company executed growth and expansion plans, with residential volumes up 8 percent and commercial volumes up over 7 percent. The 1998 results include restructuring costs and cost savings associated with management's decision in June 1998 to discontinue the appliance sales and service business.
In the diversified businesses, unconsolidated operating income before one-time charges was essentially unchanged at $114.5 million. Revenues for 1998 were $674.1 million compared to $632.5 million last year.
The 1998 results reflect strong contributions from TECO Coal, with operating income up significantly over 1997, reflecting higher volume to third parties combined with lower per unit production costs. Sales to Tampa Electric continued to decline as planned.
Peoples Gas Company, the propane business, also showed substantial improvement in operating income, reflecting the impact of higher unit margins as well as the Griffis Gas acquisition.
TECO Transport had growth in the river business from barge additions and from increased northbound volumes. Mostly offsetting this growth, however, were unfavorable weather conditions early in the year along with an active hurricane season and a weak export market which impacted demand and pricing at all three of its operating units. As a result, TECO Transport had operating income only slightly above last year's.
TECO Coalbed Methane had lower operating income in 1998, reflecting lower gas prices and lower production. Including the favorable effects of a hedging program, gas prices were, on average, 15 cents per Mcf lower this year, and production declined to 17.6 billion cubic feet (Bcf) in 1998 from 19.2 Bcf in 1997.
TECO Power Services reported lower operating income, with higher development costs associated with increased project development activity more than offsetting income from the Guatemalan distribution utility added in 1998. The higher development costs were primarily associated with initiatives undertaken during 1998 to provide a platform for greater growth over the long-term.
In December, TECO Energy announced that management was re-evaluating the collectibility of the $18.5 million note associated with the sale of certain discontinued oil and gas assets. This note and $39 million in cash were received by the company in connection with the March 1998 sale of the offshore oil and gas assets of its discontinued TECO Oil & Gas business. CFO Gillette said, "Based on the likely impact of economic factors on that business, including lower oil prices, we felt it prudent to write off the recorded value of all assets associated with our discontinued oil and gas operation. This includes the $18.5 million note from American Resources Offshore, Inc." The net, after-tax gain from discontinued operations was $6.1 million for the year, or about 5 cents per share.
Income from continuing operations of $200.4 million in 1998 included one-time, after-tax charges at Tampa Electric of $5.9 million related to the separation of certain wholesale power contracts and $4.5 million to reflect the December FPSC decision denying coal quality price adjustments, $8.9 million at TECO Coal for asset adjustments and $1.7 million at TeCom to write-off certain product development costs. Income from continuing operations of $211.4 million in 1997 included after-tax merger costs of $5.3 million.
Fourth Quarter Results
Earnings from continuing operations were 31 cents per share, which included the one-time, after-tax charge of $4.5 million at Tampa Electric reflecting the FPSC ruling denying quality price adjustments for coal purchases. This compares with 33 cents per share in 1997, which included a $1.9 million after-tax, one-time charge for merger-related costs. Excluding one-time charges, earnings from continuing operations for the fourth quarter were $45.4 million, or 34 cents per share, versus $44.5 million, or 34 cents per share, in 1997.
Fourth quarter earnings were 19 cents per share after discontinued operations and including an after-tax charge of $16.1 million, or 12 cents per share, primarily associated with the write-off of the note receivable from the sale of offshore oil and gas assets earlier in 1998. This compares with 31 cents per share in 1997, which included a $1.3 million after-tax loss from discontinued operations.
Tampa Electric's fourth quarter operating income was $48.7 million and net income was $18.2 million, compared with $47.1 million and $21.4 million, respectively, in 1997. Revenues were $286.6 million including recognition of previously deferred revenues of $6.6 million versus revenues of $274.1 million including recognition of previously deferred revenues of $2.7 million in the fourth quarter last year.
Peoples Gas reported fourth quarter operating income of $12.5 million versus $8.0 million in 1997. Revenues reflected stronger growth in the commercial segment, offset by lower residential volumes, which were down significantly because of warmer-than-normal weather. Results in 1997 included costs associated with consolidating certain Peoples Gas operations.
Fourth quarter unconsolidated operating income from the company's diversified businesses was $29.1 million on revenues of $169.2 million, compared to $32.0 million on revenues of $170.5 million in 1997.
TECO Coal performed well in the fourth quarter, reflecting higher revenues from third party sales and lower unit production costs. Operating income at TECO Transport was higher for the quarter as the effects of weather-related delays, lower grain shipments and a vessel incident were more than offset by favorable depreciation and employee expense changes. TECO Coalbed Methane's fourth quarter operating results were lower than in 1997 due to significantly lower gas prices and lower production. Operating income at TECO Power Services was slightly below last year, as income from the Guatemalan utility was offset by development expenses related to new projects.
TECO Energy is a diversified energy-related holding company headquartered in Tampa. Its principal businesses are Tampa Electric, Peoples Gas, TECO Transport, TECO Coal, TECO Coalbed Methane, TECO Power Services, and Bosek, Gibson and Associates.
This press release contains forward-looking statements which are subject to the inherent uncertainties in predicting future results and conditions. Certain factors that could cause actual results to differ materially from those projected in these forward-looking statements include the following: general economic conditions, particularly those in Tampa Electric's service area affecting energy sales; weather variations affecting energy sales and operating costs; potential competitive changes in the electric and gas industries, particularly in the area of retail competition; regulatory actions affecting Tampa Electric and Peoples Gas System; commodity price changes affecting the competitive positions of Tampa Electric and the Peoples Gas companies as well as the margins at TECO Coalbed Methane and TECO Coal; and changes in and compliance with environmental regulations that may impose additional costs or curtail some activities. These factors are discussed more fully under "Investment Considerations" in the company's Annual Report on Form 10-K for the year ended December 31, 1997, and reference is made thereto.
|Summary information (as of December 31, 1998):|
|(all amounts millions|
except per share amounts)
|Three months ended||Twelve months ended|
|Net income from continuing operations||$ 40.9||$ 42.7||$ 200.4||$ 211.4|
|Net income (loss) from discontinued operations||$ --||$ --||$ --||$ ( 6.5)|
|Gain (loss) on disposal of discontinued operations||$ (16.1)||$ (1.3)||$ 6.1||$ (3.0)|
|Net income||$ 24.8||$ 41.4||$ 206.5||$ 201.9|
|Earnings per share from continuing operations - basic||$ .31||$ .33||$ 1.52||$ 1.62|
|Earnings per share from continuing operations - diluted||$ .31||$ .32||$ 1.52||$ 1.61|
|Earnings per share - basic||$ .19||$ .31||$ 1.57||$ 1.54|
|Earnings per share - diluted||$ .19||$ .31||$ 1.57||$ 1.54|
outstanding - basic
outstanding - diluted
|(1) Net income from continuing operations|
(before one-time charges)
|$ 45.4||$ 44.5||$ 221.7||$ 216.7|
|(2) EPS from continuing operations|
(before one-time charges)
|$ .34||$ .34||$ 1.68||$ 1.66|