CenterPoint Energy, Inc.
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Net income for the first quarter of 2005 included $0.4 million of income from discontinued operations compared to $45 million, or $0.13 per diluted share, of income from discontinued operations for the first quarter of 2004.
Income from continuing operations for the first quarter of 2005 was $67 million, or $0.20 per diluted share, compared to $29 million, or $0.09 per diluted share, for the first quarter of 2004. The first quarter of 2005 included income of $34 million pre-tax, or $22 million after-tax ($0.06 per diluted share), related to interest on the company's authorized true-up balance.
"We're off to a great start this year, with overall solid financial performance from our core energy delivery businesses," said David M. McClanahan, president and chief executive officer of CenterPoint Energy. "Now that we've completed the sale of our generation assets, we will focus on enhancing the performance of our core businesses and look for opportunities to accelerate the company's growth in a disciplined manner."
OPERATING INCOME BY SEGMENT DETAILED Electric Transmission & Distribution
The electric transmission & distribution segment reported operating income of $80 million in the first quarter of 2005, consisting of $71 million for the regulated electric transmission & distribution utility (TDU) and $9 million for the transition bond company, which is an amount sufficient to pay interest on the transition bonds. Operating income for the first quarter of 2004 totaled $85 million, consisting of $75 million for the TDU and $10 million for the transition bond company.
The TDU's revenues continued to benefit from solid customer growth, with nearly 43,000 metered customers added since March 31, 2004. Revenues also increased from higher transmission cost recovery. Operating expenses were greater than last year primarily due to higher transmission costs, higher state franchise and property taxes and increased depreciation. These higher expenses were partially offset by reduced benefit and pension expenses.
Natural Gas Distribution
The natural gas distribution segment reported operating income of $139 million for the first quarter of 2005, compared to $117 million for the same period of 2004. Revenues increased primarily from the impact of rate increases, continued customer growth with the addition of over 43,000 customers since March 31, 2004, and higher income from the company's competitive natural gas sales business. The increase in revenues was partially offset by milder weather and decreased usage. Operation and maintenance expenses declined in the first quarter of 2005 compared to the same period of 2004, which included an $8 million charge for staff reductions related to process improvements. Excluding this charge, operation and maintenance expenses declined by $1 million resulting primarily from a decrease in benefit and pension expenses, which more than offset other expense increases.
Pipelines and Gathering
The pipelines and gathering segment reported operating income of $64 million for the first quarter of 2005 compared to $45 million for the same period of 2004. The improvement in operating income for the quarter resulted primarily from higher operating margins in the pipeline business driven by increased demand for transportation and ancillary services related to natural gas price volatility. In addition, the company's core gas gathering operations benefited from increased throughput and demand for its services.
Other Operations
The company's other operations reported an operating loss of $7 million for each of the first quarters of 2004 and 2005.
OTHER
The company adopted EITF Issue No. 04-8, "Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings Per Share" (EITF 04-8) effective December 31, 2004. EITF 04-8 requires certain contingently convertible debt instruments with a market price trigger to be treated the same as traditional convertible debt instruments for earnings per share (EPS) purposes. The contingently convertible debt instruments are taken into consideration in the calculation of diluted EPS using the "if-converted" method. The impact on the company's diluted EPS for each of the quarters ended March 31, 2005 and 2004, related to its $575 million contingently convertible notes was a decrease of $0.02 per share. The company is considering alternatives for decreasing this dilutive effect, including an exchange offer for the notes.
COMPLETION OF SALE OF GENERATION ASSETS
In April 2005, the company completed the final step of a two-part transaction in which Texas Genco LLC (formerly known as GC Power Acquisition LLC) agreed to acquire the company's generation assets. At that closing, in which Texas Genco LLC acquired the company's nuclear generating assets, CenterPoint Energy received a cash payment of $700 million.
In December 2004, the first step of the transaction, the sale of the fossil assets, was completed with CenterPoint Energy receiving $2.231 billion in cash.
As a result of the sale, the electric generation segment was reclassified as discontinued operations in the third quarter of 2004. These operations are presented as discontinued operations in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", for all periods presented.
RECOVERY OF TRUE-UP BALANCE
In late 2004, the Texas Public Utility Commission (PUC) issued its final true-up order in which it determined the stranded costs and other generation- related assets it would allow the company to recover under the Texas electric restructuring law. The PUC authorized recovery of $2.3 billion, including interest through August 31, 2004, subject to certain adjustments. The company and other parties have appealed certain aspects of the PUC's true-up order.
In March 2005, the PUC issued a financing order authorizing the company to issue transition bonds to securitize a portion of its true-up balance. Subsequently, several parties have appealed the financing order to the Texas courts. The company will not be able to issue transition bonds while the appeals of the financing order are pending. Previously, the company had expected that approximately $1.8 billion in transition bonds could be issued by mid-2005.
In January 2005, the company filed an application with the PUC for a "Competition Transition Charge" (CTC) under which it would recover its adjusted true-up balance that has not been securitized. Hearings were held on that application in April, and an order is expected from the PUC in late May.
The company is entitled to accrue a return on the true-up balance until it is fully recovered.
NEW CREDIT FACILITIES
In March 2005, the company closed on three new bank credit facilities to reduce interest costs, extend maturities and improve terms. The company:
* Replaced the $750 million parent company revolving credit facility
with a $1 billion, five-year revolving credit facility, with an
interest rate of LIBOR + 100 basis points
* Established a $200 million, five-year revolving credit facility at
CenterPoint Energy Houston Electric (CEHE), the company's electric
transmission and distribution subsidiary, with an interest rate of
LIBOR + 75 basis points
* Established a $1.31 billion secured revolving credit backstop facility
at CEHE, with an interest rate of LIBOR + 75 basis points, to be used
only to repay the $1.31 billion term loan at CEHE, due in
November 2005, if sufficient transition bonds have not been issued by
that date
QUASI-REORGANIZATION
On April 27, 2005, the CenterPoint Energy Board of Directors concluded that it will not implement the accounting reorganization it had expected to implement as of January 1, 2005. The accounting reorganization would have extinguished the company's current retained earnings deficit in order to facilitate the payment of dividends under constraints imposed by the Public Utility Holding Company Act of 1935. After receiving management's report on the accounting effects of the proposed reorganization, the Board of Directors concluded that the action, if taken, would have negatively impacted the company's common equity and would have adversely affected its schedule for achieving the 30 percent common equity level generally expected to be maintained by registered holding companies.
WEBCAST OF EARNINGS CONFERENCE CALL
CenterPoint Energy's management will host an earnings conference call on Friday, April 29, 2005, at 10:30 a.m. Central time or 11:30 a.m. Eastern time. Interested parties may listen to a live, audio broadcast of the conference call at http://www.centerpointenergy.com/investors/events . A replay of the call can be accessed approximately two hours after the completion of the call, and will be archived on the web site for at least one year.
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and sales, interstate pipeline and gathering operations. The company serves nearly five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas. Assets total approximately $17 billion. With more than 9,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 130 years. For more information, visit the Web site at http://www.centerpointenergy.com/ .
This news release includes forward-looking statements. Actual events and results may differ materially from those projected. The statements in this news release regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements. Factors that could affect actual results include the timing and outcome of the true-up proceeding and any legal proceedings related thereto, the timing and impact of future regulatory and legislative decisions, effects of competition, weather variations, changes in CenterPoint Energy's or its subsidiaries' business plans, financial market conditions, the timing and extent of changes in commodity prices, particularly natural gas, the impact of unplanned facility outages and other factors discussed in CenterPoint Energy's and its subsidiaries' Form 10-K's for the period ended December 31, 2004, and other filings with the Securities and Exchange Commission.
CenterPoint Energy, Inc. and Subsidiaries
Statements of Consolidated Income
(Thousands of Dollars)
(Unaudited)
Quarter Ended March 31,
2005 2004
Revenues:
Electric Transmission & Distribution $344,994 $330,313
Natural Gas Distribution 2,330,232 2,131,332
Pipelines and Gathering 120,781 102,403
Other Operations 6,679 2,889
Eliminations (40,878) (39,119)
Total 2,761,808 2,527,818
Expenses:
Natural gas 1,948,336 1,761,877
Operation and maintenance 313,071 315,842
Depreciation and amortization 129,773 116,218
Taxes other than income taxes 94,661 93,988
Total 2,485,841 2,287,925
Operating Income 275,967 239,893
Other Income (Expense):
Gain on Time Warner investment (41,114) (24,453)
Loss on indexed debt securities 39,529 27,014
Interest and other finance charges (173,340) (182,973)
Interest on transition bonds (9,220) (9,674)
Return on true-up balance 34,082 ---
Other - net 3,812 1,507
Total (146,251) (188,579)
Income from Continuing Operations
Before Income Taxes 129,716 51,314
Income Tax Expense (63,064) (22,416)
Income from Continuing Operations 66,652 28,898
Discontinued Operations:
Income from Texas Genco, net of tax 13,673 56,286
Minority Interest in income from
Texas Genco --- (11,597)
Loss on Disposal of Texas Genco, net
of tax (13,237) ---
Total 436 44,689
Net Income $67,088 $73,587
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Selected Data From Statements of Consolidated Income
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
Quarter Ended
March 31,
2005 2004
Basic Earnings Per Common Share:
Income from Continuing Operations $0.22 $0.09
Income from Discontinued Operations,
net of tax --- 0.15
Net Income $0.22 $0.24
Diluted Earnings Per Common Share:
Income from Continuing Operations $0.20 $0.09
Income from Discontinued Operations,
net of tax --- 0.13
Net Income $0.20 $0.22
Dividends Declared per Common Share $0.20 (A) $0.10
Weighted Average Common Shares
Outstanding (000):
- Basic 308,470 306,012
- Diluted 360,623 357,806
Operating Income (Loss) by Segment
Electric Transmission & Distribution:
Transmission & Distribution Operations $70,609 $75,307
Transition Bond Company 9,083 9,608
Total Electric Transmission &
Distribution 79,692 84,915
Natural Gas Distribution 139,493 116,624
Pipelines and Gathering 64,031 44,856
Other Operations (7,249) (6,502)
Total $275,967 $239,893
(A) On January 26, 2005, the Company's board of directors declared a
dividend of $0.10 per share of common stock payable on March 10,
2005 to shareholders of record as of the close of business on
February 16, 2005. On March 3, 2005, the Company's board of
directors declared a dividend of $0.10 per share of common stock
payable on March 31, 2005 to shareholders of record as of the close
of business on March 16, 2005. This additional first quarter
dividend was declared in lieu of the regular second quarter dividend
to address technical restrictions that might limit the Company's
ability to pay a regular dividend during the second quarter of this
year.
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Electric Transmission & Distribution
Quarter Ended
March 31, % Diff
2005 2004 Fav/(Unfav)
Results of Operations:
Electric transmission and
distribution revenues $323 $315 3%
Electric transmission and
distribution expenses:
Operation and maintenance 138 133 (4%)
Depreciation and amortization 64 60 (7%)
Taxes other than income taxes 50 47 (6%)
Total electric transmission and
distribution expenses 252 240 (5%)
Operating Income - Electric
transmission and distribution utility 71 75 (5%)
Operating Income - Transition bond
company 9 10 (10%)
Total Segment Operating Income $80 $85 (6%)
Electric Transmission & Distribution Quarter Ended
Operating Data: March 31,
Actual MWH Delivered 2005 2004
Residential 4,141,664 4,401,825 (6%)
Total 15,826,314 15,520,086 2%
Weather (average for service area):
Percentage of normal:
Cooling degree days 126% 104% 22%
Heating degree days 77% 85% (8%)
Average number of metered customers:
Residential 1,661,320 1,621,945 2%
Commercial and Industrial 225,700 220,731 2%
Total 1,887,020 1,842,676 2%
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Natural Gas Distribution
Quarter Ended
March 31, % Diff
2005 2004 Fav/(Unfav)
Results of Operations:
Revenues $2,330 $2,131 9%
Expenses:
Natural gas 1,975 1,790 (10%)
Operation and maintenance 140 149 6%
Depreciation and amortization 38 35 (9%)
Taxes other than income taxes 38 40 5%
Total 2,191 2,014 (9%)
Operating Income $139 $117 19%
Natural Gas Distribution Operating Data:
Throughput data in BCF
Residential 77 85 (9%)
Commercial and Industrial 77 83 (7%)
Non-rate regulated 183 139 32%
Elimination (49) (10) (390%)
Total Throughput 288 297 (3%)
Weather (average for service area)
Percentage of normal:
Heating degree days 91% 96% (5%)
Average number of customers:
Residential 2,851,514 2,811,458 1%
Commercial and Industrial 248,826 246,664 1%
Non-rate regulated 6,510 6,190 5%
Total 3,106,850 3,064,312 1%
Pipelines and Gathering
Quarter Ended
March 31, % Diff
2005 2004 Fav/(Unfav)
Results of Operations:
Revenues $121 $102 19%
Expenses:
Natural gas 7 9 22%
Operation and maintenance 34 33 (3%)
Depreciation and amortization 11 11 ---
Taxes other than income taxes 5 4 (25%)
Total 57 57 ---
Operating Income $64 $45 42%
Pipelines and Gathering Operating Data:
Throughput data in BCF
Natural Gas Sales 1 2 (50%)
Transportation 271 270 ---
Gathering 83 75 11%
Elimination (1) (2) 50%
Total Throughput 354 345 3%
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Results of Operations by Segment
(Millions of Dollars)
(Unaudited)
Other Operations
Quarter Ended
March 31, % Diff
2005 2004 Fav/(Unfav)
Results of Operations:
Revenues $7 $3 133%
Expenses 14 10 (40%)
Operating Loss $(7) $(7) ---
Capital Expenditures by Segment
(Millions of Dollars)
(Unaudited)
Quarter Ended
March 31,
2005 2004
Capital Expenditures by Segment
Electric Transmission & Distribution $55 $42
Natural Gas Distribution 40 37
Pipelines and Gathering 22 15
Other Operations 5 5
Total $122 $99
Interest Expense Detail
(Millions of Dollars)
(Unaudited)
Quarter Ended
March 31,
2005 2004
Interest Expense Detail
Amortization of Deferred Financing Cost $20 $22
Capitalization of Interest Cost (1) (1)
Transition Bond Interest Expense 9 9
Other Interest Expense 155 163
Total Interest Expense 183 193
Amortization of Deferred Financing Cost
Reclassified to Discontinued Operations --- 1
Other Interest Reclassified to
Discontinued Operations --- 11
Total Interest Reclassified to
Discontinued Operations (A) --- 12
Interest Expense Incurred by
Discontinued Operations 1 ---
Total Interest Expense in
Discontinued Operations 1 12
Total Interest Expense Incurred $184 $205
(A) In accordance with Emerging Issues Task Force Issue No. 87-24
"Allocation of Interest to Discontinued Operations", we have
reclassified interest to discontinued operations of Texas Genco
based on net proceeds received from the sale of Texas Genco of
$2.5 billion, and have applied the proceeds to the amount of debt
assumed to be paid down in 2004 according to the terms of the
respective credit facilities in effect for that period. In periods
where only the term loan was assumed to be repaid, the actual
interest paid was reclassified. In periods where a portion of the
revolver was assumed to be repaid, the percentage of that portion of
the revolver to the total outstanding balance was calculated, and
that percentage was applied to the actual interest paid in those
periods to compute the amount of interest reclassified.
Total interest expense was $184 million and $205 million for the
three months ended March 31, 2005 and 2004, respectively. Interest
expense of $12 million for the three months ended March 31, 2004,
was reclassified to discontinued operations of Texas Genco.
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Thousands of Dollars)
(Unaudited)
March 31, December 31,
2005 2004
ASSETS
Current Assets:
Cash and cash equivalents $305,293 $164,645
Other current assets 1,807,049 2,158,111
Current assets of discontinued
operations 122,908 513,768
Total current assets 2,235,250 2,836,524
Property, Plant and Equipment, net 8,201,013 8,186,393
Other Assets:
Goodwill, net 1,740,510 1,740,510
Regulatory assets 3,389,785 3,349,944
Other non-current assets 944,048 997,428
Non-current assets of discontinued
operations 1,044,483 1,051,158
Total other assets 7,118,826 7,139,040
Total Assets $17,555,089 $18,161,957
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of transition bond
long-term debt $49,352 $46,806
Current portion of other long-term
debt 1,784,772 1,789,182
Other current liabilities 2,263,262 2,902,238
Current liabilities of discontinued
operations 104,795 448,974
Total current liabilities 4,202,181 5,187,200
Other Liabilities:
Accumulated deferred income taxes,
net and investment tax credit 2,491,368 2,468,833
Regulatory liabilities 1,042,580 1,081,370
Other non-current liabilities 673,462 705,643
Non-current liabilities of
discontinued operations 367,176 420,393
Total other liabilities 4,574,586 4,676,239
Long-term Debt:
Transition bond 610,453 628,903
Other 7,032,735 6,564,113
Total long-term debt 7,643,188 7,193,016
Shareholders' Equity 1,135,134 1,105,502
Total Liabilities and
Shareholders' Equity $17,555,089 $18,161,957
Reference is made to the Notes to the Consolidated Financial Statements
contained in the Annual Report on Form 10-K of CenterPoint Energy, Inc.
CenterPoint Energy, Inc. and Subsidiaries
Condensed Statements of Consolidated Cash Flows
(Thousands of Dollars)
(Unaudited)
Three Months Ended March 31,
2005 2004
Cash Flows from Operating Activities:
Net income $67,088 $73,587
Discontinued operations, net of tax (436) (44,689)
Income from continuing operations 66,652 28,898
Adjustments to reconcile income
from continuing operations to net cash
provided by (used in) operating activities:
Depreciation and amortization 149,897 137,977
Deferred income taxes and
investment tax credit 47,623 18,526
Changes in net regulatory assets
and liabilities (86,460) (54,965)
Changes in other assets and
liabilities (361,994) 190,955
Other, net 4,875 23,674
Net Cash Provided by (Used in)
Operating Activities (179,407) 345,065
Net Cash Used in Investing Activities (120,204) (104,548)
Net Cash Provided by (Used in)
Financing Activities 385,577 (188,503)
Net Cash Provided by Discontinued
Operations 54,682 67,223
Net Increase in Cash and Cash
Equivalents 140,648 119,237
Cash and Cash Equivalents at
Beginning of Period 164,645 86,922
Cash and Cash Equivalents at End of
Period $305,293 $206,159
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