Central Vermont Public Service (NYSE: CV) today reported
consolidated 2005 earnings of $5.4 million, or 41 cents per diluted
share of common stock. This compares to 2004 earnings of $23.8
million, or $1.90 per diluted share of common stock. For the fourth
quarter of 2005, CV reported consolidated earnings of $5.3 million,
or 42 cents per diluted share of common stock. This compares to
fourth-quarter 2004 earnings of $3.8 million, or 34 cents per
diluted share of common stock. Earnings from discontinued
operations were $4.9 million in 2005, or 40 cents per diluted share
of common stock, and $5.4 million, or 43 cents per diluted share of
common stock, in the quarter. This compares to earnings from
discontinued operations of $16.3 million, or $1.32 per diluted
share of common stock, and $1.6 million, or 13 cents per diluted
share of common stock, for the respective periods in 2004. Earnings
from continuing operations were $0.5 million in 2005, or 1 cent per
diluted share of common stock, and a loss of $0.1 million, or a 1
cent loss per diluted share of common stock, in the quarter. This
compares to earnings from continuing operations of $7.5 million, or
58 cents per diluted share of common stock, and $2.2 million, or 21
cents per diluted share of common stock, for the respective periods
in 2004. 2005 Highlights CV's fourth quarter and year-end 2005
results include the favorable effect of a gain on the sale of all
of its interest in Catamount Energy Corporation ("Catamount") to
Diamond Castle, a New York-based private equity investment firm. CV
announced its decision to sell Catamount on November 21, 2005 and
the sale was consummated on December 20, 2005. CV received cash
proceeds of $59.25 million resulting in an after-tax gain of $5.6
million, or 45 cents per diluted share of common stock. For
accounting purposes, Catamount's results of operations, including
the gain on sale, are reported as discontinued operations in the
Company's financial statements. In addition to the gain on sale,
our share of Catamount's 2005 losses through the sale date amounted
to $0.7 million, or a 5 cent loss per diluted share of common
stock. Our share of Catamount's fourth-quarter 2005 losses through
the sale date amounted to $0.2 million, or a 2 cent loss per
diluted share of common stock. The results of discontinued
operations are described in more detail below. CV's 2005 results
also include a $21.8 million pre-tax charge to earnings in the
first quarter related to a March 29, 2005 Rate Order ("Rate
Order"). The effects of the Rate Order are described in more detail
below. "The past year was a difficult one, but we have a solid plan
to restore CV to a position of financial strength, which is
critical to customers and shareholders alike," CV President Bob
Young said. That plan includes: -- Securing a $25 million revolving
credit facility in October 2005; -- Restructuring the board of
directors and reducing board compensation beginning in 2006; --
Efforts to improve communication with Vermont regulators and find
common ground on customer and company needs. -- Budget reductions
of $2.7 million in 2006, including a 10 percent cut in Young's
salary and a 5 percent reduction in other officers' salaries, to
partly offset higher pension, retiree medical and other operating
costs. Quarterly Performance Summary Utility Business Operating
revenues increased $7.9 million, pre-tax, compared to the same
period in 2004, due to the following factors: -- Resale sales
increased $8.9 million as a result of: 1) more mWh available for
resale partly due to a shorter-than-expected Vermont Yankee
scheduled refueling outage in the fourth quarter of 2005, and 2)
higher average prices reflecting an overall increase in wholesale
power market prices in New England. In total, higher average prices
contributed about $4.9 million to the favorable variance and higher
volume contributed about $4.0 million. -- Other operating revenue
increased $0.2 million primarily due to higher transmission revenue
and third-party billings related to the Vermont Yankee refueling
outage, partly offset by revenue from mutual aid work in Florida in
2004. -- Retail sales decreased $1.2 million due to a 2.75 percent
rate reduction beginning in April 2005, pursuant to the Rate Order,
and lower average unit prices due to customer sales mix, offset by
a 1.9 percent increase in sales volume. In total, the rate
reduction decreased revenue by about $1.9 million and lower average
unit prices decreased revenue by $0.8 million, partly offset by
$1.5 million from increased sales volume. Purchased power expense
increased $14.0 million, pre-tax, compared to the same period in
2004, due to the following factors: -- Short-term purchases
increased $14.9 million primarily due to the cost of replacement
energy purchases for the Vermont Yankee scheduled refueling outage.
The high level of replacement power costs were due in part to high
wholesale power market prices driven by the extraordinary effects
of hurricanes Katrina and Rita on the price of natural gas. These
costs are partially offset by increased resale sales due to a
shorter-than-anticipated outage. -- Power purchases under long-term
contracts decreased $1.9 million due to fewer purchases under the
power contract with Vermont Yankee Nuclear Power Corporation
("VYNPC") as a result of the scheduled refueling outage, partly
offset by higher output from Independent Power Producers and more
deliveries under CV's contract with Hydro-Quebec. -- Other
power-related costs increased $1.0 million due to higher
Connecticut Yankee rates under FERC-approved tariffs and
elimination of accounting deferrals for incremental Yankee Atomic
dismantling costs per the Rate Order. Other operating costs
decreased $3.8 million, pre-tax, primarily due to the following
factors: -- A fourth-quarter 2004 deferral of certain utility
earnings based on a Vermont Public Service Board ("PSB") approved
accounting order that permitted the Company to record 2004 utility
earnings in excess of an 11 percent return on equity as other
regulatory liabilities. Pursuant to the accounting order, the
Company reduced 2004 utility earnings by $3.8 million pre-tax. This
results in a favorable variance when comparing 2005 versus 2004
since there was no comparable deferral in 2005. -- Other offsetting
operating items included: lower employee benefit costs including
incentive compensation and active medical, lower transmission costs
and the favorable effect of Rate Order required amortizations that
began April 1, 2005. These favorable items were offset by higher
distribution expenses due to storm restoration costs associated
with a major storm in October 2005 and higher costs associated with
our wholly and jointly owned production facilities. Non-utility
Business Eversant, CV's wholly owned subsidiary, had a $1.4 million
investment in The Home Service Store, Inc. ("HSS") at December 31,
2004. HSS has established a network of affiliate contractors who
perform home maintenance repair and improvements for its members.
Eversant's investment is comprised of shares of HSS junior
cumulative convertible preferred stock and common stock. Eversant's
voting interest is about 13 percent, accordingly, Eversant accounts
for this investment on the cost basis. In the fourth quarter of
2005, Eversant impaired its $1.4 million investment, resulting in a
$0.8 million after-tax charge to earnings. Eversant determined that
its investment was impaired based on HSS's current financial
information and slower-than-expected growth experience. Further,
Eversant determined that the impairment was other-than-temporary.
HSS is accreting preferred stock dividends of 15 percent annually
to the senior series of preferred stock. HSS's current revenue
growth experience will not exceed this current preferred dividend
rate to a level that would provide any return to HSS's junior
preferred shareholders. Year-To-Date Performance Summary The
analysis of year-over-year earnings for the utility business is
discussed in two parts: recurring earnings from continuing
operations and impacts of the first-quarter 2005 charge to earnings
related to the Rate Order. Utility Business - continuing operations
Operating revenues increased $15.4 million, pre-tax, excluding
first-quarter 2005 effects of the Rate Order, compared to the same
period in 2004, due to the following factors: -- Resale sales
increased $14.7 million primarily due to more mWh available for
resale and higher average rates in 2005 versus the same period in
2004, including the sale of excess replacement power for the
fourth-quarter 2005 Vermont Yankee scheduled refueling outage which
was shorter than expected. In 2005, CV sold most of its excess
power supply through forward sale contracts and the remainder to
ISO-New England. In 2004, CV sold its excess power supply to
ISO-New England and other third parties, but there were fewer mWh
available for resale, mostly due to an unscheduled Vermont Yankee
plant outage in 2004. In total, higher average prices contributed
about $9.0 million to the favorable variance, increased resale
sales volume contributed about $5.2 million and higher capacity-
related revenues contributed about $0.5 million. -- Retail sales
increased $0.8 million primarily due to a 2.6 percent increase in
sales volume, partly offset by the 2.75 percent rate reduction
beginning in April 2005 and lower average unit prices due to
customer sales mix. Average customer usage increased primarily due
to a warmer summer in 2005. In total, the increased sales volume
contributed about $7.5 million to the favorable variance, while the
rate reduction decreased revenue by about $5.3 million and lower
average unit prices decreased revenue by $1.4 million. -- Other
operating revenue decreased by $0.1 million. Purchased Power costs
increased $3.6 million, pre-tax, excluding first-quarter 2005
effects of the Rate Order, compared to the same period in 2004 due
to the following factors: -- Short-term purchases increased $15.2
million primarily due to replacement energy purchases for the
fourth-quarter 2005 Vermont Yankee scheduled refueling outage. The
high level of replacement power costs were due in part to high
wholesale power market prices driven by the extraordinary effects
of hurricanes Katrina and Rita on the price of natural gas. These
costs are partially offset by increased resale sales due to a
shorter-than-anticipated outage. -- Long-term purchases decreased
$1.0 million primarily related to the following: 1) lower-priced
energy under the power contract with VYNPC, partly offset by more
purchases due to higher plant output, and 2) lower output from
Independent Power Producers, offset by 3) more deliveries under
CV's contract with Hydro-Quebec. -- Other power-related costs
increased $3.8 million due to higher Connecticut Yankee rates under
FERC-approved tariffs and elimination of accounting deferrals for
incremental Yankee Atomic dismantling costs per the Rate Order. --
In the first quarter of 2004, in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 5, Accounting for
Contingencies ("SFAS No. 5"), CV recorded a $14.4 million pre-tax
loss accrual due to termination of the long-term power contract
with Connecticut Valley Electric Company ("CVEC"). The loss accrual
represented management's best estimate of the difference between
expected future sales revenue, in the wholesale market, for the
purchased power that was formerly sold to CVEC and the cost of that
power. The loss accrual is being reversed and amortized against
power expense on a straight-line basis through 2015, the estimated
life of the power contracts that were in place to source the CVEC
power contract. Other operating costs decreased $0.5 million,
pre-tax, compared to the same period in 2004, primarily due to the
following factors: -- A fourth-quarter 2004 deferral of certain
utility earnings based on the PSB- approved accounting order as
described above and the favorable effect of Rate Order-required
amortizations that began April 1, 2005, offset by -- Higher
distribution expense mostly related to restoration costs associated
with a major storm in October 2005, higher property taxes and
depreciation expense, and a favorable environmental insurance
settlement in 2004 with no comparable item in 2005. Other factors
affecting 2005 results compared to the same period in 2004
included: -- A second-quarter 2004 tax settlement that resulted in
a $1.5 million pre-tax ($1.1 million after-tax) favorable effect in
2004 with no comparable item in 2005. -- Lower interest expense of
about $1.1 million pre-tax due to the August 2004 bond refinancing.
Utility Business - Rate Order On March 29, 2005, the PSB issued its
Order on the rate investigation and CV's request for a rate
increase. For accounting purposes, the Rate Order resulted in a
$21.8 million pre-tax charge to utility earnings in March 2005, or
a 91 cent loss per diluted share of common stock. The primary
components of the charge to earnings included: 1) a revised
calculation of overearnings for the period 2001 - 2003; 2)
application of the gain resulting from the CVEC sale to reduce
costs; 3) a customer refund for over-collections for the period
April 7, 2004 through March 31, 2005; and 4) amortization of costs
and other adjustments required in the Rate Order. The table below
summarizes the unfavorable pre-tax effects of the Rate Order on
specific income statement line items for 2005 (in millions): -0- *T
Income Statement Line Item -------------------------- Operating
Revenue $(6.2) Purchased Power (2.5) Other Operations (10.7) Other
Income (0.8) Other Deductions (0.4) Other Interest (1.2) Total Rate
Order Impact $(21.8) *T Non-utility Business Eversant's 2005
results reflect a $0.8 million after-tax write-off of its
investment in HSS. See Quarterly Performance Summary above for more
detail. Discontinued Operations In 2005, earnings from discontinued
operations amounted to $4.9 million or 40 cents per diluted share
of common stock, and $5.4 million in the fourth quarter, or 43
cents per diluted share of common stock. This compares to earnings
from discontinued operations of $16.3 million in 2004, or $1.32 per
diluted share of common stock, and $1.6 million, or 13 cents per
diluted share of common stock, in the fourth quarter. The
components of the year-over-year variances for discontinued
operations are shown below. -0- *T year-over-year variances
(dollars in millions) Diluted earnings per share Fourth Year-to-
Fourth Year-to- quarter date quarter date ---------- ----------
---------- --------- Gain on Dec. 20, 2005 Catamount sale $5.6 $5.6
$.45 $.45 Catamount results of operations (1.9) (4.6) (.15) (.37)
Gain on Jan. 1, 2004 CVEC sale - (12.3) - (1.00) ----------
---------- ---------- --------- $3.7 $(11.3) $.30 (.92) ==========
========== ========== ========= *T 2005 Catamount Sale CV began
reporting Catamount's results of operations as discontinued
operations in the fourth quarter of 2005 based on its decision to
sell Catamount in November 2005 and the consummation of the sale on
December 20, 2005. The sale resulted in a $10.8 million pre-tax
gain, or $5.6 million after-tax. In addition to the gain on the
sale, Catamount's 2005 results of operations were $4.6 million less
than the same period in 2004 primarily due to 2004 gains and
related tax benefits totaling $4.4 million from sale of certain of
its investments. Catamount's fourth quarter 2005 results of
operations were $1.9 million less than the same period in 2004
primarily due to the realization of $2.5 million of income tax
benefits in 2004 associated with the sale of one of its
investments. 2004 CVEC Asset Sale In 2004, CVEC contributed $12.3
million to consolidated earnings, or $1.00 per diluted share of
common stock, reflecting an after-tax gain resulting from the
January 1, 2004 sale of the assets of CVEC. There are no remaining
significant business activities related to CVEC. For accounting
purposes, components of the CVEC transaction were recorded in both
continuing and discontinued operations on the consolidated 2004
income statement. In addition to the gain, CV recorded a loss on
power costs of $8.4 million, after-tax, relating to termination of
the power contract between CV and CVEC. Combining the two
accounting transactions to assess the total impact of the
transaction resulted in a first-quarter 2004 after-tax gain of $3.9
million, or 31 cents per diluted share of common stock. 2006
Financial Guidance On February 7, 2006, the Company announced that
its Board of Directors approved using about $50.0 million in
proceeds from the December 20, 2005 sale of Catamount to buy back
shares of its common stock in a reverse Dutch auction tender offer.
The tender offer commenced on February 14, 2006 and is scheduled to
expire on March 15, 2006, unless extended by the Company. Under the
procedures of the tender offer, shareholders may offer to sell some
or all of their stock to the company at a target price in a range
from $20.50 to $22.50 per share. Upon expiration of the tender
offer, the company will select the lowest-bid price that will allow
it to buy up to 2,250,000 shares, which represents about 18.3
percent of the Company's outstanding common stock. Because the
stock buyback will have a direct effect on earnings per share, and
is still under way, it is impossible to provide an accurate range
of guidance for EPS at this time. However, CV's 2006 earnings
available for common stock are expected to be in the range of $12.3
million to $13.3 million. CV also expects to make capital
expenditures of about $18 million and to invest $22.5 million into
Vermont Electric Power Company, Inc. Webcast CV will host a
conference call and webcast on February 28, beginning at 2 p.m.
EST. At that time, CV President and CEO Robert Young will discuss
recent corporate developments, 2006 financial guidance and the
company's strategic outlook. Acting Chief Financial Officer Ed Ryan
will explain CV's year-end results. Interested parties may listen
to the conference call live on the Internet by selecting the "Q4
2005 Central Vermont Public Service Earnings Conference Call" link
on CV's homepage at www.cvps.com. An audio archive of the call will
be available at approximately 4:30 p.m. EST at the same location or
by dialing 1-888-286-8010 and entering passcode 67710577. About CV
CV is Vermont's largest electric utility, serving more than 150,000
customers statewide. CV's non-regulated subsidiary, Eversant
Corporation, sells and rents electric water heaters through a
subsidiary, SmartEnergy Water Heating Services. Forward Looking
Statements Statements contained in this report that are not
historical fact are forward-looking statements intended to qualify
for the safe-harbors from the liability established by the Private
Securities Litigation Reform Act of 1995. Statements made that are
not historical facts are forward-looking and, accordingly, involve
estimates, assumptions, risks and uncertainties that could cause
actual results or outcomes to differ materially from those
expressed in the forward-looking statements. Actual results will
depend, among other things, upon the actions of regulators,
performance of the Vermont Yankee nuclear power plant, effects of
and changes in weather and economic conditions, volatility in
wholesale electric markets and our ability to maintain our current
credit ratings. These and other risk factors are detailed in CV's
Securities and Exchange Commission filings. CV cannot predict the
outcome of any of these matters; accordingly, there can be no
assurance that such indicated results will be realized. Readers are
cautioned not to place undue reliance on these forward-looking
statements that speak only as of the date of this press release. CV
does not undertake any obligation to publicly release any revision
to these forward-looking statements to reflect events or
circumstances after the date of this press release. -0- *T Central
Vermont Public Service Corporation Earnings per Diluted Share
Reconciliation Fourth quarter 2005 versus fourth quarter 2004:
Year-over-Year Effects on Earnings 2004 Earnings per diluted share
$.34 Continuing Operations: Higher resale sales .43 Vermont utility
11 percent allowed rate of return in 2004 .18 Eversant - HSS
write-off (.06) Lower retail revenue (.06) Higher distribution
costs (.11) Higher purchased power costs (.67) Other .07 Sub-total
(.22) Discontinued Operations: Gain on December 20, 2005 Catamount
sale .45 Results of discontinued operations (excluding gain on
sale) (.15) ----- Sub-total .30 ---- 2005 Earnings per diluted
share $.42 ====== Twelve months 2005 versus twelve months 2004:
Year-over-Year Effects on Earnings 2004 Earnings per diluted share
$1.90 Continuing Operations: Higher resale sales .70 SFAS No. 5
loss accrual - termination of CVEC power contract in 2004 .69
Vermont utility 11 percent allowed rate of return in 2004 .18
Higher retail revenue (a) .04 Eversant - HSS write-off (.06) IRS
tax settlement received in 2004 (.09) Higher transmission and
distribution costs (.17) Higher purchased power costs (b) (.85)
Other (.10) ------- Sub-total .34 Net impact of March 29, 2005 Rate
Order recorded in the first quarter of 2005 (.91) Discontinued
Operations: Gain on December 20, 2005 Catamount sale .45 Gain on
January 1, 2004 CVEC sale (1.00) Results of discontinued operations
(excluding gains on sales) (.37) ------- Sub-total (.92) 2005
Earnings per diluted share $.41 ====== (a) excludes effect of Rate
Order charge recorded in the first quarter of 2005 (b) excludes
effect of Rate Order charge recorded in the first quarter of 2005
and 2004 SFAS No. 5 loss accrual Central Vermont Public Service
Corporation - Consolidated Earnings Release (unaudited) (dollars in
thousands, except per share amounts) Three Months Ended Twelve
Months Ended December 31, December 31, 2005 2004 2005 2004
----------- ---------- ----------- ---------- Utility Operating
Data Retail and firm sales (mWh) 591,529 580,431 2,304,550
2,246,237 Operating revenues: Retail and firm sales $68,368 $69,556
$268,252 $267,461 Resale sales 15,091 6,160 41,197 26,507 Retail
customer refund - - (6,194) - Other operating revenue 2,191 2,016
8,210 8,318 Total operating ----------- ---------- -----------
---------- revenue $85,650 $77,732 $311,465 $302,286 Operating
expenses: Purchased power $51,692 $37,737 $171,643 $165,651 Other
operating expenses 31,926 36,357 131,189 123,986 Total operating
----------- ---------- ----------- ---------- expenses $83,618
$74,094 $302,832 $289,637 Consolidated Net Income and Common Stock
(Loss) Income from continuing operations $(82) $2,181 $526 $7,493
Income from discontinued operations, net of taxes 5,359 1,655 4,935
16,262 ----------- ---------- ----------- ---------- Net Income
5,277 3,836 5,461 23,755 Preferred stock dividend requirements 92
(407) 368 368 ----------- ---------- ----------- ----------
Earnings available for common stock $5,185 $4,243 $5,093 $23,387
Average shares of common stock outstanding: Basic 12,281,527
12,176,059 12,259,400 12,118,048 Diluted 12,281,527 12,378,095
12,367,207 12,301,187 (Loss) earnings per share of common stock -
basic: Continuing operations $(0.01) $0.21 $0.02 $0.59 Discontinued
operations 0.43 0.14 0.40 1.34 ----------- ---------- -----------
---------- Earnings per share $0.42 $0.35 $0.42 $1.93 (Loss)
earnings per share of common stock - diluted: Continuing operations
$(0.01) $0.21 $0.01 $0.58 Discontinued operations 0.43 0.13 0.40
1.32 ----------- ---------- ----------- ---------- Earnings per
share $0.42 $0.34 $0.41 $1.90 Dividends per share of common stock
$0.23 $0.23 $1.15 $0.92 Non-regulated Business Eversant
Corporation: (Loss) earnings per basic and diluted common share
$(0.06) $0.00 $(0.03) $0.03 *T
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