Constellation Energy Reports Strong Second Quarter Earnings Raises
2004 Guidance for EPS Excluding Special Items to $3.15 - $3.25 - a
14-18 Percent Increase From 2003 BALTIMORE, July 30
/PRNewswire-FirstCall/ -- Constellation Energy (NYSE:CEG) today
reported earnings of $0.76 per share for the three months ending
June 30, 2004. Excluding special items of $0.21 per share,
Constellation Energy earned $0.55 per share. This amount compares
to earnings per share of $0.58 from the same period last year.
These results exceeded the company's earnings guidance range
provided on April 28, 2004 of $0.24 - $0.39 per share. Reported
earnings for the first six months of 2004 were $1.15 per share
versus a loss of ($0.21) per share for the first six months of
2003. For the first six months of 2004, Constellation Energy
reported earnings excluding special items of $1.21 per share, up
$0.27 per share or 29 percent compared to earnings excluding
special items of $0.94 per share in 2003. The company also raised
its guidance range for 2004 earnings to $3.15 - $3.25 per share
from $3.05 - $3.20 per share, an increase of 14-18 percent above
2003 earnings per share excluding special items. "This is the
eleventh consecutive quarter in which Constellation Energy has met
or exceeded earnings guidance, adding to our reputation for
consistent financial performance," said Mayo A. Shattuck III,
chairman, president and chief executive officer of Constellation
Energy. "We are using our wholesale and retail competitive supply
business platform to extend our leadership in deregulated energy
markets. Portfolio scale, operating leverage and experience are
proving to be important advantages in the competitive supply
marketplace. This combination has enabled Constellation Energy to
reduce the underlying expense of full requirements load serving;
leading us to believe we are the low cost provider in this
business. Our portfolio had more than 28,000 megawatts of peak load
under management at the end of the second quarter, up from
approximately 6,000 megawatts at the end of 2001," said Shattuck.
"We continue to raise the bar on generation operational
performance, having closed on the Ginna nuclear facility
acquisition in record time without the need for transition services
from the seller," Shattuck added. "We also completed the refueling
and rotor replacement at our Calvert Cliffs Unit 1 nuclear facility
in 30 days, 15 days sooner than projected. We are realizing the
benefits of a sharp focus on execution, doing the little things
well and proving increasingly adept at integrating acquisitions.
The results are beginning to speak for themselves. With growing
visibility on the year, we are raising earnings guidance for 2004
to a range of $3.15 - $3.25 per share. This new guidance range is
an increase of 14-18 percent above 2003 earnings per share
excluding special items." The following table summarizes both
earnings per share excluding special items and earnings per share
reported in accordance with generally accepted accounting
principles (GAAP) for the three and six months ended June 30, of
2004 and 2003: Three Months Ended Three Months Ended June 30, 2004
June 30, 2003 EPS EPS Reported Excluding Reported Excluding GAAP
Special GAAP Special EARNINGS PER COMMON SHARE EPS Items EPS Items
Baltimore Gas and Electric $0.13 $0.13 $0.13 $0.13 Merchant energy
0.64 0.43 (1) 0.45 0.45 Other nonregulated - (0.01)(2) - - Earnings
Per Common Share - Assuming Dilution from Continuing Operations
$0.77 $0.55 $0.58 $0.58 Loss from discontinued operations -
Assuming Dilution (0.01) Earnings Per Common Share - Assuming
Dilution $0.76 GAAP EPS was adjusted by the following amounts to
calculate EPS excluding special items (1) Synfuel tax credits
associated with 2003 production at S.C. facility - ($0.21) per
share. (2) Net gain on sales of investments and other assets -
($0.02) per share, partially offset by impairment of a financial
investment - $0.01 per share. Six Months Ended Six Months Ended
June 30, 2004 June 30, 2003 EPS EPS Reported Excluding Reported
Excluding GAAP Special GAAP Special EARNINGS PER COMMON SHARE EPS
Items EPS Items Baltimore Gas and Electric $0.56 $0.56 $0.61 $0.61
Merchant energy 0.88 0.67 (1) 0.33 0.33 Other nonregulated -
(0.02)(2) 0.05 -(3) Earnings Per Common Share - Assuming Dilution
from Continuing Operations and Before Cumulative Effects of Changes
in Accounting Principles $1.44 $1.21 $0.99 $0.94 Loss from
discontinued operations - Assuming Dilution (0.29) - Cumulative
effects of changes in accounting principles - Assuming Dilution -
(1.20) Earnings (Loss) Per Common Share - Assuming Dilution $1.15
($0.21) GAAP EPS was adjusted by the following amounts to calculate
EPS excluding special items (1) Synfuel tax credits associated with
2003 production at S.C. facility - ($0.21) per share. (2) Net gain
on sales of investments and other assets - ($0.03) per share,
partially offset by impairment of a financial investment - $0.01
per share. (3) Net gain on sales of investments and other assets -
($0.05) per share. Baltimore Gas and Electric (BGE) BGE reported
earnings of $0.13 per share for the second quarter of 2004. These
earnings were above the high end of the $0.07 - $0.12 earnings per
share guidance range and were comparable to the $0.13 per share
earned for the second quarter of 2003. Compared to last year, BGE
benefited from warmer weather and generally higher usage in its
Central Maryland territory, offset by inflationary cost increases
and costs associated with investments for system reliability.
Merchant Energy For the second quarter of 2004, our merchant energy
business earned $0.43 per share excluding special items. These
results were above the $0.31 per share high end of our April
earnings guidance and slightly below earnings of $0.45 per share
during the second quarter of 2003. Factors contributing to our
performance relative to last year include: earnings contributions
from synfuel investments; earnings at NewEnergy, our retail
competitive supply business, related to a bankruptcy settlement
from PG&E; incremental earnings contributions from our High
Desert power plant and our newly acquired Ginna nuclear facility;
and incremental earnings from our wholesale competitive supply
business. These favorable items were more than offset by lower Mid-
Atlantic fleet gross margin; the cost of a refueling outage and
vessel head inspection at our Calvert Cliffs Unit 1 nuclear
facility; a scheduled decline in contracted power prices for
electricity produced at our Nine Mile Point nuclear facility;
Sarbanes Oxley 404 implementation costs; information technology
infrastructure expenditures to drive future productivity; and
inflationary and other cost increases. The June 2004 Financial
Statements and selected supplemental information are attached.
Earnings Excluding Special Items Constellation Energy presents
earnings excluding special items in addition to its reported
earnings per share in accordance with generally accepted accounting
principles (reported GAAP EPS). Earnings excluding special items is
a non-GAAP financial measure that differs from reported GAAP EPS
because it excludes the cumulative effects of changes in accounting
principles, losses from discontinued operations, gains or losses on
the sale of non-core assets, and other special items (which we
define as significant items that are not related to our ongoing,
underlying business or which distort comparability of results)
included in operations. We present earnings excluding special items
because we believe that it is appropriate for investors to consider
results excluding these items in addition to our results in
accordance with GAAP. We believe such a measure provides a picture
of our results that is comparable among periods since it excludes
the impact of items such as gains or losses on sales of non-core
investments and workforce reduction costs, which may recur
occasionally, but tend to be irregular as to timing, thereby
distorting comparisons between periods. However, investors should
note that these non- GAAP measures involve judgments by management
(in particular, judgments as to what is or is not classified as a
special item). These non-GAAP measures are also used to evaluate
management's performance and for compensation purposes.
Constellation Energy also provides its earnings guidance in terms
of earnings excluding special items. Constellation Energy is unable
to reconcile its 2004 earnings guidance excluding special items to
GAAP earnings per share because we do not predict the future impact
of special items due to the difficulty of doing so. The impact of
special items could be material to our operating results computed
in accordance with GAAP. SEC Filings The Company plans to file its
Form 10-Q for the three months ended June 30, 2004 on or about
August 6, 2004. Forward-Looking Statements We make statements in
this news release that are considered forward-looking statements
within the meaning of the Securities Exchange Act of 1934. These
statements are not guarantees of our future performance and are
subject to risks, uncertainties, and other important factors that
could cause our actual performance or achievements to be materially
different from those we project. For a full discussion of these
risks, uncertainties, and factors, we encourage you to read our
documents on file with the Securities and Exchange Commission,
including those set forth in our Form 10-K under the
forward-looking statements section. Conference Call July 30, 2004
Constellation Energy will host a conference call at 8:30 a.m. EDT
on July 30, 2004, to review its results. To participate, investors,
analysts, and members of the media in the United States may dial
1-800-862-9098 shortly before 8:30 a.m. The international dial-in
number is 1-785-424-1051. The conference call host is Constellation
Energy, and the password is "Constellation." A replay of the call
will be available for one week. The replay number is
1-800-753-4652; the number for international callers is 1-
402-220-4235. A live audio webcast of the conference call, as well
as presentation slides and the second quarter 2004 earnings press
release will be available on the Investor Relations page of the
company Web site, http://www.constellation.com/. The reference to
our Web site is an active textual reference and the contents of our
Web site are not part of this press release. About Constellation
Energy Constellation Energy (http://www.constellation.com/), a
Fortune 500 company based in Baltimore, is the nation's leading
competitive supplier of electricity to large commercial and
industrial customers and one of the nation's largest wholesale
power sellers. Constellation Energy also manages fuels and energy
services on behalf of energy intensive industries and utilities. It
owns and operates a diversified fleet of 35 power plants in 12
states. The company delivers electricity and natural gas through
the Baltimore Gas and Electric Company (BGE), its regulated utility
in Central Maryland. In 2003, the combined revenues of the
integrated energy company totaled $9.7 billion. Addendum -Special
Items Recognized in Second Quarter 2004 Synfuel Tax Credits
Associated with 2003 Production - $35.9 million, or $0.21 per share
As previously disclosed, on April 15, 2004, we received a favorable
private letter ruling (PLR) from the Internal Revenue Service on
our 99 percent ownership in a South Carolina facility that produces
synthetic fuel. Based on the receipt of the PLR, we recognized
$35.9 million, or $0.21 per share, in the second quarter of 2004 of
tax credits associated with 2003 production at this facility. Sale
of Hawaiian Geothermal Power Plant - before-tax charge of ($5.4)
million, or ($0.01) per share As previously disclosed, we completed
the sale of our Hawaiian geothermal generating facility in June
2004. We recognized an impairment charge in the first quarter of
2004 of ($46.3) million after-tax (recognized pursuant to Statement
of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets) based on estimated
sales proceeds. An additional ($2.7) million after-tax charge, or
($0.01) per share was recognized in the second quarter based on the
final sales price, resulting in a total charge recognized for the
discontinuation of this operation of ($49.0) million after-tax or
($0.29) per share in the first six months of 2004. Net Gains on
Sales of Investments and Other Assets - before-tax gain of $4.4
million, or $0.02 per share In the second quarter of 2004, we
recognized approximately $2.7 million in after-tax gains relating
to the monetization of several non-core financial investment and
real estate assets. While small relative to amounts we would
normally treat as special items, we have classified these amounts
as special items for consistency with prior treatment of non-core
asset dispositions. Impairment of Financial Investment - before-tax
charge of ($2.6) million, or ($0.01) per share In the second
quarter of 2004, in accordance with Accounting Principles Board
Opinion No. 18, The Equity Method of Accounting for Investments in
Common Stock, we recognized an impairment loss of ($1.6) million
after-tax or ($0.01) per share related to a decline in value of one
of our financial investments that we believe to be other than
temporary. We have classified this as a special item because it is
associated with the non-core financial investments which we are in
the process of monetizing. Constellation Energy Group and
Subsidiaries Consolidated Statements of Income (Unaudited) Three
Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003
(In Millions, Except Per Share Amounts) Revenues Nonregulated
revenues $2,204.3 $1,692.2 $4,438.5 $3,233.8 Regulated electric
revenues 477.2 436.9 961.6 923.2 Regulated gas revenues 111.5 137.5
429.4 435.7 Total revenues 2,793.0 2,266.6 5,829.5 4,592.7 Expenses
Operating expenses 2,393.9 1,845.4 4,997.3 3,821.6 Impairment
losses and other costs 2.6 - 2.6 - Workforce reduction costs - 0.7
- 1.4 Depreciation and amortization 130.2 116.9 253.2 227.9
Accretion of asset retirement obligations 12.4 10.7 23.5 21.3 Taxes
other than income taxes 62.4 64.3 127.3 130.0 Total expenses
2,601.5 2,038.0 5,403.9 4,202.2 Net Gain on Sales of Investments
and Other Assets 4.4 0.5 5.9 14.2 Income from Operations 195.9
229.1 431.5 404.7 Other Income 5.5 6.0 10.3 14.9 Fixed Charges
Interest expense 83.5 83.5 168.3 165.8 Interest capitalized and
allowance for borrowed funds used during construction (3.2) (2.8)
(5.8) (7.2) BGE preference stock dividends 3.3 3.3 6.6 6.6 Total
fixed charges 83.6 84.0 169.1 165.2 Income from Continuing
Operations Before Income Taxes 117.8 151.1 272.7 254.4 Income Taxes
(13.1) 54.3 29.3 90.6 Income from Continuing Operations and Before
Cumulative Effects of Changes in Accounting Principles 130.9 96.8
243.4 163.8 Loss from Discontinued Operations, Net of Income Taxes
of $2.6 and $26.4, Respectively (2.7) - (49.0) - Cumulative Effects
of Changes in Accounting Principles, Net of Income Taxes of $119.5
- - - (198.4) Net Income (Loss) $128.2 $96.8 $194.4 $(34.6)
Earnings (Loss) Applicable to Common Stock $128.2 $96.8 $194.4
$(34.6) Average Shares of Common Stock Outstanding - Basic 168.7
165.8 168.4 165.4 Average Shares of Common Stock Outstanding -
Diluted 169.6 166.2 169.4 165.5 Earnings Per Common Share from
Continuing Operations and Before Cumulative Effects of Changes in
Accounting Principles - Basic $0.78 $0.58 $1.45 $0.99 Loss from
Discontinued Operations - Basic (0.02) - (0.30) - Cumulative
Effects of Changes in Accounting Principles - Basic - - - (1.20)
Earnings (Loss) Per Common Share - Basic $0.76 $0.58 $1.15 $(0.21)
Earnings Per Common Share from Continuing Operations and Before
Cumulative Effects of Changes in Accounting Principles - Diluted
$0.77 $0.58 $1.44 $0.99 Loss from Discontinued Operations - Diluted
(0.01) - (0.29) - Cumulative Effects of Changes in Accounting
Principles - Diluted - - - (1.20) Earnings (Loss) Per Common Share
- Diluted $0.76 $0.58 $1.15 $(0.21) Certain prior-period amounts
have been reclassified to conform with the current period's
presentation. Constellation Energy Group and Subsidiaries
Consolidated Balance Sheets (Unaudited) June 30, December 31, 2004
2003 ASSETS (In Millions) Current Assets Cash and cash equivalents
$457.0 $721.3 Accounts receivable (net of allowance for
uncollectibles of $40.7 and $51.7, respectively) 1,206.8 1,563.0
Mark-to-market energy assets 514.1 488.3 Risk management assets
588.0 249.5 Materials and supplies 217.6 203.2 Fuel stocks 177.4
186.7 Other 147.6 221.4 Total current assets 3,308.5 3,633.4
Investments And Other Assets Nuclear decommissioning trust funds
979.8 736.1 Investments in qualifying facilities and power projects
319.4 332.6 Mark-to-market energy assets 368.5 261.9 Risk
management assets 274.3 158.4 Goodwill 142.5 144.0 Other 318.3
343.8 Total investments and other assets 2,402.8 1,976.8 Property,
Plant And Equipment Regulated property, plant and equipment 5,340.7
5,266.7 Nonregulated property, plant and equipment 8,495.2 8,110.0
Nuclear fuel (net of amortization) 229.9 202.9 Accumulated
depreciation (4,078.5) (3,978.1) Net property, plant and equipment
9,987.3 9,601.5 Deferred Charges Regulatory assets (net) 195.9
229.5 Other 164.6 149.6 Total deferred charges 360.5 379.1 Total
Assets $16,059.1 $15,590.8 LIABILITIES AND EQUITY Current
Liabilities Short-term borrowings $4.5 $9.6 Current portion of
long-term debt 534.5 343.2 Accounts payable 705.5 1,149.2 Customer
deposits and collateral 318.5 181.7 Mark-to-market energy
liabilities 539.9 474.6 Risk management liabilities 157.1 134.6
Other 470.1 542.1 Total current liabilities 2,730.1 2,835.0
Deferred Credits And Other Liabilities Deferred income taxes
1,474.0 1,384.4 Asset retirement obligations 794.7 595.9
Mark-to-market energy liabilities 354.3 258.0 Risk management
liabilities 407.5 170.1 Postretirement and postemployment benefits
372.6 361.8 Net pension liability 196.8 225.7 Deferred investment
tax credits 74.8 78.4 Other 189.7 198.4 Total deferred credits and
other liabilities 3,864.4 3,272.7 Long-Term Debt Long-term debt of
nonregulated businesses 3,733.2 3,739.2 Long-term debt of BGE
1,270.7 1,395.7 6.20% deferrable interest subordinated debentures
due October 15, 2043 to BGE wholly owned BGE Capital Trust II
relating to trust preferred securities 257.7 257.7 Unamortized
discount and premium (12.0) (10.2) Current portion of long-term
debt (534.5) (343.2) Total long-term debt 4,715.1 5,039.2 Minority
Interests 118.8 113.4 BGE Preference Stock Not Subject To Mandatory
Redemption 190.0 190.0 Common Shareholders' Equity Common stock
2,237.9 2,179.8 Retained earnings 2,180.7 2,081.9 Accumulated other
comprehensive income (loss) 22.1 (121.2) Total common shareholders'
equity 4,440.7 4,140.5 Total Liabilities And Equity $16,059.1
$15,590.8 Certain prior-period amounts have been reclassified to
conform with the current period's presentation. Constellation
Energy Group and Subsidiaries Merchant Energy Operating Statistics
(Unaudited) Six Months Ended June 30, Hydro & Nuclear Coal Oil
Gas Other Total Generation by Fuel Type (%) 2004 48.8 35.5 2.0 11.5
2.2 100.0 2003 50.1 37.4 2.0 8.0 2.5 100.0 Utility Operating
Statistics (Unaudited) Three Months Ended Six Months Ended June 30,
June 30, 2004 2003 2004 2003 (In Millions) ELECTRIC Revenues
Residential -- with househeating $85.4 $80.7 $213.4 $210.9 -- other
153.4 129.4 287.6 257.4 -- total 238.8 210.1 501.0 468.3 Commercial
-- excluding delivery service 181.4 166.8 335.1 327.3 -- delivery
service 16.4 14.7 33.0 26.8 Industrial -- excluding delivery
service 23.7 30.5 60.8 68.7 -- delivery service 4.8 4.5 8.5 8.4
System Sales 465.1 426.6 938.4 899.5 Other 12.1 10.4 23.2 23.8
Total $477.2 $437.0 $961.6 $923.3 GAS Revenues Residential --
excluding delivery service $71.6 $86.4 $284.3 $273.6 -- delivery
service 1.2 1.8 9.3 9.1 -- total 72.8 88.2 293.6 282.7 Commercial
-- excluding delivery service 22.4 25.7 83.8 81.4 -- delivery
service 5.0 4.7 16.0 13.6 Industrial -- excluding delivery service
1.8 2.6 5.9 7.0 -- delivery service 1.6 2.7 3.9 5.9 System Sales
103.6 123.9 403.2 390.6 Off-System Sales 7.0 14.0 24.6 48.7 Other
2.0 2.1 4.3 4.3 Total $112.6 $140.0 $432.1 $443.6 Utility operating
statistics do not reflect the elimination of intercompany
transactions. Heating/Cooling Degree Days (Calendar-Month Basis)
Heating Degree Days - Actual 458 667 3,062 3,425 - Normal 529 528
2,991 2,947 Cooling Degree Days - Actual 291 153 293 153 - Normal
233 235 237 239 Constellation Energy Group and Subsidiaries
Supplemental Financial Statistics (Unaudited) Six Months Ended June
30, 2004 2003 Ratio of Earnings to Fixed Charges 2.46 2.37
Effective Tax Rate (includes $80.7 million of synthetic fuel tax
credits for the six months ended June 30, 2004) 10.5% 34.7% Equity
Investment In Nonregulated Businesses -- End of Period $2,977.9
$2,317.7 Equity Investment In Utility Business -- End of Period
$1,462.8 $1,496.1 Common Stock Data Three Months Ended Six Months
Ended June 30, June 30, 2004 2003 2004 2003 Common Stock Dividends
- Per Share --Declared $0.285 $0.260 $0.570 $0.520 --Paid $0.285
$0.260 $0.545 $0.500 Market Value Per Share --High $41.35 $34.92
$41.47 $34.92 --Low $35.89 $27.50 $35.89 $25.17 --Close $37.90
$34.30 $37.90 $34.30 Shares Outstanding--End of Period (In
Millions) 169.3 166.5 169.3 166.5 Book Value per Share--End of
Period $26.23 $22.91 $26.23 $22.91 DATASOURCE: Constellation Energy
CONTACT: Rob Gould (Media), +1-410 234-7433, or Jonathan W. Thayer
(Investors), +1-410-783-3647, both of Constellation Energy Web
site: http://www.constellation.com/ Company News On-Call:
http://www.prnewswire.com/comp/084087.html
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