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SEMCO ENERGY, Inc. Reports Higher Earnings for the First Quarter 2000

PORT HURON, Mich., April 18 /PRNewswire/ -- SEMCO ENERGY, Inc. (NYSE: SEN) today reported net income of $12.0 million or $0.67 per share for the first quarter of the year 2000. The 2000 earnings increased 12 percent from the $0.60 per share on net income of $10.4 million for the first quarter of 1999.

William L. Johnson, Chairman and Chief Executive Officer said, "I am very pleased with the results for the first quarter. We are off to a good start in meeting our goals for the year, despite the third year in a row of warmer than normal weather. Had temperatures for the period been normal, we would have reported record first quarter earnings of approximately $0.82 per share in 2000 compared to weather-normalized earnings of $0.63 per share in 1999."

The increase in earnings during the first quarter of 2000 was attributable primarily to higher earnings from the Company's gas distribution business, offset partially by seasonal losses from the Company's construction business. Johnson explained that the underground construction business typically has losses during the first half of the year due to weather restrictions. This business earns most of its income during the summer and fall months. As the Company expands its construction business, the seasonal losses and profits will be more pronounced.

First quarter results also include an increase in interest expense of approximately $3.1 million after tax. The increase was due primarily to interest and fees on the $290 million bridge loan incurred to finance the acquisition of the Alaska gas distribution operation, offset partially by income recognized on interest rate hedge instruments during the first quarter of 2000.

Net income for the twelve months ended March 31, 2000 was $19.3 million, or $1.08 per share, compared to $11.9 million, or $0.72 per share, for the twelve months ended March 31, 1999. On a weather-normalized basis, net income would have been $25.0 million, or $1.40 per share, for the twelve months ended March 31, 2000 compared to $17.1 million or $1.03 per share for the same period of the prior year. This represents a 36% increase in earning power for the Company.

GAS DISTRIBUTION -- The Gas Distribution business reported operating income of $28.7 million for the first quarter of 2000, compared to $17.9 million for the first quarter of 1999. The 60% increase in operating income is attributed primarily to $9.7 million of operating income from the Alaska gas distribution business which was acquired on November 1, 1999 plus higher revenues from continued customer growth and new profit margins from the sale of the gas commodity, offset partially by the effect of warmer weather.

Volumes of gas sold and transported increased from 25.2 Bcf in the first quarter of 1999 to 39.3 Bcf in the first quarter of 2000. The increase is attributed primarily to the operations of the recent acquisition in Alaska offset partially by the impact of warmer weather. Temperatures for the first quarter of 2000 were approximately 11 percent warmer than normal and also warmer than the first quarter of 1999 when temperatures were approximately 2 percent warmer than normal.

CONSTRUCTION SERVICES -- The Construction Services business reported an operating loss of $2.3 million for the first quarter of 2000 compared to a $1.2 million operating loss during the first quarter of 1999. The Company's construction businesses typically incur seasonal operating losses during the winter months because underground construction is generally inhibited by weather. The increased operating loss in 2000 is attributable primarily to the seasonal operating losses from three construction businesses acquired after the first quarter of 1999.

ENGINEERING SERVICES -- The Engineering Services business reported operating income of $.1 million for the first quarter of 2000, compared to $0.5 million for the first quarter of 1999. The lower operating income reflects a decrease in engineering projects that began during the first half of 1999. Many pipeline construction and engineering projects scheduled for 1999 were cut back or delayed because of gas market uncertainty and lower oil prices in 1998 and early 1999. Petroleum prices have since recovered significantly and the Company anticipates a turnaround in business for 2000 as new and delayed engineering projects are released. In fact, the Company already has more committed engineering work for 2000 than it had in all of 1999. The first quarter 2000 earnings represent a turnaround in profitability from the loss incurred during the year 1999.

PROPANE, PIPELINES AND STORAGE -- The Propane, Pipelines and Storage business reported operating income of $0.5 million for the first quarter of 2000, compared to $0.8 million for the first quarter of 1999. The decrease in operating income is due primarily to lower margins for the propane business and the absence of operating income from a pipeline that was sold in mid-1999.

CAPITAL INVESTMENTS -- For the first quarter of 2000, the Company had capital expenditures for property additions of $9.1 million compared to $5.8 million for the first quarter of 1999. There were no capital expenditures for business acquisitions during the first quarter of 2000, versus $1.9 million for the first quarter of 1999.

SEMCO ENERGY, Inc. is a diversified energy and infrastructure services company that distributes natural gas to more than 350,000 customers combined in Michigan and Alaska. Its subsidiary, SEMCO ENERGY VENTURES, owns and operates businesses involved in gas engineering and quality assurance services, pipeline construction services, propane distribution, intrastate pipelines and natural gas storage in various regions of the United States.

The following is a "Safe-Harbor" statement under the Private Securities Litigation Reform Act of 1995. This release contains forward-looking statements that involve risks and uncertainties, including, but not limited to, statements involving the Company's expectations regarding operating revenues and expenses, operating income, returns on invested assets, regulatory approval processes, success in obtaining new business, success in integrating acquired businesses, and other risks detailed from time to time in the company's Securities and Exchange Commission filings.

                              SEMCO ENERGY, INC.
                     News Release Statistics (Unaudited)

                            Three Months Ended        Twelve Months Ended
                                   March 31,                  March 31,
                              2000           1999         2000        1999
                            (in thousands, except per share amounts)
    Financial Summary

     Operating Revenues (a)  $130,302      $183,880     $331,184     $594,895

     Operating Expenses (a)  $104,033      $166,533     $280,373     $564,292

     Operating Income         $26,269       $17,347      $50,811      $30,603

     Other Income and (Deductions)
      Business
       Divestitures (b) (c)        $-        $1,122           $-       $4,690
      Interest Expense         (8,696)       (3,894)     (25,376)     (15,018)
      Other (d)                 1,060           371        3,316          187
        Total Other Income
         and (Deductions)     $(7,636)      $(2,401)    $(22,060)    $(10,141)

     Income Taxes              $6,639        $4,543       $9,501       $8,591

     Net Income               $11,994       $10,403      $19,250      $11,871

     Net Income - Weather
      Normalized              $14,726       $11,070      $24,955      $17,118

     Earnings Per Share -
      Basic and Diluted         $0.67         $0.60        $1.08        $0.72

     Earnings Per Share -
      Basic and Diluted -
      Weather Normalized        $0.82         $0.63        $1.40        $1.03

     Cash Dividends
      Per Share (e)            $0.205        $0.200       $0.868       $0.766

     Average Number Of Common
      Shares Outstanding       17,917        17,438       17,815       16,553

     Return on Average Common Shareholders' Equity:
       As Reported                                          13.2%         9.5%
       Weather Normalized                                   17.1%        13.7%


(a) The decrease in operating revenues and expenses is due primarily to the energy marketing business, which was sold effective March 31, 1999, offset partially by the results of new business acquisitions.

(b) The three months and twelve months ended March 31, 1999 include after-tax income of $729 ($0.04 per share) related to the divestiture of the Company's energy marketing business.

(c) The twelve months ended March 31, 1999 includes a pre-tax adjustment to the gain on the divestiture of the NOARK investment. On an after-tax basis, the adjustment had no impact on net income for the twelve months ended March 31, 1999.

(d) The twelve months ended March 31, 1999 includes an after-tax charge of $499 ($0.03 per share) from an early retirement of long-term debt.

(e) The twelve months ended March 31, 2000 includes a special one-time dividend of $0.05 per share

                              SEMCO ENERGY, INC.
                     News Release Statistics (Unaudited)

                             Three Months Ended       Twelve Months Ended
                                 March 31,                  March 31,
                            2000         1999         2000           1999
                           (dollars in thousands, except per share amounts)

    Business Segment Information
     Operating Revenues
       Gas Distribution    $111,688     $76,980     $251,539       $185,413
       Engineering
        Services              5,549       5,719       17,315         43,938
       Construction
        Services             14,554       4,685       68,141         27,869
       Propane/Pipelines/
        Storage               2,061       1,944        6,400          6,106
       Energy Marketing (f)       -      96,904            -        346,519
       Corporate and
        Other (g)            (3,550)     (2,352)     (12,211)       (14,950)
          Total Operating
           Revenues        $130,302    $183,880     $331,184       $594,895

     Operating Income (Loss)
       Gas Distribution     $28,659     $17,867      $50,925        $27,217
       Engineering Services      71         451         (894)         2,975
       Construction Services (2,278)     (1,245)       1,578           (186)
       Propane/Pipelines/
        Storage                 473         796        2,017          2,008
       Energy Marketing (f)       -        (341)           -            654
       Corporate and Other (g) (656)       (181)      (2,815)        (2,065)
          Total Operating
           Income           $26,269     $17,347      $50,811        $30,603

    Operating Statistics
      Gas Distribution:
       Volumes Sold (MMcf)   23,248      15,875       46,618         32,552
       Volumes
        Transported (MMcf)   16,010       9,293       39,134         26,651
       Number of Customers at
        End of Period                                359,913        250,065
       Degree Days            3,140       3,239        6,551          6,021
       Percent Colder (Warmer)
        Than Normal           (10.6)%      (2.1)%      (10.7)%        (12.5)%
       Increase (Decrease) From Normal In:
        Net Income
         (in thousands)     $(2,700)      $(600)     $(5,550)       $(5,000)
        Earnings Per Share   $(0.15)     $(0.03)      $(0.31)        $(0.30)

    Engineering Services:
      Billed Hours           94,000      97,000      356,000        619,000

    Construction Services:
      Feet of Pipe
       Installed            997,000     697,000    6,508,000      4,702,000

    Propane Distribution:
      Volumes Sold
       (Gallons)          1,673,000   1,644,000    4,361,000      4,011,000
      Degree Days             3,517       3,754        7,651          7,487
      Percent Colder (Warmer)
       Than Normal            (11.2)%      (0.5%)      (12.3)%        (10.5)%
      Increase (Decrease) From Normal In:
       Net Income
        (in thousands)         $(32)        $(67)      $(155)         $(247)
       Earnings Per Share        $-           $-      $(0.01)        $(0.01)

    (f)  The Energy Marketing business was sold effective March 31, 1999.
    (g)  Includes intercompany eliminations.

SOURCE SEMCO ENERGY, Inc.
CONTACT: Analyst, Edric R. Mason, Jr., 810-989-4104, or fax, 810-989-4098, or Media, Francis R. Lieder, 810-987-2200, ext. 4186, or fax, 810-989-4098, both of SEMCO ENERGY, Inc.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding SEMCO Energy's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

 
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