SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 22, 2003
VECTREN CORPORATION
(Exact name of registrant as specified in its charter)
Commission Registrant, State of Incorporation, I.R.S Employer
File No. Address, and Telephone Number Identification No.
------------- ----------------------------------- ------------------
1-15467 Vectren Corporation 35-2086905
(An Indiana Corporation)
20 N.W. Fourth Street,
Evansville, Indiana 47708
(812) 491-4000
1-16739 Vectren Utility Holdings, Inc. 35-2104850
(An Indiana Corporation)
20 N.W. Fourth Street,
Evansville, Indiana 47708
(812) 491-4000
Item 5. Other Events and Regulation FD Disclosure
On July 22, 2003, Vectren Corporation (the Company) released financial
information to the investment community regarding the Company's results of
operations for the three and six month periods ended June 30, 2003. A portion of
the financial information released is included herein and should be considered
filed with the Securities and Exchange Commission. The entire financial release
was furnished to the Securities and Exchange Commission in another 8-K filed
July 23, 2003. The information herein does not include footnote disclosures and
should not be considered complete financial statements.
Vectren Corporation is the parent Company of Vectren Utility Holdings, Inc.
(VUHI). VUHI serves as the intermediate holding company of the Company's three
operating public utilities.
Unaudited Consolidated Statements of Income for the Company and VUHI for the
three and six months ended June 30, 2003 and 2002 are attached to this filing as
Exhibits 99-1 and 99-2, respectively. Highlighted information is attached as
Exhibit 99-3.
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby filing cautionary
statements identifying important factors that could cause actual results of the
Company and its subsidiaries, including Vectren Utility Holdings, Inc., Indiana
Gas Company, Inc. and Southern Indiana Gas and Electric Company, to differ
materially from those projected in forward-looking statements of the Company and
its subsidiaries made by, or on behalf of, the Company and its subsidiaries.
Press Release Excerpts
Vectren Corporation reported 2003 second quarter earnings of $4.1
million, or $0.06 per share, compared to net income of $12.5 million,
or $0.18 per share, for the same period last year. For the six months
ended June 30, 2003, reported earnings were $59.8 million, or $0.88 per
share, compared to $58.1 million, or $0.86 per share, for the same
period in 2002.
The 2003 second quarter results declined $0.10 per share as compared to
the same period in 2002 due to milder weather affecting both heating
and cooling sales and the write-off of two investments, as previously
announced. Heating weather experienced in the second quarter 2003 was
9% warmer than the same period last year and cooling sales were reduced
by weather 51% milder than the same period in 2002. The estimated
quarter over quarter impact of milder weather was $4.3 million after
tax, or $0.06 per share.
The 2003 results include the write-off of the Company's investment in
BABB International, Inc., an entity that processes fly ash into
building materials. Charges of $1.9 million, pre-tax and $2.0 million,
pre-tax were recorded in the second and first quarters, respectively,
of 2003. The second quarter 2003 also includes the write-off of $2.0
million pre-tax of the investment in First Mile Technologies, a small
broadband entity located in Indianapolis, Indiana. The write-off of
both investments reduced net income for the second quarter by $2.3
million, or $0.04 per share, and the first six months by $3.5 million,
or nearly $0.06 per share.
Operating Review for the Quarter ended June 30
Utility Group
Utility earnings for the second quarter 2003 were $1.4 million as
compared to $8.7 million for the same quarter last year. As noted
previously, the primary contributors to the decline are electric
cooling weather that was significantly below normal in the 2003 quarter
and the write-off of the BABB investment.
Gas margins were $60.8 million, an increase of $2.5 million over the
same quarter in 2002. The increase is primarily due to increased late
payment charges, an increase in Ohio's percent of income payment plan
(PIPP) rate recovery rider, recovery of customer choice implementation
costs, recovery of gross receipts and excise taxes on higher gas costs,
and other items. The increase was partially offset by heating weather
which was normal and 9% warmer than the prior year period. The
estimated quarter over quarter pre-tax impact of the warmer weather on
gas utility margins was approximately $3.3 million. Weather and an
overall decline in customer usage were the primary factors resulting in
the 8% decrease in throughput.
Electric margins were $50.8 million, a decrease of $2.2 million
compared to the second quarter of 2002. The decrease in electric margin
was due primarily to the effect of milder cooling weather which was 43%
cooler than normal and 51% cooler than last year, offset by increased
margins from wholesale power activities. The estimated quarter over
quarter pre-tax decrease as a result of the milder weather on electric
utility margins was approximately $3.9 million. As a result of the mild
weather, volumes sold to retail and firm wholesale customers decreased
7%. Non-firm wholesale electric utility margins increased $1.9 million
to $3.9 million in 2003 compared to 2002.
Other operating expenses for the second quarter increased $5.1 million
compared to the same period in the prior year. The increased expenses
were principally due to higher uncollectible accounts expenses, the
timing of electric plant maintenance expenditures, and other costs such
as PIPP and Ohio customer choice costs that are recovered through
margins.
Depreciation and amortization increased $3.3 million compared to the
prior year due to utility plant additions. Since June 30, 2002, the
Company has placed in service over $100 million in utility plant
including a new gas-fired electric peaking unit, expenditures for
implementing a choice program for Ohio gas customers, and other
upgrades to existing transmission and distribution facilities.
Taxes other than income increased $0.9 million compared to the prior
year due primarily to higher gross receipts and excise taxes incurred
as a result of higher gas prices.
Other income (expense), net for the utility group decreased $3.0
million compared to the prior year. The decrease is primarily the
result of the additional pre-tax charge of $1.9 million taken to
write-off the BABB investment. In addition, the second quarter of 2002
includes income from the sale of emission allowances of approximately
$1.0 million pre-tax that did not recur in 2003.
Interest expense decreased $1.4 million when compared to the same
quarter last year. The decrease primarily resulted from lower interest
rates. This was partially offset by higher outstanding balances due
primarily to funding of capital expenditures and increased working
capital requirements resulting from the higher gas prices experienced
during late 2002 and 2003.
Non Regulated Group (all amounts following in this section are after
tax)
Nonregulated earnings for the second quarter 2003 decreased to $3.4
million as compared to $4.4 million for the same period last year due
to the impact of the write-off of the First Mile investment.
Earnings from Energy Marketing and Services were $2.1 million, a
decline of $1.5 million from the second quarter of 2002. Gas
Marketing's contribution was down $2.2 million period over period
primarily due to the timing of costs and optimization benefits related
to pipeline contracts. Performance Contracting was up $0.7 million due
to success in obtaining higher margins and working from a higher
construction backlog at the end of 2002. Performance Contracting
results also reflect 100% Vectren ownership during the quarter versus
67% Vectren ownership in 2002.
Earnings from Coal Mining were $4.7 million, an increase of $1.8
million from the second quarter 2002. Mining operations were $0.4
million and $0.9 million for the 2003 quarter compared to the 2002
quarter. Net earnings from the investment in Pace Carbon were $3.2
million and $1.3 million in 2003 and 2002, respectively. Synfuels
related results, which reflect earnings from the investment in Pace
Carbon and Synfuels related fees, were $4.3 million and $2.0 million in
2003 and 2002, respectively. Approximately eight hundred thousand tons
of coal were mined and an additional three hundred thousand tons were
brokered. Of that amount, seven hundred thousand tons were sold to the
utility operations under approved contracts, with the remainder sold to
third parties. The earnings from mining operations were impacted by
reduced mining yields.
Broadband includes the $1.2 million after tax write-off of the First
Mile investment. The company's investments in SIGECOM and its parent
Utilicom Networks, LLC, a local broadband provider to Evansville,
Indiana, had no significant impact on the company's operating results.
Utility Infrastructure and Other Non Regulated businesses results were
generally unchanged quarter over quarter.
Operating Review for the Six Months Ended June 30
Utility Group
Utility earnings for the six months ended June 30, 2003 were $48.7
million in 2003 as compared to $50.7 million for the same period in
2002, primarily driven by weather that on the year was favorably
impacted by $5.4 million after tax compared to last year and increased
wholesale and other margin, offset by the BABB investment write-off of
$2.3 million after tax and increased other operating costs.
Gas margins were $205.2 million, an increase of $19.0 million over
second quarter 2002. It is estimated that weather, 17% colder than the
prior year and 7% colder than normal, contributed $12.0 million pre-tax
to the increased margin. The remaining $7.0 million increase is
primarily attributable to gross receipts and excise taxes, increased
late payment fees, and recovery of Ohio customer choice implementation
costs.
Electric margins were $109.0 million, an increase of $6.7 million over
2002 primarily due to increased non-firm wholesale power activity
resulting from price volatility, offset by lower retail sales due to
milder cooling weather. As a result of the mild weather which was 44%
cooler than normal and 51% cooler than last year, volumes sold to
retail and firm wholesale customers decreased 3% with an estimated
margin impact of $2.9 million pre-tax. Non-firm wholesale margins were
$12.1 million, an increase of $9.0 million over 2002.
Other operating expenses increased $10.4 million compared to the prior
year. The increased expenses were due principally to higher
uncollectible accounts expense, the timing of electric plant
maintenance and other costs such as PIPP and customer choice
implementation costs in Ohio that are recovered through margins.
Depreciation and amortization increased $5.3 million compared to the
prior year due to utility plant additions.
Taxes other than income increased $4.5 million compared to the prior
year due to higher gross receipts and excise taxes as a result of
higher gas prices and increased gas volumes sold.
Other income (expense), net for the utility group decreased $7.0
million pre-tax compared to the prior year. The decrease is primarily
the result of the $3.9 million pre-tax write-off of the BABB
investment, less AFUDC and interest income, and contributions of $1.2
million pre-tax to low income customer assistance programs resulting
from the ProLiance settlement. In addition, 2002 amounts include income
from the sale of emission allowances and other assets totaling $2.2
million pre-tax.
Interest expense decreased $2.5 million when compared to last year. The
decrease primarily resulted from lower interest rates. This was
partially offset by higher outstanding balances due primarily to
funding of capital expenditures and increased working capital
requirements resulting from the higher gas prices experienced during
late 2002 and 2003.
Non Regulated Group (all amounts following in this section are after
tax)
For the six months ended June 30, nonregulated earnings were $11.9
million in 2003 as compared to $8.8 million for the same period in
2002.
Earnings from Energy Marketing and Services were $10.5 million, an
increase of $2.3 million over 2002. Gas Marketing's contribution
increased $1.2 million period over period due to continued realization
of benefits from the integration of its two gas marketing companies in
2002 and from opportunities provided by gas price volatility in the
first quarter. Performance Contracting is up $0.9 million due to the
higher margins, a large construction backlog at the end of 2002, and
Vectren's higher ownership percentage in the second quarter of 2003.
Earnings from Coal Mining were $7.2 million, an increase of $2.3
million over 2002. Mining operations contributed $0.6 million in 2003
and $1.4 million in 2002. Net earnings from the investment in Pace
Carbon, comprised of Synfuel tax credits net of operating losses, were
$4.8 million and $2.1 million, in 2003 and 2002 respectively. Synfuels
related results, which reflect earnings from the investment in Pace
Carbon and Synfuels related fees, were $6.6 million and $3.5 million,
in 2003 and 2002 respectively. Approximately 1.6 million tons of coal
were mined and an additional five hundred thousand tons were brokered.
Of that amount, 1.5 million tons were sold to the utility operations
under approved contracts, with the remainder sold to third parties.
Reduced mining yield continues to impact 2003 earnings of the mining
operations.
Utility Infrastructure losses increased to $1.2 million from $0.5
million in 2002 as a result of continued cutbacks from gas distribution
utility customers which began in the later part of 2002.
Broadband includes the $1.2 million after tax write-off of First Mile
in the second quarter of 2003.
Other nonregulated businesses contributed an after tax loss of $3.5
million in 2003 as compared to a $4.0 million after tax loss in 2002.
There was substantial improvement in the losses at the municipal
broadband consulting company and in the financial asset portfolio.
However, the 2002 results include a $0.8 million gain in the Haddington
Ventures portfolio which did not recur in 2003 and therefore offset
part of this turnaround. Retail marketing operations had a less than
expected loss of $1.0 million.
Item 7. Exhibits
99-1 Vectren Corporation Consolidated Statement of Income for the three and
six months ended June 30, 2003 and 2002
99-2 Vectren Utility Holdings, Inc. Consolidated Statement of Income for the
three and six months ended June 30, 2003 and 2002
99-3 Vectren Corporation Operating Highlights
99-4 Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VECTREN CORPORATION
VECTREN UTILITY HOLDINGS, INC.
July 23, 2003
By: /s/ M. Susan Hardwick
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M. Susan Hardwick
Vice President and Controller