April 27, 2000
Securities and Exchange Commission
Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
Gentlemen:
We are transmitting herewith Vectren Corporation's
Current Report on Form 8-K.
Very truly yours,
/s/James A.Hummel, II
James A.Hummel, II
JH:tmw
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)
April 27, 2000
VECTREN CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 1-15467 35-2086905
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification
No.)
20 N.W. Fourth Street
Evansville, Indiana 47741
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (812)465-5300
N/A
(Former name or address, if changed since last report.)
Item 5. Other Events
On April 27, 2000, Vectren Corporation conducted their quarterly
conference call with the investment community regarding
results of operations and financial position. The script
for this teleconference is included herein. This script contains
certain subjects that pertain to our growth strategy and may contain
forward-looking information. Actual results could differ materially
from those that will be projected in this script.
Item 7. Exhibits
99 Analyst Teleconference Script - First Quarter 2000
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 thereunto duly authorized.
VECTREN CORPORATION
April 27, 2000 /s/ M. Susan Hardwick
M. Susan Hardwick
Vice President and
Controller
VECTREN CORPORATION
1st Quarter Results
Moderator: Steve Schein
April 27, 2000, 8:30 a.m. CDT
Operator:
Good day everyone and welcome to Vectren Corporation's first
quarter conference call. This call is being recorded and is
copyrighted material. Today's presentation will be
available for rebroadcast through April 30 through May 4, 2000,
dialing (719) 457-0802. The confirmation number is 163432.
Now I would like to turn the call over to Mr. Schein, Vice
President-Investor Relations. Please go ahead sir.
S. Schein:
Thank you. Good morning and welcome to our teleconference
highlighting Vectren's first quarter results. As the
operator mentioned, I am Steve Schein. We are pleased that
you could join us this morning. I hope that all of you
received a fax of our quarterly financial report that
includes highlights and our financial statements for the
first quarter of 2000. If for some reason you did not, you
may obtain one immediately by calling 1-800-366-9831.
Today we will be discussing certain subjects including
subjects pertaining to our growth strategy that may contain
forward-looking information. I would caution you that
actual results could differ materially from those that will
be projected in our discussions. Additional detailed
information concerning a number of factors that could cause
actual results to differ materially from the information
that is provided to you is readily available in our report
Form 8K to be filed with the Securities and Exchange
Commission on April 27, 2000.
Today you will hear from Jerry Benkert, Executive Vice
President and Chief Financial Officer, and Carl Chapman,
Executive Vice President and President of Vectren
Enterprises, Inc. Also joining us today are Andy Goebel,
President and Chief Operating Officer, Ron Christian, Senior
Vice President, General Counsel and Secretary, and Susan
Hardwick, Vice President and Controller. This morning, Jerry
will provide a brief update regarding our pending
acquisition of Dayton Power and Light Company's gas
properties and discuss our first quarter results. Following
Jerry, Carl will provide a general update regarding our non-
regulated results. Jerry will then close with a discussion
of expected 2000 results.
As usual, we will allow time at the conclusion of our
remarks for questions and answers. And with that, I will
ask Jerry to begin his remarks.
J. Benkert:
Thank you Steve and good morning everyone. Well, it
certainly has been an interesting three weeks. We opened
trading on the NYSE on April 3, closing at 20 3/16ths, and
expected to trade an average of 75,000 shares a day. We
have closed as high as 20 3/8ths and as low as 15 3/4 with
trading volumes over 350,000 shares on April 14th and 17th.
As you probably know, on the later date, we led the Big
Board in percentage gain. Recently, it appears the roller
coaster ride may have stabilized some, with Vectren settling
into a somewhat more predictable level of trading volumes.
The merger close is now behind us and we are moving forward
to aggressively manage integration and meet our earnings
targets. The pending acquisition of the gas distribution
assets from Dayton Power and Light is also progressing well.
We have had numerous discussions with the Ohio and federal
regulators and believe the approval process remains
manageable. Transition teams are orchestrating the
integration planning, utilizing the knowledge and expertise
we gained throughout the Vectren merger process. We remain
confident we will be operationally ready to close the
transaction mid year upon receipt of all regulatory
approvals.
As Steve mentioned, you should have received the Vectren
quarterly financial report that includes highlights and
financial statements for the quarter and 12 month periods
ended March 31. This is Vectren's first release of
quarterly earnings. This report represents combined Indiana
Energy and SIGCORP results. We will be filing an 8-K that
will provide calendar year 1999, 1998 and 1997 combined
operating results for Vectren. This filing will also
include a MD & A and footnotes.
For the first quarter of 2000, consolidated net income
before merger related charges was $41.4 million and $.68 per
share, as compared to $40.7 million and $.66 for the same
quarter last year. After reflecting the merger related
charges, reported net income and earnings per share for the
current period were $22. 1 million and $.36 per share,
respectively.
Merger costs incurred at March 31 totaled $27.2 million,
$19.3 million net of tax or $.32 per share. Vectren
expects to realize net merger savings of nearly $200 million
over ten years from our elimination of duplicate corporate
and administrative programs and greater efficiencies in
operations, business processes and purchasing. More than
one third of the first quarter charge relates to transaction
costs. In addition, costs were incurred related to
severance and other merger integration activities. The
continued merger integration activities, which will
contribute to the net merger savings, will be substantially
complete by 2001.
Weather has impacted our first Quarter utility margins. For
the quarter, weather was 17 percent warmer than normal and
10 percent warmer than the same period last year.
Gas utility margins decreased by $5.4 million and electric
utility margins increased by about $.5 million. While we
experienced additional residential and commercial customer
growth, this was more than offset by the warmer than normal
weather, which impacted earnings by 5 to 7 cents per share
vs. last year. You may also recall that prior year margins
for the quarter included $3.2 million or about $.03 per
share for a one-time sale of native gas.
Operation and maintenance expenses increased $1.6 million
and depreciation and amortization were up quarter over
quarter by 7% or approximately $1.5 million, due to normal
additions to plant.
Taxes other than income taxes were up about $300,000 or 4%
due to higher gross receipts and property taxes.
Equity in earnings of unconsolidated affiliates was down
about $1.7 million, of which most of this decline was due to
lower earnings from ProLiance Energy. Carl previously
brought to your attention that we expected to recognize
lower earnings due to timing differences related to the
ProLiance's net position on financial instruments held to
hedge storage inventories. Carl will discuss this issue
further in just a moment.
Other income increased by $10.5 million pre-tax. A large
part of the increase was attributable to the restructuring
of SIGCORP's investment in SIGECOM, an integrated
communication provider, which created a $4.9 million after-
tax gain or 8 cents per share.
Interest expense increased by approximately $2.1 million due
to additional debt outstanding related to additional
investments in 1999 at SIGCORP's financial investment
subsidiary, Southern Indiana Properties, and to some extent
due to higher interest rates.
Income taxes were down by $8.6 million principally due to
lower earnings. First Quarter 2000 income taxes do however
recognize that an estimated $5 to $7 million of the merger
expenses recorded in the first quarter, may not be
deductible.
Our quarterly earnings of $.36 are relatively strong
considering merger related costs of $.32 and weather which
may have cost us as much as $.11 to $.13 on the quarter.
Recognizing the potential impact of this warmer than normal
weather, we will manage controllable costs while staying
focused on now completing the DPL acquisition and meeting
our growth targets. With that, I will turn it over to Carl.
C. Chapman:
Thanks, Jerry. I would like to expand on Vectren's non-
regulated results for the first quarter and provide some
guidance for 2000 non-regulated earnings. As we indicated
in New York, we expect non-regulated earnings to contribute
35-40% of Vectren's income by 2004. Over the upcoming five-
year period, Energy Services is expected to contribute
nearly 40% of those earnings, Financial Group will
contribute approximately 20%, Generation Services,
Resources, and Utility Services will contribute about 10%
each and Ventures and Communications about 5% each.
As Jerry discussed, our share of pre-tax earnings from
ProLiance are down from the prior year due primarily to the
timing of various issues. Those issues include nonrecurring
gains on storage gas in 1999 that were discussed with
Indiana Energy analysts at this time last year, the
recognition of hedging losses in a different quarter than
the gain on the already committed physical sales, and the
restructuring of several customer transportation contracts
that move earnings into summer quarters, that should make
earnings less seasonal going forward.
In the future, we expect that FAS 133 will allow less
volatility in our marketers' quarterly earnings by better
matching hedging and physical contracts. Even without those
changes, however, we still believe the Energy Service Group
should be at target calendar year.
Jerry also commented that Communications restructuring of
its investment in SIGECOM resulted in a one-time gain of
$4.9 million after-tax gain or 8 cents per share. While not
directly impacting earnings, we are excited about the
results at SIGECOM. They now have over 30,000 revenue
generating units and are making 100 installations per day.
We also continue to discuss additional sites with Utilicom
Networks management and the new majority owner, Blackstone
Group.
Financial Group's earnings increased nearly 2 cents per
share over last year primarily due to Southern Indiana
Properties' 1999 investments.
We are also pleased with the improving results at Vectren
Synfuels. Production of briquettes continues to improve and
nearly 250,000 tons were sold during the first quarter
resulting in slightly better than break even earnings for
the quarter. The coal market, however, does continue to be
very soft.
Vectren Ventures has now invested approximately $8.5 million
of its $10 million commitment in Haddington Energy Partners.
Six investments in portfolio companies have been made to
date. Haddington continues to invest in leading edge
technology in the evolving utility industry. These
investments include high deliverability gas storage,
compressed air energy storage, thermally-balanced
cogeneration, gathering and processing in the Powder River
Basin, rollups of Gulf Coast gathering and processing and
most recently fuel cells and hydrogen generators.
We feel that Haddington Energy Partners, LP is unique
because of the majority position it generally takes in its
portfolio companies, and that it places successful and
experienced management in each of the companies. Ventures
is directly involved in these investments, as we maintain an
investment committee board seat at Haddington Energy
Partners and board representation or observation rights in
the larger operating companies. We are confident in
Haddington's investment strategy, as well as the experience
of their management and our investment partner, Chase
Capital Partners. Earnings for 2000 for Vectren are on
target with good earnings growth projected through 2004.
Non-regulated earnings for the first quarter prove the
strength of our investment strategy. First quarter earnings
normalized for the one-time gain from the Sigecom investment
restructuring and the merger transaction expenses show an
increase of nearly 2 cents a share over the same period last
year, even with the unusual year to year comparisons for
Energy Services.
We continue to focus on non-regulated investments that
complement our core competencies. Moreover, we feel we have
positioned our investments to develop further and provide
opportunities for Vectren to achieve its earnings growth
targets in the future.
I will now turn it back to Jerry.
J. Benkert:
I would like to briefly discuss our expectations for 2000.
Last month in New York we laid out our growth strategy
through 2004. On a combined basis, Vectren's 1999 pro forma
earnings per share were $1.48. We attributed 1999 warmer
than normal weather to have a $.13 to $.15 per share impact,
for an adjusted 1999 base of $1.62. Growing earnings,
consistent with our targeted 5 year average annual compound
growth rate of 10%, would produce a reasonable range of
$1.73 to $1.83 for 2000 and $2.60 to $2.65 for 2004.
We also indicated that 2000 first quarter weather at that
time was much warmer than normal and it has caused an $.11
to $.13 impact to earnings to date.
In addition to the 2000 one-time merger charges reported in
the first quarter of $.32, we still expect annual charges to
be in the range of $.55 to $.60.
Excluding first quarter weather, the Utility Group's annual
contribution to earnings is on target and with normal
weather or even a hot summer throughout the remainder of the
year, management of controllable expenses will allow us to
achieve our targets.
As Carl stated, the non-regulated group remains on target to
achieve its expected results.
Expected earnings before merger related charges for 2000
remain in the range of $1.60 to $1.65, which does not
include the possibility of some recovery of margins for
weather.
With that I will stop and ask for questions.
S. Schein:
As always, we appreciate your time and interest in Vectren.
Please let us know if we can provide any additional
information regarding this teleconference or other topics.
We look forward to talking to you in the future.
