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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 5, 2000
DQE, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 1-10290 25-1598483
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
Cherrington Corporate Center, Suite 100
500 Cherrington Parkway, Coraopolis, Pennsylvania 15108-3184
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 269-0700
N/A
(Former name or former address, if changed since last report.)
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Items 1-4. Not applicable.
Item 5. Other Events.
Incorporated herein by reference as Exhibit 99.1 is the Earnings Release of
DQE, Inc. for the quarter ended March 31, 2000.
Item 6. Not applicable.
Item 7. Exhibits.
99.1 Earnings Release of DQE, Inc. for the quarter ended
March 31, 2000.
Items 8-9. Not applicable
SIGNATURE
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.
DQE, Inc.
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(Registrant)
Date May 8, 2000 /s/Morgan K. O'Brien
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(Signature)
Morgan K. O'Brien
Executive Vice President,
Corporate Development
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Exhibit 99.1
N E W S [DQE logo]
Cherrington Corporate Center
Suite 100
500 CherringtonParkway
Coraopolis, PA 15108-3181
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Contact: M. Beth Straka
(412) 393-1204 FOR IMMEDIATE RELEASE
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DQE 1st Quarter Results Include
Comprehensive Earnings Per Share
PITTSBURGH, PA, May 5, 2000 - To better reflect the ongoing transformation of
the company, DQE is including both comprehensive income and comprehensive
earnings per share in its first quarter financial results released today.
From its roots as the electric provider for the Pittsburgh region, DQE has
evolved into a growth utility that delivers a variety of essential products to
more than one million customers throughout the United States. DQE is
leveraging its strengths in energy delivery and deregulation to continue to grow
beyond its electric utility roots and prosper in new industries, including
water, propane, landfill gas, communications, energy technology and electronic
commerce.
Reporting comprehensive income and comprehensive earnings per share on the face
of the income statement more appropriately discloses the fundamental change in
the company's underlying business and the change in the way the financial
markets are valuing DQE. Comprehensive income includes both traditional net
income and items of "other comprehensive income." Changes in valuation of
investments in marketable equity securities - expected to be material to DQE in
2000 - are specifically included in this disclosure. Going forward, the
company plans to give emphasis to both basic earnings per share and
comprehensive earnings per share.
Comprehensive earnings per share for the first quarter were 75 cents, a 21%
increase over 1999's first quarter comprehensive earnings per share result of 62
cents. This increase reflects the appreciation of the stock of subsidiary DQE
Enterprises' investment in SatCon Technology. (NASDAQ: SATC). SatCon
manufactures and sells power and energy management products for
telecommunications, factory automation, aircraft, satellites and automotive
applications and also supplies important components to the leading fuel cell
manufacturers.
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DQE's first quarter 2000 basic earnings per share were 63 cents, representing a
1 cent or 1.6% increase over first quarter 1999. Basic earnings per share for
the 12 months ended March 31 were $2.66, a 3.9% increase over 1999's operating
EPS for the same period. The earnings growth is principally attributable to a
solid year at the company's Duquesne Light electric distribution subsidiary, as
well as continued progress at DQE's other subsidiaries. Both comprehensive and
basic earnings per share exclude the $83 million ($1.06) extraordinary
Pennsylvania restructuring charge taken in June 1998.
During the first quarter of 2000, DQE repurchased approximately $78 million of
DQE common stock. An additional $94 million of stock was repurchased in April.
In total, the company has purchased more than 4.2 million shares this year, and
expects to continue to aggressively repurchase DQE shares throughout the
remainder of the year.
The quarterly dividend level stands at 40 cents per share, an increase of 5.3%
over the prior year's level of 38 cents per share. Dividends declared per share
for the 12 months ended are $1.56, a 5.4% increase over 1999.
With the sale of Duquesne Light's generation stations on April 28, 2000, the
electricity business will be less significant to DQE than it has been
historically. Among the challenges DQE faces is changing the role of its
administration infrastructure. As a result, DQE has initiated a corporate
center excellence project designed to consolidate its administrative resources
and significantly reduce administrative costs by the end of 2001.
While smaller, Duquesne Light remains focused on delivering electricity
reliably and with excellent customer service, and is determined to improve its
performance in these areas through the use of leading-edge technology. As
Duquesne Light transforms into a transmission and distribution services company,
it will continue to create unique sources of value by developing services that
stem from new and innovative ways of thinking about its core utility delivery
business.
Through this transformation, DQE continues to focus on realizing operating
efficiencies in its other delivery businesses.
While AquaSource continues to grow its utility revenues, its first quarter
results were negatively affected by higher-than-expected operating expenses
involving repairs and maintenance. AquaSource is in the process of filing a
consolidated rate case in Texas, the state with its largest investment level.
The company is seeking consistent, statewide rates, increased to reflect
upgrades for environmental compliance and other system improvements. During the
fourth quarter, the company expects to file for a rate increase in Indiana,
another state with a substantial level of investment.
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AquaSource also is evaluating the sale of its non-core investments, including
bottled water. In the second quarter of 2000, the company plans to announce the
profitable sale of its bottled water operations. Proceeds from these types of
dispositions will be used to acquire water utilities within its regional
clusters to further achieve cost reductions and synergies from its aggregation
strategy. In addition to streamlining operations, the company is installing
comprehensive customer and financial information systems and is leveraging DQE's
corporate support services to help attain targeted cost levels.
With the success of these initiatives, AquaSource expects to achieve its
targeted return on investment of 8 percent by the end of 2000 and will continue
to look for opportunities to grow its water delivery business in a disciplined
manner.
DQE Systems' propane delivery business, ProAm, also is continuing to focus on
achieving cost reductions and synergies through an aggregation strategy. The
propane business is cyclical, with the first and fourth quarters providing the
bulk of the annual earnings as residential heating represents the majority of
ProAm's load. During the first quarter of 2000, sales were hampered by warmer
than normal weather in Texas, where the majority of ProAm's investments are
clustered. The company is focusing acquisitions in two additional distinct
geographic regions as a means to mitigate the weather risk inherent in the
business. ProAm also is instituting a supply management strategy as a means of
mitigating commodity price risk. First quarter margins were adversely affected
by an unexpected spike in propane supply prices.
DQE Systems' other primary business line is DQE Communications, which recently
has completed a 50,000 fiber-mile metropolitan network. This network is
operational and presently is being leased. The interest in this network has
exceeded our expectations. Several companies have signed leasing agreements and
the list of potential customers is substantial.
With a full year's operating improvements in ProAm and the execution of DQE
Communications' growth opportunities, DQE Systems expects to achieve its
targeted return on investments of 10 percent.
In addition to service-oriented delivery companies and an efficient support
infrastructure, another integral component of DQE's multi-utility vision is the
use of electronic commerce channels to more efficiently offer products and
services to its growing customer base.
DQE, through its DQE Enterprises subsidiary, continues to add to its electronic
commerce and energy technology businesses. In addition to continuing to
develop its current businesses, DQE Enterprises expects to make investments in
at least 10 new, principally early-stage companies during 2000. Two such
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compelling businesses are expected to be announced over the next several weeks;
one involving Internet-based technologies to create efficiencies in the water
delivery and management industry, and a second involving the development and
management of local electronic commerce shopping networks using low-cost
Internet appliances.
Additionally, several of the companies within the current portfolio are expected
to undertake additional capital raising activities during the year. One
business, H Power Corporation, filed a registration statement in April for an
initial public offering. DQE Enterprises anticipates other such opportunities
for market valuation of its investments to occur during the third and fourth
quarters.
ABOUT DQE
DQE is a growth utility delivering essential products, including electricity,
water, gas and communications, to more than one million customers throughout the
United States. DQE combines the stability of a utility with the spirit of a dot
com business by applying leading-edge technology to create greater value for
customers and shareholders.
The foregoing contains forward-looking statements regarding the following:
DQE's plans to continue repurchasing its common stock; AquaSource's planned
disposition of its bottled water operations; AquaSource's planned rate cases in
Texas and Indiana; the projected returns on investments by AquaSource and DQE
Systems; DQE Enterprises' plans to make additional technology company
investments, and the possibility of certain of its businesses undertaking
initial public offerings in 2000. Actual results may materially differ from
those implied by such statements due to known and unknown risks including, but
not limited to, the following: fluctuations in the price for DQE's common stock
could affect DQE's repurchasing plans; the outcome of negotiations with
purchasers could affect the sale of bottled water; the timing and outcome of the
rate case filings are dependent on determinations made by the public utility
commissions in Texas and Indiana; changing market conditions, weather conditions
and demand for utility services with respect to water and propane companies and
the availability of appropriate investment opportunities in those industries, as
well as changing market conditions and demand for utility services with respect
to telecommunications companies, could affect projected returns on investments
by AquaSource and DQE Systems; the availability of appropriate investment
opportunities could affect plans for additional technology company investments;
the volatility of the stock markets, as well as general business and economic
conditions, could affect the potential for initial public offerings being made
at any time by the companies in which DQE invests; and other risks discussed in
our filings with the Securities and Exchange Commission.
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Financial Data
First Quarter & Twelve Months Ended March 31
(All figures in thousands except per share amounts)
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<CAPTION>
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Three Months Ended Twelve Months Ended
March 31 March 31
<S> <C> <C> <C> <C>
2000 1999 2000 1999
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Total operating revenues $315,061 $313,501 $1,337,182 $1,269,277
Net income $ 45,104 $ 48,465 $ 198,056 $ 200,023 (a)
Comprehensive income $ 53,461 $ 48,099 $ 208,319 $ 195,901 (a)
Average number of common
shares outstanding (b) 70,936 77,217 73,906 77,568
Basic earnings per share
of common stock $ 0.63 $ 0.62 $ 2.66 $ 2.56 (a)
Comprehensive earnings per
share of common stock $ 0.75 $ 0.62 $ 2.80 $ 2.52 (a)
Dividends declared per share
of common stock $ 0.40 $ 0.38 $ 1.56 $ 1.48
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(a) Excluding the extraordinary Pennsylvania restructuring charge in June 1998
of $82,548 or $1.06 per share.
(b) Actual shares outstanding were 70,137,636 at March 31, 2000 and 71,766,159
at December 31, 1999.
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