EX-99 3 ppl8k_7-29exhibit99.htm EXHIBIT 99-1 TO PPL FORM 8-K PPL 8K Exhibit 99.1

Exhibit 99.1

CONFIDENTIAL
DRAFT-7/22/03; 5 p.m.
George E. Biechler, ETN 220-4740

Contacts:

  

For media - Dan McCarthy, 610-774-5758
For financial analysts - Tim Paukovits, 610-774-4124

 

 

PPL Reports Second-Quarter Earnings

          ALLENTOWN, Pa. (July 29, 2003) - PPL Corporation (NYSE: PPL) today announced an increase in reported earnings for the second quarter and for the first half of 2003 compared to a year ago.

          The company reported net income, or earnings, of $116 million, or $0.67 per share, for the second quarter of 2003 compared to a net loss of $27 million, or $0.18 per share, in the second quarter of 2002. For the first half of 2003, PPL reported earnings of $355 million, or $2.09 per share, compared to a loss of $30 million, or $0.20 per share, in the first half of 2002.

          Since there were no unusual items in the second quarter of 2003, PPL's earnings from core operations also were $116 million, or $0.67 per share. Earnings from core operations, which exclude unusual items, were $111 million, or $0.75 per share in the second quarter of 2002. In last year's second quarter, PPL recorded two unusual items: a writedown of $0.64 per share in its Brazilian investment and a charge of $0.29 per share from a seven percent reduction in PPL's domestic workforce.

          For the first half of 2003, PPL announced earnings from core operations of $292 million, or $1.72 per share, compared to $262 million, or $1.77 per share, for the same period a year ago.

          Despite higher total earnings, PPL's per share earnings from core operations declined in the second quarter and first half of 2003 compared to the same periods a year ago, due to the dilutive effect of additional common shares outstanding. The shares outstanding for the current-year reporting periods reflect the issuance of approximately $500 million of common stock in September of 2002 and $400 million of common stock during the first half of 2003.

          PPL's strong operating performance in 2003, combined with its successful financing program, has substantially improved the company's liquidity position and strengthened its balance sheet. At June 30, 2003, the company had no commercial paper outstanding, approximately $370 million of cash on hand and $1.8 billion of available credit facilities.

Chairman's Outlook

           "We are encouraged by the modest rebound of our energy margins in the Eastern and Western United States during the past quarter," said William F. Hecht, PPL chairman, president and chief executive officer. "Our second-quarter results show once again the advantages of our disciplined market approach, which allows us to benefit from market improvements while minimizing risk," said Hecht.

          PPL's margins on its energy sales in both the Eastern and Western United States were higher in the second quarter of 2003 compared to the same period a year ago.

          Hecht said PPL also recorded solid results from its electricity delivery business in the United Kingdom during the second quarter, reflecting the assumption of sole ownership of this affiliate in September of 2002. "Operating excellence and commitment to customer satisfaction in our energy delivery businesses are key components of PPL's corporate strategy and continued success," he added.

          Hecht said the company remains on target to achieve its 2003 forecast of $3.45 to $3.75 in earnings per share from core operations. Additionally, PPL expects its reported earnings per share for 2003 to be $3.70 to $4.00, reflecting the net benefit of $0.25 from two unusual items resulting from changes in accounting rules. These items are: the adoption, in the first quarter, of a new accounting rule addressing asset retirement obligations (a credit to earnings of $0.37 per share); and the addition to the company's balance sheet, in the third quarter, of power plant financing arrangements that were reflected as operating leases in prior years (a charge to earnings of about $0.12 per share).

          PPL also is reaffirming its long-term forecast of a 5 percent to 8 percent compound annual growth rate based on 2002 earnings from core operations of $3.54 per share.

Second-quarter 2003 earnings factors

          Other earnings drivers for PPL in the second quarter of 2003 were: increased sales of wholesale electricity in the Eastern United States, despite mild weather during the quarter; and the profitable operation of PPL's Shoreham and Edgewood power plants, which went on line in Long Island last August. Favorable pricing of wholesale energy contracts in the Northwestern U.S. contributed to improved margins in the Western U.S. In addition, interest costs were lower in the second quarter of 2003, as proceeds from the issuances of common shares were used to pay down debt.

          Offsetting the earnings benefits in the second quarter of 2003 were: the net dilutive effect of additional shares of PPL common stock outstanding; higher operating and maintenance costs, reflecting the costs of new generation facilities; and lower pension income.

First-half 2003 earnings factors

          PPL's earnings for the first half of 2003 benefited from an unusual item of $0.37 per share in the first quarter due to the adoption of a new accounting rule addressing asset retirement obligations. The loss a year ago was due primarily to the negative impact of several unusual items: $1.02 per share related to changes in accounting rules for goodwill affecting PPL's Latin American investments; $0.66 related to the writedown in its Brazilian investment; and $0.29 related to its workforce reduction program.

          Earnings drivers for PPL in the first six months of 2003 were: increased earnings from its electricity delivery business in the United Kingdom; the profitable operation of PPL's Shoreham and Edgewood power plants on Long Island; increased electricity delivery revenues in the Eastern United States; improved energy margins in the Northwestern U.S.; and lower interest costs.

          Offsetting the earnings benefits during the first half of 2003 were: decreased energy margins in the Eastern United States that occurred in the first quarter; the dilutive effect of additional shares of PPL common stock outstanding; higher operating and maintenance costs associated with new generation facilities; higher fuel costs for generation units that operated during unusually high winter demand; and lower pension income.

12-month earnings results

          PPL's reported earnings for the 12 months ended June 30, 2003, were $593 million, or $3.63 per share, compared to a loss of $190 million, or $1.30 per share, for the same period of 2002. The company recorded a variety of unusual items during this period a year ago (see the chart that follows).

          Earnings from core operations for the 12 months ended June 30, 2003, were $571 million, or $3.50 per share, compared to $543 million, or $3.69 per share, for the same period of 2002. Earnings drivers for the period included increased earnings from PPL's electricity delivery business in the United Kingdom and improved energy margins in the Northwestern United States. These earnings improvements were offset by decreased energy margins in the Eastern U.S.; the dilutive effect of additional shares of PPL common stock outstanding; higher operating and maintenance costs associated with new generation facilities; and lower pension income.

 

Reconciliation of Core and Reported Earnings
 

Current Year - 2003

Last Year - 2002

(Millions of dollars)

2nd Qtr

June
YTD

12 Mos.-
June

2nd
Qtr

June
YTD

12 Mos.-
June

 

Earnings - Core

$116

$292

$571

$111

$262

$543

  Unusual Items:

            

    Accounting method change- asset retirement
      obligations

 

63

63

      

    Goodwill impairment

       

(150)

(150)

    Impact of Enron bankruptcy

         

(29)

    Cancellation of generation projects

          

(88)

    CEMAR operating losses

    

(23)

      

    WPD impairment

          

(117)

    CEMAR impairment

      

(94)

(98)

(315)

    Tax benefit - Teesside

   

8

      

    Writedown of generation equipment

    

(26)

      

    Workforce reduction

     

(44)

(44)

(44)

    Accounting method change - pensions

         

10
 

  Total Unusual Items

  

63

22

(138)

(292)

(733)
 

Earnings - Reported

$116

$355

$593

($27)

($30)

($190)
 


Reconciliation of Core and Reported Earnings per Share (Diluted)
 
Current Year - 2003
Last Year - 2002
 

2nd
Qtr

June
YTD

12 Mos.-
June

2nd
Qtr

June
YTD

12 Mos-
June

 

Earnings per share - Core

$0.67

$1.72

$3.50

$0.75

$1.77

$3.69

  Unusual Items:

            

    Accounting method change- asset retirement
      obligations

  

0.37

0.38

      

    Goodwill impairment

        

(1.02)

(1.02)

    Impact of Enron Bankruptcy

          

(0.19)

    Cancellation of generation projects

          

(0.60)

    CEMAR operating losses

    

(0.14)

      

    WPD impairment

          

(0.80)

    CEMAR impairment

      

(0.64)

(0.66)

(2.15)

    Tax benefit - Teesside

   

0.05

      

    Writedown of generation equipment

    

(0.16)

      

    Workforce reduction

     

(0.29)

(0.29)

(0.30)

    Accounting method change - pensions

          

0.07
 

  Total Unusual Items

0.00

0.37

0.13

(0.93)

(1.97)

(4.99)
 

Earnings per share - Reported

$0.67

$2.09

$3.63

($0.18)

($0.20)

($1.30)
 

          PPL's 2003 forecast excludes any positive or negative impact of exiting its Brazilian investment, CEMAR, and is based on the following key developments or assumptions: current forward wholesale electricity prices; the adoption of new accounting rules that will result in the addition to the company's balance sheet, in the third quarter, of the variable interest entities related to power plants that currently are reflected as operating leases; and, effective January of 2003, the adoption of a new accounting rule addressing asset retirement obligations.

          PPL Corporation, headquartered in Allentown, Pa., controls about 11,500 megawatts of generating capacity in the United States, sells energy in key U.S. markets and delivers electricity to customers in Pennsylvania, the United Kingdom and Latin America.

           (Note: All references to earnings per share in the text and tables of this news release are stated in terms of diluted earnings per share.)

          PPL invites interested parties to listen to the live Internet Webcast of management's teleconference with financial analysts about second-quarter financial results at 9 a.m. (EDT) on Tuesday, July 29. The teleconference is available online live, in audio format, on PPL's Internet Web site: www.pplweb.com. The Webcast will be available for replay on the PPL Web site for 30 days. Interested individuals also can access the live conference call via telephone at (913) 981-4910.

PPL CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

Condensed Consolidated Balance Sheet
(Millions of Dollars)

 

 

June 30, 2003

Dec. 31, 2002 (a)

Assets

      

Cash

$370

  

$245

Other current assets

1,615

  

1,592

Investments

677

  

656

Property, plant and equipment -- net

      

    Electric plant

9,449

  

9,110

    Gas and oil plant

203

  

201

    Other property

276

252
 
 

9,928

9,563

Recoverable transition costs

1,820

1,946

Regulatory and other assets

1,602

1,545
 

    Total assets

$16,012

$15,547
 
 

Liabilities and Equity

      

Short-term debt (including current portion of long-term debt)

$437

  

$1,309

Other current liabilities

1,302

  

1,304

Long-term debt (less current portion)

6,589

  

5,901

Deferred income taxes and investment tax credits

2,436

  

2,371

Other noncurrent liabilities

1,602

  

1,659

Minority interest

33

  

36

Company-obligated mandatorily redeemable securities

661

  

661

Preferred stock

72

  

82

Earnings reinvested

1,235

  

1,013

Other common equity

2,887

  

2,493

Accumulated other comprehensive loss

(405)

  

(446)

Treasury stock

(837)

  

(836)
 

    Total liabilities and equity

$16,012

  

$15,547
 

(a)  Certain amounts have been reclassified to conform to the current year presentation.

Condensed Consolidated Income Statement
(Millions of Dollars, Except per Share Data)
3 Months Ended June 30,
6 Months Ended June 30,
12 Months Ended June 30,

2003
2002(a)
2003
2002(a)
2003
2002(a)

Operating Revenues

            

  Utility

$861

$888

$1,881

$1,839

$3,718

$3,351

  Unregulated retail electric and gas

33

42

85

91

176

204

  Wholesale energy marketing and trading

303

221

601

414

1,223

888

  Net energy trading margins

14

2

7

16

10

34

  Energy-related businesses

127

146

251

293

517

631
 
 

1,338

1,299

2,825

2,653

5,644

5,108
 

Operating Expenses

            

  Fuel and purchased power

388

341

887

686

1,701

1,379

  Other operation and maintenance

322

263

598

538

1,188

1,049

  Amortization of recoverable transition
     costs

56

50

127

103

250

228

  Depreciation

92

91

188

177

378

310

  Energy-related businesses

135

150

256

279

520

564

  Taxes, other than income

60

58

125

118

239

193

  Other charges

            

    Write-down of international energy
          projects

0

94

0

100

13

436

    Workforce reduction

0

74

0

74

1

74

    Cancellation of generation projects

0

0

0

0

44

150
 
 

1,053

1,121

2,181

2,075

4,334

4,383
 

Operating Income

285

178

644

578

1,310

725

Other income - net

23

4

31

11

49

16

Interest expense

128

132

236

262

534

456
 

Income before income taxes and

            

   minority interest

180

50

439

327

825

285

Income taxes

49

29

118

115

213

215

Minority interest

1

30

2

56

24

51
 

Income (loss) before cumulative effect of

            

   a change in accounting principles

130

(9)

319

156

588

19

Cumulative effect of a change in

           

   accounting principle (net of tax)

0

0

63

(150)

63

(140)
 

Income (loss) before dividends and

           

   distributions on preferred securities

130

(9)

382

6

651

(121)

Dividends and distributions on preferred

            

   securities

14

18

27

36

58

69
 

Net Income (Loss)

$116

($27)

$355

($30)

$593

($190)
 
             

Earnings per share of common stock -
    basic

            

  Income from core operations (b)

$0.68

$0.75

$1.73

$1.78

$3.51

$3.69

  Unusual items

0

(0.93)

0.37

(1.98)

0.13

(4.99)
 

  Net Income (Loss)

$0.68

($0.18)

$2.10

($0.20)

$3.64

($1.30)
 
             

Earnings per share of common stock -    diluted

            

  Income from core operations (b)

$0.67

$0.75

$1.72

$1.77

$3.50

$3.69

  Unusual items

0

(0.93)

0.37

(1.97)

0.13

(4.99)
 

  Net Income (Loss)

$0.67

($0.18)

$2.09

($0.20)

$3.63

($1.30)
 
             

Average shares outstanding (thousands)

            

  Basic

171,892

147,149

169,482

146,927

162,910

146,642

  Diluted

172,541

147,149

170,061

147,275

163,455

146,642
     

(a)

  

Certain amounts have been reclassified to conform to the current year presentation.

(b)

  

Income in the 2003 and 2002 periods was impacted by several unusual items, as described in the text and tables of this news release. Income from core operations excludes the impact of these unusual items.

Key Indicators

Financial

 
12 Months Ended
June 30, 2003
  
12 Months Ended
June 30, 2002

Dividends declared per share

$1.490

  

$1.250

Book value per share (a)

$16.30

  

$12.71

Market price per share (a)

$43.00

  

$33.08

Dividend yield (a)

3.5%

  

3.8%

Dividend payout ratio (b)

41%

  

(d)

Dividend payout ratio - core operations (b) (c)

43%

  

34%

Price/earnings ratio (a) (b)

11.8

  

(d)

Price/earnings ratio - core operations (a) (b) (c)

12.3

  

9.0

Return on average common equity

25.15%

  

(9.23%)

Return on average common equity - core operations (c)

20.47%

  

23.03%
     

(a)

  

End of period.

(b)

  

Based on diluted earnings per share.

(c)

  

Calculated using income from core operations, which excludes the impact of unusual items, as described in the text and tables of this news release.

(d)

  

Calculation not meaningful due to net loss for the 12 months ended June 30, 2002.

Operating - Domestic Electricity Sales

 

3 Months Ended June 30

6 Months Ended June 30

12 Months Ended June 30

PPL Corp.

                  

(millions of kwh)

2003

2002

Percent
Change

2003

2002

Percent
Change

2003

2002

Percent
Change

Retail

                  

   Delivered (a)

8,058

8,269

(2.6%)

17,969

17,376

3.4%

35,701

34,063

4.8%

   Supplied

8,376

8,687

(3.6%)

18,543

18,319

1.2%

37,046

36,274

2.1%
                   

Wholesale

                  

   East

7,223

5,288

36.6%

14,254

9,907

43.9%

29,263

19,528

49.9%

   West

                  

      NorthWestern Energy/

                  

          Montana Power (b)

838

1,200

(30.2%)

1,665

2,566

(35.1%)

3,358

5,036

(33.3%)

      Other

2,084

1,811

15.1%

4,275

3,475

23.0%

8,693

5,547

56.7%
                   

(a)

  

Electricity delivered to retail customers represents the kwh delivered to customers within PPL Electric Utilities Corp.'s service territory.

(b)

  

NorthWestern Corporation purchased The Montana Power Company's electric delivery business in February 2002, including Montana Power's rights under a power supply agreement with PPL Montana that expired on June 30, 2002. In July 2002, PPL EnergyPlus, on behalf of PPL Montana, began selling energy to NorthWestern Corporation under a new five-year agreement.

 

Income from core operations excludes the impact of unusual items. Income from core operations should not be considered as an alternative to net income, which is an indicator of operating performance determined in accordance with GAAP. PPL believes that income from core operations, although a non-GAAP measure, is also useful and meaningful to investors because it provides them with PPL's underlying earnings performance as another criterion in making their investment decisions. PPL's management also uses income from core operations in measuring certain corporate performance goals. Other companies may use different measures to present financial performance.

 

 

Certain statements contained in this news release, including statements with respect to future earnings, energy prices, accounting treatment, and corporate strategy, are "forward-looking statements" within the meaning of the federal securities laws. Although PPL Corporation believes that the expectations and assumptions reflected in these forward-looking statements are reasonable, these statements involve a number of risks and uncertainties, and actual results may differ materially from the results discussed in the statements. The following are among the important factors that could cause actual results to differ materially from the forward-looking statements: market demand and prices for energy, capacity and fuel; weather variations affecting customer energy usage; competition in retail and wholesale power markets; the effect of any business or industry restructuring; the profitability and liquidity of PPL Corporation and its subsidiaries; new accounting requirements or new interpretations or applications of existing requirements; operating performance of plants and other facilities; environmental conditions and requirements; system conditions and operating costs; development of new projects, markets and technologies; performance of new ventures; political, regulatory or economic conditions in states, regions and countries where PPL Corporation or its subsidiaries conduct business; receipt of necessary governmental permits and approvals; capital market conditions; stock price performance; foreign exchange rates; and the commitments and liabilities of PPL Corporation and its subsidiaries. Any such forward-looking statements should be considered in light of such factors and in conjunction with PPL Corporation's Form 10-K and other reports on file with the Securities and Exchange Commission.

# # #

Note to Editors: Visit PPL's media Web site for additional news and background about the corporation and its subsidiaries.