Fourth quarter financial statements
ALLENTOWN, Pa.---PP&L Resources, Inc. (NYSE: PPL) Wednesday (1/27) reported 1998 adjusted earnings of $2.07 per share, a 4 cent per share increase over similarly adjusted 1997 earnings.
John R. Biggar, PP&L Resources senior vice president and chief financial officer, said the company's 1998 adjusted earnings of $2.07 per share exclude the effects of numerous one-time and other adjustments, most of which are related to the transition to a competitive electricity market in Pennsylvania. And, he said, this amount also excludes the effect of milder than normal weather that resulted in a 20 cent per share reduction in actual earnings, the largest such effect in more than a decade.
"We are continuing to see growth in sales, even in the face of additional competition in our business," said Biggar. "Weather-adjusted delivery sales to customers in central and eastern Pennsylvania were 2.9 percent higher in 1998 than in 1997." Biggar said much of that increase can be attributed to the commercial and residential sectors, in which delivery sales grew at the rate of 4.1 percent and 3 percent, respectively.
"Certainly 1998 was a challenging year for PP&L Resources, one in which we positioned the company for a new, more competitive energy market," said Biggar. "We believe that our successes this year establish our company as one of the major players in this rapidly evolving business."
Before adjustments, PP&L Resources reported a 1998 loss of $3.46 per share, reflecting $948 million of net write-offs related to the settlement of the company's restructuring case before the Pennsylvania Public Utility Commission and another competition-related case before the Federal Energy Regulatory Commission.
Biggar said the company took significant actions during 1998 to improve its long-term prospects for success, including reducing its dividend and establishing a target payout ratio in the 45 to 55 percent range, which improves free cash flow and permits the company to retain more of its earnings for investment in business growth. In addition, the company bought back 17 million shares or about 10 percent of its common stock.
"This repurchase allowed us to reduce our permanent capitalization and provide remaining shareowners with an increased ownership interest in the company. In the long-run, shareowner value will be enhanced by the financial actions the company took in 1998," said Biggar.
Earnings also were favorably affected by increased wholesale electricity revenues and slightly higher industrial sales. Operating revenues from wholesale energy and trading activities in 1998 were up 88 percent from the prior year, while delivery sales to industrial customers increased 1.4 percent over 1997. The increases were offset somewhat by higher operation and maintenance expenses related to the transition to a competitive market and the phaseout of a long-term power sales contract with another utility.
The following tabulation details the company's earnings in 1998 as compared with 1997.
|
12 Months Ended |
|
Dec. 31, 1998 |
Dec. 31, 1997 |
Earnings Per Share -- Actual |
($3.46) |
$1.80 |
Weather Variance |
0.20 |
0.03 |
EPS -- Weather-Normalized |
($3.26) |
$1.83 |
One-Time Adjustments: |
|
|
PUC restructuring charge |
5.56 |
-- |
FERC restructuring charge |
0.19 |
-- |
Windfall Profits Tax |
-- |
0.24 |
UK Income Tax Rate Reduction |
(0.06) |
(0.06) |
Penn Fuel Gas Acquisition Costs |
(0.03) |
0.03 |
Schuylkill Energy Resources settlement |
(0.11) |
-- |
Normalized EPS |
2.29 |
2.03 |
Additional restructuring impacts |
(0.22) |
-- |
Adjusted normalized EPS |
2.07 |
2.03 |