DEARBORN, Mich., Jan. 24, 2003 — CMS Energy announced Friday that it is suspending its dividend to bolster its ongoing financial improvement plan, updating its earnings guidance for 2002, and providing earnings guidance for 2003.
The Board of Directors decided to suspend the common stock dividend. CMS Energy expects the dividend suspension will boost liquidity by more than $100 million in 2003.
Commenting on the dividend change, Ken Whipple, CMS Energy’s chairman and chief executive officer, said: “While not easy, we believe that the Board’s decision to suspend the dividend is the most appropriate at this time. By conserving cash, our liquidity is strengthened, and we are in a better position to meet the challenges facing our company and our industry. We will keep our focus on aggressive cost management and on actions to improve our balance sheet and further strengthen our financial flexibility. Our Board of Directors recognizes the importance of a dividend to a company like ours, and the Board intends to reinstate it as soon as it is financially prudent to do so.”
The company updated its 2002 guidance, announcing reported earnings per share in accordance with Generally Accepted Accounting Principles (GAAP) are expected to be a loss in the range of $4.25 to $4.75. The increased loss from prior guidance largely reflects additional non-cash writedowns associated with CMS Field Services and certain independent power projects.
The company expects ongoing (non-GAAP) earnings per share will be in the $1.50 to $1.55 range, unchanged, including CMS Panhandle Companies operating earnings. Management believes that ongoing earnings provide a key measure of the company’s current operating financial performance, unaffected by losses or gains caused by asset impairments and sales, one-time expenses, and other accounting items that are not reasonably likely to recur.
The company also announced that for 2003 it projects reported earnings per share will be roughly break even, dependent largely on the timing and proceeds from planned asset sales. The company expects ongoing earnings will be in the range of 80 cents to 90 cents per share.
Key factors negatively affecting the 2003 versus 2002 ongoing earnings outlook include the loss of income resulting from the sale of the CMS Panhandle Companies and other assets, higher interest and depreciation costs at CMS Energy’s principal subsidiary, Consumers Energy, and lower electric sales at Consumers associated with Michigan’s electric restructuring law.
The principal variances between the projected reported and ongoing earnings for 2002 and 2003 are set forth in the attached schedule.
Whipple noted the company’s financial improvement plan has reached significant milestones. “We are continuing to take the steps necessary to strengthen our balance sheet, preserve our liquidity, and increase our financial flexibility, which is paramount in today’s economy,” he said. “The company continues to focus on liquidity, with the goal of maintaining a consolidated cash balance of approximately $400 million, split about equally between CMS Energy and Consumers Energy. Executing our plan also eliminates the need for CMS Energy to access the capital markets in 2003.”
CMS Energy is an integrated energy company, which has as its primary business operations an electric and natural gas utility, natural gas pipeline systems and independent power generation.
For more information: http://www.cmsenergy.com.