2004 RESULTS: POSITIONING FOR THE FUTURE
Milder than normal weather and rising costs experienced during 2004 made for a challenging year. Most notably, fuel and emission allowance costs and the costs associated with employee labor and benefits, each rose significantly over our expectations for the year.
Cinergy’s earnings were $2.18 per share on a diluted basis, after net charges totaling $0.26 per share primarily for write-downs of certain investments, implementation of the company’s continuous improvement initiative and a gain from the sale of certain technology assets. Excluding the net impact of these items, ongoing earnings for 2004 of $2.44 per share were below our expectations for the year.
Yet, we made Cinergy a much stronger company in 2004. We completed large, unprecedented regulatory initiatives — one of which, as I will discuss later, specifically addresses our higher fuel and emission allowance costs. We took proactive steps to address the next wave of federal environmental laws and regulations. We built on our track record of operational excellence and of implementing comprehensive productivity improvements throughout every aspect of our business. We supported the measured growth of our commercial businesses. And, we further strengthened our balance sheet and improved our liquidity.
Our board recently showed its confidence in our prospects for the future. In January 2005, our directors authorized an increase in the annual dividend from $1.88 to $1.92 per share. This is the third consecutive year in which the board has voted for an increase and reflects our continued commitment to the steady, competitive growth of our dividend.
Last year’s dividend increase allowed us to return about $340 million in cash to our shareholders in 2004. This, in turn, helped contribute to another year of solid performance on the important metric of Total Shareholder Return (TSR). Cinergy’s TSR for 2004 was 12.6 percent. We have been a consistent strong performer on this metric. Our three-year annualized TSR (2002-2004) was 13.3 percent compared to 10.1 percent for the S&P Electric Utility Index, 9.9 percent for the S&P Super Composite Electric Utility Index and 3.6 percent for the S&P 500 over the same period.
Over the next few pages, I want to describe in a little more detail why I believe our 2004 accomplishments position us for strong growth in 2005 and beyond.