Nicor Inc.’s net income slipped 18% for the year and 11% for the fourth quarter of 2003 in part because of lower distribution results and the adoption of an accounting change on wholesale gas marketing partially offset by higher equity investment income and improved operating results in the company’s shipping segment and other energy ventures businesses. Earnings per diluted share were down 17% for the year to $2.38 and were down 11% to 79 cents for the fourth quarter.

“Higher operating costs at our utility business, including the adverse effects of high natural gas costs, were the most significant factors impacting our operating results in 2003,” said CEO Thomas L. Fisher. “Many of the factors that impacted 2003 are also expected to put continued pressure on our gas distribution operating results in 2004. Despite a challenging environment, we still had a year of solid performance in our shipping segment and have effectively positioned our other energy-related businesses for continued improvement.”

Gas distribution operating income decreased in the fourth quarter to $50.4 million from $56.9 million in 2002. For the year, gas distribution operating income decreased to $166.2 million, from $207 million in 2002.

Both 2003 quarterly and annual results were positively impacted by activities related to the wind-down of one of the company’s equity investments, Nicor Energy. In the third quarter of 2002, the company wrote-off its equity investment in the 50%-owned joint venture (with Dynegy). The 2002 results included $9.2 million of pretax related losses, including the write-off of Nicor Energy. Through wind-down efforts, the company received cash, and recorded pretax gains, of $0.7 million and $9.6 million, respectively, for the 2003 fourth quarter and twelve-month periods. Future gains or losses from the wind-down of Nicor Energy are not expected to be material.

Net income for 2003 was cut by a required change in accounting method in wholesale gas marketing from fair value to accrual accounting. The method resulted in a loss in the first quarter of 2003 to convert from fair value to accrual accounting as of Jan. 1, 2003, removing previously recorded unrealized mark-to-market gains on natural gas inventory and non-derivative energy-related contracts for storage and transportation services, the company said.

Nicor also issued its 2004 guidance for earnings per share in the range of $2.10-2.30. The estimate assumes, however, that there will be no future impacts from the Illinois Commerce Commission’s purchased gas adjustment investigation, mercury-related adjustments or recoveries, additional gains or losses related to the wind-down of Nicor Energy, or any cumulative effect accounting change adjustments. These three items combined for a net positive impact on earnings of about 27 cents per share in 2003.

The guidance also is based on expectations for lower operating results in the company’s gas distribution segment, due primarily to increased operating expenses relating to higher depreciation, and increased labor and compliance-related costs, partially offset by increased property sales. Higher interest expense is also expected to put downward pressure on 2004 results. The company expects modest improvement in the operating results of its shipping segment in 2004. The company also expects operating results in its other energy-related businesses will improve in 2004.

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