By Mike Boyer, John Byczkowski and Jeff McKinney
Enquirer staff writers

Higher costs for coal and emission allowances triggered a 32 percent decline in Cinergy Corp.'s second-quarter earnings.

For the three months ended June 30, the utility holding company reported net income of $58.5 million, or 32 cents a share, down from $84.7 million, or 47 cents a share, in the year-ago period.

Total operating revenues rose 13 percent to $1.05 billion from $933 million a year ago.

Cinergy generates most of its electricity from coal.

"Coal prices were up dramatically, and one of our suppliers did not meet their obligations" spokesman Steve Brash said.

Increased fuel costs lowered second-quarter profit by the equivalent of 4 cents a share, and higher prices for air-pollution credits, required to burn higher-sulfur coal, cut earnings by 5 cents, Cinergy said.

The average spot price for coal delivered to barge terminals along the Big Sandy River near Huntington, W.Va., rose 71 percent from a year earlier to a second-quarter average of $51.63 a ton, according to Bloomberg News. The average market price for Illinois basin mid-sulfur coal rose 26 percent to $30.35 a ton.

The parent of Cincinnati Electric & Gas said the latest quarter also included charges totaling 9 cents a share for costs stemming from its continuous improvement program, exiting a non-regulated business and writing down some investments.

Brash said 3 cents of the second-quarter charges stemmed from a decision by Vestar, Cinergy's performance contracting unit, to exit a business where it shared in the percentage of energy savings provided its clients. Four cents stemmed from costs for its continuous improvement effort and 2 cents a share was for revaluation of investments in two technology companies.

Cinergy's shares closed Tuesday at $37.64, up 4 cents. The consensus among analysts was earnings of 49 cents a share for the quarter.

Despite the shortfall, chairman James Rogers said the utility still expects to earn between $2.65 and $2.80 a share for the year. He said the pressure from higher fuel costs should ease in the second half and an improving economy should increase energy demand.

Earnings from the company's regulated utility operations rose to 20 cents a share from 14 cents a share in the second quarter last year. Earnings from Cinergy's commercial business declined to 16 cents a share from 36 cents a share a year ago.

Cinergy also said it expects to generate $50 million in pre-tax savings next year from hundreds of efficiencies identified by employees in its continuous improvement effort.

Separately, Cinergy said about 35 of 112 employees in its information technology organization have decided to join two outside vendors taking over its non-core information processing. The company gave employees the option to join either IBM or Computer Sciences Corp. or remain with Cinergy.

LCA-Vision Inc.

LCA-Vision Inc., the Sycamore Township-based operator of laser vision-correction centers, saw sales and profits jump in the spring quarter and raised its outlook for the rest of 2004, the company said Tuesday.

Sales grew 56 percent to $31.6 million for the three months ended June 30, compared to the same period a year ago. Net earnings rocketed to $10.8 million in the quarter, up from $1.8 million a year earlier, but this year's results contain a $4.1 million tax benefit.

Revenues at eye centers open at least a year were up 39 percent from a year ago.

The company says revenues for all of 2004 are expected to be $121 million to $123 million, up from previous estimates of $115 million to $117 million. Earnings per share are expected to be $2.05 to $2.15, up from previous estimates of $1.55 to $1.65. The company also said it expects sales to grow 30 percent or more in 2005, and operating profits will grow 40 percent or more.

LCA Vision stock closed Tuesday at $26.78, up 65 cents.

L-3 Communications Inc.

The defense contractor, which owns KDI Precision Products in Clermont County and is acquiring Mason's Cincinnati Electronics, reported record results for the second quarter due to stepped-up military spending and acquisitions.

For the three months ended June 30, New York City-based L-3 reported net income of $88.1 million, or 81 cents a share, compared with $53.4 million, or 53 cents a share, in the same period last year.

Revenue rose 37 percent to $1.68 billion, including increases in sales from acquired companies of $279 million.

The company, which supplies surveillance and reconnaissance systems, said it expects continued strong performance in the second half. L-3 is forecasting 2004 revenues of $6.6 billion, up 30 percent and earnings per share of $3.40.

Shares in L-3 closed at $60.40, up $3.90.

PFS Bancorp Inc.

Strong loan growth helped the parent of Peoples Federal Savings Bank post higher second-quarter profits.

The Aurora-based thrift holding company earned $221,000, or 15 cents a share, up from $197,000, or 15 cents a share, in the second quarter of 2003. The higher profits mainly came from a $56,000, or 6 percent, gain in net interest income from the same quarter a year ago. The rise in the thrift's net interest income was due to an 8 percent increase in loans outstanding from last year's second quarter.

Peoples Federal Savings, with assets of nearly $125 million, has a main office in Aurora and branches in Rising Sun and Vevay.

Shares in PFS remained Tuesday at $21.25, where it closed on Friday. The price rose 75 cents that day on the earnings news.

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E-mail mboyer@enquirer.com, johnb@enquirer.com or jmckinney@enquirer.com