800 Cabin Hill Drive, Greensburg, PA 15601-1689
| Media, contact: Fred Solomon Manager, Corporate Communications Phone: (724) 838-6650 Media Hotline: (888)233-3583 E-Mail:fsolomo@alleghenyenergy.com | Investor contact: Max Kuniansky Executive Director, Investor Relations and Corporate Communications Phone: (724) 838-6895 E-Mail:mkunian@alleghenyenergy.com |
FOR IMMEDIATE RELEASE
Allegheny Energy Reports Second Quarter 2005 Results
GREENSBURG, Pa., July 28, 2005 — Allegheny Energy, Inc. (NYSE: AYE) today announced a consolidated net loss of $18.4 million, or $0.12 per diluted share, for the second quarter of 2005, compared with a net loss of $39.5 million, or $0.31 per diluted share, for the same period in 2004.
To provide a better understanding of core results and trends, Allegheny Energy also reported adjusted financial results, which are non-GAAP financial measures. Adjusted net income from continuing operations was $12.7 million, or $0.08 per diluted share, for the second quarter of 2005. The adjusted 2005 results exclude costs of $47.2 million (pre-tax) related to an April 2005 tender offer for the company’s 11 7/8% convertible trust preferred securities, $11.2 million (pre-tax) received from a former trading executive’s forfeited assets and insurance proceeds of $6.7 million (pre-tax) related to the 2004 extended outage at the Hatfield’s Ferry power station. Also excluded is a $12.3 million after-tax loss from discontinued operations.
For the second quarter of 2004, the adjusted net loss from continuing operations was $26.2 million, or $0.21 per diluted share. The 2004 adjusted results exclude a loss of $11.7 million (pre-tax) on the release of gas pipeline capacity and a $6.6 million after-tax loss from discontinued operations. A reconciliation of these non-GAAP financial measures to results reported in accordance with GAAP is attached to this release.
“Our core operations delivered solid results for the second quarter,” said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. “We also made progress in refinancing and reducing debt, signing new coal supply agreements, and completing the Pennsylvania generation bidding process. With these accomplishments and our other initiatives, we are on track to deliver significant earnings growth for 2005 and beyond.”
Second Quarter Consolidated Results
Income from continuing operations before income taxes and minority interest was $3.8 million for the second quarter of 2005, an increase of $61.3 million compared with the same period in 2004. Key factors contributing to the improved results include:
| • | Operating revenues increased by $105.7 million compared to the same period in 2004, largely as a result of improved performance at the power stations, the inception of market-based rates in Maryland and growth in the number of customers. Second quarter 2004 results were adversely affected by unplanned outages at the Pleasants and Hatfield's Ferry power stations. |
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• | Fuel, purchased power and transmission expense increased by $53.4 million, reflecting higher coal prices, increased coal consumption due to improved plant performance, and increased power purchases related to the inception of market-based rates in Maryland. |
• | Operations and maintenance expense decreased by $32.0 million, primarily as a result of the timing and level of spending for special maintenance at power plants, lower costs for outside services and the receipt of insurance proceeds previously mentioned. |
• | Other income increased by $16.6 million due primarily to the cash received from a former trading executive, as noted above. |
• | Interest expense increased by $37.2 million due to costs associated with the tender offer previously mentioned. Excluding the tender offer costs, interest expense decreased by $10.0 million, reflecting benefits from debt reduction and debt refinancing. |
The effective tax rate for the second quarter of 2005 was affected by adjustments related to certain state tax law changes and the anticipated filing of amended state tax returns for 2003 resulting from expected changes in the company's 2003 federal tax return.
Unplanned outages at the Pleasants and Hatfield’s Ferry power stations in the second quarter 2004 adversely affected that period’s results by approximately $59 million (pre-tax), consisting primarily of lost revenues net of fuel cost savings.
Adjusted earnings from continuing operations before interest, taxes, depreciation and amortization (adjusted EBITDA) for the second quarter of 2005 were $192.7 million, a $70.7 million increase from the second quarter of 2004. Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of EBITDA to GAAP financial measures and details on the calculation of EBITDA, see the reconciliation of non-GAAP financial measures attached to this release.
Second Quarter Segment Results
Delivery and Services: The Delivery and Services segment reported income from continuing operations of $16.9 million for the second quarter of 2005, a decrease of $8.5 million compared to the same quarter of the prior year. Kilowatt-hour sales increased by 0.6 percent, and operating revenues increased by $4.6 million, reflecting growth in the number of customers and higher prices, partly offset by milder weather compared to the same period in 2004. Cooling degree-days for the second quarter of 2005 were 1 percent lower than the prior year, and 30 percent above normal. The inception of market-based rates in Maryland affected both revenues and purchased power. Purchased power cost increased by $11.9 million. Interest expense increased by $14.9 million, reflecting the tender offer costs (previously mentioned) allocated to the segment. Other income increased by $4.2 million, while income taxes decreased by $10.4 million.
Generation and Marketing: The Generation and Marketing segment reported a loss from continuing operations of $23.0 million for the second quarter of 2005. For the same period in the prior year, the segment reported a loss from continuing operations of $58.2 million, reflecting the unplanned outages at Pleasants and Hatfield’s Ferry. Power plant output increased by 8.1 percent and revenues increased by $84.0 million. Fuel costs increased by $25.0 million due to increased plant output and higher coal prices. Operations and maintenance expenses decreased by $33.1 million, reflecting the shift in the level and timing of spending for special plant maintenance and the insurance proceeds previously mentioned. Other income increased $12.6 million, largely as a result of cash received from the forfeited assets of a former trading executive. Interest expense increased by $22.5 million due to tender offer costs (mentioned above) allocated to the segment. Income taxes increased $44.1 million.
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Discontinued Operations:For the second quarter of 2005, Allegheny Energy reported an after-tax loss of $12.3 million on discontinued operations, compared to a loss of $6.6 million in the same quarter of the prior year. The 2005 results reflect a net impairment charge of $8.9 million (after-tax) on the West Virginia natural gas operations and Allegheny Energy’s Midwest generating facilities, as well as the operating performance of those assets.
Six-Month Consolidated Results
For the first six months of 2005, Allegheny reported consolidated net income of $24.2 million, or $0.16 per diluted share, as compared to a net loss of $6.2 million, or $0.05 per diluted share, for the first six months of 2004.
Results for the first half of 2004 were significantly affected by the previously mentioned outages at the Pleasants and Hatfield’s Ferry power stations. A summary of six-month results by business segment is included in the attached financial tables.
Reconciliation of Non-GAAP Financial Measures
This news release and the attached table include non-GAAP financial measures as defined in the Securities and Exchange Commission’s Regulation G. Where noted, we present financial information on an adjusted basis to exclude the effect of certain items as described herein. By presenting adjusted results, management intends to provide investors with a better understanding of the core results and underlying trends from which to consider past performance and prospects for the future. We also present EBITDA as an additional measure of our operating performance.
Users of this financial information should consider the types of events and transactions for which adjustments have been made. Neither the adjusted information nor EBITDA should be considered in isolation or viewed as substitutes for or superior to net income or other data prepared in accordance with GAAP as measures of our operating performance or liquidity. In addition, neither the adjusted information nor EBITDA are necessarily comparable to similarly titled measures provided by other companies.
Pursuant to the requirements of Regulation G, we have attached tables that reconcile non-GAAP financial measures, including those presented in this release, to the most directly comparable GAAP measures.
Investor Conference Call
Allegheny Energy will comment further on these results in an investor conference call at 9:30 a.m. Eastern Time on Friday, July 29, 2005. To listen to a live Internet broadcast of the call, visitwww.alleghenyenergy.com. A taped replay of the call will be available after the live broadcast.
Allegheny Energy
Headquartered in Greensburg, Pa., Allegheny Energy is an investor-owned utility consisting of two major businesses. Allegheny Energy Supply owns and operates electric generating facilities, and Allegheny Power delivers low-cost, reliable electric service to customers in Pennsylvania, West Virginia, Maryland, Virginia and Ohio. For more information, visit our Web site atwww.alleghenyenergy.com.
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Forward-Looking Statements
In addition to historical information, this release contains a number of “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as anticipate, expect, project, intend, plan, believe, and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These include statements with respect to: regulation and the status of retail generation service supply competition in states served by Allegheny Energy’s distribution business, Allegheny Power; financing plans; demand for energy and the cost and availability of raw materials, including coal; provider-of-last-resort and power supply contracts; results of litigation; results of operations; internal controls and procedures; capital expenditures; status and condition of plants and equipment; regulatory matters; and accounting issues. Forward-looking statements involve estimates, expectations and projections and, as a result, are subject to risks and uncertainties. There can be no assurance that actual results will not materially differ from expectations. Actual results have varied materially and unpredictably from past expectations. Factors that could cause actual results to differ materially include, among others, the following: changes in the price of power and fuel for electric generation; general economic and business conditions; changes in access to capital markets; complications or other factors that render it difficult or impossible to obtain necessary lender consents or regulatory authorizations on a timely basis; environmental regulations; the results of regulatory proceedings, including proceedings related to rates; changes in industry capacity, development and other activities by Allegheny Energy’s competitors; changes in the weather and other natural phenomena; changes in the underlying inputs and assumptions, including market conditions used to estimate the fair values of commodity contracts; changes in laws and regulations applicable to Allegheny Energy, its markets or its activities; the loss of any significant customers or suppliers; dependence on other electric transmission and gas transportation systems and their constraints or availability; changes in PJM, including changes to participant rules and tariffs; the effect of accounting policies issued periodically by accounting standard-setting bodies; and the continuing effects of global instability, terrorism and war. Additional risks and uncertainties are identified and discussed in Allegheny Energy’s reports filed with the Securities and Exchange Commission.
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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands) | 2005 | 2004 | 2005 | 2004 | ||||||||||||||||
| Operating revenues | $ | 714,650 | $ | 608,995 | $ | 1,468,680 | $ | 1,344,345 | ||||||||||||
Operating expenses: | ||||||||||||||||||||
| Fuel consumed in electric generation | 166,139 | 141,092 | 340,026 | 302,804 | ||||||||||||||||
| Purchased power and transmission | 108,243 | 79,877 | 213,065 | 160,890 | ||||||||||||||||
| Deferred energy costs, net | (1,805 | ) | 1,209 | (619 | ) | 2,123 | ||||||||||||||
| Operations and maintenance | 200,906 | 232,852 | 363,583 | 433,642 | ||||||||||||||||
| Depreciation and amortization | 77,358 | 74,850 | 153,769 | 147,837 | ||||||||||||||||
| Taxes other than income taxes | 51,738 | 48,928 | 106,796 | 98,113 | ||||||||||||||||
| Total operating expenses | 602,579 | 578,808 | 1,176,620 | 1,145,409 | ||||||||||||||||
| Operating income | 112,071 | 30,187 | 292,060 | 198,936 | ||||||||||||||||
Other income and expenses, net | 21,234 | 4,629 | 26,487 | 12,483 | ||||||||||||||||
Interest expense and preferred dividends: | ||||||||||||||||||||
| Interest expense | 128,277 | 91,036 | 254,071 | 210,866 | ||||||||||||||||
| Preferred dividends of subsidiary | 1,260 | 1,260 | 2,519 | 2,519 | ||||||||||||||||
| Total interest expense and preferred dividends | 129,537 | 92,296 | 256,590 | 213,385 | ||||||||||||||||
| Income (loss) from continuing operations before income | ||||||||||||||||||||
| taxes and minority interest | ||||||||||||||||||||
| 3,768 | (57,480 | ) | 61,957 | (1,966 | ) | |||||||||||||||
Income tax expense (benefit) from continuing operations | 9,815 | (23,948 | ) | 33,191 | (930 | ) | ||||||||||||||
Minority interest in net income (loss) of subsidiaries | 52 | (720 | ) | 467 | 1,139 | |||||||||||||||
| (Loss) income from continuing operations | (6,099 | ) | (32,812 | ) | 28,299 | (2,175 | ) | |||||||||||||
Loss from discontinued operations, net of tax | (12,308 | ) | (6,644 | ) | (4,064 | ) | (4,003 | ) | ||||||||||||
| Net (loss) income | $ | (18,407 | ) | $ | (39,456 | ) | $ | 24,235 | $ | (6,178 | ) | |||||||||
| Basic weighted average common shares outstanding | 156,730,744 | 126,971,447 | 147,127,707 | 126,970,373 | ||||||||||||||||
| Diluted weighted average common shares outstanding | 156,730,744 | 126,971,447 | 150,276,429 | 126,970,373 | ||||||||||||||||
Basic (loss) income per common share: | ||||||||||||||||||||
| (Loss) income from continuing operations | $ | (0.04 | ) | $ | (0.26 | ) | $ | 0.19 | $ | (0.02 | ) | |||||||||
| Loss from discontinued operations, net | (0.08 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | ||||||||||||
| Net (loss) income per common share | $ | (0.12 | ) | $ | (0.31 | ) | $ | 0.16 | $ | (0.05 | ) | |||||||||
| Diluted (loss) income per common share: | ||||||||||||||||||||
| (Loss) income from continuing operations | $ | (0.04 | ) | $ | (0.26 | ) | $ | 0.19 | $ | (0.02 | ) | |||||||||
| Loss from discontinued operations, net | (0.08 | ) | (0.05 | ) | (0.03 | ) | (0.03 | ) | ||||||||||||
| Net (loss) income per common share | $ | (0.12 | ) | $ | (0.31 | ) | $ | 0.16 | $ | (0.05 | ) | |||||||||
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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
| (In thousands) | June 30, 2005 | December 31, 2004 | ||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 185,790 | $ | 189,482 | ||||
| Accounts receivable: | ||||||||
| Customer | 182,063 | 164,666 | ||||||
| Unbilled utility revenue | 137,872 | 145,498 | ||||||
| Wholesale and other | 50,078 | 32,966 | ||||||
| Allowance for uncollectible accounts | (16,373 | ) | (19,854 | ) | ||||
| Materials and supplies | 99,565 | 100,054 | ||||||
| Fuel | 85,002 | 61,812 | ||||||
| Deferred income taxes | 63,662 | 44,590 | ||||||
| Prepaid taxes | 50,929 | 46,900 | ||||||
| Assets held for sale | 108,131 | 150,031 | ||||||
| Collateral deposits | 105,819 | 88,708 | ||||||
| Commodity contracts | 9,364 | 13,523 | ||||||
| Restricted funds | 22,295 | 228,857 | ||||||
| Regulatory assets | 39,120 | 37,626 | ||||||
| Other | 13,093 | 20,273 | ||||||
| Total current assets | 1,136,410 | 1,305,132 | ||||||
| Property, Plant and Equipment, net: | ||||||||
| Generation | 5,692,267 | 5,695,851 | ||||||
| Transmission | 1,029,692 | 1,015,751 | ||||||
| Distribution | 3,439,574 | 3,366,217 | ||||||
| Other | 462,924 | 463,515 | ||||||
| Accumulated depreciation | (4,426,279 | ) | (4,341,282 | ) | ||||
| Subtotal | 6,198,178 | 6,200,052 | ||||||
| Construction work in progress | 89,593 | 102,966 | ||||||
| Total property, plant and equipment, net | 6,287,771 | 6,303,018 | ||||||
| Investments and Other Assets: | ||||||||
| Assets held for sale | 316,103 | 340,457 | ||||||
| Goodwill | 367,287 | 367,287 | ||||||
| Investments in unconsolidated affiliates | 28,835 | 29,991 | ||||||
| Intangible assets | 33,010 | 33,215 | ||||||
| Other | 46,147 | 46,628 | ||||||
| Total investments and other assets | 791,382 | 817,578 | ||||||
| Deferred Charges: | ||||||||
| Commodity contracts | 1,817 | 3,667 | ||||||
| Regulatory assets | 553,945 | 562,843 | ||||||
| Other | 46,195 | 52,902 | ||||||
| Total deferred charges | 601,957 | 619,412 | ||||||
| Total Assets | $ | 8,817,520 | $ | 9,045,140 | ||||
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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(unaudited)
| (In thousands) | June 30, 2005 | December 31, 2004 | ||||||
|---|---|---|---|---|---|---|---|---|
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Long-term debt due within one year | $ | 384,953 | $ | 385,142 | ||||
| Accounts payable | 201,760 | 223,584 | ||||||
| Accrued taxes | 89,764 | 112,866 | ||||||
| Commodity contracts | 47,102 | 40,835 | ||||||
| Accrued interest | 99,305 | 61,726 | ||||||
| Liabilities associated with assets held for sale | 47,472 | 37,471 | ||||||
| Other | 149,519 | 144,082 | ||||||
| Total current liabilities | 1,019,875 | 1,005,706 | ||||||
| Long-term Debt | 3,971,835 | 4,540,764 | ||||||
Deferred Credits and Other Liabilities: | ||||||||
| Commodity contracts | 46,307 | 56,501 | ||||||
| Investment tax credit | 80,136 | 83,307 | ||||||
| Deferred income taxes | 679,944 | 635,374 | ||||||
| Obligations under capital leases | 20,110 | 23,788 | ||||||
| Regulatory liabilities | 462,517 | 453,913 | ||||||
| Adverse power purchase commitment | 192,801 | 201,377 | ||||||
| Liabilities associated with assets held for sale | 89,295 | 89,356 | ||||||
| Other | 489,107 | 505,620 | ||||||
| Total deferred credits and other liabilities | 2,060,217 | 2,049,236 | ||||||
| Minority Interest | 22,085 | 21,618 | ||||||
Preferred Stock of Subsidiary | 74,000 | 74,000 | ||||||
Common Stockholders' Equity: | ||||||||
| Common stock--$1.25 par value per share, 260,000,000 shares authorized, 162,713,281 and 137,430,137 shares issued, and 162,663,788 and 137,380,644 shares outstanding at June 30, 2005 and December 31, 2004, respectively | 203,392 | 171,788 | ||||||
| Other paid-in capital | 1,869,953 | 1,600,215 | ||||||
| Retained deficit | (283,455 | ) | (307,690 | ) | ||||
| Treasury stock | (1,756 | ) | (1,756 | ) | ||||
| Accumulated other comprehensive loss | (118,626 | ) | (108,741 | ) | ||||
| Total common stockholders' equity | 1,669,508 | 1,353,816 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 8,817,520 | $ | 9,045,140 | ||||
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ALLEGHENY ENERGY, INC. AND SUBSIDIARIES
RESULTS BY BUSINESS SEGMENT
(unaudited)
| Three months ended June 30, 2005 | Three months ended June 30, 2004 | |||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In millions) | Delivery and Services | Generation and Marketing | Eliminations | Total | Delivery and Services | Generation and Marketing | Eliminations | Total | ||||||||||||||||||||||||||||||||||||
| Operating revenues | $ | 663.2 | $ | 404.5 | $ | (353.0 | ) | $ | 714.7 | $ | 658.6 | $ | 320.5 | $ | (370.1 | ) | $ | 609.0 | ||||||||||||||||||||||||||
| Fuel consumed in electric generation | -- | (166.1 | ) | -- | (166.1 | ) | -- | (141.1 | ) | -- | (141.1 | ) | ||||||||||||||||||||||||||||||||
| Purchased power and transmission | (436.0 | ) | (23.2 | ) | 350.9 | (108.3 | ) | (424.1 | ) | (23.5 | ) | 367.7 | (79.9 | ) | ||||||||||||||||||||||||||||||
| Deferred energy costs, net | 1.8 | -- | -- | 1.8 | (1.2 | ) | -- | -- | (1.2 | ) | ||||||||||||||||||||||||||||||||||
| Operations and maintenance | (99.7 | ) | (103.3 | ) | 2.1 | (200.9 | ) | (98.9 | ) | (136.4 | ) | 2.4 | (232.9 | ) | ||||||||||||||||||||||||||||||
| Depreciation and amortization | (39.0 | ) | (38.4 | ) | -- | (77.4 | ) | (36.6 | ) | (38.2 | ) | -- | (74.8 | ) | ||||||||||||||||||||||||||||||
| Taxes other than income taxes | (31.4 | ) | (20.3 | ) | -- | (51.7 | ) | (30.7 | ) | (18.2 | ) | -- | (48.9 | ) | ||||||||||||||||||||||||||||||
| Operating income (loss) | 58.9 | 53.2 | -- | 112.1 | 67.1 | (36.9 | ) | -- | 30.2 | |||||||||||||||||||||||||||||||||||
| Other income and expenses, net | 8.5 | 12.9 | (0.2 | ) | 21.2 | 4.3 | 0.3 | -- | 4.6 | |||||||||||||||||||||||||||||||||||
| Interest expense and preferred dividends | (47.3 | ) | (82.4 | ) | 0.2 | (129.5 | ) | (32.4 | ) | (59.9 | ) | -- | (92.3 | ) | ||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before | ||||||||||||||||||||||||||||||||||||||||||||
| income taxes and minority interest | 20.1 | (16.3 | ) | -- | 3.8 | 39.0 | (96.5 | ) | -- | (57.5 | ) | |||||||||||||||||||||||||||||||||
| Income tax (expense) benefit from continuing operations | (3.2 | ) | (6.6 | ) | -- | (9.8 | ) | (13.6 | ) | 37.5 | -- | 23.9 | ||||||||||||||||||||||||||||||||
| Minority interest | -- | (0.1 | ) | -- | (0.1 | ) | -- | 0.8 | -- | 0.8 | ||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 16.9 | (23.0 | ) | -- | (6.1 | ) | 25.4 | (58.2 | ) | -- | (32.8 | ) | ||||||||||||||||||||||||||||||||
| Loss from discontinued operations, net of tax | (6.5 | ) | (5.8 | ) | -- | (12.3 | ) | (1.2 | ) | (5.5 | ) | -- | (6.7 | ) | ||||||||||||||||||||||||||||||
| Net income (loss) | $ | 10.4 | $ | (28.8 | ) | $ | -- | $ | (18.4 | ) | $ | 24.2 | $ | (63.7 | ) | $ | -- | $ | (39.5 | ) | ||||||||||||||||||||||||
| Six months ended June 30, 2005 | Six months ended June 30, 2004 | |||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (In millions) | Delivery and Services | Generation and Marketing | Eliminations | Total | Delivery and Services | Generation and Marketing | Eliminations | Total | ||||||||||||||||||||||||||||||||||||
| Operating revenues | $ | 1,402.6 | $ | 821.4 | $ | (755.3 | ) | $ | 1,468.7 | $ | 1,379.9 | $ | 742.8 | $ | (778.4 | ) | $ | 1,344.3 | ||||||||||||||||||||||||||
| Fuel consumed in electric generation | -- | (340.0 | ) | -- | (340.0 | ) | -- | (302.8 | ) | -- | (302.8 | ) | ||||||||||||||||||||||||||||||||
| Purchased power and transmission | (921.1 | ) | (43.0 | ) | 751.0 | (213.1 | ) | (892.6 | ) | (41.6 | ) | 773.3 | (160.9 | ) | ||||||||||||||||||||||||||||||
| Deferred energy costs, net | 0.6 | -- | -- | 0.6 | (2.1 | ) | -- | -- | (2.1 | ) | ||||||||||||||||||||||||||||||||||
| Operations and maintenance | (184.2 | ) | (183.6 | ) | 4.3 | (363.5 | ) | (204.7 | ) | (234.1 | ) | 5.1 | (433.7 | ) | ||||||||||||||||||||||||||||||
| Depreciation and amortization | (77.1 | ) | (76.7 | ) | -- | (153.8 | ) | (73.7 | ) | (74.1 | ) | -- | (147.8 | ) | ||||||||||||||||||||||||||||||
| Taxes other than income taxes | (66.0 | ) | (40.8 | ) | -- | (106.8 | ) | (63.8 | ) | (34.3 | ) | -- | (98.1 | ) | ||||||||||||||||||||||||||||||
| Operating income | 154.8 | 137.3 | -- | 292.1 | 143.0 | 55.9 | -- | 198.9 | ||||||||||||||||||||||||||||||||||||
| Other income and expenses, net | 12.2 | 14.6 | (0.3 | ) | 26.5 | 11.5 | 1.0 | -- | 12.5 | |||||||||||||||||||||||||||||||||||
| Interest expense and preferred dividends | (77.0 | ) | (179.8 | ) | 0.2 | (256.6 | ) | (65.6 | ) | (147.8 | ) | -- | (213.4 | ) | ||||||||||||||||||||||||||||||
| Income (loss) from continuing operations before | ||||||||||||||||||||||||||||||||||||||||||||
| income taxes and minority interest | 90.0 | (27.9 | ) | (0.1 | ) | 62.0 | 88.9 | (90.9 | ) | -- | (2.0 | ) | ||||||||||||||||||||||||||||||||
| Income tax (expense) benefit from continuing operations | (23.4 | ) | (9.8 | ) | -- | (33.2 | ) | (35.5 | ) | 36.4 | -- | 0.9 | ||||||||||||||||||||||||||||||||
| Minority interest | -- | (0.5 | ) | -- | (0.5 | ) | -- | (1.1 | ) | -- | (1.1 | ) | ||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | 66.6 | (38.2 | ) | (0.1 | ) | 28.3 | 53.4 | (55.6 | ) | -- | (2.2 | ) | ||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | 4.3 | (8.5 | ) | 0.1 | (4.1 | ) | 9.8 | (13.8 | ) | -- | (4.0 | ) | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 70.9 | $ | (46.7 | ) | $ | -- | $ | 24.2 | $ | 63.2 | $ | (69.4 | ) | $ | -- | $ | (6.2 | ) | |||||||||||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions, except per share data)
(unaudited)
| THREE MONTHS ENDED JUNE 30, 2005 | INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST | NET (LOSS) INCOME | DILUTED (LOSS) INCOME PER SHARE | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Calculation of Adjusted Income (Loss): | |||||||||||||||
| Income (Loss) - GAAP basis | $ | 3.8 | $ | (18.4 | ) | $ | (0.12 | ) | |||||||
| Adjustments: | |||||||||||||||
| Loss from discontinued operations1 | 12.3 | ||||||||||||||
| Expense related to conversion of trust preferred securities2 | 47.2 | 29.8 | |||||||||||||
| Cash receipt from former trading executive's forfeited assets3 | (11.2 | ) | (6.9 | ) | |||||||||||
| Receipt of Hatfield power station insurance proceeds4 | (6.7 | ) | (4.1 | ) | |||||||||||
| Adjusted Income | $ | 33.1 | $ | 12.7 | $ | 0.08 | |||||||||
| Calculation of Adjusted EBITDA: | |||||||||||||||
| Net Loss - GAAP basis | $ | (18.4 | ) | ||||||||||||
| Loss from discontinued operations | 12.3 | ||||||||||||||
| Interest expense and preferred dividends | 129.5 | ||||||||||||||
| Income tax expense | 9.8 | ||||||||||||||
| Depreciation and amortization | 77.4 | ||||||||||||||
| EBITDA from continuing operations | 210.6 | ||||||||||||||
| Cash receipt from former trading executive's forfeited assets | (11.2 | ) | |||||||||||||
| Receipt of Hatfield power station insurance proceeds | (6.7 | ) | |||||||||||||
| Adjusted EBITDA from continuing operations | $ | 192.7 | |||||||||||||
| THREE MONTHS ENDED JUNE 30, 2004 | LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST | NET LOSS | DILUTED LOSS PER SHARE | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Calculation of Adjusted Loss: | |||||||||||||||
| Loss - GAAP basis | $ | (57.5 | ) | $ | (39.5 | ) | $ | (0.31 | ) | ||||||
| Adjustments: | |||||||||||||||
| Loss from discontinued operations | 6.6 | ||||||||||||||
| Loss on release of gas pipeline capacity5 | 11.7 | 6.7 | |||||||||||||
| Adjusted Loss | $ | (45.8 | ) | $ | (26.2 | ) | $ | (0.21 | ) | ||||||
| Calculation of Adjusted EBITDA: | |||||||||||||||
| Net Loss - GAAP basis | $ | (39.5 | ) | ||||||||||||
| Loss from discontinued operations | 6.6 | ||||||||||||||
| Interest expense and preferred dividends | 92.3 | ||||||||||||||
| Income tax benefit | (24.0 | ) | |||||||||||||
| Depreciation and amortization | 74.9 | ||||||||||||||
| EBITDA from continuing operations | 110.3 | ||||||||||||||
| Loss on release of gas pipeline capacity | 11.7 | ||||||||||||||
| Adjusted EBITDA from continuing operations | $ | 122.0 | |||||||||||||
FOOTNOTES:
| 1 | This amount includes a net after-tax charge of $8.9 million relating to adjustments to the carrying values of assets held-for-sale. |
| 2 | This amount is included in Interest expense on the Consolidated Statement of Operations. |
| 3 | This amount is included in Other income on the Consolidated Statement of Operations. |
| 4 | This amount is included in Operations and maintenance expense on the Consolidated Statement of Operations. |
| 5 | This amount is included in Purchased power and transmission on the Consolidated Statement of Operations. |
10
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions, except per share data)
(unaudited)
| SIX MONTHS ENDED JUNE 30, 2005 | INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST | NET INCOME | DILUTED INCOME PER SHARE | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Calculation of Adjusted Income: | |||||||||||||||
| Income - GAAP basis | $ | 62.0 | $ | 24.2 | $ | 0.16 | |||||||||
| Adjustments: | |||||||||||||||
| Loss from discontinued operations1 | 4.1 | ||||||||||||||
| Interest expense related to Merrill Lynch summary judgment2 | 38.5 | 24.3 | |||||||||||||
| Expense related to conversion of trust preferred securities3 | 47.2 | 29.8 | |||||||||||||
| Cash receipt from former trading executive's forfeited assets4 | (11.2 | ) | (6.9 | ) | |||||||||||
| Receipt of Hatfield power station insurance proceeds5 | (6.7 | ) | (4.1 | ) | |||||||||||
| Adjusted Income | $ | 129.8 | $ | 71.4 | $ | 0.48 | |||||||||
| Calculation of Adjusted EBITDA: | |||||||||||||||
| Net Income - GAAP basis | $ | 24.2 | |||||||||||||
| Loss from discontinued operations | 4.1 | ||||||||||||||
| Interest expense and preferred dividends | 256.6 | ||||||||||||||
| Income tax expense | 33.2 | ||||||||||||||
| Depreciation and amortization | 153.8 | ||||||||||||||
| EBITDA from continuing operations | 471.9 | ||||||||||||||
| Cash receipt from former trading executive's forfeited assets | (11.2 | ) | |||||||||||||
| Receipt of Hatfield power station insurance proceeds | (6.7 | ) | |||||||||||||
| Adjusted EBITDA from continuing operations | $ | 454.0 | |||||||||||||
| SIX MONTHS ENDED JUNE 30, 2004 | LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST | NET LOSS | DILUTED LOSS PER SHARE | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Calculation of Adjusted Loss: | |||||||||||||||
| Loss - GAAP basis | $ | (2.0 | ) | $ | (6.2 | ) | $ | (0.05 | ) | ||||||
| Adjustments: | |||||||||||||||
| Loss from discontinued operations | (4.0 | ) | |||||||||||||
| Gain on California contract escrow release 6 | (68.1 | ) | (39.2 | ) | |||||||||||
| Write-off of 2003 financing costs 3 | 14.1 | 8.1 | |||||||||||||
| Gain on land sale, New York office space charge, net 7 | (4.2 | ) | (2.4 | ) | |||||||||||
| Loss on release of gas pipeline capacity 8 | 11.7 | 6.7 | |||||||||||||
| Adjusted Loss9 | $ | (48.5 | ) | $ | (29.0 | ) | $ | (0.23 | ) | ||||||
| Calculation of Adjusted EBITDA: | |||||||||||||||
| Net Loss - GAAP basis | $ | (6.2 | ) | ||||||||||||
| Loss from discontinued operations | 4.0 | ||||||||||||||
| Interest expense and preferred dividends | 213.4 | ||||||||||||||
| Income tax benefit | (0.9 | ) | |||||||||||||
| Depreciation and amortization | 147.8 | ||||||||||||||
| EBITDA from continuing operations | 358.1 | ||||||||||||||
| Gain on California contract escrow release | (68.1 | ) | |||||||||||||
| Gain on land sale, New York office space charge, net | (4.2 | ) | |||||||||||||
| Loss on release of gas pipeline capacity | 11.7 | ||||||||||||||
| Adjusted EBITDA from continuing operations9 | $ | 297.5 | |||||||||||||
FOOTNOTES:
| 1 | This amount includes a net after-tax charge of $9.5 million relating to adjustments to the carrying values of assets held-for-sale. |
| 2 | This amount is included in Interest expense on the Consolidated Statement of Operations. This amount represents the estimated interest owed to Merrill Lynch from March 16, 2001 thru March 31, 2005. It does not include an additional $2.8 million of interest accrued in the second quarter. |
3 | These amounts are included in Interest expense on the Consolidated Statements of Operations. |
| 4 | This amount is included in Other income on the Consolidated Statement of Operations. |
| 5 | This amount is included in Operations and maintenance expense on the Consolidated Statement of Operations. |
| 6 | This amount is included in Operating revenues on the Consolidated Statement of Operations. |
| 7 | These amounts are included in Operations and maintenance expense and Other income, net, on the Consolidated Statement of Operations. |
| 8 | This amount is included in Purchased power and transmission on the Consolidated Statement of Operations. |
| 9 | Not adjusted for $9.2 million of charges related to Allegheny Ventures for write-downs of inventory and discontinued product ($4.3 million), equity interests ($2.3 million) and adjustments in revenue recognition for a percentage of completion contract ($2.6 million). |
12
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions)
(unaudited)
| ADJUSTED INTEREST EXPENSE AND PREFERRED DIVIDENDS | THREE MONTHS ENDED JUNE 30, 2005 | THREE MONTHS ENDED JUNE 30, 2004 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense and preferred dividends of subsidiary: | |||||||||||
| As reported | $ | 129.5 | $ | 92.3 | |||||||
Expense related to conversion of trust preferred securities | (47.2 | ) | -- | ||||||||
| As Adjusted | $ | 82.3 | $ | 92.3 | |||||||
13
Allegheny Energy, Inc. and Subsidiaries
Operating Statistics
Unaudited
Three Months Ended June 30,
| 2005 | 2004 | Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Delivery and Services: | |||||||||||
| Electricity sales (million kWh, including wholesale) | 11,369 | 11,300 | +0.6% | ||||||||
| Usage per customer (kWh): | |||||||||||
Residential | 2,596 | 2,614 | -0.7% | ||||||||
| Commercial | 14,738 | 14,751 | -0.1% | ||||||||
| Industrial | 190,797 | 192,836 | -1.1% | ||||||||
Natural gas sales (Mmcf) | 3,430 | 3,229 | +6.2% | ||||||||
Generation and Marketing: | |||||||||||
| Generation (million kWh) | 11,052 | 10,218 | +8.2% | ||||||||
Unaudited
Six Months Ended June 30,
| 2005 | 2004 | Change | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Delivery and Services: | |||||||||||
| Electricity sales (million kWh, including wholesale) | 23,869 | 23,687 | +0.8% | ||||||||
| Usage per customer (kWh): | |||||||||||
Residential | 6,169 | 6,169 | -0.4% | ||||||||
| Commercial | 29,678 | 29,485 | +0.7% | ||||||||
| Industrial | 374,899 | 378,563 | -1.0% | ||||||||
Natural gas sales (Mmcf) | 16,086 | 17,520 | -8.2% | ||||||||
Generation and Marketing: | |||||||||||
| Generation (million kWh) | 23,349 | 22,449 | +4.0% | ||||||||
14