EXHIBIT 99
[ALLETE LOGO]
For Release: February 16, 2006
CONTACT: Eric Olson
218-723-3947
eolson@allete.com
INVESTOR Tim Thorp
CONTACT: 218-723-3953
tthorp@allete.com
NEWS
ALLETE REPORTS 2005 FINANCIAL RESULTS;
PROJECTS 15-20 PERCENT 2006 EARNINGS PER SHARE GROWTH
ALLETE, Inc. (NYSE: ALE) today reported 2005 earnings from continuing operations
of $0.64 per diluted share, compared to $1.35 in 2004. Excluding transactions
not representative of ongoing operations in 2005 and 2004 (described below),
earnings from continuing operations were $2.26 per share in 2005 compared to
$1.32 in 2004, an increase of 71 percent.
"We couldn't be more pleased with the financial and operational performance of
our company," said Donald J. Shippar, ALLETE's chairman, president and CEO.
"Utility power sales were higher across all customer classes in 2005. Real
estate sales were robust and our Town Center at Palm Coast project began to take
shape."
REGULATED UTILITY income improved $8.0 million from 2004 to 2005, primarily due
to a four percent increase in overall electricity sales. Healthier economic
conditions in Minnesota Power's service territory combined with warmer weather
in the summer of 2005 contributed to stronger sales to all customer classes.
NONREGULATED ENERGY OPERATIONS recorded a $1.9 million profit in 2005 compared
to a loss of $2.9 million in 2004, excluding the $50.4 million, or $1.84 per
share, charge related to the assignment of the Kendall County, Ill. power
purchase agreement. Elimination of the operating loss related to this agreement
and strong results from BNI Coal contributed to the 2005 increase. Earnings from
the Taconite Harbor Energy Center were down from last year because of
outage-related maintenance and other expenses.
Income from REAL ESTATE climbed to $17.5 million in 2005, a 22 percent increase
over 2004. The first real estate sales from ALLETE Properties' Town Center at
Palm Coast development were recorded in 2005, representing 643,000 square feet
of commercial space. After months of infrastructure construction, the first
developer-owned structures on the 1,550-acre project will be built in 2006.
ALLETE's OTHER segment recorded income of $2.9 million, a $13.5 million
improvement from last year. In 2005, ALLETE recorded lower interest expense and
higher earnings on excess cash, and had a smaller loss in its emerging
technology investment portfolio. In addition, during the fourth quarter of 2005,
a $3.7 million, or $0.13 per share, current tax benefit due to the positive
resolution of income tax audit issues was recognized and comprehensive tax
planning initiatives implemented by ALLETE in 2005 resulted in a $2.5 million,
or $0.09 per share, deferred tax benefit. In 2004, a $10.9 million, or $0.38 per
share, debt prepayment expense nearly offset an $11.5 million, or $0.41 per
share, gain on the sale of ADESA, Inc. common shares.
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ALLETE NEWS RELEASE PAGE 2
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"Beyond the solid financial gains in this earnings report, we achieved a number
of milestones and accomplished important strategic objectives in 2005," Shippar
said. These events included:
- Assigning the Kendall County power purchase agreement, eliminating
projected after-tax operating losses of approximately $8 million per
year;
- Entering into an agreement to invest in American Transmission Company,
which is expected to be a significant and consistent earnings
contributor in our energy business;
- Extending electric contracts with five of Minnesota Power's customers
in the taconite mining and pulp and paper industries for an additional
four to eight years;
- Announcing a $60 million plan to reduce air emissions at two generating
stations, while requesting current cost recovery;
- Entering an agreement to purchase renewable energy from a new wind
facility to be built in North Dakota and continuing to pursue the
purchase of renewable energy from a new wind facility in northern
Minnesota;
- Recording the company's first real estate sales at ALLETE Properties'
Town Center project, signing the company's first sales contract for the
Palm Coast Park development, and beginning the Development of Regional
Impact process for Ormond Crossings, the company's third major real
estate development;
- Completing the exit from the company's Water Services businesses by
selling our water and wastewater assets in Georgia; and
- Selling Enventis Telecom, a transaction that provided approximately $29
million in cash.
Due in large part to these accomplishments, ALLETE expects 2006 earnings per
share from continuing operations to increase by 15 percent to 20 percent. This
earnings expectation is based on a 2005 diluted earnings per share from
continuing operations of $2.26, which excludes transactions not representative
of ongoing operations. The 2006 earnings expectation does not include earnings
from additional investments we may make in growth initiatives.
"Our company is in a good position to keep the positive momentum going in
2006," Shippar said. "We look forward to building upon ALLETE's strengths, and
expect another strong year."
Shippar also noted that, due to the company's near and long-term earnings
outlook, the ALLETE Board of Directors recently declared a substantial 15
percent increase in the quarterly common stock dividend.
"The board is confident in the company's ability to provide consistent future
dividend increases while, at the same time, funding its growth strategy," he
said.
ALLETE, headquartered in Duluth, Minn., provides energy services in the upper
Midwest and has significant real estate holdings in Florida. More information
about the company is available at www.allete.com.
THE STATEMENTS CONTAINED IN THIS RELEASE AND STATEMENTS THAT ALLETE MAY MAKE
ORALLY IN CONNECTION WITH THIS RELEASE THAT ARE NOT HISTORICAL FACTS ARE
FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
PROJECTED IN FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES, AND INVESTORS ARE DIRECTED TO THE RISKS
DISCUSSED IN DOCUMENTS FILED BY ALLETE WITH THE SECURITIES AND EXCHANGE
COMMISSION.
#####
ALLETE - 30 WEST SUPERIOR STREET, DULUTH, MINNESOTA 55802
WWW.ALLETE.COM
ALLETE NEWS RELEASE PAGE 3
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ALLETE, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS ENDED DECEMBER 31, 2005 AND 2004
Millions Except Per Share Amounts
QUARTER ENDED YEAR ENDED
2005 2004 2005 2004
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OPERATING REVENUE $192.3 $168.8 $737.4 $704.1
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OPERATING EXPENSES
Fuel and Purchased Power 71.2 69.1 273.1 286.2
Operating and Maintenance 81.7 72.4 293.5 270.1
Kendall County Charge - - 77.9 -
Depreciation 12.1 11.7 47.8 46.9
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Total Operating Expenses 165.0 153.2 692.3 603.2
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OPERATING INCOME FROM CONTINUING OPERATIONS 27.3 15.6 45.1 100.9
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OTHER INCOME (EXPENSE)
Interest Expense (6.3) (6.1) (26.4) (31.7)
Other 3.4 9.3 1.1 (12.2)
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Total Other Income (Expense) (2.9) 3.2 (25.3) (43.9)
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INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND INCOME TAXES 24.4 18.8 19.8 57.0
MINORITY INTEREST 0.3 0.1 2.7 2.1
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 24.1 18.7 17.1 54.9
INCOME TAX EXPENSE (BENEFIT) (0.1) 2.6 (0.5) 16.4
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INCOME FROM CONTINUING OPERATIONS
BEFORE CHANGE IN ACCOUNTING PRINCIPLE 24.2 16.1 17.6 38.5
INCOME (LOSS) FROM DISCONTINUED OPERATIONS - NET OF TAX (3.2) (6.4) (4.3) 73.7
CHANGE IN ACCOUNTING PRINCIPLE - NET OF TAX - - - (7.8)
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NET INCOME $ 21.0 $ 9.7 $ 13.3 $104.4
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AVERAGE SHARES OF COMMON STOCK
Basic 27.5 28.2 27.3 28.3
Diluted 27.6 28.4 27.4 28.4
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BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing Operations $0.89 $0.57 $0.65 $1.37
Discontinued Operations (0.12) (0.22) (0.16) 2.60
Change in Accounting Principle - - - (0.28)
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$0.77 $0.35 $0.49 $3.69
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DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing Operations $0.88 $0.56 $0.64 $1.35
Discontinued Operations (0.12) (0.22) (0.16) 2.59
Change in Accounting Principle - - - (0.27)
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$0.76 $0.34 $0.48 $3.67
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DIVIDENDS PER SHARE OF COMMON STOCK $0.3150 $0.3000 $1.2450 $2.8425
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CONSOLIDATED BALANCE SHEET
FOR THE PERIODS ENDED DECEMBER 31, 2005 AND 2004
Millions
2005 2004
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ASSETS
Cash and Cash Equivalents $ 89.6 $ 43.7
Restricted Cash - 30.3
Short-Term Investments 116.9 149.2
Other Current Assets 167.0 131.8
Property, Plant and Equipment 860.4 849.6
Investments 117.7 124.5
Discontinued Operations 2.6 49.5
Other 44.6 52.8
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TOTAL ASSETS $1,398.8 $1,431.4
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 106.7 $ 91.7
Long-Term Debt 387.8 389.4
Other Liabilities 288.5 295.3
Discontinued Operations 13.0 24.5
Shareholders' Equity 602.8 630.5
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,398.8 $1,431.4
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ALLETE NEWS RELEASE PAGE 4
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QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
ALLETE, INC. 2005 2004 2005 2004
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INCOME (LOSS)
Millions
Regulated Utility $14.4 $ 9.6 $45.7 $ 37.7
Nonregulated Energy Operations <F1> (1.2) (3.5) (48.5) (2.9)
Real Estate 3.8 (0.2) 17.5 14.3
Other 7.2 10.2 2.9 (10.6)
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Income from Continuing Operations 24.2 16.1 17.6 38.5
Income (Loss) from Discontinued Operations (3.2) (6.4) (4.3) 73.7
Change in Accounting Principle - - - (7.8)
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Net Income $21.0 $ 9.7 $13.3 $104.4
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DILUTED EARNINGS (LOSS) PER SHARE
Continuing Operations $0.88 $0.56 $0.64 $1.35
Discontinued Operations (0.12) (0.22) (0.16) 2.59
Change in Accounting Principle - - - (0.27)
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$0.76 $0.34 $0.48 $ 3.67
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<FN>
<F1> In April 2005, ALLETE recorded a $50.4 million, or $1.84 per share, charge related to the assignment of the Kendall County
power purchase agreement.
</FN>
Note: In 2005, we began allocating corporate charges and interest expense to our
business segments. For comparative purposes, segment information for 2004
has been restated to reflect the new allocation method used in 2005 for
corporate charges and interest expense. This restatement had no impact on
consolidated net income or earnings per share.
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
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KILOWATTHOURS SOLD
Millions
Regulated Utility
Retail and Municipals
Residential 297.4 280.5 1,101.6 1,053.3
Commercial 339.9 320.9 1,326.8 1,281.8
Industrial 1,823.0 1,797.1 7,129.8 7,070.8
Municipals 220.0 209.1 877.3 823.0
Other 19.9 21.1 79.1 79.0
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2,700.2 2,628.7 10,514.6 10,307.9
Other Power Suppliers 276.7 271.7 1,141.6 917.5
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2,976.9 2,900.4 11,656.2 11,225.4
Nonregulated Energy Operations 361.7 298.1 1,521.3 1,496.1
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3,338.6 3,198.5 13,177.5 12,721.5
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REAL ESTATE
Town Center Development Project
Commercial Square Footage Sold <F1> - - 643,000 -
Other Land
Acres Sold 44 34 1,102 1,479
Lots Sold - - 7 211
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<FN>
<F1> For the year ended December 31, 2005, 70 acres were sold (0 acres for the quarter ended December 31, 2005).
</FN>
ALLETE NEWS RELEASE PAGE 5
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NON-GAAP FINANCIAL MEASURES
ALLETE prepares financial statements in accordance with accounting principles
generally accepted in the United States (GAAP). Along with this information, the
company discloses and discusses certain non-GAAP financial information in our
quarterly earnings releases, on investor conference calls and during investor
conferences and related events. Management believes that non-GAAP financial data
supplements ALLETE's GAAP financial statements by providing investors with
additional information which enhances the investors' overall understanding of
our financial performance and the comparability of our operating results from
period to period. The presentation of this additional information is not meant
to be considered in isolation or as a substitute for our results of operations
prepared and presented in accordance with GAAP.
Financial results for 2005 were significantly impacted by the following
transactions:
- A $50.4 million after tax, or $1.84 per share, charge due to the
assignment of the Kendall County power purchase agreement to
Constellation Energy Commodities;
- A $3.7 million, or $0.13 per share, current tax benefit due to a
positive resolution of income tax audit issues; and
- A $2.5 million, or $0.09 per share, deferred tax benefit due to
comprehensive tax planning initiatives.
In 2004, financial results were significantly impacted by the following
transactions:
- A $10.9 million after tax, or $0.38 per share, debt prepayment cost as
part of ALLETE's financial restructuring in preparation for the
spin-off of Automotive Services; and
- An $11.5 million after tax, or $0.41 per share, gain on the sale of
shares of ADESA, Inc. common stock related to the company's Retirement
Savings and Stock Ownership Plan.
Since these transactions significantly impacted the financial results from
continuing operations in 2005 and 2004, ALLETE believes that for comparative
purposes and a more accurate reflection of our ongoing operations, it is useful
to present diluted earnings per share from continuing operations for each
applicable period excluding the impact of these items. The table below
reconciles actual reported diluted earnings per share from continuing operations
before change in accounting principle to the adjusted results that exclude these
transactions in the respective periods.
QUARTER ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
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DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing Operations Before Change in Accounting Principle $0.88 $0.56 $0.64 $1.35
Add: Kendall County Charge - - 1.84 -
Debt Prepayment Cost - - - 0.38
Less: Gain on Sale of ADESA Shares - 0.41 - 0.41
Positive Resolution of Tax Audit Issues 0.13 - 0.13 -
Tax Planning Initiatives 0.09 - 0.09 -
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$0.66 $0.15 $2.26 $1.32
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[THIS EXHIBIT HAS BEEN FURNISHED AND SHALL NOT BE DEEMED "FILED" FOR PURPOSES OF
SECTION 18 OF THE SECURITIES ACT OF 1934, NOR SHALL IT BE DEEMED INCORPORATED BY
REFERENCE IN ANY FILING UNDER THE SECURITIES ACT OF 1933, EXCEPT AS SHALL BE
EXPRESSLY SET FORTH BY SPECIFIC REFERENCE IN SUCH FILING.]