EXHIBIT 99
ALLETE 2006 Form 10-K
[ALLETE LOGO]
For Release: February 16, 2007
CONTACT: Eric Olson
218-723-3947
eolson@allete.com
INVESTOR Tim Thorp
CONTACT: 218-723-3953
tthorp@allete.com
NEWS
ALLETE REPORTS 2006 EARNINGS INCREASE OF 23%;
HIGHER EARNINGS PROJECTED IN 2007
ALLETE, Inc. (NYSE: ALE) today reported 2006 earnings from continuing operations
of $2.77 per diluted share, compared with 64 cents in 2005. Excluding
transactions in 2005 not representative of ongoing operations (described below),
2006 earnings from continuing operations increased 23 percent over the adjusted
2005 diluted earnings per share of $2.26.
ALLETE in 2006 recorded net income of $76.4 million on revenue of $767.1
million, compared to 2005 income of $13.3 million and revenue of $737.4 million.
Financial results in 2005 were impacted by three one-time transactions: a $50.4
million after-tax charge for the assignment of the Kendall County power purchase
agreement and two non-recurring tax benefits totaling $6.2 million.
Real estate income in 2006 increased 30 percent to $22.8 million, while ALLETE's
energy businesses recorded $52.4 million for the year, a 10 percent increase
over 2005 excluding the Kendall County charge.
"Increased earnings contributions from both our core real estate and energy
businesses resulted in another year of strong earnings growth," said ALLETE
Chairman, President and CEO Donald J. Shippar. "ALLETE Properties' performance
was on track, with sales contracts closing on schedule. Earnings from our
American Transmission Company (ATC) investment began ramping up and energy sales
remain at high levels."
Initial returns from ALLETE's ATC investment, the absence of operating losses
from Kendall County, and increased demand from Minnesota Power's industrial
customers contributed to an earnings increase at ALLETE's energy business in
2006. At the end of 2006, ALLETE had an investment balance of $53.7 million in
ATC, representing an ownership interest of approximately seven percent.
ALLETE's higher real estate earnings included recognition of deferred profit
from past years' sales at the Town Center at Palm Coast development project, as
well as 2006 sales at both the Town Center and Palm Coast Park projects. At the
close of 2006, ALLETE Properties had about $114 million in future land sales
under contract. ALLETE Properties' third major real estate development, Ormond
Crossings, received development order approval late in 2006.
Income at ALLETE's "other" business segment rose by $5.4 million in 2006
compared to 2005 when excluding last year's tax benefits. Higher earnings on
cash and short-term investments in 2006 and the absence of impairments in the
emerging technology investment portfolio in 2006 versus 2005 contributed to the
increase.
- more -
ALLETE NEWS RELEASE PAGE 2
- --------------------------------------------------------------------------------
"Earnings growth is a priority for our corporation," Shippar said. "We're proud
of the key milestones ALLETE achieved during the year that lay the groundwork
for future success." These achievements include:
- Starting construction on an aggressive air emissions control plan with
current cost recovery
- Purchasing electricity from a new 50-megawatt wind facility in North
Dakota and signing an agreement to purchase power from a second
48-megawatt wind facility
- Signing a long-term 70-megawatt contract with PolyMet Mining
- Receiving development order approval for ALLETE Properties' Ormond
Crossings real estate project
- Closing the first sales contracts at ALLETE Properties' Palm Coast Park
development.
Shippar noted that the 13 percent dividend increase on ALLETE common stock
announced on January 26th reflects the positive outlook for the company's future
shared by the board of directors and management.
"We project that in 2007 ALLETE's earnings per share from continuing operations
will be in the range of $2.95 to $3.05," Shippar said. "Our portfolio of
valuable real estate and the growth prospects in our energy business give us
great confidence for 2007 and beyond."
ALLETE's corporate headquarters are located in Duluth, Minnesota. ALLETE
provides energy services in the upper Midwest and has significant real estate
holdings in Florida. More information about the company is available on ALLETE's
Web site 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 THE 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
- --------------------------------------------------------------------------------
ALLETE, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005
Millions Except Per Share Amounts
QUARTER ENDED YEAR TO DATE
2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING REVENUE $197.2 $192.3 $767.1 $737.4
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and Purchased Power 69.8 71.2 281.7 273.1
Operating and Maintenance 76.0 81.7 296.0 293.5
Kendall County Charge - - - 77.9
Depreciation 12.1 12.1 48.7 47.8
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 157.9 165.0 626.4 692.3
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME FROM CONTINUING OPERATIONS 39.3 27.3 140.7 45.1
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest Expense (7.3) (6.3) (27.4) (26.4)
Other 6.1 3.4 14.9 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Expense (1.2) (2.9) (12.5) (25.3)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND INCOME TAXES 38.1 24.4 128.2 19.8
MINORITY INTEREST 1.4 0.3 4.6 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 36.7 24.1 123.6 17.1
INCOME TAX EXPENSE (BENEFIT) 13.7 (0.1) 46.3 (0.5)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 23.0 24.2 77.3 17.6
LOSS FROM DISCONTINUED OPERATIONS - NET OF TAX (0.4) (3.2) (0.9) (4.3)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 22.6 $ 21.0 $ 76.4 $ 13.3
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OF COMMON STOCK
Basic 27.9 27.5 27.8 27.3
Diluted 28.0 27.6 27.9 27.4
- ------------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing Operations $0.82 $0.89 $2.78 $0.65
Discontinued Operations (0.01) (0.12) (0.03) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
$0.81 $0.77 $2.75 $0.49
- ------------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing Operations $0.82 $0.88 $2.77 $0.64
Discontinued Operations (0.01) (0.12) (0.03) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
$0.81 $0.76 $2.74 $0.48
- ------------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS PER SHARE OF COMMON STOCK $0.3625 $0.3150 $1.4500 $1.2450
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
FOR THE PERIODS ENDED DECEMBER 31, 2006 AND 2005
Millions
2006 2005
- ----------------------------------------------------------------------
ASSETS
Cash and Cash Equivalents $ 44.8 $ 89.6
Short-Term Investments 104.5 116.9
Other Current Assets 138.4 167.0
Property, Plant and Equipment 921.6 860.4
Investments 189.1 117.7
Discontinued Operations - 2.6
Other 135.0 44.6
- ----------------------------------------------------------------------
TOTAL ASSETS $1,533.4 $1,398.8
- ----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities $ 143.5 $ 106.7
Long-Term Debt 359.8 387.8
Other Liabilities 364.3 288.5
Discontinued Operations - 13.0
Shareholders' Equity 665.8 602.8
- ----------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,533.4 $1,398.8
- ----------------------------------------------------------------------
ALLETE NEWS RELEASE PAGE 4
- --------------------------------------------------------------------------------
QUARTER ENDED YEAR TO DATE
DECEMBER 31, DECEMBER 31,
ALLETE, INC. 2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS)
Millions
Regulated Utility <F1> $13.3 $14.4 $46.8 $45.7
Nonregulated Energy Operations <F1><F2> 0.8 (1.2) 3.7 (48.5)
ATC 1.3 - 1.9 -
Real Estate 7.1 3.8 22.8 17.5
Other 0.5 7.2 2.1 2.9
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 23.0 24.2 77.3 17.6
Loss from Discontinued Operations (0.4) (3.2) (0.9) (4.3)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $22.6 $21.0 $76.4 $13.3
- ------------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER SHARE
Continuing Operations <F2> $0.82 $0.88 $2.77 $0.64
Discontinued Operations (0.01) (0.12) (0.03) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
$0.81 $0.76 $2.74 $0.48
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> In 2006, financial results for ALLETE's Taconite Harbor Energy Center are included in the Regulated Utility segment. In 2005,
Taconite Harbor is included in the Nonregulated Energy Operations segment.
<F2> In April 2005, ALLETE recorded a $50.4 million, or $1.84 per diluted share, charge related to the assignment of the Kendall
County power purchase agreement.
</FN>
QUARTER ENDED YEAR TO DATE
DECEMBER 31, DECEMBER 31,
2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA
CORPORATE
Common Stock
High $47.84 $47.36 $49.30 $51.70
Low $42.55 $41.28 $42.55 $35.65
Close $46.54 $44.00 $46.54 $44.00
Book Value $21.90 $20.03 $21.90 $20.03
KILOWATTHOURS SOLD
Millions
Regulated Utility
Retail and Municipals
Residential 300.3 297.4 1,100.4 1,101.6
Commercial 329.3 339.9 1,335.2 1,326.8
Industrial 1,776.5 1,823.0 7,205.6 7,129.8
Municipals 226.5 220.0 910.5 877.3
Other 19.3 19.9 78.7 79.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total Retail and Municipals 2,651.9 2,700.2 10,630.4 10,514.6
Other Power Suppliers 548.0 276.7 2,152.9 1,141.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total Regulated Utility 3,199.9 2,976.9 12,783.3 11,656.2
Nonregulated Energy Operations 59.1 361.7 240.4 1,521.3
- ------------------------------------------------------------------------------------------------------------------------------------
Total Kilowatthours Sold 3,259.0 3,338.6 13,023.7 13,177.5
- ------------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE
Town Center Development Project
Commercial Square Footage Sold 36,976 - 401,971 643,000
Residential Units 231 - 773 -
Palm Coast Park Development Project
Residential Units - - 200 -
Other Land
Acres Sold 24 44 732 1,102
Lots Sold - - - 7
- ------------------------------------------------------------------------------------------------------------------------------------
ALLETE NEWS RELEASE PAGE 5
- --------------------------------------------------------------------------------
NON-GAAP FINANCIAL MEASURES
ALLETE prepares financial statements in accordance with accounting principles
generally accepted in the United States (GAAP). Along with this information,
ALLETE discloses and discusses certain non-GAAP financial information in its
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
ALLETE's financial performance and the comparability of its 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 ALLETE's 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.
Since these transactions significantly impacted the financial results from
continuing operations in 2005, ALLETE believes that for comparative purposes and
a more accurate reflection of its 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 to the adjusted results
that exclude these transactions in the respective periods.
QUARTER ENDED YEAR TO DATE
DECEMBER 31, DECEMBER 31,
2006 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing Operations $0.82 $0.88 $2.77 $0.64
Add: Kendall County Charge - - - 1.84
Less: Positive Resolution of Tax Audit Issues - 0.13 - 0.13
Tax Planning Initiatives - 0.09 - 0.09
- ------------------------------------------------------------------------------------------------------------------------------------
$0.82 $0.66 $2.77 $2.26
- ------------------------------------------------------------------------------------------------------------------------------------
[THIS EXHIBIT HAS BEEN FURNISHED AND SHALL NOT BE DEEMED "FILED" FOR PURPOSES OF
SECTION 18 OF THE SECURITIES EXCHANGE 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.]