Exhibit 99
AEP Reports 2004 Second-Quarter Earnings
COLUMBUS, Ohio, July 30 /PRNewswire-FirstCall/ --
- Second-quarter results: GAAP $0.25 per share, ongoing $0.38 per share
- Improving economy, weather boost regulated utilities' sales, gross
margin
- Higher O&M costs driven by increased maintenance activity, storms
- Company affirms previous ongoing earnings guidance range for 2004
AMERICAN ELECTRIC POWER
Preliminary, unaudited results
(EPS based on 395mm shares Q2 2003, 396mm in Q2 2004,
376mm in 6 mo. 2003 and 396mm in 6 mo.2004)
Second quarter ended June 30 6-months ended June 30
2003 2004 Variance 2003 2004 Variance
Revenue
($ in billions) 3.5 3.4 (0.1) 7.2 6.7 (0.5)
Earnings
($ in millions):
GAAP 175 100 (75) 615 382 (233)
Ongoing 170 150 (20) 426 439 13
EPS ($):
GAAP 0.44 0.25 (0.19) 1.64 0.96 (0.68)
Ongoing 0.43 0.38 (0.05) 1.13 1.11 (0.02)
American Electric Power (NYSE: AEP) today reported 2004 second-quarter
earnings, prepared in accordance with Generally Accepted Accounting Principles
(GAAP), of $100 million, or $0.25 per share, compared with $175 million, or
$0.44 per share, in the same period last year.
Ongoing earnings for second-quarter 2004 were $150 million, or $0.38 per
share, compared with $170 million, or $0.43 per share, in the same period last
year.
A key factor in the second-quarter ongoing earnings performance, when
compared with the prior periods, was increased retail sales, which improved
gross margins in AEP's core utility operations. The higher margins helped the
company offset the absence of a Texas stranded cost recovery mechanism that
added $52 million pre-tax, or $0.09 per share, to ongoing earnings in last
year's second quarter; however, a provision for a potential fuel disallowance
in Texas this quarter reduced ongoing earnings by $59 million pre-tax, or
$0.10 per share. Higher operations and maintenance (O&M) expenses, primarily
from increased generation and distribution maintenance activities and storm
damage expenses in utility operations, were partially offset by reduced losses
from the company's non-utility investments.
GAAP and ongoing earnings per share for second-quarter 2004 are based on
an average of approximately 396 million shares outstanding, compared to an
average of approximately 395 million shares outstanding for the same period in
2003. GAAP and ongoing earnings per share for the year-to-date period are
based on an average of 396 million shares in 2004, compared to an average of
376 million shares in 2003. For the 2004 year-to-date period, dilution for
GAAP earnings is $0.05 per share and dilution for ongoing earnings is
$0.06 per share.
A full reconciliation of GAAP earnings to ongoing earnings for each period
is included in tables at the end of this news release.
EARNINGS GUIDANCE
AEP affirmed its previous 2004 ongoing earnings guidance range of between
$2.20 and $2.40 per share. In providing ongoing earnings guidance, AEP
management is aware of potential differences between 2004 ongoing earnings and
2004 GAAP earnings because of the classification of UK operations and LIG as
discontinued. At this time AEP management is not able to accurately estimate
the impact on GAAP earnings of potential differences in timing of planned
disposals of UK operations, LIG and other non-core assets, or the potential
impact of any future changes in accounting principles. Therefore, AEP is not
able at this time to provide a corresponding GAAP equivalent for 2004 earnings
guidance.
SUMMARY ONGOING RESULTS BY SEGMENT
($ in millions except EPS; EPS based on 395mm shares Q2 2003,
396mm in Q2 2004, 376mm in 6mo. 2003 and 396mm in 6mo. 2004)
Q2 03 Q2 04 Variance YTD 03 YTD 04 Variance
Utility Operations 225 183 (42) 534 486 (48)
Ongoing EPS 0.57 0.46 (0.11) 1.42 1.23 (0.19)
Investments (52) (8) 44 (90) (13) 77
Ongoing EPS (0.13) (0.02) 0.11 (0.24) (0.03) 0.21
Parent Company (3) (25) (22) (18) (34) (16)
Ongoing EPS (0.01) (0.06) (0.05) (0.05) (0.09) (0.04)
Ongoing Earnings 170 150 (20) 426 439 13
Ongoing EPS $0.43 $0.38 ($0.05) $1.13 $1.11 ($0.02)
"While gross margin from our Utility Operations improved year to year, O&M
expenses have increased," said Michael G. Morris, AEP's chairman, president
and chief executive officer. "Part of the O&M increase is the timing of
generation maintenance and the impact of severe storms in many of our states,
but we have also made the conscious decision to increase maintenance spending
on our distribution system to assure reliability."
Morris said that Utility Operations O&M expenses for 2004 will exceed
budget but will not impact ongoing earnings guidance. However, year-over-
year, the overall corporate O&M will be lower because of a decline in expenses
for Investments.
"The utility O&M spending levels reflect what is necessary to properly
manage and maintain our power plants and the transmission and distribution
infrastructure," Morris said. "As we approach rate proceedings, it's
important that O&M costs fairly represent to regulators the full story of what
it takes to manage these assets and supply the reliable service the regulators
and customers demand."
The significant improvement in the Investments segment performance
reflects AEP's plan to operate the remaining gas pipelines more efficiently
and the overall reduction of activity in the Investments segment as a whole.
The $22 million increase in Parent Company expenses in the quarter is
primarily the result of a reallocation of debt service obligations from
subsidiaries back to the parent. This negative contribution to earnings
should improve as the parent company debt is paid down over time.
ONGOING RESULTS FROM UTILITY OPERATIONS
($ in millions except EPS; EPS based on 395mm shares Q2 2003,
396mm in Q2 2004, 376mm in 6mo. 2003 and 396mm in 6mo. 2004)
Q2 03 Q2 04 Variance YTD 03 YTD 04 Variance
Regulated
Integrated
Utilities 655 751 96 1,383 1,500 117
Ohio Companies 464 468 4 960 981 21
Texas Wires 174 106 (68) 331 206 (125)
Texas Supply/REP 115 84 (31) 226 183 (43)
Off-System Sales 104 113 9 222 282 60
Other Wholesale
Transactions (2) 9 11 (5) 13 18
Transmission
Revenue - 3rd
Party 116 119 3 229 243 14
Other Operating
Revenue 83 73 (10) 179 160 (19)
Total Gross Margin 1,709 1,723 14 3,525 3,568 43
Operations &
Maintenance (735) (824) (89) (1,421) (1,556) (135)
Depreciation &
Amortization (315) (308) 7 (610) (618) (8)
Taxes Other Than
Income Taxes (154) (174) (20) (339) (355) (16)
Interest Expense &
Preferred Dividend (167) (157) 10 (331) (320) 11
Other Income &
Deductions 5 16 11 7 25 18
Income Taxes (118) (93) 25 (297) (258) 39
Total Utility
Operations 225 183 (42) 534 486 (48)
Ongoing EPS $0.57 $0.46 ($0.11) $1.42 $1.23 ($0.19)
Improvements in gross margin from Regulated Integrated Utilities and Off-
System Sales more than offset the absence in 2004 of a Texas stranded cost
recovery mechanism (a wholesale capacity auction true-up) that was available
in 2003 and the additional provision booked in second quarter for potential
fuel refunds in Texas.
More favorable weather, when compared with the prior period, and an
improving economy contributed to increased gross margin from Regulated
Integrated Utilities, as did the cessation of fuel amortization for the Donald
C. Cook nuclear plant in Michigan. Retail power sales by Regulated Integrated
Utilities increased 7 percent when compared with second-quarter 2003,
reflecting both the more favorable weather conditions for AEP's eastern
utilities and an economy-driven increase in demand across all customer groups.
Cooling degree days for AEP's eastern utilities almost doubled from second-
quarter 2003 and heating degree days were up 18 percent.
AEP's optimization activities continue to enhance realization and boost
gross margin from Off-System Sales.
The decline in gross margin from Texas Wires for the quarter and year to
date reflects the absence of earnings from the wholesale capacity auction
true-up in 2003, which added $52 million pre-tax last year to second-quarter
results and $108 million pre-tax to 2003's year-to-date results.
Second-quarter gross margin for Texas Supply/REP was reduced by a
$59 million pre-tax provision for a potential fuel disallowance.
O&M expenses were higher primarily because of increased planned
maintenance for the generation fleet compared to the same period last year
when scheduled maintenance outages were deferred to benefit from higher market
prices for power, continued system improvement work on the distribution
network and severe storms in the second quarter. Employee benefit and
insurance costs also contributed to the increase.
Higher property values and tax rates increased AEP's tax payments from the
prior period.
Interest expenses declined as the company continues to refinance debt.
ONGOING RESULTS FROM INVESTMENTS
($ in millions except EPS; EPS based on 395mm shares Q2 2003,
396mm in Q2 2004, 376mm in 6mo. 2003 and 396mm in 6mo. 2004)
Q2 03 Q2 04 Variance YTD 03 YTD 04 Variance
AEPES, inc. Gas
HoldCo (HPL) (26) (4) 22 (44) (13) 31
MEMCO 1 2 1 2 4 2
IPPs and Wind Farms (2) 1 3 (9) 6 15
AEP Resources
- Other (11) (4) 7 (18) (1) 17
Other (14) (3) 11 (21) (9) 12
Total Investments (52) (8) 44 (90) (13) 77
Ongoing EPS ($0.13) ($0.02) $0.11 ($0.24) ($0.03) $0.21
Ongoing results improved in all of the Investment operations, reducing the
period-to-period loss by $44 million in the second quarter and $77 million
year-to-date when compared with the prior period.
AEP Energy Services, which includes Houston Pipeline (HPL), was the
primary reason for the reduction in losses. HPL benefited from improved
pipeline optimization and storage activities, and lower expenses.
ADDITIONAL INFORMATION ON WEB SITE
AEP's balance sheet and a cash flow table are available on AEP's web site
at http://www.aep.com/go/earnings.
WEBCAST
American Electric Power's quarterly conference call with financial
analysts will be broadcast live over the Internet at 9 a.m. EDT today
at http://www.aep.com/go/webcasts
or http://www.firstcallevents.com/service/ajwz408005928gf12.html .
The call will be archived on http://www.aep.com/go/webcasts for use by
those unable to listen during the live webcast.
Minimum requirements to listen to broadcast: The Windows Media Player
software, free from http://windowsmedia.com/download , and at least a 56Kbps
connection to the Internet.
American Electric Power owns more than 36,000 megawatts of generating
capacity in the United States and is the nation's largest electricity
generator. AEP is also one of the largest electric utilities in the United
States, with more than 5 million customers linked to AEP's 11-state
electricity transmission and distribution grid. The company is based in
Columbus, Ohio.
AEP's GAAP earnings are prepared in accordance with accounting principles
generally accepted in the United States and represent the company's earnings
as reported to the Securities and Exchange Commission. AEP's management
believes that the company's ongoing earnings, or GAAP earnings adjusted for
certain items as described in the news release and charts, provide a more
meaningful representation of the company's performance. AEP uses ongoing
earnings as the primary performance measurement when communicating with
analysts and investors regarding its earnings outlook and results. The
company also uses ongoing earnings data internally to measure performance
against budget and to report to AEP's board of directors.
This report made by AEP and certain of its subsidiaries contains forward-
looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Although AEP and each of its registrant subsidiaries
believe that their expectations are based on reasonable assumptions, any such
statements may be influenced by factors that could cause actual outcomes and
results to be materially different from those projected. Among the factors
that could cause actual results to differ materially from those in the
forward-looking statements are: electric load and customer growth; weather
conditions; available sources and costs of fuels; availability of generating
capacity and the performance of AEP's generating plants; the ability to
recover regulatory assets and stranded costs in connection with deregulation;
new legislation and government regulation including requirements for reduced
emissions of sulfur, nitrogen, mercury, carbon and other substances;
resolution of pending and future rate cases, negotiations and other regulatory
decisions (including rate or other recovery for environmental compliance);
oversight and/or investigation of the energy sector or its participants;
resolution of litigation (including pending Clean Air Act enforcement actions
and disputes arising from the bankruptcy of Enron Corp.); AEP's ability to
reduce its operation and maintenance costs; the success of disposing of
investments that no longer match AEP's business model; AEP's ability to sell
assets at acceptable prices and on other acceptable terms; international and
country-specific developments affecting foreign investments including the
disposition of any foreign investments; the economic climate and growth in
AEP's service territory and changes in market demand and demographic patterns;
inflationary trends; AEP's ability to develop and execute a strategy based on
a view regarding prices of electricity, natural gas, and other energy-related
commodities; changes in the creditworthiness and number of participants in the
energy trading market; changes in the financial markets, particularly those
affecting the availability of capital and AEP's ability to refinance existing
debt at attractive rates; actions of rating agencies, including changes in the
ratings of debt and preferred stock; volatility and changes in markets for
electricity, natural gas, and other energy-related commodities; changes in
utility regulation, including the establishment of a regional transmission
structure; accounting pronouncements periodically issued by accounting
standard-setting bodies; the performance of AEP's pension plan; prices for
power that AEP generates and sells at wholesale; changes in technology and
other risks and unforeseen events, including wars, the effects of terrorism
(including increased security costs), embargoes and other catastrophic events.
American Electric Power
Financial Results for 2nd Quarter 2004 Actual vs 2nd Quarter 2003 Actual
2003 Actual 2004 Actual
($ millions) EPS ($ millions) EPS
UTILITY OPERATIONS:
Gross Margin:
1 Regulated Integrated Utilities 655 751
2 Ohio Cos. 464 468
3 Texas Wires 174 106
4 Texas Supply / REP 115 84
5 Off-System Sales 104 113
6 Other Wholesale Transactions (2) 9
7 Transmission Revenue - 3rd
Party 116 119
8 Other Operating Revenue 83 73
9 Total Gross Margin 1,709 1,723
10 Operations & Maintenance (735) (824)
11 Depreciation & Amortization (315) (308)
12 Taxes Other than Income Taxes (154) (174)
13 Interest Exp & Preferred
Dividend (167) (157)
14 Other Income & Deductions 5 16
15 Income Taxes (118) (93)
16 Net Earnings Utility
Operations 225 0.57 183 0.46
INVESTMENTS:
17 AEPES, inclds Gas HoldCo (HPL) (26) (4)
18 MEMCO 1 2
19 IPPs and Wind Farms (2) 1
20 AEP Resources - Other (11) (4)
21 Other (14) (3)
22 Total Investments (52) (0.13) (8) (0.02)
23 Parent Company (3) (0.01) (25) (0.06)
24 ON-GOING EARNINGS 170 0.43 150 0.38
Note: For analysis purposes, certain financial statement amounts have been
reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for 2nd Quarter 2004 Actual
Reconciliation of On-going and Reported Earnings
2004 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 183 (8) (25) 150 0.38
Discontinued Operations:
UK Discontinued Operations - (52) - (52) (0.13)
LIG Discontinued Operations - 2 - 2 -
Total Special Items - (50) - (50) (0.13)
Reported Earnings 183 (58) (25) 100 0.25
Financial Results for 2nd Quarter 2003 Actual
Reconciliation of On-going and Reported Earnings
2003 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 225 (52) (3) 170 0.43
Discontinued Operations:
UK Discontinued Operations - 3 - 3 0.01
LIG Discontinued Operations - 2 - 2 -
Total Special Items - 5 - 5 0.01
Reported Earnings 225 (47) (3) 175 0.44
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
3 Months Ended June 30,
2003 2004 Change
ENERGY SUMMARY
Retail - Domestic Electric (in
millions of kWh):
Residential 8,659 9,740 12.5%
Commercial 8,773 9,390 7.0%
Industrial 12,449 12,902 3.6%
Miscellaneous 734 806 9.8%
Total Domestic Retail (Exclds AEP
C&I, ME SWEPCo, & Tx POLR) (a) 30,615 32,838 7.3%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 739 262 -64.5%
Total Domestic Retail 31,354 33,100 5.6%
Wholesale - Domestic Electric (in
millions of kWh): 16,357 19,884 21.6%
EAST REGION WEATHER SUMMARY (in
degree days):
Actual - Heating (b) 141 167 18.4%
- Cooling (c) 157 313 99.4%
Normal - Heating (b) 180 -7.2% *
- Cooling (c) 278 12.6% *
PSO/SWEPCo WEATHER SUMMARY (in
degree days):
Actual - Heating (b) 34 30 -11.8%
- Cooling (c) 638 659 3.3%
Normal - Heating (b) 33 -9.1% *
- Cooling (c) 642 2.6% *
* 2004 Actual vs. Normal
(a) The energy summary represents load supplied by AEP. The AEP C&I load
has been segregated to clarify the year-to-year comparison. Delivery
of energy by Texas Wires supplied by others is not included.
(b) Heating Degree Days temperature base is 55 degrees
(c) Cooling Degree Days temperature base is 65 degrees
American Electric Power
Financial Results for June 2004 YTD Actual vs June 2003 YTD Actual
2003 Actual 2004 Actual
($ millions) EPS ($ millions) EPS
UTILITY OPERATIONS:
Gross Margin:
1 Regulated Integrated Utilities 1,383 1,500
2 Ohio Cos. 960 981
3 Texas Wires 331 206
4 Texas Supply / REP 226 183
5 Off-System Sales 222 282
6 Other Wholesale Transactions (5) 13
7 Transmission Revenue - 3rd
Party 229 243
8 Other Operating Revenue 179 160
9 Total Gross Margin 3,525 3,568
10 Operations & Maintenance (1,421) (1,556)
11 Depreciation & Amortization (610) (618)
12 Taxes Other than Income Taxes (339) (355)
13 Interest Exp & Preferred
Dividend (331) (320)
14 Other Income & Deductions 7 25
15 Income Taxes (297) (258)
16 Net Earnings Utility
Operations 534 1.42 486 1.23
INVESTMENTS:
17 AEPES, inclds Gas HoldCo (HPL &
LIG) (44) (13)
18 MEMCO 2 4
19 IPPs and Wind Farms (9) 6
20 AEP Resources - Other (18) (1)
21 Other (21) (9)
22 Total Investments (90) (0.24) (13) (0.03)
23 Parent Company (18) (0.05) (34) (0.09)
24 ON-GOING EARNINGS 426 1.13 439 1.11
Note: For analysis purposes, certain financial statement amounts have been
reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for YTD June 2004 Actual
Reconciliation of On-going and Reported Earnings
2004 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 486 (13) (34) 439 1.11
Dispositions:
Gain from sale of Nanyang General
Light Electric Co. - 6 - 6 0.01
Discontinued Operations:
UK Discontinued Operations - (64) - (64) (0.16)
LIG Discontinued Operations - 1 - 1 -
Total Special Items - (57) - (57) (0.15)
Reported Earnings 486 (70) (34) 382 0.96
Financial Results for YTD June 2003 Actual
Reconciliation of On-going and Reported Earnings
2003 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 534 (90) (18) 426 1.13
Changes in Accounting Principles:
SFAS 143 Asset Retirement
Obligation 249 (7) - 242 0.64
Cessation of EITF 98-10 re: MTM
accounting (13) (36) - (49) (0.13)
Impairments and Dispositions:
Adjustment to South Coast
Impairment - 6 - 6 0.02
Net Proceeds from Sale of Mutual
Energy (back office operations) - 26 - 26 0.07
Adjustment to sale of water
heater rental program (3) - - (3) (0.01)
Discontinued Operations:
UK Discontinued Operations - (37) - (37) (0.09)
LIG Discontinued Operations - 4 - 4 0.01
Total Special Items 233 (44) - 189 0.51
Reported Earnings 767 (134) (18) 615 1.64
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
6 Months Ended June 30,
2003 2004 Change
ENERGY SUMMARY
Retail - Domestic Electric (in
millions of kWh):
Residential 22,080 23,167 4.9%
Commercial 17,568 18,169 3.4%
Industrial 24,455 25,175 2.9%
Miscellaneous 1,424 1,549 8.8%
Total Domestic Retail (Exclds AEP
C&I, ME SWEPCo, & Tx POLR) (a) 65,527 68,060 3.9%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 1,538 486 -68.4%
Total Domestic Retail 67,065 68,546 2.2%
Wholesale - Domestic Electric (in
millions of kWh): 36,716 39,225 6.8%
EAST REGION WEATHER SUMMARY (in
degree days):
Actual - Heating (b) 2,169 2,031 -6.4%
- Cooling (c) 158 316 100.0%
Normal - Heating (b) 1,986 2.3% *
- Cooling (c) 281 12.5% *
PSO/SWEPCo WEATHER SUMMARY (in
degree days):
Actual - Heating (b) 1,074 913 -15.0%
- Cooling (c) 644 689 7.0%
Normal - Heating (b) 1,012 -9.8% *
- Cooling (c) 660 4.4% *
* 2004 Actual vs. Normal
(a) The energy summary represents load supplied by AEP. The AEP C&I load
has been segregated to clarify the year-to-year comparison. Delivery
of energy by Texas Wires supplied by others is not included.
(b) Heating Degree Days temperature base is 55 degrees
(c) Cooling Degree Days temperature base is 65 degrees
SOURCE American Electric Power
-0- 07/30/2004
/CONTACT: Media, Pat D. Hemlepp, Director, Corporate Media Relations,
+1-614-716-1620, or Analysts, Julie Sloat, Managing Director, Investor
Relations, +1-614-716-2885, both of American Electric Power/
/Company News On-Call: http://www.prnewswire.com/comp/042050.html /
/Web site: http://www.aep.com
http://www.aep.com/go/earnings
http://www.aep.com/go/webcasts
http://www.firstcallevents.com/service/ajwz408005928gf12.html/
(AEP)
CO: American Electric Power
ST: Ohio
IN: OIL UTI
SU: ERN CCA MAV