Exhibit 99.1
AEP Reports 2004 Third-Quarter Earnings
-- Third-quarter results: GAAP $1.34 per share, ongoing $0.80 per share
-- Higher industrial demand, lower expenses help offset mild weather,
ECOM absence
-- Company affirms previous 2004 ongoing earnings guidance range of $2.20
to $2.40
COLUMBUS, Ohio, Oct. 21 /PRNewswire-FirstCall/ --
AMERICAN ELECTRIC POWER
Preliminary, unaudited results
(EPS based on 395mm shares Q3 2003, 396mm in Q3 2004,
382mm in 9 mo. 2003 and 396mm in 9 mo.2004)
Third quarter ended Sept. 30 9-months ended Sept. 30
2003 2004 Variance 2003 2004 Variance
Revenue ($ in billions) 3.9 3.7 (0.2) 11.2 10.4 (0.8)
Earnings ($ in millions):
GAAP 257 530 273 872 912 40
Ongoing 352 318 (34) 778 757 (21)
EPS ($):
GAAP 0.65 1.34 0.69 2.28 2.30 0.02
Ongoing 0.89 0.80 (0.09) 2.04 1.91 (0.13)
American Electric Power (NYSE: AEP) today reported 2004 third-quarter
earnings, prepared in accordance with Generally Accepted Accounting Principles
(GAAP), of $530 million, or $1.34 per share, compared with $257 million, or
$0.65 per share, in the same period last year.
One-time gains in third-quarter 2004, related to the sale of assets, were
primary contributors to $212 million in special items that improved the
company's performance when compared to the prior period when the company
recorded a loss of $95 million on special items.
Ongoing earnings (earnings excluding special items) for third-quarter 2004
were $318 million, or $0.80 per share, compared with $352 million, or
$0.89 per share, in the same period last year.
The key factor in the third-quarter ongoing earnings performance, when
compared with the prior period, is the absence of a non-cash Texas stranded
cost recovery mechanism (commonly referred to as ECOM) in 2004 that added
$60.6 million pre-tax, or $0.10 per share, to ongoing earnings in last year's
third quarter. ECOM was $169 million pre-tax for the nine months ended
September 2003 and $218 million pre-tax for the full year. Under Texas
regulations, companies could record ECOM earnings, based on a wholesale
capacity auction true-up, from Jan. 1, 2002, through Dec. 31, 2003.
GAAP and ongoing earnings per share for third-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
382 million shares in 2003. For the 2004 year-to-date period, dilution for
GAAP earnings is $0.09 per share and dilution for ongoing earnings is
$0.07 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 $2.40 per share. In providing ongoing earnings guidance, there are
differences between 2004 ongoing earnings and 2004 GAAP earnings because of
the classification of UK operations and Louisiana Intrastate Gas (LIG) as
discontinued and the impacts of disposals of UK operations, LIG and other non-
core assets. At this time, AEP management is not able to estimate the impact
on GAAP earnings of the anticipated Texas true-up proceedings or the potential
impact of any future changes in accounting principles. Therefore, AEP is not
able at this time to provide a corresponding GAAP equivalent for 2004 earnings
guidance.
SUMMARY ONGOING RESULTS BY SEGMENT
($ in millions except EPS; EPS based on 395mm shares Q3 2003, 396mm in Q3
2004, 382mm in 9 mo. 2003 and 396mm in 9 mo.2004)
Q3 03 Q3 04 Variance YTD 03 YTD 04 Variance
Utility Operations 394 359 (35) 928 845 (83)
Ongoing EPS 1.00 0.91 (0.09) 2.43 2.13 (0.30)
Investments (21) (32) (11) (111) (45) 66
Ongoing EPS (0.06) (0.08) (0.02) (0.29) (0.11) 0.18
Parent Company (21) (9) 12 (39) (43) (4)
Ongoing EPS (0.05) (0.03) 0.02 (0.10) (0.11) (0.01)
Ongoing Earnings 352 318 (34) 778 757 (21)
Ongoing EPS $0.89 $0.80 ($0.09) $2.04 $1.91 ($0.13)
"We accomplished much in the third quarter and recorded solid earnings for
the period," said Michael G. Morris, AEP's chairman, president and chief
executive officer. "We completed the divestiture of a number of assets that
did not fit our business model, including the generation in the United
Kingdom. Our domestic utility assets, the core of our ongoing business
strategy, performed well. When you factor ECOM out of the equation, our
utilities improved earnings from the prior period despite milder weather
conditions.
"We continue to see growth in industrial demand, evidence of an ongoing
economic recovery in areas we serve," Morris said. "I consider that to be a
further indication that our decision to focus our strategy on our utility
operations and assets has us well positioned for the future."
The decline in the Investments segment performance from third-quarter 2003
is primarily attributed to fluctuations in the value, for accounting purposes,
of natural gas in storage. This will be reported as income in future periods
as the gas is withdrawn from storage.
The $12 million reduction in Parent Company expenses in the quarter
compared to the prior period is primarily the result of lower interest and
other expenses.
ONGOING RESULTS FROM UTILITY OPERATIONS
($ in millions except EPS; EPS based on 395mm shares Q3 2003, 396mm in Q3
2004, 382mm in 9 mo. 2003 and 396mm in 9 mo.2004)
Q3 03 Q3 04 Variance YTD 03 YTD 04 Variance
Regulated Integrated
Utilities 800 815 15 2,183 2,315 132
Ohio Companies 545 516 (29) 1,505 1,497 (8)
Texas Wires 177 128 (49) 508 334 (174)
Texas Supply/REP 99 89 (10) 325 273 (52)
Off-System Sales 157 131 (26) 379 413 34
Other Wholesale
Transactions 1 -- (1) (4) 13 17
Transmission Revenue -
3rd Party 121 125 4 350 368 18
Other Operating Revenue 91 88 (3) 270 247 (23)
Total Gross Margin 1,991 1,892 (99) 5,516 5,460 (56)
Operations & Maintenance (717) (720) (3) (2,138) (2,276) (138)
Depreciation &
Amortization (317) (322) (5) (927) (940) (13)
Taxes Other Than Income
Taxes (182) (175) 7 (521) (530) (9)
Interest Expense &
Preferred Dividend (168) (151) 17 (499) (471) 28
Other Income & Deductions -- 7 7 7 32 25
Income Taxes (213) (172) 41 (510) (430) 80
Total Utility
Operations 394 359 (35) 928 845 (83)
Ongoing EPS $1.00 $0.91 ($0.09) $2.43 $2.13 ($0.30)
Reduced expenses, increased industrial demand for electricity and growth
in the number of residential and commercial customers helped AEP partially
offset the absence of ECOM in third-quarter 2004. Mild summer weather reduced
residential and commercial demand for power in many areas served by AEP when
compared with the same period last year.
AEP's Regulated Integrated Utilities increased gross margin in the
quarter, even though residential and commercial sales were down slightly
because of weather. Industrial sales increased 6 percent from the prior
period.
The reduction in gross margin in the quarter from AEP's Ohio Companies
reflects the mild summer weather, which contributed to a 5 percent reduction
in retail sales to residential and commercial customers, and higher fuel costs
in a state that has frozen rates. Industrial sales increased 5 percent from
the prior period.
The loss of ECOM from Texas Wires gross margin in the quarter was
partially offset by higher residential usage and residential and commercial
customer growth in AEP's Texas Central Company (TCC).
The decrease in gross margin in the quarter from Texas Supply is primarily
attributed to the divestiture of TCC generation to comply with Texas stranded
cost recovery regulations. This resulted in higher purchased power costs to
fulfill contractual commitments.
Reduced gross margins from Off-System Sales are primarily the result of
less favorable optimization activities in the current period.
Utility expenses in the quarter were $64 million lower than in the same
period last year, primarily because of lower tax expenses in the quarter and
reduced interest expenses as a result of refinancings and paying down debt.
Operations & Maintenance and Depreciation & Amortization expenses were
relatively flat period to period.
ONGOING RESULTS FROM INVESTMENTS
($ in millions except EPS; EPS based on 395mm shares Q3 2003, 396mm in Q3
2004, 382mm in 9 mo. 2003 and 396mm in 9 mo.2004)
Q3 03 Q3 04 Variance YTD 03 YTD 04 Variance
AEPES, inc. Gas
HoldCo (HPL) (21) (28) (7) (65) (41) 24
MEMCO 3 1 (2) 4 6 2
IPPs and Wind Farms 4 1 (3) (6) 7 13
AEP Resources - Other (5) (5) -- (23) (6) 17
Other (2) (1) 1 (21) (11) 10
Total Investments (21) (32) (11) (111) (45) 66
Ongoing EPS ($0.06) ($0.08) ($0.02) ($0.29) ($0.11) $0.18
Improved pipeline margins and lower operating expenses for AEP Energy
Services were more than offset by a $16 million after-tax reduction in value,
for accounting purposes, of natural gas in storage, which will be reported as
income in future periods as the gas is withdrawn from storage.
Two factors decreased third-quarter earnings from the MEMCO barge system:
Higher diesel fuel costs in the quarter when compared to the prior period, and
reduced August barge freight sales attributed to the U.S. Corps of Engineers'
closure of the McAlpine Lock on the Ohio River for repairs.
The decline in earnings from Independent Power Plants (IPPs) and Wind
Farms reflects the sale of IPPs in Colorado and Florida that contributed
$2.8 million to third-quarter 2003 earnings.
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://phx.corporate-ir.net/phoenix.
zhtml?p=irol-eventDetails&c=105011&eventID=952103 .
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, including storms; available sources and costs of, and
transportation for, 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,
litigation 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 new investments and
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 3rd Quarter 2004 Actual vs 3rd Quarter 2003 Actual
2003 Actual 2004 Actual
($ millions) EPS ($ millions) EPS
UTILITY OPERATIONS:
Gross Margin:
1 Regulated Integrated Utilities 800 815
2 Ohio Cos. 545 516
3 Texas Wires 177 128
4 Texas Supply / REP 99 89
5 Off-System Sales 157 131
6 Other Wholesale Transactions 1 -
7 Transmission Revenue - 3rd Party 121 125
8 Other Operating Revenue 91 88
9 Total Gross Margin 1,991 1,892
10 Operations & Maintenance (717) (720)
11 Depreciation & Amortization (317) (322)
12 Taxes Other than Income Taxes (182) (175)
13 Interest Exp & Preferred
Dividend (168) (151)
14 Other Income & Deductions - 7
15 Income Taxes (213) (172)
16 Net Earnings Utility
Operations 394 1.00 359 0.91
INVESTMENTS:
17 AEPES, inclds Gas HoldCo (HPL) (21) (28)
18 MEMCO 3 1
19 IPPs and Wind Farms 4 1
20 AEP Resources - Other (5) (5)
21 Other (2) (1)
22 Total Investments (21) (0.06) (32) (0.08)
23 Parent Company (21) (0.05) (9) (0.03)
24 ON-GOING EARNINGS 352 0.89 318 0.80
Note: For analysis purposes, certain financial statement amounts have been
reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for 3rd Quarter 2004 Actual
Reconciliation of On-going and Reported Earnings
2004 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 359 (32) (9) 318 0.80
Dispositions:
Gain from sale of IPP's - 64 - 64 0.16
Gain from sale of UK Generation - 127 - 127 0.32
Gain from sale of Southcoast
Power Ltd. - 31 - 31 0.08
Loss from sale of Jefferson
Island Storage Hub - (2) - (2) -
Discontinued Operations:
UK Discontinued Operations - (7) - (7) (0.02)
LIG Discontinued Operations - (1) - (1) -
Total Special Items - 212 - 212 0.54
Reported Earnings 359 180 (9) 530 1.34
Financial Results for 3rd Quarter 2003 Actual
Reconciliation of On-going and Reported Earnings
2003 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 394 (21) (21) 352 0.89
Impairments:
IPP Impairment - (45) - (45) (0.11)
Discontinued Operations:
UK Discontinued Operations - (52) - (52) (0.13)
LIG Discontinued Operations - 2 - 2 -
Total Special Items - (95) - (95) (0.24)
Reported Earnings 394 (116) (21) 257 0.65
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
3 Months Ended September 30,
2003 2004 Change
ENERGY SUMMARY
Retail - Domestic Electric
(in millions of kWh):
Residential 12,578 12,002 -4.6%
Commercial 10,267 10,070 -1.9%
Industrial 12,309 13,052 6.0%
Miscellaneous 827 857 3.6%
Total Domestic Retail (Exclds
AEP C&I, ME SWEPCo, & Tx POLR) (a) 35,981 35,981 0.0%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 725 316 -56.4%
Total Domestic Retail 36,706 36,297 -1.1%
Wholesale - Domestic Electric (in
millions of kWh): 19,669 23,613 20.1%
EAST REGION WEATHER SUMMARY (in degree days):
Actual - Heating (b) 12 1 -91.7%
- Cooling (c) 592 553 -6.6%
Normal - Heating (b) 7 -85.7% *
- Cooling (c) 679 -18.6% *
PSO/SWEPCo WEATHER SUMMARY (in degree days):
Actual - Heating (b) 0 0 0.0%
- Cooling (c) 1,390 1,178 -15.3%
Normal - Heating (b) 2 -100.0% *
- Cooling (c) 1,398 -15.7% *
* 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 September 2004 YTD Actual vs September 2003 YTD
Actual
2003 Actual 2004 Actual
($ millions) EPS ($ millions) EPS
UTILITY OPERATIONS:
Gross Margin:
1 Regulated Integrated Utilities 2,183 2,315
2 Ohio Cos. 1,505 1,497
3 Texas Wires 508 334
4 Texas Supply / REP 325 273
5 Off-System Sales 379 413
6 Other Wholesale Transactions (4) 13
7 Transmission Revenue - 3rd
Party 350 368
8 Other Operating Revenue 270 247
9 Total Gross Margin 5,516 5,460
10 Operations & Maintenance (2,138) (2,276)
11 Depreciation & Amortization (927) (940)
12 Taxes Other than Income Taxes (521) (530)
13 Interest Exp & Preferred
Dividend (499) (471)
14 Other Income & Deductions 7 32
15 Income Taxes (510) (430)
16 Net Earnings Utility
Operations 928 2.43 845 2.13
INVESTMENTS:
17 AEPES, inclds Gas HoldCo (HPL
& LIG) (65) (41)
18 MEMCO 4 6
19 IPPs and Wind Farms (6) 7
20 AEP Resources - Other (23) (6)
21 Other (21) (11)
22 Total Investments (111) (0.29) (45) (0.11)
23 Parent Company (39) (0.10) (43) (0.11)
24 ON-GOING EARNINGS 778 2.04 757 1.91
Note: For analysis purposes, certain financial statement amounts have been
reclassified for this effect on earnings presentation.
American Electric Power
Financial Results for YTD September 2004 Actual
Reconciliation of On-going and Reported Earnings
2004 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 845 (45) (43) 757 1.91
Dispositions:
Gain from sale of Nanyang
General Light Electric Co. - 6 - 6 0.02
Gain from sale of IPP's - 64 - 64 0.16
Gain from sale of UK Generation - 127 - 127 0.32
Gain from sale of Southcoast
Power Ltd. - 31 - 31 0.08
Loss from sale of Jefferson
Island Storage Hub - (2) - (2) (0.01)
Discontinued Operations:
UK Discontinued Operations - (71) - (71) (0.18)
LIG Discontinued Operations - - - - -
Total Special Items - 155 - 155 0.39
Reported Earnings 845 110 (43) 912 2.30
Financial Results for YTD September 2003 Actual
Reconciliation of On-going and Reported Earnings
2003 Actual
Utility Invest. Parent Total EPS
($ millions)
On-going Earnings 928 (111) (39) 778 2.04
Changes in Accounting Principles:
SFAS 143 Asset Retirement
Obligation 249 (7) - 242 0.63
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)
IPP Impairment - (45) - (45) (0.12)
Discontinued Operations:
UK Discontinued Operations - (89) - (89) (0.24)
LIG Discontinued Operations - 6 - 6 0.02
Total Special Items 233 (139) - 94 0.24
Reported Earnings 1,161 (250) (39) 872 2.28
American Electric Power
Summary of Selected Sales Data
For Domestic Operations
(Data based on preliminary, unaudited results)
9 Months Ended September 30,
2003 2004 Change
ENERGY SUMMARY
Retail - Domestic Electric (in
millions of kWh):
Residential 34,658 35,169 1.5%
Commercial 27,834 28,240 1.5%
Industrial 36,764 38,227 4.0%
Miscellaneous 2,251 2,406 6.9%
Total Domestic Retail (Exclds
AEP C&I, ME SWEPCo, & Tx POLR) (a) 101,507 104,042 2.5%
AEP C&I, Mutual Energy SWEPCo, &
Tx POLR 2,264 802 -64.6%
Total Domestic Retail 103,771 104,844 1.0%
Wholesale - Domestic Electric (in
millions of kWh): 56,385 62,838 11.4%
EAST REGION WEATHER SUMMARY (in degree days):
Actual - Heating (b) 2,181 2,032 -6.8%
- Cooling (c) 750 869 15.9%
Normal - Heating (b) 1,993 2.0% *
- Cooling (c) 960 -9.5% *
PSO/SWEPCo WEATHER SUMMARY (in degree days):
Actual - Heating (b) 1,074 913 -15.0%
- Cooling (c) 2,034 1,867 -8.2%
Normal - Heating (b) 1,013 -9.9% *
- Cooling (c) 2,058 -9.3% *
* 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- 10/21/2004
/CONTACT: Media, Melissa McHenry, Manager, Corporate Media Relations,
+1-614/-716-1120, or Analysts, Julie Sloat, Vice President, 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 /
(AEP)
CO: American Electric Power
ST: Ohio
IN: OIL UTI
SU: ERN ERP CCA