KANSAS CITY, Mo., Aug. 4, 2005 (PRIMEZONE) -- Aquila, Inc. (NYSE:ILA) today reported a loss of $.06 per fully diluted share for the three months ended June 30, 2005, or a net loss of $27.2 million, compared to a loss of $.22 per fully diluted share, or a net loss of $43.3 million, for the second quarter of 2004. The 2004 results included earnings of $.12 per share, or $23.8 million net of tax, from discontinued operations. Sales were $407.6 million in this year's second quarter, up from $335.3 million in the same quarter last year.
For the six months ended June 30, 2005, the company reported a loss of $.04 per fully diluted share, or a net loss of $26.5 million, compared to a loss of $.49 per fully diluted share, or a net loss of $95.1 million, in the first half of 2004. The 2004 results included earnings of $.29 per share, or $56.6 million net of tax, from discontinued operations. Sales in the first six months of 2005 totaled $1.1 billion, compared to sales of $888.5 million during the same period in 2004.
Per-share results for 2005 reflect the issuance of 46.0 million common shares and 13.8 million Premium Income Equity Securities (PIES) in late August 2004. Approximately 98.9% of the PIES were converted into 131.357 million shares of common stock in an exchange offer completed in July 2005.
"Our core utility operations continue to show improvement and our employees are doing an impressive job of keeping our customer service metrics at a high level," said Richard C. Green, chairman and chief executive officer. "We also are making significant progress on the sale of selected utilities that we announced earlier this year, a key element in our repositioning plan."
In March, Aquila announced plans to further reduce debt by selectively divesting some of the company's regulated utility assets and its non-core assets. During the second quarter the company received indicative bids on the various utility properties being offered for sale. Aquila expects to announce more specific transaction details this fall.
Utilities
Utilities reported earnings before interest and taxes, depreciation and amortization (EBITDA) of $49.7 million in the second quarter of 2005, compared to $40.4 million in 2004. Gross profit of $150.2 million was $8.0 million higher than gross profit of $142.2 million in the 2004 quarter. Electric Utilities EBITDA was $37.4 million, up from $29.2 million a year earlier, and Gas Utilities EBITDA was $12.3 million, up slightly over the $11.2 million earned in the prior year's quarter.
Electric Utilities
Sales from electric operations were $204.8 million in this year's quarter, up from $182.1 million a year earlier. Gross profit was $92.6 million, up from $83.8 million in 2004. The improvement was primarily due to rate increases that took effect in Missouri in April 2004, in Colorado in September 2004, and in Kansas in April 2005; the favorable impacts of weather and growth in the number of customers served also contributed to the improvement over the prior year. Operating expense increased $3.1 million primarily due to higher costs of labor, benefits, and services provided by outside contractors.
On July 6, 2005, Union Pacific Railroad notified us and other utilities receiving coal shipments from the Southern Powder River Basin that a force majeure event requiring maintenance on rail lines is expected to result in a 15-20% reduction in contracted deliveries through November 2005. We are analyzing the potential effects of this reduction in deliveries on our coal-fired power plants but believe that our coal inventory levels are sufficient, assuming continued deliveries at these levels, to carry us through November without significantly reducing utilization of these plants below original forecast levels.
Gas Utilities
Sales from natural gas operations were $173.3 million in this year's quarter, up from $164.9 million a year earlier. Gross profit was $57.6 million, down slightly from $58.4 million in 2004.
The slight decline in gross profit is primarily the result of milder spring weather in the 2005 quarter compared to a year earlier. Operating expense increases related to labor and benefits were more than offset by a reduction in taxes other than income taxes and other costs.
Merchant Services
Merchant Services recorded earnings before interest and taxes, depreciation and amortization of $7.9 million for the second quarter of 2005, compared to a loss of $35.2 million in the prior year's second quarter. Gross profit was $3.5 million in the second quarter of 2005, compared to a gross loss of $35.6 million in the same quarter a year earlier.
The improvement in this year's second quarter gross profit is primarily related to the continued wind-down of this business as reflected in the following factors:
-- A reduction in losses associated with the company's former
alternative risk contracts and other contract settlements
which resulted in margin losses of $12.5 million in the 2004
quarter compared to gross profit of $1.4 million in the
current quarter.
-- The termination of four of the company's six long-term gas
contracts in the second half of 2004 resulted in an $8.6
million reduction in margin losses associated with these
contracts.
-- Reversal of $7.1 million of reserves resulting from the
termination of certain hedge contracts and the release from
contingent obligations retained from the sale of the company's
former merchant loan portfolio in 2002.
-- Net gains of $5.6 million on merchant peaking plant capacity
sales and other settlements related to the wind-down of the
trading portfolio.
-- An additional factor which significantly affected last year's
second quarter was an approximately $6.1 million non-cash loss
related to the discounting of the trading portfolio, primarily
driven by long-term gas contracts. In the second quarter of
2005 the company experienced only a minimal non-cash loss
related to discounting of the trading portfolio.
Operating expense decreased $12.9 million in the 2005 second quarter from expense of $9.8 million a year earlier, reflecting the continued wind-down of this business.
In the second quarter of 2005, Aquila did not recognize any Merchant Services asset impairments. In the second quarter of 2004, the company recorded a pretax gain of $9.1 million on a distribution from its 23.11% limited partnership interest in BAF Energy.
Corporate and Other
In the second quarter of 2005, Corporate and Other recorded a loss before interest and taxes, depreciation and amortization of $1.5 million, compared to a loss of $11.7 million a year earlier.
Operating expense of $11.5 million decreased $11.2 million in the 2005 quarter compared to $22.7 million a year earlier. Operating expenses in 2004 included $8.4 million related to the settlement of a shareholder lawsuit regarding appraisal rights in the 2002 exchange for Aquila Merchant shares and $4.4 million of costs associated with exiting our international networks investments, neither of which was recurring in 2005. Partially offsetting these items in the second quarter of 2005 are costs associated with conducting the utility asset competitive auction process.
Discontinued Operations
Aquila reported the results of its Canadian utility businesses (sold in May 2004) and the two consolidated independent power plants (sold in March 2004) as discontinued operations. Total income in the second quarter of 2004 from discontinued operations, net of tax, was $23.8 million, or $.12 per fully diluted share. The company had no earnings from discontinued operations in the second quarter of 2005.
Conference Call, Webcast and Additional Information
This morning at 10:30 a.m. Eastern Time, Aquila will host a conference call and webcast in which senior executives will review 2005 second quarter results. Participants will be Chief Executive Officer Richard C. Green, Chief Operating Officer Keith Stamm and Chief Financial Officer Rick Dobson.
To access the live webcast via the Internet, go to Aquila's website at www.aquila.com and click "Presentations & Webcasts" in the "Investor Information" section. Listeners should allow at least five minutes to register and access the presentation. For those unable to listen to the live broadcast, an online replay will be available for two weeks at the same location on the website ("Investor Information"), beginning approximately two hours after the presentation. Replay also will be available by telephone through Thursday, August 11, 2005 at 800-405-2236 in the United States, and at 303-590-3000 for international callers. Callers need to enter the access code 11033073 when prompted.
Based in Kansas City, Missouri, Aquila operates electricity and natural gas transmission and distribution utilities serving customers in Colorado, Iowa, Kansas, Michigan, Minnesota, Missouri and Nebraska. The company also owns and operates power generation assets. At June 30, 2005, Aquila had total assets of $4.5 billion. More information is available at www.aquila.com.
"EBITDA"
Aquila uses the term "earnings before interest and taxes, depreciation and amortization (EBITDA)" as a performance measure for segment financial analysis. The term is not meant to be considered an alternative to net income or cash flows from operating activities, which are determined in accordance with generally accepted accounting principles. In addition, the term may not be comparable to similarly titled measures used by other companies.
The Aquila, Inc. logo can be found at: http://www.primezone.com/newsroom/prs/?pkgid=1753
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements involve risks and uncertainties, and certain important factors can cause actual results to differ materially from those anticipated. The forward-looking statements contained in this press release include:
-- The company intends to improve its core utility business
and complete its repositioning plan (including completion of
the asset divestitures). Some important factors that could
cause actual results to differ materially from those
anticipated include:
-- We may receive bids for assets that are inadequate or
insufficient for accomplishing our targeted goals;
-- Regulatory commissions may not approve some or all of the
contemplated divestitures;
-- The timing of our asset divestitures may be affected by
the sale of other assets in the marketplace and other
factors beyond our control;
-- We may not be able to improve operational efficiencies in
a magnitude that would help improve our credit profile; and
-- The amount of utility system improvements could be less
than contemplated due to change in law or other factors,
which could impact the amount of assets divested and
otherwise affect our restructuring plan.
-- Aquila does not expect the Union Pacific rail curtailment
to create coal inventory issues for the company. Some
important factors that could cause actual results to differ
materially from those anticipated include:
-- Track restoration efforts may take longer than expected;
-- If we are required to procure additional rail access to
satisfy our Powder River Basin coal requirements, the
cost of this additional rail capacity could be higher
than anticipated; and
-- Regulatory commissions may not approve some or all of
the costs, if any, associated with procuring additional
rail access.
AQUILA, INC.
Consolidated Statements of Income
---------------------------------
3 Months Ended 6 Months Ended
June 30, June 30,
------------------------------------------------
In millions,
except per
share amounts 2005 2004 2005 2004
---------------------------------------------------------------------
Sales $ 407.6 $ 335.3 $ 1,058.6 $ 888.5
Cost of sales 245.9 222.3 718.4 654.2
---------------------------------------------------------------------
Gross profit 161.7 113.0 340.2 234.3
--------------------------------------------------------------------
Operating expenses:
Operating expenses 111.2 133.8 217.7 251.6
Restructuring charges -- .6 6.6 .9
Net (gain) loss on
asset sales and other
charges -- (10.4) (25.6) 21.7
---------------------------------------------------------------------
Total operating
expenses 111.2 124.0 198.7 274.2
---------------------------------------------------------------------
Other income (expense):
Equity in earnings
of investments -- -- -- 2.1
Other income 5.6 4.5 12.4 6.0
---------------------------------------------------------------------
Total other income 5.6 4.5 12.4 8.1
---------------------------------------------------------------------
Earnings (loss) before
interest and taxes,
depreciation and
amortization 56.1 (6.5) 153.9 (31.8)
Depreciation and
amortization
expense 39.2 36.4 78.2 74.8
Total interest
expense 58.9 63.5 117.1 127.8
---------------------------------------------------------------------
Loss from continuing
operations before
income taxes (42.0) (106.4) (41.4) (234.4)
Income tax benefit (14.8) (39.3) (14.9) (82.7)
---------------------------------------------------------------------
Loss from continuing
operations (27.2) (67.1) (26.5) (151.7)
Earnings from
discontinued operations,
net of tax -- 23.8 -- 56.6
---------------------------------------------------------------------
Net loss $ (27.2) $ (43.3) $ (26.5) $ (95.1)
=====================================================================
Weighted average shares
outstanding - diluted(a) 352.8 195.6 352.7 195.5
---------------------------------------------------------------------
Loss per share from
continuing operations
- diluted $ (.06) $ (.34) $ (.04) $ (.78)
---------------------------------------------------------------------
Earnings per share from
discontinued operations
- diluted -- .12 -- .29
---------------------------------------------------------------------
Net loss per share
- diluted $ (.06) $ (.22) $ (.04) $ (.49)
=====================================================================
(a) Weighted average shares outstanding increased in 2005 over 2004
as a result of the issuance on August 24, 2004 of 46.0 million
shares of common stock and 13.8 million Premium Income Equity
Securities which are equivalent to 110.9 million common shares.
AQUILA, INC.
Earnings (Loss) Before Interest and Taxes,
Depreciation and Amortization (EBITDA)
------------------------------------------
3 Months Ended June 30,
------------------------------- Favorable
In millions 2005 2004 (Unfavorable)
---------------------------------------------------------------------
Utilities:
Electric Utilities $ 37.4 $ 29.2 $ 8.2
Gas Utilities 12.3 11.2 1.1
---------------------------------------------------------------------
Total Utilities 49.7 40.4 9.3
---------------------------------------------------------------------
Merchant Services 7.9 (35.2) 43.1
Corporate and Other:
International Networks (.1) (3.9) 3.8
Communications 2.3 2.8 (.5)
Corporate (3.7) (10.6) 6.9
---------------------------------------------------------------------
Total Corporate
and Other (1.5) (11.7) 10.2
---------------------------------------------------------------------
Total EBITDA 56.1 (6.5) 62.6
Depreciation and
amortization 39.2 36.4 (2.8)
Interest expense 58.9 63.5 4.6
---------------------------------------------------------------------
Loss from continuing
operations before
income taxes $ (42.0) $ (106.4) $ 64.4
=====================================================================
6 Months Ended June 30,
------------------------------- Favorable
In millions 2005 2004 (Unfavorable)
---------------------------------------------------------------------
Utilities:
Electric Utilities $ 73.7 $ 55.8 $ 17.9
Gas Utilities 79.7 80.9 (1.2)
---------------------------------------------------------------------
Total Utilities 153.4 136.7 16.7
---------------------------------------------------------------------
Merchant Services 1.3 (157.1) 158.4
Corporate and Other:
International Networks (.1) .3 (.4)
Communications 4.6 4.0 .6
Corporate (5.3) (15.7) 10.4
---------------------------------------------------------------------
Total Corporate and
Other (.8) (11.4) 10.6
---------------------------------------------------------------------
Total EBITDA 153.9 (31.8) 185.7
Depreciation and
amortization 78.2 74.8 (3.4)
Interest expense 117.1 127.8 10.7
---------------------------------------------------------------------
Loss from continuing
operations before
income taxes $ (41.4) $(234.4) $ 193.0
=====================================================================
AQUILA, INC.
Consolidated Balance Sheets
---------------------------
June 30, December 31,
In millions 2005 2004
---------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 171.0 $ 225.1
Short-term investments 53.4 --
Restricted cash 10.0 22.8
Funds on Deposit 232.3 353.1
Accounts receivable, net 315.3 463.4
Price risk management assets 132.1 124.9
Other current assets 312.8 359.5
---------------------------------------------------------------------
Total current assets 1,226.9 1,548.8
---------------------------------------------------------------------
Property, plant and equipment, net 2,835.4 2,777.4
Price risk management assets 161.0 136.1
Other assets 306.0 315.0
---------------------------------------------------------------------
Total Assets $ 4,529.3 $ 4,777.3
=====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 21.9 $ 42.0
Accounts payable 188.6 375.6
Price risk management liabilities 139.3 137.3
Other current liabilities 271.8 299.5
---------------------------------------------------------------------
Total current liabilities 621.6 854.4
---------------------------------------------------------------------
Long-term debt, net 2,328.3 2,329.9
Deferred income taxes and credits 134.0 148.0
Price risk management liabilities 128.9 102.3
Long-term gas contracts, net 25.1 32.9
Other liabilities 187.7 179.3
Common shareholders' equity 1,103.7 1,130.5
---------------------------------------------------------------------
Total Liabilities and Shareholders'
Equity $ 4,529.3 $ 4,777.3
=====================================================================
The Aquila, Inc. logo can be found at: http://www.primezone.com/newsroom/prs/?pkgid=1753