AES Reports Fourth Quarter and Full-Year 2005 Results; Full-Year Diluted EPS from Continuing Operations up 132% and Net Cash from Operating Activities up 38%; Certain Prior Period Results Restated.ARLINGTON Arlington, county, United States Arlington, county (1990 pop. 170,936), N Va., across the Potomac River from Washington, D.C. Arlington is a residential and commercial suburb of Washington. , Va. -- The AES Corporation AES Corporation AES (NYSE) is a Fortune 1000 company that generates and distributes electrical power. It was founded on January 28, 1981 by Roger Sant from the US Federal Energy Administration and Dennis Bakke from the Office of Management and Budget. (NYSE NYSE See: New York Stock Exchange : AES) today reported strong results for the fourth quarter and full year, with annual revenues of $11,086 million, up 17% from last year. Fourth quarter net income was $177 million or $0.27 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. This compares to net income of $101 million or $0.16 per diluted share in the fourth quarter of 2004. Fourth quarter income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the was $179 million or $0.27 per diluted share, compared to $19 million or $0.03 per diluted share in the prior year quarter. Fourth quarter adjusted earnings per share* were $0.28 compared to $0.10 last year. Full year 2005 net income was $630 million or $0.95 per diluted share, compared to $298 million or $0.46 per diluted share in 2004. Income from continuing operations was $632 million or $0.95 per diluted share, compared to $264 million or $0.41 per diluted share last year. Adjusted earnings per share* for the year were $0.91 compared to $0.59 in 2004. "We ended 2005 on a very strong note, and achieved record revenues and operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the year," said Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. Hanrahan, President and Chief Executive Officer. "We successfully managed through a period of increased energy costs and generated higher free cash flow to improve our credit quality. Over the course of the year, we achieved many strategic milestones, including the acquisition of a major wind energy company in the U.S. and the start of many new projects and platform expansions in various markets around the world." The Company also identified certain errors in its 2003 and 2004 financial results during its 2005 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. closing process that resulted in a need to restate re·state tr.v. re·stat·ed, re·stat·ing, re·states To state again or in a new form. See Synonyms at repeat. re·state those results. 2003 net income was reduced by $17 million or $0.03 per diluted share and 2004 net income increased by $6 million or $0.01 per diluted share. The 2003, 2004 and interim period 2005 previously issued financial statements and report of the Company's independent registered public accounting firm, Deloitte & Touche LLP LLP - Lower Layer Protocol , should no longer be relied upon. The errors, described in the attached Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. Summaries, relate primarily to the following items: --Correction of minority interest expense related to one of our foreign subsidiaries; --Correction of tax expense related to additional withholding taxes The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. identified at one of our foreign subsidiaries and certain adjustments derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from the filing of the Company's 2004 income tax return in 2005; and --Correction of the accounting for four cash flow derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. as a result of a reassessment Reassessment The process of re-determining the value of property or land for tax purposes. Notes: Property is usually reassessed on an annual basis. You may request a "reassessment" if you disagree with your assessment. of the accounting requirements. The Company also said that as of March 31, 2006, it was in default under its senior bank credit facility due to the restatement of its 2003 financial statements. As a result, $200 million of the debt under the Company's senior bank credit facility has been classified as current on the balance sheet as of December December: see month. 31, 2005. The Company currently is seeking a waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. of this default and an amendment of the representation relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the 2003 financial statements. Upon receipt of the waiver and amendment, the Company will be able to borrow Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. additional funds under the revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, if needed. Financial Highlights The following table summarizes key financial measures for the fourth quarter and full year 2005:
($ in millions except per share amounts, 2004 periods restated)
Fourth Fourth Full Full
Quarter Quarter % Year Year %
2005 2004 Change 2005 2004 Change
-------- -------- ------ -------- ------- ------
Revenue $2,973 $2,523 18% $11,086 $9,463 17%
Gross Margin $929 $706 32% $3,178 $2,782 14%
Income from Continuing
Operations $179 $19 842% $632 $264 139%
Net Income $177 $101 75% $630 $298 111%
Diluted EPS from
Continuing Operations $0.27 $0.03 800% $0.95 $0.41 132%
Adjusted Earnings Per
Share $0.28 $0.10 180% $0.91 $0.59 54%
Net Cash Provided by
Operating Activities $699 $454 54% $2,165 $1,571 38%
Fourth Quarter Highlights Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: key financial highlights for the fourth quarter of 2005 as compared to the same period in 2004 are summarized below: --Revenue increased 18% from the fourth quarter of 2004 to $2,973 million, primarily due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency exchange rates in Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. and tariff tariff, tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic increases in our Brazil and Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. regulated reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. utilities. Excluding the estimated impacts of foreign currency translation, revenues increased 11%. --Gross margin increased 32% to $929 million, principally due to the higher revenues and favorable tariff increases. Gross margin as a percent of sales increased to 31.2% from 28.0% largely due to the tariff increases. --Income before tax and minority interest increased 102% to $411 million due to higher operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before at our subsidiaries, the lack of asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges and lower foreign currency translation losses versus the prior year. These gains were partially offset by higher other expenses and increased corporate costs, the latter primarily due to external fees related to the prior year restatement effort. --Interest expense of $504 million increased $11 million reflecting higher short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. and adverse foreign currency translation effects, partially offset by lower hedge related derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. expense. Interest income increased $20 million to $111 million largely as a result of the higher short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. rates and higher cash balances. --Income tax expense decreased $55 million to $93 million versus the prior year. The 2005 tax expense had an effective rate of 23% and was positively impacted by a reduction of foreign subsidiary-related taxes, adjustments related to prior year tax returns and a favorable shift in the composition of income relative to tax rates. The fourth quarter 2004 tax expense had an effective rate of 73% and was heavily influenced by the taxation of unrealized foreign exchange gains on dollar-denominated debt held at certain of our Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of subsidiaries and taxes on dividend distributions from certain foreign subsidiaries. --Income from continuing operations increased to $179 million from $19 million in 2004 due to higher income before tax and minority interest and a significantly lower tax rate, partially offset by higher minority interest expense related largely to higher earnings contributions from Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . --Diluted earnings per share from continuing operations increased to $0.27 from $0.03 in the prior year period. Adjusted earnings per share increased to $0.28 from $0.10 in the prior year period. --Net cash from operating activities of $699 million increased 54% from $454 million in 2004. Free cash flow (a non-GAAP financial measure defined as net cash from operating activities less maintenance capital expenditures) was $577 million, up 86% from $310 million for the same period in 2004. Maintenance capital expenditures were $122 million compared to $144 million in the prior year period. Maintenance capital expenditures are defined as property additions less growth capital expenditures. Fourth Quarter Segment Highlights --Regulated utilities revenues increased 13% to $1,537 million from $1,355 million in 2004 due to favorable foreign currency translation rates, especially in Brazil, and higher tariffs This is a list of tariffs and trade legislation:
emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to revenue gains as well as Brazil-related favorable currency translation impacts, and favorable purchased electricity costs, partially offset by unfavorable fixed cost comparisons. --Contract generation revenues increased 24% to $1,118 million from $904 million in the fourth quarter of 2004, due to higher electricity prices, higher volume and favorable foreign currency translation effects. Excluding the estimated impacts of foreign currency translation, revenues would have increased approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 23%. Gross margin increased 8% to $405 million from $374 million in the prior year quarter. Gross margin as a percent of sales decreased to 36.2% from 41.4% in the fourth quarter of 2005 due to higher fuel costs throughout our businesses, scheduled contract price reduction at Shady Point in Oklahoma Oklahoma (ōkləhō`mə), state in SW United States. It is bordered by Missouri and Arkansas (E); Texas, partially across the Red R. (S, W); New Mexico, across the narrow edge of the Oklahoma Panhandle (W); and Colorado and Kansas (N). and outages at Thames Thames, river, Canada Thames (tĕmz), river, c.160 mi (260 km) long, rising NW of Woodstock, S Ont., Canada, and flowing SW past London and Chatham to Lake St. Clair. in Connecticut Connecticut, state, United States Connecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). . --Competitive supply revenues increased 20% to $318 million from $264 million in the prior year period due to higher prices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Panama Panama, country, Central America Panama (păn`əmä'), Span. Panamá, officially Republic of Panama, republic (2005 est. pop. and Argentina and increased electricity demand and the sale of excess emission EMISSION, med. jur. The act by which any matter whatever is thrown from the body; thus it is usual to say, emission of urine, emission of semen, &c. 2. allowances in New York. Excluding the estimated impacts of foreign currency translation, revenues would have increased approximately 23%. Gross margin of $108 million was 89% above the prior year quarter. Gross margin as a percent of sales increased to 34.0% from 21.6% in the comparable 2004 quarter primarily due to higher prices. Full Year Highlights --Full-year revenues were a record $11,086 million, an increase of 17% over $9,463 million in 2004. Excluding the estimated impact of foreign currency translation, revenues increased 10%. --Gross margin was $3,178 million, an increase of $396 million or 14% compared to $2,782 million in 2004, with gains across all segments. Favorable currency translation effects and higher prices led the increase, partially offset by $192 million of receivable reserves recorded by our Brazilian regulated utilities in the second quarter of 2005. Gross margin as a percent of sales declined 70 basis points to 28.7% due to the receivable reserve and the pass-through pass-through n. 1. An opening between two rooms, especially a shelved space between a kitchen and dining room that is used for passing food. 2. A route through which something is permitted to pass. 3. of higher energy costs in revenue without additional gross margin contribution. --Interest expense declined $36 million to $1,896 million compared to $1,932 million in the prior year, reflecting the benefits of debt retirement and lower interest rate hedge related costs, partially offset by unfavorable currency translation effects and higher short-term interest rates. Interest income increased $109 million on the higher rates. --Income before taxes and minority interest increased 77% to $1,458 million, compared to $822 million in 2004. The improvement reflects higher gross margin, lower net interest expense, lower foreign currency transaction losses, a loss on sale of investments in 2004 and a lack of asset impairment charges in 2004 versus 2005. --The effective tax rate in the 2005 period was 32% compared to 44% in the prior period. Income tax expense was positively impacted in 2005 by a reduction in the taxes imposed on earnings of, and distributions from, foreign subsidiaries as well as adjustments derived from the Company's 2004 income tax returns filed in 2005. --Income from continuing operations increased 139% to $632 million from $264 million in 2004 due to higher operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before tax and minority interest and a lower effective tax rate, partially offset by higher minority interest expense related to an increase in the earnings of certain subsidiaries in Brazil. --Diluted earnings per share from continuing operations increased to $0.95 from $0.41 in 2004. Adjusted earnings per share increased to $0.91 from $0.59 in 2004. --Net cash from operating activities was a record $2,165 million and 38% above 2004. Higher earnings and relatively stable working capital levels contributed to the increase. --Free cash flow was $1,534 million in 2005, up 44% from $1,064 million in 2004. Maintenance capital expenditures were $631 million compared to $507 million in 2004. --AES reduced total debt in 2005 by 5% to $17,706 million including a $270 million reduction in recourse The right of an individual who is holding a Commercial Paper, such as a check or promissory note, to receive payment on it from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment. parent debt and a $612 million reduction in non-recourse subsidiary debt. 2006 Earnings Guidance AES expects 2006 diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations of $0.90 and adjusted earnings per share of $0.95. It also expects net cash from operating activities of $2.2 billion to $2.3 billion and subsidiary distributions of $1.0 billion. The Company is increasing its business development efforts and parent growth investments in 2006 consistent with its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth objectives. The operating scenario A scenario (from Italian, that which is pinned to the scenery) is a synthetic description of an event or series of actions and events. In the Commedia dell'arte underlying this guidance assumes a number of factors, including effective tax rate, foreign exchange rates, commodity prices, interest rates, tariff increases, new investments, as well as other significant factors which could make actual results vary from the guidance. The difference between diluted earnings per share from continuing operations and adjusted earnings per share guidance is attributable to expected net effects from derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. accounting, corporate debt repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan , portfolio management transactions, and gains or losses from certain foreign currency transactions. "Our 2006 earnings guidance is fully consistent with our 2008 financial targets, which remain on track," said Hanrahan. "We're we're Contraction of we are. we're we are starting 2006 on a strong note, with a high quality development pipeline." New Corporate Borrowing Facility AES also announced today that on March 31, 2006 it entered into a new four-year, $600 million credit facility lead arranged by Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. . The Credit Facility will be used for general corporate purposes and to provide letters of credit to support AES's investment commitment as well as the underlying funding for the equity portion of its investment in its Maritza Maritza may refer to:
coal-burning fueled - heated, driven, or produced by burning fuel generation plant in Bulgaria Bulgaria (bŭlgâr`ēə), Bulgarian Balgarija, officially Republic of Bulgaria, republic (2005 est. pop. 7,450,000), 42,823 sq mi (110,912 sq km), SE Europe, on the E Balkan Peninsula. . Separately, Standard & Poor's raised its corporate credit rating to BB- from B+ on March 29, 2006. "This new credit facility will help support our growth objectives and add to our financial flexibility," said Victoria Harker Harker is an English surname. Many geographic locations are named after individuals with the Harker surname. Individuals
Attachments: Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Consolidated Statements of Operations, Segment Information, Condensed Consolidated Balance Sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. , Consolidated Statements of Cash Flows, Reconciliation of Adjusted Earnings per Share, Restatement Summary (Income Statement, Balance Sheet and Adjusted Earnings per Share), Parent Financial Information, and 2006 Financial Guidance Elements. 2005 Financial Review Conference Call Information: AES will host a conference call on Thursday Thursday: see week. , April 6, 2006 to discuss these results as well as its 2006 financial outlook. The call will be held at 9:00 am Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time (EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). The call may be accessed via a live webcast which will be available at www.aes.com or by telephone in listen-only mode at 1-877-691-0877. International callers should dial +1-973-582-2852. Please call at least ten minutes before the scheduled start time. You will be requested to provide your name, e-mail address See Internet address. e-mail address - electronic mail address , and affiliation affiliation (  fil´ēā´sh . The AES 2005 Financial Review and 2006 Outlook
presentation will be available at www.aes.com on the home page and also
by selecting "Investor Information" and then "Quarterly
Financial Results".A webcast replay will be accessible via the internet at www.aes.com beginning shortly after the completion of the call. A telephonic replay will be available at approximately 12:00 noon, EDT on Thursday, April 6, 2006. Please dial 1-877-519-4471. International callers should dial +1-973-341-3080. The system will ask for a reservation A clause in a deed of real property whereby the grantor, one who transfers property, creates and retains for the grantor some right or interest in the estate granted, such as rent or an Easement ,a right of use over the land of another. number; please enter 7210619 followed by the pound key (#). The telephonic replay will be available until Thursday, April 27, 2006. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Disclosure: This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Securities Act of 1933 and of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, those related to future earnings, growth and financial and operating performance. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute AES's current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to, continued normal levels of operating performance and electricity demand at our distribution companies and operational performance at our contract generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. growth investments at normalized investment levels and rates of return consistent with prior experience. Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Important factors that could affect actual results are discussed in AES's filings with the Securities and Exchange Commission, including, but not limited to, the risks discussed under Item 1A, "Risk Factors" in AES's 2005 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . Readers are encouraged to read AES's filings to learn more about the risk factors associated with AES's business. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. About AES: AES is one of the world's largest global power companies, with 2005 revenues of $11.1 billion. With operations in 25 countries on five continents, AES's generation and distribution facilities have the capacity to serve 100 million people worldwide. Our 14 regulated utilities amass annual sales of over 82,000 MWh and our 128 generation facilities have the capacity to generate over 44,000 megawatts. Our global workforce of 30,000 people is committed to operational excellence and meeting the world's growing power Growing Power is an urban agriculture organization headquartered in Milwaukee, Wisconsin. It runs the last functional farm within the Milwaukee city limits and also organizes activities in Chicago. needs. To learn more about AES, please visit www.aes.com or contact AES media relations at media@aes.com. * Adjusted earnings per share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or losses associated with (i) mark-to-market amounts related to FAS 133 derivative transactions, (ii) foreign currency transaction impacts on the net monetary position related to Brazil, Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. , and Argentina, (iii) significant asset gains or losses due to disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of transactions and impairments, and (iv) costs related to the early retirement of recourse debt. See the attached Reconciliation of Adjusted Earnings Per Share.
THE AES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Quarter Ended Year Ended
December 31, December 31,
($ in millions, except per 2004 2004
share amounts) 2005 (Restated) 2005 (Restated)
-------- ---------- ------- ----------
Revenues $ 2,973 $ 2,523 $11,086 $ 9,463
Cost of sales (2,044) (1,817) (7,908) (6,681)
-------- ---------- -------- --------
GROSS MARGIN 929 706 3,178 2,782
General and administrative
expenses (78) (52) (221) (182)
Interest expense (504) (493) (1,896) (1,932)
Interest income 111 91 391 282
Other (expense) income, net (22) 36 19 12
Loss on sale of investments,
asset and goodwill impairment
expense - (40) - (45)
Foreign currency transaction
(losses) on net monetary
position (35) (58) (89) (165)
Equity in earnings of
affiliates 10 13 76 70
-------- ---------- -------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 411 203 1,458 822
Income tax expense (93) (148) (465) (359)
Minority interest expense (139) (36) (361) (199)
-------- ---------- -------- --------
INCOME FROM CONTINUING
OPERATIONS 179 19 632 264
Income from operations of
discontinued businesses (net
of income tax benefit of $0,
$4, $0 and $36, respectively) - 82 - 34
-------- ---------- -------- --------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 179 101 632 298
Cumulative effect of accounting
change (2) - (2) -
NET INCOME $ 177 $ 101 $ 630 $ 298
======== ========== ======== ========
DILUTED EARNINGS PER SHARE
Income from continuing
operations $ 0.27 $ 0.03 $ 0.95 $ 0.41
Discontinued operations - 0.13 - 0.05
Cumulative effect of accounting
change - - - -
-------- ---------- -------- --------
Diluted Earnings Per Share $ 0.27 $ 0.16 $ 0.95 $ 0.46
======== ========== ======== ========
Diluted weighted average
shares outstanding (in
millions) 661 656 665 648
======== ========== ======== ========
THE AES CORPORATION
SEGMENT INFORMATION (unaudited)
Quarter Ended Year Ended
December 31, December 31,
($ in millions) 2004 2004
2005 (Restated) 2005 (Restated)
----------------- ------------------
BUSINESS SEGMENTS
REVENUES
Regulated Utilities $1,537 $ 1,355 $ 5,737 $ 4,897
Contract Generation 1,118 904 4,137 3,546
Competitive Supply 318 264 1,212 1,020
------- --------- -------- ---------
Total revenues $2,973 $ 2,523 $11,086 $ 9,463
GROSS MARGIN
Regulated Utilities $ 416 $ 275 $ 1,237 $ 1,116
Contract Generation 405 374 1,603 1,428
Competitive Supply 108 57 338 238
------- --------- -------- ---------
Total gross margin $ 929 $ 706 $ 3,178 $ 2,782
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST
Regulated Utilities $ 275 $ 222 $ 786 $ 634
Contract Generation 236 140 1,049 726
Competitive Supply 80 13 267 153
Corporate (180) (172) (644) (691)
------- --------- -------- ---------
Total income before income
taxes and minority interest $ 411 $ 203 $ 1,458 $ 822
----------------------------------------------------------------------
GEOGRAPHIC SEGMENTS
REVENUES
Latin America $1,727 $ 1,413 $ 6,420 $ 5,136
North America 727 645 2,776 2,589
Europe/Middle East/Africa (EMEA) 429 397 1,587 1,481
Asia 90 68 303 257
Corporate - - - -
------- --------- -------- ---------
Total revenues $2,973 $ 2,523 $11,086 $ 9,463
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST
Latin America $ 345 $ 232 $ 1,090 $ 617
North America 114 112 538 530
Europe/Middle East/Africa (EMEA) 110 38 387 308
Asia 22 (7) 87 58
Corporate (180) (172) (644) (691)
------- --------- -------- ---------
Total income before income
taxes and minority interest $ 411 $ 203 $ 1,458 $ 822
THE AES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31, December 31,
($ in millions) 2004
2005 (Restated)
------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,390 $ 1,281
Restricted cash 420 395
Short term investments 203 268
Accounts receivable, net of reserves of $279
and $303, respectively 1,615 1,530
Inventory 460 418
Receivable from affiliates 2 8
Deferred income taxes - current 267 218
Prepaid expenses 119 87
Other current assets 756 781
------------ --------
Total current assets 5,232 4,986
PROPERTY, PLANT AND EQUIPMENT
Land 860 788
Electric generation and distribution assets 22,440 21,729
Accumulated depreciation and amortization (6,087) (5,259)
Construction in progress 1,441 919
------------ --------
Property, plant and equipment, net 18,654 18,177
OTHER ASSETS
Deferred financing costs, net 294 343
Investment in and advances to affiliates 670 655
Debt service reserves and other deposits 611 737
Goodwill, net 1,428 1,419
Deferred income taxes - noncurrent 807 774
Other assets 1,736 1,832
------------ --------
Total other assets 5,546 5,760
------------ --------
TOTAL ASSETS $ 29,432 $28,923
============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,104 $ 1,081
Accrued interest 382 335
Accrued and other liabilities 2,122 1,707
Recourse debt-current portion 200 142
Non-recourse debt-current portion 1,598 1,619
------------ --------
Total current liabilities 5,406 4,884
LONG-TERM LIABILITIES
Non-recourse debt 11,226 11,817
Recourse debt 4,682 5,010
Deferred income taxes 721 678
Pension liabilities 857 891
Other long-term liabilities 3,280 3,382
------------ --------
Total long-term liabilities 20,766 21,778
Minority Interest 1,611 1,305
STOCKHOLDERS' EQUITY
Common stock 7 7
Additional paid-in capital 6,517 6,434
Accumulated deficit (1,214) (1,844)
Accumulated other comprehensive loss (3,661) (3,641)
------------ --------
Total stockholders' equity 1,649 956
------------ --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,432 $28,923
============ ========
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Year Ended December 31,
($ in millions) 2004
2005 (Restated)
---------- -----------
OPERATING ACTIVITIES
Net income $ 630 $ 298
Adjustments to net income:
Depreciation and amortization of intangible
assets 889 799
Loss from sale of investments and goodwill
and asset impairment expense 43 45
Gain on disposal and impairment write-down
associated with discontinued operations - (98)
Provision for deferred taxes 100 190
Minority interest expense 361 199
Other 92 322
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 26 (128)
Increase in inventory (73) (33)
Decrease in prepaid expenses and other
current assets 41 7
(Decrease) increase in accounts payable and
accrued liabilities (79) 78
Other assets and liabilities 135 (108)
---------- -----------
Net cash provided by operating activities 2,165 1,571
INVESTING ACTIVITIES
Property additions (1,143) (892)
Proceeds from the sale of assets 26 63
Sale of short-term investments 1,496 1,387
Purchase of short-term investments (1,344) (1,371)
Acquisitions, net of cash acquired (85) -
Proceeds from the sale of emission
allowances 41 -
Decrease (increase) in restricted cash 58 (32)
Decrease (increase) in debt service reserves
and other assets 68 (151)
Other investing 10 (29)
---------- -----------
Net cash used in investing activities (873) (1,025)
FINANCING ACTIVITIES
(Repayments) borrowings under the revolving
credit facilities, net 53 -
Issuance of recourse debt 5 491
Issuance of non-recourse debt and other
coupon bearing securities 1,884 2,449
Repayments of recourse debt (259) (1,140)
Repayments of non-recourse debt and other
coupon bearing securities (2,682) (2,534)
Payments for deferred financing costs (21) (109)
Distributions to minority interests (186) (139)
Contributions from minority interests 1 28
Issuance of common stock 26 16
Other financing (16) 2
---------- -----------
Net cash used in financing activities (1,195) (936)
Effect of exchange rate changes on cash 12 8
---------- -----------
Total increase (decrease) in cash and cash
equivalents 109 (382)
Cash and cash equivalents, beginning 1,281 1,663
--------- ----------
Cash and cash equivalents, ending $ 1,390 $ 1,281
========== ===========
THE AES CORPORATION
RECONCILIATION OF ADJUSTED EARNINGS PER SHARE (unaudited)
Quarter Ended Year Ended
December 31, December 31,
($ per share) 2004 2004
2005 (Restated) 2005 (Restated)
------ ---------- ------ ----------
Diluted EPS From Continuing
Operations $0.27 $ 0.03 $ 0.95 $0.41
FAS 133 Mark-to-Market
(Gains)/Losses (2) - - - 0.06
Currency Transaction
(Gains)/Losses 0.01 0.01 (0.04) 0.06
Net Asset (Gains)/Losses and
Impairments - 0.05 - 0.05
Debt Retirement (Gains)/Losses - 0.01 - 0.01
------ -------- ------- ------
Adjusted Earnings Per Share (1) $0.28 $ 0.10 $ 0.91 $0.59
====== ======== ======= ======
(1) Adjusted earnings per share (a non-GAAP financial measure) is
defined as diluted earnings per share from continuing operations
excluding gains or losses associated with (a) mark-to-market
amounts related to FAS 133 derivative transactions, (b) foreign
currency transaction impacts on the net monetary position related
to Brazil, Venezuela, and Argentina, (c) significant asset gains
or losses due to disposition transactions and impairments, and (d)
costs related to the early retirement of recourse debt. AES
believes that adjusted earnings per share better reflects the
underlying business performance of the Company, and is considered
in the Company's internal evaluation of financial performance.
Factors in this determination include the variability associated
with mark-to-market gains or losses related to certain derivative
transactions, currency transaction gains or losses, periodic
strategic decisions to dispose of certain assets which may
influence results in a given period, and the early retirement of
corporate debt.
(2) 2004 results include $(0.03) related to Chile debt restructuring
costs.
THE AES CORPORATION
RESTATEMENT SUMMARY - INCOME STATEMENT (unaudited)
Year Ended Quarter Ended
December December September June March
31, 31, 30, 30, 31,
($ in millions, except 2004 2004 2004 2004 2004
per share amounts) --------- -------- -------- ------ -------
INCOME STATEMENT EFFECTS
Income from continuing
operations as previously
reported $ 258 $ 27 $ 86 $ 103 $ 42
Changes in income from
continuing operations
from restatement due to:
Decrease (increase) in
interest expense $ 9 $ (1) $ (22) $ 42 $ (10)
Decrease/(increase) in
foreign currency
transaction gains/(losses)$ (18) $ (14) $ (4) $ - $ -
Decrease/(increase) in
income tax expense $ 16 $ 7 $ 5 $ 1 $ 3
Decrease/(increase) in
minority interest expense $ (1) $ - $ 1 $ (3) $ 1
Other changes affecting
income (loss) from
continuing operations $ - $ - $ - $ - $ -
------- ------- ------- ------ -------
Total changes in income
(loss) from continuing
operations $ 6 $ (8) $ (20) $ 40 $ (6)
Income from continuing
operations as restated $ 264 $ 19 $ 66 $ 143 $ 36
======= ======= ======= ====== =======
Diluted earnings per share
from continuing operations
as previously reported $ 0.40 $ 0.04 $ 0.13 $0.16 $ 0.07
Changes due to restatement
effects 0.01 (0.01) (0.03) 0.06 (0.01)
------- ------- ------- ------ -------
Diluted earnings per share
from continuing operations
as restated $ 0.41 $ 0.03 $ 0.10 $0.22 $ 0.06
====== ====== ====== ===== ======
Year Ended
December 31,
($ in millions, except 2003
per share amounts) -------
INCOME STATEMENT EFFECTS
Income from continuing
operations as previously
reported $ 311
Changes in income from
continuing operations from
restatement due to:
Decrease (increase) in
interest expense $ 2
Decrease/(increase) in
minority interest expense $ (19)
Other changes affecting
income (loss) from
continuing operations $ -
-------
Total changes in income
(loss) from continuing
operations $ (17)
Income from continuing
operations as restated $ 294
=======
Diluted earnings per share
from continuing operations
as previously reported $ 0.52
Changes due to
restatement effects (0.03)
-------
Diluted earnings per share
from continuing operations
as restated $ 0.49
=======
THE AES CORPORATION
RESTATEMENT SUMMARY - BALANCE SHEET (unaudited)
As of As of
December 31, December 31,
($ in millions, except per share amounts) 2004 2003
----------- ------------
BALANCE SHEET EFFECTS
Total assets as previously reported $ 28,923 $ 29,137
Changes in assets from restatement due to:
Accounts receivable, net $ (45) $ -
Other current assets $ 45 $ -
---------- -----------
Total changes in assets $ - $ -
Total assets as restated $ 28,923 $ 29,137
========== ===========
Total liabilities and stockholders' equity
as previously reported $ 28,923 $ 29,137
Changes in liabilities and stockholders'
equity from restatement due to:
Accounts Payable $ (61) $ -
Accrued and Other Liabilities $ 51 $ (2)
Deferred income taxes $ (7) $ (3)
Other long-term liabilities $ 7 $ 5
Minority interest $ 26 $ 34
Additional Paid in Capital $ 11 $ -
Accumulated deficit $ (29) $ (35)
Accumulated other comprehensive loss $ 2 $ 1
$ - $ -
----------- ------------
Total changes in liabilities and
stockholders' equity $ - $ -
Total liabilities and stockholders' equity
as restated $ 28,923 $ 29,137
=========== ============
THE AES CORPORATION
RESTATEMENT SUMMARY - ADJUSTED EARNINGS PER SHARE (1) (unaudited)
Quarter Ended Quarter Ended
March 31, June 30,
($ per share) 2004 2004
2005 (Restated) 2005 (Restated)
----------------- -----------------
Diluted EPS From Continuing
Operations (2) $ 0.19 $ 0.06 $ 0.13 $ 0.22
FAS 133 Mark-to-Market
(Gains)/Losses (3) - 0.06 0.01 (0.04)
Currency Transaction
(Gains)/Losses (0.01) 0.02 (0.03) 0.03
Net Asset (Gains)/Losses and
Impairments - - - -
Debt Retirement (Gains)/Losses - 0.01 - -
------- ---------- ------- ---------
Adjusted Earnings Per Share (2) $ 0.18 $ 0.15 $ 0.11 $ 0.21
======= ========== ======= =========
Quarter Ended Quarter Ended
September 30, December 31,
($ per share) 2004 2004
2005 (Restated) 2005 (Restated)
----------------- -----------------
Diluted EPS From Continuing
Operations (2) $ 0.37 $ 0.10 $ 0.27 $ 0.03
FAS 133 Mark-to-Market
(Gains)/Losses (3) (0.01) 0.04 - -
Currency Transaction
(Gains)/Losses (0.01) (0.01) 0.01 0.01
Net Asset (Gains)/Losses and
Impairments - - - 0.05
Debt Retirement (Gains)/Losses - - - 0.01
------- ---------- ------- ---------
Adjusted Earnings Per Share (2) $ 0.35 $ 0.13 $ 0.28 $ 0.10
======= ========== ======= =========
(1) Adjusted earnings per share (a non-GAAP financial measure) is
defined as diluted earnings per share from continuing operations
excluding gains or losses associated with (a) mark-to-market
amounts related to FAS 133 derivative transactions, (b) foreign
currency transaction impacts on the net monetary position related
to Brazil, Venezuela, and Argentina, (c) significant asset gains
or losses due to disposition transactions and impairments, and (d)
costs related to the early retirement of recourse debt. AES
believes that adjusted earnings per share better reflects the
underlying business performance of the Company, and is considered
in the Company's internal evaluation of financial performance.
Factors in this determination include the variability associated
with mark-to-market gains or losses related to certain derivative
transactions, currency transaction gains or losses, periodic
strategic decisions to dispose of certain assets which may
influence results in a given period, and the early retirement of
corporate debt.
(2) The Quarter ended June 30, 2005 includes $(0.06) related to Brazil
receivable reserve costs net of a reversal of a business tax
reserve. The Quarter ended September 30, 2005 includes $0.06
related to an Argentina valuation allowance reversal.
(3) The Quarter ended March 31, 2004 includes $(0.03) related to Chile
debt restructuring costs.
The AES Corporation
Parent Financial Information
---------------------------------------------------------------------
Parent only data: last four quarters
($ in millions)
4 Quarters Ended
December 31, September 30, June 30, March 31,
2005 2005 2005 2005
Actual Actual Actual Actual
---------------------------------------------
Total subsidiary
distributions & returns
of capital to Parent
------------------------
Subsidiary distributions
to Parent $ 988 $ 920 $ 855 $ 977
Net distributions
to/(from) QHCs (1) 5 (4) 8 18
----------- -------------- ------- --------
Subsidiary distributions 993 916 863 995
Returns of capital
distributions to Parent 44 42 152 115
Net returns of capital
distributions to/(from)
QHCs (1) 13 13 24 11
----------- -------------- ------- --------
Returns of capital
distributions 57 55 176 126
Combined distributions &
return of capital
received 1,050 971 1,039 1,121
Less: combined net
distributions & returns
of capital to/(from)
QHCs (1) (18) (9) (32) (29)
----------- -------------- -------- --------
Total subsidiary
distributions & returns
of capital to Parent $ 1,032 $ 962 $ 1,007 $ 1,092
=========== ============== ======== ========
Parent only data: quarterly
($ in millions) Quarter Ended
December 31, September 30, June 30, March 31,
2005 2005 2005 2005
Actual Actual Actual Actual
---------------------------------------------
Total subsidiary
distributions & returns
of capital to Parent
-------------------------
Subsidiary distributions
to Parent $ 354 $ 274 $ 170 $ 190
Net distributions
to/(from) QHCs (1) - - - 5
----------- -------------- -------- --------
Subsidiary distributions 354 274 170 195
Returns of capital
distributions to Parent 5 - 37 2
Net returns of capital
distributions to/(from)
QHCs (1) - - 13 -
----------- -------------- -------- --------
Returns of capital
distributions 5 - 50 2
Combined distributions &
return of capital
received 359 274 220 197
Less: combined net
distributions & returns
of capital to/(from)
QHCs (1) - - (13) (5)
----------- -------------- -------- --------
Total subsidiary
distributions & returns
of capital to Parent $ 359 $ 274 $ 207 $ 192
=========== ============== ======== ========
Liquidity (2) Balance at
------------------------
($ in millions) December 31, September 30, June 30, March 31,
2005 2005 2005 2005
Actual Actual Actual Actual
---------------------------------------------
Cash at Parent $ 262 $ 146 $ 145 $ 256
Availability under
revolver 356 281 215 218
Cash at QHCs (1) 6 9 19 3
----------- -------------- -------- --------
Ending liquidity $ 624 $ 436 $ 379 $ 477
=========== ============== ======== ========
(1) The cash held at qualifying holding companies (QHCs) represents
cash sent to subsidiaries of the company domiciled outside of the
US. Such subsidiaries had no contractual restrictions on their
ability to send cash to AES, the parent company. Cash at those
subsidiaries was used for investment and related activities
outside of the US. These investments included equity investments
and loans to other foreign subsidiaries as well as development and
general costs and expenses incurred outside the US. Since the cash
held by these qualifying holding companies is available to the
parent, AES uses the combined measure of subsidiary distributions
to parent and qualified holding companies as a useful measure of
cash available to the parent to meet its international liquidity
needs.
(2) AES believes that unconsolidated parent company liquidity is
important to the liquidity position of AES as a Parent company
because of the non-recourse nature of most of AES's indebtedness.
THE AES CORPORATION
2006 FINANCIAL GUIDANCE ELEMENTS
2006 Guidance
---------------------
Income Statement Elements
Revenue Growth 4 to 5%
(% change vs prior year)
Gross Margin $3.2 to 3.3 billion
Business Segment Income Before Tax and Minority $2.3 billion
Interest
(Excludes Corporate Costs of $625 Million)
Allocated by Segment as % of Total
- Regulated Utilities 44%
- Contract Generation 38%
- Competitive Supply 18%
Diluted Earnings Per Share From Continuing
Operations $0.90
Adjusted Earnings Per Share Factors (1) $0.05
Adjusted Earnings Per Share (1) $0.95
Cash Flow Elements
Net Cash From Operating Activities $2.2 to 2.3 billion
Maintenance Capital Expenditures $800 to 900 million
Free Cash Flow (2) $1.3 to 1.5 billion
Subsidiary Distributions (3) $1.0 billion
Parent Growth Investments and Capital $250 to 350 million
Expenditures (4)
Foreign Currency Sensitivity (annual) 10% currency move =
app. $0.07 per
diluted share
Interest Rate Sensitivity (annual) 1% rate move = app.
$0.02 per diluted
share
Exchange Rate Assumptions (annual average)
- Brazil Real 2.23 / $
- Venezuela Bolivar 2,388 / $
- Argentina Peso 3.10 / $
-----------------------------------------------
(1) Non-GAAP measure. See Reconciliation of Adjusted Earnings per
Share Note 1.
(2) Non-GAAP measure, defined as net cash from operating activities
less maintenance capital expenditures. Maintenance capital
expenditures reflect property additions less growth capital
expenditures.
(3) Non-GAAP measure. See Parent Financial Information.
(4) Excludes other sources of funds. Total 2006 capital expenditures
are estimated to be $1.7 - $1.8 billion, including certain growth
projects not yet awarded.
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