AES Reports Record Third Quarter Revenues and Cash Flow.Brazil Restructuring Allowing AES to Receive Future Brazil Dividends Results in Non-Cash Charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $500 Million ARLINGTON, 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 record revenues and net cash from operating activities for the third quarter of 2006. Revenues increased 14% to $3.15 billion, compared to $2.76 billion in the third quarter of 2005, while net cash from operating activities increased 35% to $837 million, compared to $619 million last year. During the quarter, the Company completed a portion of a broad financial restructuring of its Brazil businesses by selling part of its interest in Eletropaulo, a regulated utility. AES voting control was unaffected by the sale, and the proceeds were used in early October to repay in full $608 million in debt and accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. owed to the Brazilian National Development Bank (BNDES BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazilian Development Bank) BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brasil) ). Refinancing of the remaining holding company debt is expected to be completed later in the fourth quarter. The restructuring resulted in a $500 million after-tax, non-cash charge, or $0.76 diluted loss per share impact, resulting in a third quarter 2006 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). loss and reducing year to date GAAP earnings. Included in the non-cash charge is a $0.07 per share favorable adjusted earnings per share benefit. The charge and estimated impact was previously disclosed on the Company's second quarter 2006 earnings conference call on August 7, 2006. The loss related primarily to the non-cash realization of cumulative currency translation losses associated with the Eletropaulo share sale. On a GAAP basis, which includes the one-time charge, the third quarter 2006 net loss was $340 million, or $0.52 diluted loss per share, while the net loss 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 $353 million, or $0.54 diluted loss per share. Adjusted earnings per share (a non-GAAP financial measure) was a positive $0.34 per share for the quarter. These results compare to third quarter 2005 net income of $244 million, or $0.37 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 , net income from continuing operations of $214 million, or $0.32 diluted earnings per share, and adjusted earnings per share of $0.31. For the nine months ending September 30, 2006 compared to the same 2005 period: * Revenues increased 14% to $9.17 billion from last year's $8.05 billion. * Net cash from operating activities increased 24% to $1.81 billion from last year's $1.46 billion. * Net income was $180 million, or $0.27 diluted earnings per share, versus $453 million, or $0.68 diluted earnings per share. * Net income from continuing operations was $213 million, or $0.32 diluted earnings per share, compared to $423 million, or $0.64 diluted earnings per share. * Adjusted earnings per share were $1.05 compared to $0.59. "This successful restructuring of our Brazil holding company allows us to reduce subsidiary debt and to receive future dividends from these businesses," said Paul Hanrahan, President and Chief Executive Officer. "During the quarter, we continued to grow our business. We signed a long-term power purchase agreement and began construction in Texas of our largest wind project to date. We also signed a new power purchase agreement for a coal and biomass-fired power plant in Canada and continued to add quality projects to our business development pipeline." Prior period results reflect the decision in the second quarter of this year to dispose of To determine the fate of; to exercise the power of control over; to fix the condition, application, employment, etc. of; to direct or assign for a use. See also: Dispose two businesses and account for them as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . The Company reported the following highlights for the third quarter of 2006: * The 14% revenue increase (approximately 12% excluding estimated foreign currency translation impacts) reflects higher prices in all segments, higher demand in Contract Generation and Regulated Utilities and consolidation of Itabo in Contract Generation. * Gross margin increased 9% over the prior year due to higher demand, consolidation of Itabo and favorable foreign exchange rates in Brazil. Gross margin as a percent of revenue declined 160 basis points to 30.9% driven by higher fuel and maintenance costs in both Contract Generation and Competitive Supply. * General and administrative expense increased $17 million, largely from higher business development spending and increased corporate staffing. The Company continues to strengthen its finance function in areas such as accounting and tax. * The $500 million after-tax, non-cash Brazil restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. includes $537 million recorded as loss on sale of subsidiary stock, $18 million of foreign currency transaction losses related to a transaction-related hedge, $121 million in favorable tax benefits, and $66 million of minority interest expense. * Income tax for the 2006 period includes a $20 million unfavorable adjustment due to the recent identification and correction of an error on the 2004 income tax return. * Net income for the third quarter includes $13 million associated with discontinued operations including a $5 million gain on the previously announced sale of our Indian Queens Indian Queens is a village in Cornwall, England, United Kingdom. The village is situated close to the villages of Fraddon and St Columb Road. Who was the Indian Queen? There are a number of stories which try to explain who the Indian Queen was. business in the U.K. and 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 from the discontinued operations. * Free cash flow (a non-GAAP financial measure) increased to $664 million from $380 million in the third quarter of 2005. See the attached Non-GAAP Measures for further information on adjusted earnings per share and free cash flow. The Company also reported the following segment highlights for the third quarter: * Regulated Utilities segment revenues increased 13%, or approximately 7% excluding estimated foreign currency translation impacts, primarily driven by higher prices and demand in 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. . Gross margin increased 29%, largely resulting from the increased revenues, while gross margin as a percent of revenue improved to 28.0% primarily due to lower transmission costs in Latin America and a favorable business tax settlement in Cameroon. Eletropaulo recorded an increase in labor contingencies which was offset by a correction to depreciation expense. * Contract Generation segment revenues increased 20%. Foreign currency translation was not a significant factor in the quarter. The increase largely relates to consolidation of Itabo, a Dominican Republic Dominican Republic (dəmĭn`ĭkən), republic (2005 est. pop. 8,950,000), 18,700 sq mi (48,442 sq km), West Indies, on the eastern two thirds of the island of Hispaniola. The capital and largest city is Santo Domingo. business previously carried as an equity investment, and higher demand. Gross margin was consistent with the prior quarter as higher emission allowance sales in Europe were offset by higher maintenance costs in Latin America and North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Gross margin as a percent of revenue fell to 36.1% due to higher fuel costs and maintenance expenses. * Competitive Supply segment revenues grew 3%, or approximately 4% excluding the estimated impacts of foreign currency translation, primarily reflecting higher prices in Argentina and 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 . Gross margin fell 20% and gross margin as a percent of revenues declined to 25.4% largely due to outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. related costs in North America. The Company revised its guidance for earnings from continuing operations to $0.28 per share from $1.05 per share previously, largely reflecting the Brazil restructuring charge impacts in the third and fourth quarters. It increased its adjusted earnings per share guidance to $1.09 per share, which includes an estimated $0.05 per share non-recurring benefit from the Brazil restructuring, from $1.01 per share previously. The updated guidance also includes expected costs associated with certain fourth quarter debt refinancing transactions. The operating scenario underlying this guidance assumes a number of factors, including effective tax rate, foreign exchange rates, commodity prices, interest rates, tariff increases, new investments, and other significant factors, which could make actual results vary from the guidance. During the quarter, the Company continued to build a strong business development pipeline that includes projects focusing on platform expansion and greenfield investments that generally follow the long-term contract generation business model, complemented by continued growth in the alternative energy business. As of September 30, 2006, the Company had almost 2,400 MW of new generation capacity under construction or in advanced engineering and design in Bulgaria, Chile, Panama, Spain, and the U.S. including fossil fuel fossil fuel: see energy, sources of; fuel. fossil fuel Any of a class of materials of biologic origin occurring within the Earth's crust that can be used as a source of energy. Fossil fuels include coal, petroleum, and natural gas. and renewable energy Renewable energy utilizes natural resources such as sunlight, wind, tides and geothermal heat, which are naturally replenished. Renewable energy technologies range from solar power, wind power, and hydroelectricity to biomass and biofuels for transportation. projects. During the quarter the Company also acquired 73 MW of wind generation assets in California. 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. , Condensed Consolidated Statements of Cash Flows, Non-GAAP Measures, Parent Financial Information, and 2006 Financial Guidance Update. Conference Call Information: AES will host a conference call today at 10:00 am Eastern Standard Time (EST EST electroshock therapy. EST abbr. electroshock therapy ). 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 1-800-690-3108. International callers should dial 1-973-935-8753. Please call at least ten minutes before the scheduled start time. You will be requested to provide your name and affiliation. The AES Third Quarter 2006 Financial Review presentation will be available prior to the call at www.aes.com on the home page and also by selecting "Investor Information" and then "Quarterly Financial Results." A webcast replay, as well as a replay in downloadable MP3 format, will be accessible at www.aes.com beginning shortly after the completion of the call. A telephonic replay will be available at approximately 12:00 noon EST by dialing 1-877-519-4471 or 1-973-341-3080 for international callers. The system will ask for a reservation number; please enter 8007471 followed by the pound key (#). The telephonic replay will be available until Monday, November 20, 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 volume 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 billion. With operations in 26 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 GWh and our 122 generation facilities have the capacity to generate approximately 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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