Allegheny Energy Reports Strong Financial Results for Fourth Quarter, Full Year 2006.GREENSBURG Greensburg, city (1990 pop. 16,318), seat of Westmoreland co., SW Pa.; settled c.1770, inc. as a city 1928. Located in a coal area, the city manufactures concrete, chemicals, machinery, and metal products. Col. , Pa. -- Allegheny Energy Allegheny Energy (NYSE: AYE) is a traditional public utility based in the Pittsburgh suburb of Greensburg. It services communities in Western Pennsylvania, Western Maryland, Northern West Virginia, Northwest Virginia. , Inc. (NYSE NYSE See: New York Stock Exchange :AYE AYE Allegheny Energy, Inc. (stock symbol) AYE Ayer Rajah Expressway AYE Amplifying Your Effectiveness (conference) ) today reported financial results for the fourth quarter and full year 2006. To provide a better understanding of core results and trends, Allegheny Energy also reported adjusted financial results, as shown in the table below: [TABLE OMITTED] Adjusted net income for all periods shown above excludes results of discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . There were no other adjustments for the three months ended December December: see month. 31, 2006. For the three months ended December 31, 2005, adjusted net income excluded a $5.9 million (after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. ) charge due to the effect of an accounting change. For information on adjustments for both twelve-month periods, and the calculation of adjusted net income for all periods, see the attached reconciliation of non-GAAP financial measures. "We delivered strong earnings growth in 2006, aided by a solid fourth quarter," 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. J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. "Improved performance at our power plants, reduced costs and lower interest expense more than offset the effect of lower market prices and mild weather in the fourth quarter. Looking ahead, we remain focused on growing earnings and building shareholder value through improving operations, managing the transition to market-based rates and expanding our transmission system." Fourth Quarter Consolidated Results Adjusted net income for the fourth quarter of 2006 increased by $58.4 million compared to the same period in 2005. Key factors contributing to the improved results include the following: * Operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. increased by $12.8 million, reflecting improved plant performance, higher generation rates in Pennsylvania Pennsylvania (pĕnsəlvā`nyə), one of the Middle Atlantic states of the United States. It is bordered by New Jersey, across the Delaware River (E), Delaware (SE), Maryland (S), West Virginia (SW), Ohio (W), and Lake Erie and New York and the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of a below-market power sales contract Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. , partially offset by lower market prices, the expiration of a power purchase agreement with the Ohio Valley Electric Corporation (OVEC OVEC Ohio Valley Environmental Coalition (Huntington, WV) OVEC Ohio Valley Educational Cooperative OVEC Ohio Valley Electric Corporation OVEC Ohio Valley Electric Company ) and milder weather. During the fourth quarter of 2005, unplanned power plant outages adversely affected Allegheny's financial results. * Fuel expense increased by $9.9 million, largely due to higher prices paid for coal and increased coal usage. * Purchased power and transmission expense decreased by $36.4 million, reflecting reduced purchases from OVEC and the sale of the former Ohio service territory. * Operations and maintenance expense decreased by $27.6 million, due in part to lower special maintenance costs at the company's power plants and increased costs in the previous year due to a severe October October: see month. snowstorm. * Depreciation and amortization expense decreased by $8.8 million, largely due to the previously disclosed extension of the estimated lives of unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. power plants. * Interest expense decreased by $10.2 million, due to a lower debt balance. * Income taxes for the quarter increased by $33.3 million, reflecting an increase in pre-tax income of $92.2 million. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the fourth quarter of 2006 was $234.7 million, an increase of $72.6 million compared to the same period of the prior year. EBITDA and adjusted EBITDA are non-GAAP financial measures. Details on the calculation of EBITDA and adjusted EBITDA and a reconciliation of EBITDA to net income are attached to this release. Fourth Quarter Segment Results To provide a better understanding of core results and trends, Allegheny also reported adjusted financial results for each segment, as shown in the table below.
Three Months Ended December 31 > >
($ millions) > >
> >
> > 2006
2005
Delivery and Services: > >
Net income- GAAP > > $65.9
$38.3
Adjusted net income > > 66.9
34.8
> >
Generation and Marketing: > >
Net loss - GAAP > > $(1.3)
$(35.2)
Adjusted net loss > > (5.1)
(31.5)
Adjusted results for both periods shown exclude results of discontinued operations. For the three months ended December 31, 2005, adjusted results for the Generation and Marketing segment also exclude the charge related to the accounting change previously mentioned. For further information, see the attached reconciliation of non-GAAP financial measures. Delivery and Services: Adjusted net income for the quarter increased by $32.1 million compared to the same quarter of the prior year. Operating revenues and retail electric kilowatt-hour sales decreased by $31.4 million and 10.2 percent, respectively. The decrease in operating revenues reflected the expirations of a below-market power sales contract and transmission capacity contracts, along with milder weather. The impact of these factors was partially offset by higher Pennsylvania generation rates, the impact of the sale of the Ohio service territory and customer growth. Purchased power and transmission costs decreased by $28.3 million, primarily due to the below-market sales contract expiration, the impact of the sale of the Ohio territory and milder weather, partially offset by higher Pennsylvania generation rates and customer growth. Operations and maintenance expense decreased by $12.3 million, reflecting lower employee and contract work costs and the costs associated with the previously mentioned snowstorm in the fourth quarter of 2005. Taxes other than income taxes decreased by $8.2 million, primarily due to a decrease in reserves. Interest expense decreased by $2.4 million, reflecting lower debt balances. Pre-tax income increased by $18.2 million compared to the fourth quarter of 2005. Income taxes decreased by $13.9 million, primarily due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. resolutions of tax issues. Generation and Marketing: The adjusted net loss for the quarter decreased by $26.4 million compared to same quarter of the prior year. The loss for the fourth quarter of 2005 reflected the adverse impact of the unplanned outages previously mentioned. Operating revenues in the fourth quarter of 2006 increased by $39.2 million, reflecting better power plant performance, higher generation rates in Pennsylvania and the expiration of a below-market contract, partially offset by lower market prices and the expiration of the OVEC agreement. Fuel costs increased by $9.9 million as a result of higher coal prices and increased coal usage. Purchased power and transmission expense decreased by $12.8 million, reflecting reduced purchases from OVEC. Operations and maintenance expense decreased by $15.8 million, largely due to lower special maintenance costs at power plants. Depreciation and amortization decreased by $8.5 million, reflecting the previously mentioned extension of unregulated power plants' estimated lives. Interest expense decreased by $7.4 million, reflecting lower debt outstanding. As a result, pre-tax income for the fourth quarter was $26.0 million, a $74.1 million increase compared to a loss of $48.1 million for the fourth quarter of 2005. Income taxes increased by $47.2 million, primarily due to higher pre-tax income and, to a lesser extent, an increase in reserves associated with an open tax position taken in previous years. Discontinued Operations: For the fourth quarter of 2006, Allegheny Energy reported income from discontinued operations of $2.8 million, compared to income of $5.7 million in the same quarter of the prior year. The 2006 results reflect adjustments associated with the sale of Midwest peaking units, including the December 2006 sale of the Gleason power station, which represents the last in a series of previously announced asset sales. Reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. : During the fourth quarter of 2006, Allegheny began classifying fuel handling and residual disposal costs as fuel expenses. Formerly, such costs were classified as operations and maintenance expenses. The company made this change to improve comparability with other energy and utility companies and to more closely conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" industry standards. The reclassification had no impact on net income in any of the reporting periods. In the attached Consolidated Statement of Operations See Income statement. , fuel and operations and maintenance expenses for all periods ending December 31, 2006 and December 31, 2005 reflect this reclassification. Fuel handling and disposal costs for the fourth quarter of 2006 were $6.4 million, compared to $6.1 million in the fourth quarter of 2005. Fuel handling and disposal costs for the full year 2006 and 2005 were $24.7 million and $22.4 million, respectively.
Full Year Segment Results > >
> >
Twelve Months Ended December 31 > >
($ millions) > >
> >
> > 2006
2005
Delivery and Services: > >
Net income- GAAP > > $179.4
$113.2
Adjusted net income > > 181.4
143.4
> >
Generation and Marketing: > >
Net income (loss) - GAAP > > $139.9
$(50.1)
Adjusted net income > > 126.5
6.2
Adjusted net income for the twelve-month periods excludes results from discontinued operations and other adjustments detailed in the attached reconciliation of non-GAAP financial measures. Reconciliation of Non-GAAP Financial Measures This news release and the attached table include non-GAAP financial measures as defined in the Securities and Exchange Commission's Regulation G. Where noted, we present financial information on an adjusted basis to exclude the effect of certain items as described herein. By presenting adjusted results, management intends to provide investors with a better understanding of the core results and underlying trends from which to consider past performance and prospects for the future. We also present EBITDA as an additional measure of our operating performance. Users of this financial information should consider the types of events and transactions for which adjustments have been made. Neither the adjusted information nor EBITDA should be considered in isolation or viewed as substitutes for or superior to net income or other data prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). as measures of our operating performance or liquidity. In addition, neither the adjusted information nor EBITDA are necessarily comparable to similarly titled measures provided by other companies. Pursuant to the requirements of Regulation G, we have attached tables that reconcile non-GAAP financial measures, including those presented in this release, to the most directly comparable GAAP measures. Investor Conference Call Allegheny Energy will comment further on these results in an investor conference call at 8:30 a.m. Eastern Time on Friday, February 9, 2007. To listen to a live Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the broadcast of the call, visit www.alleghenyenergy.com. A taped replay of the call will be available after the live broadcast. Allegheny Energy Headquartered in Greensburg, Pa., Allegheny Energy is an investor-owned utility consisting of two major businesses. Allegheny Energy Supply owns and operates electric generating facilities, and Allegheny Power delivers low-cost, reliable electric service to customers in Pennsylvania, West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. , Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). and Virginia Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). . For more information, visit our Web site at www.alleghenyenergy.com. 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. In addition to historical information, this release may contain a number of "forward-looking statements" as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Words such as anticipate, expect, project, intend, plan, believe, and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. These include statements with respect to: regulation and the status of retail generation service supply competition in states served by Allegheny Energy's delivery business, Allegheny Power; the closing of various agreements; financing plans; demand for energy and the cost and availability of raw materials, including coal; provider-of-last-resort ("PLR PLR pupillary light reflex. ") and power supply contracts; results of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. ; results of operations; internal controls and procedures; capital expenditures; status and condition of plants and equipment; capacity purchase commitments; regulatory matters; and accounting issues. Forward-looking statements involve estimates, expectations and projections and, as a result, are subject to risks and uncertainties. There can be no assurance that actual results will not materially differ from expectations. Actual results have varied materially and unpredictably from past expectations. Factors that could cause actual results to differ materially include, among others, the following: plant performance and unplanned outages; changes in the price of power and fuel for electric generation; general economic and business conditions; changes in access to capital; complications or other factors that render it difficult or impossible to obtain necessary lender consents or regulatory authorizations on a timely basis; environmental regulations; the results of regulatory proceedings, including proceedings related to rates; changes in industry capacity, development and other activities by Allegheny Energy's competitors; changes in the weather and other natural phenomena; changes in the underlying inputs and assumptions, including market conditions used to estimate the fair values of commodity contracts; changes in customer switching behavior and their resulting effects on existing and future PLR load requirements; changes in laws and regulations applicable to Allegheny Energy, its markets or its activities; the loss of any significant customers or suppliers; dependence on other electric transmission and gas transportation systems and their constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. or availability; changes in PJM PJM Pacific Journal of Mathematics PJM Project Manager PJM Puerto Jimenez, Costa Rica (Airport code) PJM Pennsylvania New Jersey Maryland Interconnection LLC (Mid-Atlantic region power pool) , including changes to participants rules and tariffs This is a list of tariffs and trade legislation:
detrusor instability , terrorism and war. Additional risks and uncertainties are identified and discussed in Allegheny Energy's reports and registration statements filed with the Securities and Exchange Commission. These forward-looking statements speak only as of the date of this document. Allegheny Energy undertakes no obligation to update its forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of this document. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] See accompanying Notes to Reconciliation of Non-GAAP Financial Measures [TABLE OMITTED] [TABLE OMITTED] See accompanying Notes to Reconciliation of Non-GAAP Financial Measures [TABLE OMITTED] [TABLE OMITTED] See accompanying Notes to Reconciliation of Non-GAAP Financial Measures [TABLE OMITTED] [TABLE OMITTED] See accompanying Notes to Reconciliation of Non-GAAP Financial Measures [TABLE OMITTED] See accompanying Notes to Reconciliation of Non-GAAP Financial Measures Notes to Reconciliation of Non-GAAP Financial Measures: (1) Represents the charge recorded in connection with adoption of the Financial Accounting Standards Board's Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations Asset Retirement Obligations provide for future disposal of assets as required by SFAS 143 [1]. Firms must recognize the ARO liability in the period it was acquired, generally acquisition. ." (2) Included in income tax expense on the Consolidated Statements of Operations. (3) Included in interest expense on the Consolidated Statements of Operations. (4) Included in interest expense on the Consolidated Statements of Operations. This amount represents the estimated interest owed to 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. from March 16, 2001 thru March 31, 2005. It does not include interest accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. subsequent to March 31, 2005. (5) Included in other income and expenses, net, on the Consolidated Statements of Operations. (6) Included in operations and maintenance expense on the Consolidated Statements of Operations. (7) Included in loss on sale of Ohio T&D assets on the Consolidated Statements of Operations. (8) Operations and maintenance expense reflects the reclassification of fuel handling and residual disposal costs to fuel expense for all periods presented. [TABLE OMITTED] (a) Reflects the expiration of a below-market contract with a Maryland industrial customer [TABLE OMITTED] (a) Reflects the expiration of a below-market contract with a Maryland industrial customer |
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