Allegheny Energy Reports Third Quarter 2006 Results.GREENSBURG, 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 consolidated net income of $110.2 million, or $0.65 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, for the third quarter of 2006, compared to net income of $35.7 million, or $0.21 per diluted share, for the same period in 2005. 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 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 for the third quarter of 2006 excluded a $16.7 million (after-tax) benefit associated with a change 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 tax law, and a $0.5 million (after-tax) loss from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Adjusted income from continuing operations for the third quarter of 2005 excluded debt redemption costs of $32.6 million (pre-tax), a $30.5 million (pre-tax) 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. charge associated with the sale of the company's Ohio service territory and insurance proceeds of $11.0 million (pre-tax). Also excluded from the adjusted results for the third quarter in 2005 was a $7.8 million (after-tax) loss from discontinued operations. Adjusted results are non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to results reported 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). is attached to this release. "We achieved solid earnings growth in the third quarter, despite lower market prices," said Paul J. Evanson, Chairman, President and Chief Executive Officer of Allegheny Energy. "Higher Pennsylvania generation rates, 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 contract and lower costs were the key contributors to our improved results. Power plant performance was in line with last year, even with the transformer transformer, electrical device used to transfer an alternating current or voltage from one electric circuit to another by means of electromagnetic induction. failure at our Harrison generating unit." Third Quarter Consolidated Results Income from continuing operations before income taxes and minority interest, as adjusted, was $152.6 million for the third quarter of 2006, an increase of $35.2 million compared to adjusted results for the same period in 2005. Key factors contributing to the improved results included: * 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. decreased by $28.4 million, reflecting lower market prices, the Harrison transformer failure and 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 ), partially offset by higher generation rates in Pennsylvania and the expiration of a below-market contract. * Purchased power expense decreased by $22.1 million, reflecting reduced purchases from OVEC and decreased purchases from third parties to serve 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). customers. * Fuel expense increased by $12.4 million, due primarily to higher prices paid for coal. * Operations and maintenance expense decreased by $35.3 million compared to adjusted expense for the third quarter of 2005, largely due to reduced 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. settlement costs, lower site remediation reserves and completion of a construction services contract. Adjusted expense for the third quarter of 2005 excluded the insurance proceeds previously mentioned. * Depreciation expense decreased by $8.4 million, largely due to the previously announced extension of certain 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' estimated lives. * Interest expense decreased by $14.1 million compared to adjusted results for the same period in 2005 due to lower debt outstanding. Adjusted expense for the third quarter of 2005 excluded the debt redemption costs previously mentioned. 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 quarter was $286.3 million, an increase of $12.1 million compared to adjusted EBITDA for the third quarter of 2005. EBITDA is a non-GAAP financial measure. Details on the calculation of EBITDA and a reconciliation of EBITDA to net income are attached to this release. Third Quarter Segment Results Generation and Marketing: The segment reported income from continuing operations of $66.9 million for the third quarter of 2006, an increase of $34.2 million compared to the same quarter of the prior year. Operating revenues and kilowatt-hours generated decreased by $7.8 million and 3 percent, respectively. The decrease in revenues was primarily due to lower market prices, the expiration of the OVEC agreement and the Harrison transformer failure. The decreases were partially offset by increased generation rates in Pennsylvania, as well as the benefits of the below-market contract expiration and the 2005 Ohio territory sale. Purchased power and transmission decreased by $10.3 million, reflecting reduced purchases from OVEC. Fuel costs increased by $12.4 million, due primarily to higher prices paid for coal. Operations and maintenance expense increased by $2.6 million, reflecting the receipt of insurance proceeds in the prior year and reduced site remediation reserves in the current period. Depreciation expense decreased by $7.9 million, reflecting the extension of power plant lives mentioned above. Interest expense decreased by $41.5 million, largely due to debt redemption costs in the prior year and lower debt outstanding. Due to higher pre-tax earnings, income taxes increased by $2.8 million, despite the $16.7 million Pennsylvania tax benefit recorded in the current period. Delivery and Services: The segment reported income from continuing operations of $43.8 million for the third quarter of 2006, an increase of $33.1 million compared to the same quarter of the prior year. The 2005 results included the Ohio sale impairment charge. Operating revenues and retail electric kilowatt-hour sales decreased by $28.8 million and 10 percent respectively. The decrease in operating revenues reflected the expirations of a below-market contract and transmission capacity contracts and the completion of a construction services contract, along with milder weather. These detriments were partially offset by higher Pennsylvania generation rates, the sale of the Ohio service territory and customer growth. Purchased power and transmission costs decreased by $19.0 million, primarily due to the below-market contract expiration, 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 $27.8 million, primarily due to reduced litigation settlement costs and the completion of a construction services contract. Interest expense decreased by $4.8 million, reflecting lower debt balances, and income taxes increased by $16.7 million. Discontinued Operations: Allegheny reported a $0.5 million (after-tax) loss on discontinued operations, compared to a $7.8 million loss in the same quarter of the prior year. The 2006 results relate to the Gleason generating facility. The 2005 loss was attributable to the 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. natural gas operations and the Gleason and Wheatland generating facilities. Allegheny sold the gas operations and Wheatland during 2005. Nine-Month Consolidated Results For the first nine months of 2006, Allegheny reported consolidated net income of $254.7 million, or $1.51 per diluted share, as compared to net income of $59.9 million, or $0.38 per diluted share, for the first nine months of the prior year. Adjusted net income from continuing operations was $246.0 million, or $1.46 per diluted share, for the first nine months of 2006, compared to $146.1 million, or $0.90 per diluted share, for the same period of 2005. Adjusted net income from continuing operations is a non-GAAP financial measure, and excludes items mentioned above and other items described 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 with 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 Daylight Time on Friday, October 27, 2006. 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. The slide presentation to be used during the conference call will be available on the company's Web site at 7:00 a.m. on October 27. 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, Maryland 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 contains 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; 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] FOOTNOTES: 1 This amount is included in income tax expense on the Consolidated Statement of Operations See Income statement. . 2 This amount is included in operations and maintenance expense on the Consolidated Statement of Operations. 3 This amount is included in interest expense on the Consolidated Statement of Operations. [TABLE OMITTED] FOOTNOTES: 1 This amount is included in income tax expense on the Consolidated Statement of Operations. 2 These amounts are included in interest expense on the Consolidated Statements of Operations. 3 This amount is included in interest expense on the Consolidated Statement 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. 4 This amount is included in other income and expenses, net, on the Consolidated Statement of Operations. 5 This amount is included in operations and maintenance expense on the Consolidated Statement of Operations. [TABLE OMITTED] [TABLE OMITTED] (a) Reflects the expiration of a below-market contract with a Maryland industrial customer |
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