Allegheny Energy Reports Unaudited Consolidated Financial Data For Nine Months Ended September 30, 2002.Business Editors HAGERSTOWN Hagerstown (hā`gərztoun'), city (1990 pop. 35,445), seat of Washington co., NW Md., on Antietam Creek near its junction with the Potomac River, in the fertile Cumberland Valley; inc. 1791. , Md.--(BUSINESS WIRE)--Dec. 19, 2002 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 released unaudited 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: financial data for the nine months ended September September: see month. 30, 2002. This information was prepared for delivery to its lenders in the course of the Company's ongoing comprehensive financial review disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). on November November: see month. 4, 2002, when the Company announced it was delaying the release of third quarter results. The Company reported a consolidated net loss of $334.4 million (or a $2.67 loss per share) for the nine-month period, which includes a reduction in the market value of its energy trading portfolio to reflect changes in valuation model assumptions and market conditions; the cumulative effect of an accounting change related to the adoption of the Statement of Financial Accounting Standards (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System ) No. 142, "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. "; workforce reduction expenses; and other items. In the course of the comprehensive review of its financial records, Allegheny Energy has identified a number of required adjustments with respect to its 2002 financial statements that resulted from accounting errors. These adjustments are fully reflected in the unaudited financial data released today. Based on the results of this comprehensive review, the Company has determined that it and certain of its subsidiaries will have 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 their first and second quarter financial statements for 2002. The Company will release third quarter 2002 earnings data when the comprehensive review has been completed and will issue restated financial statements for the first and second quarters of 2002 as soon as possible thereafter. The Company completed an analysis of the potential 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. of goodwill related to the acquisition of its energy trading business 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 SFAS No. 142, as well as the potential impairment of its investment in its Midwest Midwest or Middle West, region of the United States centered on the western Great Lakes and the upper-middle Mississippi valley. It is a somewhat imprecise term that has been applied to the northern section of the land between the Appalachians generating assets in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. Assets." The Company concluded that these assets are not impaired See assistive technology. . Allegheny Allegheny (ăl`əgā'nē, ăl`əgä'nē), river, 325 mi (523 km) long, rising in N central Pa., and flowing NW into N.Y., then SW through Pa. Energy's unaudited consolidated financial data for the nine months ended September 30, 2002, includes the following items that contributed to the Company's reported net loss:
Pre-tax After-Tax Earnings
(In millions) Amount Amount per Share
----------------------------------------------------------------------
Reduction in the market value of
the energy trading portfolio $(356.3) $(217.6) $(1.73)
----------------------------------------------------------------------
Cumulative effect of accounting
change related to the adoption of
SFAS No. 142 (210.1) (130.5) (1.04)
----------------------------------------------------------------------
Workforce reduction expenses (104.2) (62.6) (.50)
----------------------------------------------------------------------
Charges related to generating
plant cancellations (51.8) (31.4) (.25)
----------------------------------------------------------------------
Impairment of unregulated
investments (38.8) (22.9) (.18)
----------------------------------------------------------------------
Gain on Canaan Valley land sale 14.3 11.9 .09
----------------------------------------------------------------------
The comparative prior period ended September 30, 2001, included
the following item that reduced net income:
Pre-tax After- Earnings
(In millions) Amount Tax per
Amount Share
----------------------------------------------------------------------
----------------------------------------------------------------------
Cumulative effect of accounting change related
to the adoption of SFAS No. 133 $(52.3) $(31.1) $(.26)
----------------------------------------------------------------------
Allegheny Energy is continuing discussions with banks, other lenders, and trading counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. regarding outstanding defaults, needed amendments to existing agreements, and obtaining additional secured financing. As announced on October October: see month. 21, 2002, the Company has received authority from the U.S. Securities and Exchange Commission (SEC) to borrow Borrow To obtain or receive money on loan with the promise or understanding that it will be repaid. up to $2 billion on a secured basis, related to the refinancing Refinancing An extension and/or increase in amount of existing debt. . Additional approvals needed to implement this refinancing are still pending. In addition, the Company's subsidiaries, Allegheny Energy Supply Company, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (Allegheny Energy Supply), and Allegheny Generating Company, have received extensions through December December: see month. 31, 2002, on waivers from bank lenders under their credit agreements. The Company continues to negotiate with these and other lenders and is also working with the St. Joseph County St. Joseph County is the name of several counties in the United States:
v. o·bliged, o·blig·ing, o·blig·es v.tr. 1. To constrain by physical, legal, social, or moral means. 2. to seek bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection. As previously announced, Allegheny Energy has already taken steps to reduce its cost structure, preserve cash, and strengthen its balance sheet, including reducing the Company's reliance on its wholesale energy trading business; significantly reducing pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. in 2002; cancelling the development of several generating facilities, saving $700 million in capital expenditures over the next several years; reducing the workforce by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 10 percent through a voluntary early retirement option, normal attrition Attrition The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry. Notes: , and selected staff reductions; and suspending the dividend on its common stock. The Company actively continues its work to resolve the following issues which are critical to its financial stability and 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. performance: - satisfactory completion of asset sales and/or the issuance of equity; - satisfactory outcome of Federal Energy Regulatory Commission proceedings in which the validity of the Company's contracts with the California Department of Water Resources is challenged; - satisfactory resolution of litigation with Merrill Lynch regarding the Allegheny Energy Global Markets acquisition (in which Merrill Lynch is claiming $115 million plus interest and the Company has filed counter claims against Merrill Lynch); - satisfactory resolution of trading counterparties' current and future demands in settlement of terminated trades and collateral in respect of ongoing positions; and - continued transition of the Company to refocus on its core businesses. Information regarding results for Allegheny Energy Supply for the first nine months of 2002 is included in the Company's Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed today with the SEC. With headquarters in Hagerstown, Md., Allegheny Energy is an integrated energy company with a balanced portfolio of businesses, including Allegheny Energy Supply, which owns and operates electric generating facilities and supplies energy and energy-related commodities in selected domestic retail and wholesale markets; Allegheny Power, which delivers low-cost, reliable electric and natural gas service to about three million people in 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). , Ohio, 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 , 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). , and 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. ; and a business offering fiber-optic See fiber optics. and data services, energy procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. and management, and energy services. More information about the Company is available at www.alleghenyenergy.com. Certain statements contained herein constitute 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. with respect to Allegheny Energy, Inc. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of Allegheny Energy to be materially different from any future results, performance, or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements. Such factors may affect Allegheny Energy's operations, markets, products, services, prices, capital expenditures, development activities, and future plans. Such factors include, among others, the following: changes in general, economic, and business conditions; changes in the price of electricity and natural gas; changes in industry capacity; changes in technology; changes in financial and capital market conditions; changes in political and social conditions, deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. activities and the movement toward competition in the states served by our operations; the effect of regulatory 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. and legislative decisions; regulatory approvals and conditions; the loss of any significant customers; 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. ; and changes in business strategy or business plans.
Allegheny Energy, Inc.
Adjusted Financial Results
For the Nine Months Ended September 30, 2002 and
September 30, 2001
(In thousands)
Year-to-Date 2002 2001
------------------------------------------------- ---------- ---------
Consolidated net income (loss) $(334,379) $353,208
Less: Adjustments to consolidated net income:
Reduction in the market value of the energy
trading portfolio (217,564) -
Cumulative effect of accounting change related
to the adoption of SFAS No. 142 (130,514) -
Workforce reduction expenses (62,604) -
Charges related to generating plant
cancellations (31,377) -
Impairment of unregulated investments (22,954) -
Gain on Canaan Valley land sale 11,917 -
Cumulative effect of accounting change related
to the adoption of SFAS No. 133 - (31,147)
---------- ---------
Total of adjustments to consolidated net income (453,096) (31,147)
---------- ---------
Adjusted consolidated net income $118,717 $384,355
========== =========
Allegheny Energy, Inc.
Comparison of Earnings (Loss) per Share
For the Nine Months Ended September 30, 2002 vs. September 30, 2001
(In dollars per share)
Unaudited
Year-to-Date
------------------------
2002 2001 Variance
------------------------
Earnings per share
-------------------
Basic consolidated earnings (loss) per share $(2.665) $2.982 $(5.647)
========================
EPS Variance Reconciliation
---------------------------- ---------
Net revenues (Note 1) $(3.571)
---------
---------
Operation expense (0.412)
---------
Other:
Workforce reduction expenses (0.529)
Depreciation and amortization (0.060)
Taxes other than income taxes (0.004)
Other income and expenses (0.138)
Interest charges and preferred dividends (0.084)
Minority interest 0.057
Issuance of shares 0.096
Change in effective income tax rate (0.255)
All other 0.030
---------
Other (0.887)
---------
---------
Income before accounting change (4.870)
---------
Cumulative effect of accounting change (0.777)
---------
Consolidated net income (loss) $(5.647)
=========
Note 1: Reflects revenues less the cost of fuel consumed for electric
generation, purchased energy and transmission, natural gas purchases,
deferred power costs, and cost of goods sold.
Allegheny Energy, Inc.
Sales Volume Data
For the Nine Months Ended September 30, 2002 and September 30, 2001
Year-to-Date 2002 2001 Variance
------------- ------- ------- --------
Delivery and services regulated electric
sales (gigawatt-hours) (Note 1)
Residential 11,216 10,927 2.6%
Commercial 7,525 7,262 3.6%
Industrial 14,915 14,805 0.7%
Municipals and street lighting 1,125 1,153 -2.4%
------- -------
Total 34,781 34,147 1.9%
======= =======
Delivery and services regulated gas sales
(MMcfs) 43,596 46,132 -5.5%
Note 1: Excludes affiliated and bulk power
transmission sales.
Allegheny Energy, Inc.
Consolidated Statement of Operations
Unaudited
Nine Months Ended
September 30,
(In thousands, except per share data) 2002 2001(a)
-------------------------------------- ------------ ------------
Total operating revenues $2,324,726 $2,592,433
Cost of revenues:
Fuel consumed for electric generation 436,885 438,062
Purchased energy and transmission 265,107 222,317
Natural gas purchases 431,977 99,084
Deferred energy costs, net 7,608 (5,450)
Other 76,528 26,397
------------ ------------
Total cost of revenues 1,218,105 780,410
------------ ------------
Net revenues 1,106,621 1,812,023
------------ ------------
Other operating expenses:
Workforce reduction expenses 104,170 ---
Operation expense 696,182 614,805
Depreciation and amortization 232,870 220,696
Taxes other than income taxes 163,646 162,871
------------ ------------
Total other operating expenses 1,196,868 998,372
------------ ------------
Operating income (loss) (90,247) 813,651
------------ ------------
Other income and expenses (26,412) 7,061
Interest charges and preferred dividends:
Interest on long-term debt and other interest 230,378 210,680
Allowance for borrowed funds used during
construction and interest capitalized (9,599) (6,684)
Dividends on preferred stock of subsidiaries 3,778 3,780
------------ ------------
Total interest charges and preferred
dividends 224,557 207,776
------------ ------------
Consolidated income (loss) before income taxes, minority
interest,
and cumulative effect of accounting change (341,216) 612,936
Federal and state income tax expense
(benefit) (132,871) 226,314
Minority interest (4,480) 2,267
------------ ------------
Consolidated income (loss) before cumulative
effect of accounting change (203,865) 384,355
Cumulative effect of accounting change, net (130,514) (31,147)
------------ ------------
Consolidated net income (loss) $(334,379) $353,208
============ ============
Average common shares outstanding 125,460,716 118,434,527
Average diluted common shares outstanding 125,790,364 118,920,222
Basic earnings per share:
Consolidated income (loss) before
cumulative effect of
accounting change $(1.63) $3.24
Cumulative effect of accounting change, net (1.04) (0.26)
------------ ------------
Consolidated net income (loss) $(2.67) $2.98
============ ============
Diluted earnings per share:
Consolidated income (loss) before
cumulative effect of
accounting change $(1.63) $3.23
Cumulative effect of accounting change, net (1.04) (0.26)
------------ ------------
Consolidated net income (loss) $(2.67) $2.97
============ ============
(a) Certain amounts have been reclassified for comparative
purposes.
ALLEGHENY ENERGY, INC.
Consolidated Balance Sheet
Unaudited
September 30, December 31,
(In thousands) 2002 2001(b)
-------------- ------------- ------------
ASSETS:
Current assets:
Cash and temporary cash investments $235,231 $37,980
Accounts receivable:
Billed:
Customer 356,902 350,349
Other 113,787 44,613
Unbilled 122,890 169,612
Allowance for uncollectible accounts (33,309) (32,796)
Materials and supplies - at average cost:
Operating and construction 111,856 104,965
Fuel 115,013 82,390
Commodity contracts 186,717 297,879
Taxes receivable 155,628 124,718
Other, including current portion of
regulatory assets 140,685 133,200
------------ ------------
1,505,400 1,312,910
------------ ------------
Property, plant, and equipment:
In service, at cost 10,888,209 10,660,177
Construction work in progress 427,826 426,706
------------ ------------
11,316,035 11,086,883
Accumulated depreciation (4,422,817) (4,233,868)
------------ ------------
6,893,218 6,853,015
------------ ------------
Investments and other assets:
Excess of cost over net assets acquired
(Goodwill) 397,984 603,615
Benefit plans' investments 63,749 102,078
Unregulated investments 58,116 66,422
Intangible assets 11,509 43,045
Other 4,316 4,135
------------ ------------
535,674 819,295
------------ ------------
Deferred charges:
Commodity contracts 1,252,725 1,457,504
Regulatory assets 570,882 594,182
Other 115,593 130,646
------------ ------------
1,939,200 2,182,332
------------ ------------
Total assets $10,873,492 $11,167,552
============ ============
(b) Certain amounts have been reclassified for comparative
purposes.
ALLEGHENY ENERGY, INC.
Consolidated Balance Sheet (Continued)
Unaudited
September 30, December 31,
(In thousands) 2002 2001(c)
-------------- ------------- ------------
STOCKHOLDERS' EQUITY AND LIABILITIES:
Current liabilities:
Short-term debt $1,138,131 $1,238,728
Long-term debt due within one year 425,643 353,054
Accounts payable 462,720 373,958
Taxes accrued:
Federal and state income 91,138 21,613
Other 82,978 99,393
Adverse power purchase commitments 20,080 24,839
Deferred income taxes 44,948 186,933
Commodity contracts 341,941 512,788
Other, including current portion of
regulatory liabilities 190,342 238,504
------------ ------------
2,797,921 3,049,810
------------ ------------
Long-term debt and QUIDS 3,513,760 3,200,421
Deferred credits and other liabilities:
Commodity contracts 498,481 482,225
Unamortized investment credit 97,785 102,589
Deferred income taxes 1,008,121 972,910
Obligations under capital leases 35,590 35,309
Regulatory liabilities 109,063 108,055
Adverse power purchase commitments 240,913 253,499
Other 204,163 148,774
------------ ------------
2,194,116 2,103,361
------------ ------------
Minority interest 33,343 29,991
Preferred stock 74,000 74,000
Stockholders' Equity:
Common stock 157,890 156,596
Other paid-in capital 1,440,513 1,421,117
Retained earnings 656,196 1,152,487
Treasury stock (244) ---
Other comprehensive income 5,997 (20,231)
------------ ------------
2,260,352 2,709,969
------------ ------------
Total stockholders' equity and liabilities $10,873,492 $11,167,552
============ ============
(c) Certain amounts have been reclassified for comparative
purposes.
--30--JK/ny* csm
CONTACT: Allegheny Energy
Media:
Cynthia A. Shoop, 301/665-2718
Media Hotline: 1-888-233-3583
cshoop@alleghenyenergy.com
Investor Relations:
Gregory L. Fries, 301/665-2713
gfries@alleghenyenergy.com
M. Beth Straka, 412/856-3731
mstraka@alleghenyenergy.com
KEYWORD: MARYLAND
INDUSTRY KEYWORD: ENERGY EARNINGS
SOURCE: Allegheny Energy
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