Aquila's First Quarter Results Show Improvement Compared to First Quarter of 2004; Earnings Conference Call and Webcast Are Tomorrow at 10:00 a.m. Eastern.KANSAS CITY Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , Mo. -- Aquila Aquila, in the Bible Aquila (ăk`wĭlə, əkwĭl`ə), in the New Testament, Christian of Jewish origin from Pontus who lived at Rome. He and his wife, Prisca or Priscilla, were friendly to Paul. , Inc. (NYSE NYSE See: New York Stock Exchange : ILA ILA abbr. insulinlike activity ) today reported a slight profit of $.02 per fully 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 three months ended March 31, 2005, or net income of $.7 million, compared to a loss of $.26 per fully diluted share, or net loss of $51.8 million, for the first quarter of 2004. The 2004 results included earnings of $.17 per share, or $32.8 million net of tax, 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. . Sales were $651.0 million in this year's first quarter, up from $553.2 million a year earlier. Per-share results for the 2005 quarter reflect the issuance of 46.0 million common shares and 13.8 million mandatorily convertible securities in late August 2004. "Our main focus this year is on continuing to improve our core utility businesses and customer service," said Richard C. Green, chairman and chief executive officer. "We are also intent on implementing the rest of our repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. plan, including the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of our remaining non-core businesses, so we can continue to strengthen our balance sheet. Our goal is to improve our credit profile so we can invest in utility system improvements more cost-effectively." In March, Aquila announced plans to further reduce debt by selectively divesting some of the company's regulated utility assets and its non-core assets. Aquila has retained investment banking advisors to conduct a competitive sale process for certain regulated utility assets. The company is currently conducting a competitive auction process for six utility properties, and it expects to enter into definitive sale agreements for one or more of those utility properties after concluding the auction process. Confidential information Noun 1. confidential information - an indication of potential opportunity; "he got a tip on the stock market"; "a good lead for a job" steer, tip, wind, hint, lead memoranda have been circulated to a number of qualified bidders, and Aquila expects to announce more specific transaction details in this year's third quarter. Utilities Utilities reported earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income , depreciation and amortization (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 ) of $103.7 million in the first quarter of 2005, compared to $96.3 million in 2004. Gross profit of $200.8 million was $7.8 million higher than gross profit of $193.0 million in the 2004 quarter. Electric Utilities EBITDA was $36.3 million, up from $26.6 million a year earlier, and Gas Utilities EBITDA was $67.4 million, slightly below the $69.7 million earned in the prior year's quarter. Electric Utilities Sales from electric operations were $174.2 million in this year's quarter, up from $160.2 million a year earlier. Gross profit was $88.1 million, up from $78.2 million. The improvement was primarily due to rate increases that took effect in Colorado in September 2004 and in Missouri Missouri, state, United States Missouri (mĭz  r`ē, –ə), one of the midwestern states of the United States. in April 2004 and the recognition of $6.8 million of
mark-to-market Mark-to-marketAdjustment of the book value or collateral value of a security to reflect current market value. income on certain NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). natural gas contracts as a result of increases in forward natural gas prices. The company purchased these contracts primarily for the summer season to offset the risk of increased gas costs in Missouri electric operations. Gross profit was reduced approximately $6.5 million by higher costs of fuel, purchased power and transmission, net of offsetting derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. positions, and $1.5 million of unfavorable weather-related volume and other variances. Operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. increased $2.9 million primarily due to higher labor and benefit costs. In June 2004, the company filed for a rate increase totaling $19.2 million, later revised to $16.4 million, for its electric territories in Kansas in order to recover infrastructure improvements and increased maintenance and operating costs operating costs npl → gastos mpl operacionales . In January 2005, the Kansas Corporation Commission The Kansas Corporation Commission is a Kansas government agency that regulates public utilities, common carriers, oil and gas production, telecommunications companies, and motor carriers. ordered that the company's rates be increased $7.4 million. Aquila filed for reconsideration re·con·sid·er v. re·con·sid·ered, re·con·sid·er·ing, re·con·sid·ers v.tr. 1. To consider again, especially with intent to alter or modify a previous decision. 2. of certain issues included in the Commission's order, and a formal order was issued in March 2005 adjusting the approved rate increase to $8.0 million. The company has appealed to the Circuit Court of the State of Kansas on a number of issues included in the final rate order. In April 2005, Aquila was notified by C.W. Mining Company, a Utah company that supplies 25 percent of the coal needs for the company's Sibley and Lake Road power plants in Missouri, that C.W. Mining has terminated the underlying contract due to workforce issues at its coal mine. Aquila has notified the supplier that it does not believe the termination was valid, and the company expects to pursue its rights and remedies under the contract. A cessation cessation Vox populi The stopping of a thing. See Smoking cessation. of deliveries from this supplier will not affect Aquila's ability to provide safe and reliable electric service, as the company has made arrangements to satisfy its power generation requirements by purchasing coal on the spot market and from other suppliers. Gas Utilities Sales from natural gas operations were $483.2 million in this year's quarter, up from $445.7 million a year earlier. Gross profit was $112.7 million, down from $114.8 million. Sales and cost of sales increased approximately $44.3 million due to a 13 percent increase in natural gas prices. However, because gas purchase costs for these operations are passed through to customers, the change in gas prices did not have a corresponding impact on gross profit. Mild winter weather reduced gross profit by approximately $2.2 million in the 2005 quarter compared to a year earlier. Gross profit also declined approximately $.5 million due to the sale of a small gas operation in eastern Missouri in May 2004 and $1.3 million due to decreased gas transmission sales. These declines were partly offset by approximately $1.0 million from rate increases in Missouri that took effect in May and July 2004 and $1.2 million of additional margins from an increase in the number of customers. The Kansas natural gas rate increase request Aquila filed in November 2004 has been settled for an increase of $2.7 million, subject to final written order from the Kansas Corporation Commission. The new rates are expected to become effective on June 1, 2005. Merchant Services Merchant services is the name given in the United States to a broad category of financial services intended for use by businesses. In its most specific use, it usually refers to the service that enables a business to accept a transaction payment by use of the customer's credit or Merchant Services recorded a loss before interest and taxes, depreciation and amortization of $6.6 million for the first quarter of 2005, compared to a loss of $121.9 million in the prior year's first quarter. Gross loss was $29.7 million in 2005, compared to $77.9 million a year earlier. This year's first quarter gross loss is primarily related to the following factors: --Mark-to-market losses of approximately $11.2 million related to Aquila's remaining stream flow transaction, which expires in 2006. In the first quarter of 2004, the company had mark-to-market losses of approximately $16.0 million related to the stream flow transaction and a 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. power supply transaction which was terminated in May 2004. --Margin losses of $7.9 million related to fixed capacity payments that entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: Aquila to generate power at merchant power plants owned by others but earn minimal revenue because of current conditions in the generation market. Capacity payments were lower in 2005 compared to $10.8 million a year earlier because Aquila terminated its Aries capacity contract in the first quarter of 2004. --A margin loss of $4.5 million recorded in this year's first quarter on the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of certain balances retained in the previous sale of Aquila's gas pipeline investments. --Margin losses of $1.7 million resulting from the difference between revenue recognized on Aquila's two remaining long-term natural gas supply contracts compared to the net cost of gas delivered under the contracts. In the first quarter of 2004, these margin losses were $14.1 million. Four long-term gas supply contracts were terminated later in 2004. --The remaining $4.4 million of 2005 gross loss primarily relates to merchant peaking plant capacity sales offset by losses on various open positions. This compares to $5.9 million of gross loss in the 2004 first quarter. Additional factors which affected only last year's first quarter included the following: --Approximately $9.9 million of costs to exit natural gas hedge positions related to the Onondaga swap derivative sold in connection with the sale of Aquila's independent power plants, cash flow hedge A cash flow hedge is a hedge of the exposure to the variability of cash flow that
--An approximately $21.2 million non-cash loss related to the discounting of the trading portfolio, primarily driven by long-term gas contracts. During the first quarter of 2004, the benchmark indexes used to determine the discount rate appropriate for Aquila's credit standing decreased by approximately 300 basis points, resulting in the partial reversal of related earnings and price risk management asset recorded previously. Operating expense decreased $11.4 million in the 2005 quarter from expense of $9.2 million a year earlier. This was primarily due to the refund TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of value-added taxes value-added tax (VAT), levy imposed on business at all levels of the manufacture and production of a good or service and based on the increase in price, or value, provided by each level. (VAT VAT See: Value-added tax VAT See value-added tax (VAT). ) previously paid and expensed by Aquila's European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. merchant trading business, reduced surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. payments due to the settlement of four long-term gas contracts, and reduced staffing needed to manage remaining trading positions and non-regulated power generation assets. Restructuring charges 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. of $6.6 million increased $6.4 million in the 2005 quarter compared to $.2 million a year earlier. This increase was primarily due to termination of most of the remaining leases related to the former Merchant Services headquarters. In connection with this termination, Aquila made a lump-sum payment of $13.0 million, which exceeded its restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). reserve obligation as of the termination date termination date, n See expiration date. . This resulted in an additional lease restructuring charge of $6.6 million. In the first quarter of 2005, Aquila recorded pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern gains of $25.6 million, which included $16.3 million on the termination of the Batesville tolling agreement and related forward sale contract and $9.3 million on the sale of the company's stock investment in the IntercontinentalExchange, Inc. (ICE). In the first quarter of 2004, Aquila recorded a net loss on sale of assets of $35.9 million, consisting of a $47.0 million loss on the transfer of its equity interest in the Aries power project and termination of the related tolling obligation, offset by a $6.1 million gain related to the sale of Aquila's equity method investments in independent power plants and a $5.0 million gain on the sale of its Marchwood development project in the United Kingdom. Corporate and Other In the first quarter of 2005, Corporate and Other had EBITDA of $.7 million, compared to $.3 million a year earlier. Gross profit of $7.4 million in the 2005 quarter increased by $1.2 million compared to $6.2 million in the 2004 quarter. First quarter sales of $10.9 million in 2005 increased by $2.0 million from $8.9 million in 2004. This was primarily due to an increase in the number of customers served by the Everest Connections subsidiary. Operating expense of $8.4 million decreased $2.7 million in the 2005 quarter compared to $11.1 million a year earlier. This was primarily due to decreases in insurance and other costs and loan amendment fees paid in the 2004 quarter. A gain on sale of assets of $3.8 million was recorded in the first quarter of 2004, primarily related to the $3.3 million gain realized from the sale of Aquila's interest in Midlands Electricity The Midlands Electricity Board was formed in 1947, under the Electricity Act of that year. The counterpart of the East Midlands board, it served southern, and western parts of Warwickshire, as well as the counties of Worcestershire, Herefordshire, Shropshire, and Staffordshire, as in the United Kingdom. Discontinued Operations Aquila reports the results of its Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. utility businesses (sold in May 2004) and the two consolidated independent power plants (sold in March 2004) as discontinued operations. Total income in the first quarter of 2004 from discontinued operations, net of tax, was $32.8 million, or $.17 per fully diluted share. The company had no earnings from discontinued operations in 2005. Income Tax Benefit Aquila's income tax benefit for the first quarter of 2005 decreased by $43.3 million compared to the 2004 first quarter, primarily due to higher pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. in 2005. Included in the income tax benefit for the first quarter of 2005 was the reversal of $3.7 million of income tax valuation allowances previously provided on capital losses due to the recognition of capital gain on the sale of Aquila's ICE shares. Liquidity The most significant factor affecting Aquila's working capital is the purchase of natural gas for the company's gas utility customers. Aquila could experience significant working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. , up to $350 million, during peak winter heating months due to higher natural gas consumption and prices, and the current requirement to prepay pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. certain gas commodity suppliers and pipeline
transportation companies.The company anticipates using the combination of its $110 million, five-year unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. 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; its $150 million, four-year revolving credit facility secured by accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying ; up to $180 million provided by a five-year unsecured revolving credit and letter of credit facility; and its cash on hand to meet peak winter working capital requirements. Conference Call, Webcast and Additional Information Tomorrow at 10:00 a.m. Eastern Time, Aquila will host a conference call and webcast in which senior executives will review 2005 first quarter results. Participants will be Chief Executive Officer Richard C. Green, Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. Keith Stamm and Chief Financial Officer Rick Dobson dob·son n. See hellgrammite. [Probably from the name Dobson.] Noun 1. dobson - large brown aquatic larva of the dobsonfly; used as fishing bait hellgrammiate . To access the live webcast via the 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 , go to Aquila's website at www.aquila.com and click "Presentations & Webcasts" in the "Investor Information" section. Listeners should allow at least five minutes to register and access the presentation. For those unable to listen to the live broadcast, an online replay will be available for two weeks at the same location on the website ("Investor Information"), beginning approximately two hours after the presentation. Replay also will be available by telephone through May 12 at 800-405-2236 in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , and at 303-590-3000 for international callers. Callers need to enter the access code 11029425 when prompted. Today Aquila will have a live webcast of its annual shareholder meeting at 3:00 p.m. Eastern Time, also accessible through the company's website. Based in Kansas City, Missouri Kansas City is the largest city in the state of Missouri. It encompasses parts of Jackson, Clay, Cass, and Platte counties and is the anchor city of the Kansas City Metropolitan Area, the second largest in Missouri, which includes counties in both Missouri and Kansas. , Aquila operates electricity and natural gas distribution utilities serving customers in Colorado, Iowa, Kansas, Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). , Minnesota, Missouri and Nebraska. The company also owns and operates power generation assets. At March 31, 2005, Aquila had total assets of $4.7 billion. More information is available at www.aquila.com. "EBITDA" Aquila uses the term "earnings before interest and taxes, depreciation and amortization (EBITDA)" as a performance measure for segment financial analysis. The term is not meant to be considered an alternative to net income or cash flows from operating activities, which are determined 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 generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . In addition, the term may not be comparable to similarly titled measures used by other companies. 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. This press release contains forward-looking statements. Forward-looking statements involve risks and uncertainties, and certain important factors can cause actual results to differ materially from those anticipated. The forward-looking statements contained in this press release include the statement that Aquila's goal is to improve its credit profile so it can invest in its utility system improvements more cost-effectively, and the statement that Aquila intends to conduct a bidding process for certain regulated utility assets and to announce more specific transaction details in the third quarter of 2005. Some important factors that could cause actual results to differ materially from those anticipated include: --Aquila's credit profile can be negatively impacted by factors beyond its control, such as commodity prices, interest rates and third party defaults. --Third parties may be unwilling to provide investment capital to Aquila even if its credit profile improves. --Aquila may receive bids for assets that are inadequate or insufficient for accomplishing targeted goals. --Regulatory commissions may not approve some or all of the contemplated divestitures.
AQUILA, INC.
Consolidated Statements of Income
3 Months Ended
Mar. 31,
---------------
In millions, except per share amounts 2005 2004
----------------------------------------------------------------------
Sales $651.0 $553.2
Cost of sales 472.5 431.9
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Gross profit 178.5 121.3
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Operating expenses:
Operating expenses 106.5 117.8
Restructuring charges 6.6 .3
Net (gain) loss on asset sales and other charges (25.6) 32.1
----------------------------------------------------------------------
Total operating expenses 87.5 150.2
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Other income (expense):
Equity in earnings of investments -- 2.1
Other income 6.8 1.5
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Total other income (expense) 6.8 3.6
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Earnings (loss) before interest and taxes,
depreciation and amortization 97.8 (25.3)
Depreciation and amortization expense 39.0 38.4
Total interest expense 58.2 64.3
----------------------------------------------------------------------
Income (loss) from continuing operations before
income taxes .6 (128.0)
Income tax expense (benefit) (.1) (43.4)
----------------------------------------------------------------------
Income (loss) from continuing operations .7 (84.6)
Earnings from discontinued operations, net of tax -- 32.8
----------------------------------------------------------------------
Net income (loss) $.7 $(51.8)
======================================================================
Weighted average shares outstanding - diluted (a) 353.1 195.4
----------------------------------------------------------------------
Income (loss) per share from continuing
operations - diluted $.02 $(.43)
Earnings per share from
discontinued operations - diluted -- .17
----------------------------------------------------------------------
Net income (loss) per share - diluted $.02 $(.26)
======================================================================
(a) Weighted average shares outstanding increased in 2005 over 2004 as
a result of the issuance on August 24, 2004 of 46.0 million shares of
common stock and 13.8 million mandatorily convertible securities which
are equivalent to 110.8 million common shares.
AQUILA, INC.
Earnings (Loss) Before Interest and Taxes, Depreciation
and Amortization (EBITDA)
3 Months Ended
March 31,
---------------- Favorable
In millions 2005 2004 (Unfavorable)
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Utilities:
Electric Utilities $36.3 $26.6 $9.7
Gas Utilities 67.4 69.7 (2.3)
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Total Utilities 103.7 96.3 7.4
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Merchant Services (6.6) (121.9) 115.3
Corporate and Other:
International Networks -- 4.2 (4.2)
Communications 2.3 1.2 1.1
Corporate (1.6) (5.1) 3.5
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Total Corporate and Other .7 .3 .4
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Total EBITDA 97.8 (25.3) 123.1
Depreciation and amortization 39.0 38.4 (.6)
Interest expense 58.2 64.3 6.1
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Income (loss) from continuing operations
before income taxes $ .6 $(128.0) $128.6
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AQUILA, INC.
Consolidated Balance Sheets
March 31, December 31,
In millions 2005 2004
----------------------------------------------------------------------
ASSETS
Cash and cash equivalents $196.1 $225.1
Short-term investments 52.5 --
Restricted cash 22.9 22.8
Accounts receivable, net 415.8 463.4
Price risk management assets 177.9 124.9
Other current assets 547.8 712.6
----------------------------------------------------------------------
Total current assets 1,413.0 1,548.8
----------------------------------------------------------------------
Property, plant and equipment, net 2,804.5 2,777.4
Price risk management assets 164.9 136.1
Other assets 304.4 315.0
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Total Assets $4,686.8 $4,777.3
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $21.6 $42.0
Accounts payable 243.5 375.6
Price risk management liabilities 177.1 137.3
Other current liabilities 295.4 299.5
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Total current liabilities 737.6 854.4
----------------------------------------------------------------------
Long-term debt, net 2,329.0 2,329.9
Deferred income taxes and credits 147.5 148.0
Price risk management liabilities 130.3 102.3
Long-term gas contracts, net 28.7 32.9
Other liabilities 182.6 179.3
Common shareholders' equity 1,131.1 1,130.5
----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $4,686.8 $4,777.3
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