Aquila announces $.32 first Quarter EPS; Conference Call And Webcast Set for 1:00 P.M. Eastern Time Today.Business Editors 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.--(BUSINESS WIRE)--May 1, 2002 Aquila, Inc. (NYSE NYSE See: New York Stock Exchange :ILA ILA abbr. insulinlike activity ) announced today first quarter diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $.32, down 54 percent from $.69 per share in the 2001 period. Key factors affecting lower first quarter 2002 results were an extremely mild winter, general economic decline, and lower commodity prices and volatility. By contrast, a normal winter and robust commodity environment favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted Aquila's first quarter results in 2001. Also affecting quarter-to-quarter comparability was a change in accounting for gas storage inventory in 2002 that if applied to 2001 would have reduced first quarter 2001 earnings per share by $.16. The company's diluted earnings per share also were impacted by an additional 31.4 million 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. average shares outstanding in 2002, resulting primarily from the exchange offer for shares of the Aquila 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 subsidiary and the Aquila, Inc. equity offering completed earlier in the year. On April 19, Aquila lowered its full-year guidance for 2002 operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per share to a range of $2.20 to $2.30 per share. Its earlier guidance was $2.83 per share. "We are disappointed by our first quarter results," said Robert K. Green, Aquila's president and chief executive officer. "However, we did have a number of bright spots in the quarter including the performance of our International Networks, Client Services and our European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. Wholesale Services businesses." Merchant Services Merchant Services' first quarter 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 (EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ) were down $57.9 million from the first quarter of 2001, which was one of Aquila's best quarters. Approximately $28.7 million of this variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality was attributable to a change in accounting method relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of gas storage inventory in the Merchant Services business. The change in accounting had little impact on 2002 results. However, if applied in first quarter 2001, EBIT would have been significantly reduced. Additionally, results were impacted by one of the mildest winters ever recorded, which significantly reduced opportunities, as well as by lower commodity prices and volatility. Volumes, however, continued to grow, both in terms of commodities and capacity, again placing Aquila in the industry's top five competitors. Wholesale Services Wholesale Services reported $28.4 million in EBIT for the first quarter 2002 compared to $62.4 million in first quarter 2001. As stated above, approximately $28.7 million of this variance results from a change in inventory accounting. The remaining $5.3 million variance is from lower price volatility in 2002. Merchant Services' newly focused European operation significantly surpassed its prior year results. New leadership and talent and a sharper strategic focus are all contributing to performance. The new business strategy in Europe focuses on providing merchant services to wholesale clients while extracting arbitrage arbitrage: see foreign exchange. arbitrage Business operation involving the purchase of foreign currency, gold, financial securities, or commodities in one market and their almost simultaneous sale in another market, in order to profit from price value from the management of capacity and movement of commodity across the entire European energy grid. Client Services reported its best quarter yet with EBIT of $19.2 million compared to $16.8 million in first quarter 2001, a 14 percent increase. A number of significant structured transactions were closed during the quarter including a significant full-requirements contract with a Northeast utility, a number of GuaranteedGeneration(SM) transactions, and the first large GuaranteedBill(SM) transaction with a Midwest utility. Capacity Services Capacity Services EBIT was $3.2 million compared to $27.1 million in first quarter 2001. The main factors impacting the year-over-year change were a return to an expected spark spread Spark Spread The difference between the market price of electricity and its cost of production. Notes: This measure is important because it helps utility companies determine their bottom line (profit). (conversion of natural gas to electricity) environment, lower prices and volumes in the gas gathering and processing business, and new capacity payments. Generation plants, including the Acadia (LA), Crossroads (MS) and Raccoon Creek Raccoon Creek may refer to:
The Katy Gas Storage expansion project in Texas was completed. Operating performance objectives were accomplished, raising the annual inventory turn rate from 2.2 to 4.3 times. Global Networks Group The first quarter for Global Networks brought mixed results. First quarter 2002 EBIT was $23.1 million less than first quarter 2001. While the domestic network business was down $30.9 million from the prior year's first quarter, the international portfolio provided a $7.8 million increase in EBIT. International Networks International Networks provided EBIT of $33.0 million compared to $25.2 million in 2001. Stronger results were driven mainly by rate increases in Canadian operations. Overall, international distribution companies in Canada, New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. and Australia are performing well with the economies and operating environments In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. in the various countries remaining strong. However, the retail businesses have seen pressure in Australia. Late last year the government in Victoria increased retail rates only 4 percent, well below retail companies' expectations. As a result, consistent with the network strategy, Aquila is evaluating strategic options for the retail business in Australia. The agreement to acquire 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 , the fourth-largest regional electricity company in the United Kingdom, received final approval from the Missouri Public Service Commission. The order will become effective May 3, and the transaction is expected to close May 8. Domestic Networks First quarter financial results from Domestic Networks were $46.1 million, or $30.9 million below first quarter 2001. Key issues creating the shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. were warmer-than-normal weather, 2001 off-system sales to western markets in 2001, and an increase in other 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 an effort to improve financial returns, Aquila announced its intention to restructure this business to a state-based structure and further decentralize de·cen·tral·ize v. de·cen·tral·ized, de·cen·tral·iz·ing, de·cen·tral·iz·es v.tr. 1. To distribute the administrative functions or powers of (a central authority) among several local authorities. decision-making. This new structure will allow state leadership more autonomy in managing the network business, plus create closer relationships with customers and communities. Staff reductions from these actions will be primarily in administration and support areas. 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). activities are expected to be completed by the end of July. Corporate and Other Corporate and Other had EBIT of ($16.1) million for the first quarter 2002, compared to EBIT of ($.2) million in first quarter 2001. Lower results stem from certain corporate costs not being fully allocated out to the business segments and lower interest income earned in 2002 as yields were lower and cash on hand was used to retire short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. . Income Tax Expense The first quarter 2002 income tax expense benefited from certain regulatory adjustments confirmed in a recent regulatory proceeding and the utilization of net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. in the United Kingdom. These adjustments have a significant impact on the 2002 effective tax rate due to the lower earnings performance previously discussed. Goodwill A new accounting standard related to goodwill accounting became effective January 1, 2002. This standard required that goodwill no longer be amortized to expense. In the first quarter of 2001, Aquila recorded amortization expense on goodwill of approximately $5.9 million. Additionally, the adoption of this standard increased earnings from equity investments by approximately $4.4 million. The standard also requires evaluation of goodwill to determine if it is impaired. Aquila is in the process of performing this analysis and will report the results of its evaluation in the second quarter. Conference Call, Webcast and Additional Information Aquila will host a conference call and webcast today at 1:00 p.m. Eastern Time at which Chief Executive Officer Bob Green and Chief Financial Officer Dan Streek will review first quarter results and the full-year outlook. To access the webcast via the Internet, go to Aquila's website at www.aquila.com and click on "Investors" at the bottom of the screen, then click on "Presentations & Webcasts" for the link to the live webcast. Listeners should allow five minutes to register and access the presentation. For those unable to listen to the live broadcast, replays will be available for two weeks, beginning approximately one hour after the presentation, using the same access method. Additional supplemental information including income statements by business segment, consolidated cash flow statement, consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. and statistical information is available at www.aquila.com. Click on "Investors" at the bottom of the screen, then "Investor Guide" in the middle of the page. 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 (formerly UtiliCorp United) is an international energy and risk management company. Aquila is one of the largest wholesalers of electricity and natural gas in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , provides wholesale energy services in the United Kingdom and has a presence in Germany and Scandinavia. It also operates electricity and natural gas distribution networks in seven states and in Canada, New Zealand and Australia. Aquila will serve 2.3 million customers in the United Kingdom following its early May purchase of Midlands Electricity. More information is available at www.aquila.com. Forward-Looking Information This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. including statements about our future financial performance and our projected business results. The terms "expect," "believe," and similar statements identify such forward-looking statements. All projections are based on assumptions as to future events that are inherently uncertain and subjective. Our actual results could differ materially from the forward-looking statements and the projections as a result of the important factors described below:
-- Unanticipated changes in commodity prices and interest rates;
-- Unusual weather conditions;
-- Changes in our credit ratings;
-- The failure to obtain necessary approvals or other closing conditions
required to complete the acquisitions of Midlands and Cogentrix Energy, and;
-- Declines in market values of certain investments that become other than
temporary.
AQUILA, INC.
Consolidated Condensed Statements of Income
Three Months Ended
March 31,
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In millions, except per share 2002 2001
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Sales $8,861.3 $11,980.0
Cost of sales 8,513.4 11,473.8
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Gross profit 347.9 506.2
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Operating expenses (297.8) (355.5)
Other income 44.5 40.8
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EBIT 94.6 191.5
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Interest expense and
dividends on company-
obligated preferred
securities 49.9 63.9
Income tax expense .3 54.1
----------------------------------------------------------------------
Earnings Available for
Common Shares $ 44.4 $ 73.5
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Weighted Average Shares
Outstanding -- Diluted 138.3 106.9
Earnings Per Share -- Diluted $ .32 $ .69
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AQUILA, INC.
Earnings Before Interest and Taxes (EBIT)
Three Months
Ended March 31,
------------------ Favorable
In millions, except per share 2002 2001 (Unfavorable)
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Merchant Services:
Wholesale Services $28.4 $62.4 $(34.0)
Capacity Services 3.2 27.1 (23.9)
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Total Merchant Services 31.6 89.5 (57.9)
Global Networks Group:
International Networks 33.0 25.2 7.8
Domestic Networks 46.1 77.0 (30.9)
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Total Global Networks 79.1 102.2 (23.1)
Corporate and Other (16.1) (.2) (15.9)
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Total EBIT $94.6 $191.5 $(96.9)
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