Dynegy Announces First Quarter 2006 Results.HOUSTON Houston, city (1990 pop. 1,630,553), seat of Harris co., SE Tex., a deepwater port on the Houston Ship Channel; inc. 1837. EconomyThe fourth largest city in the nation and the largest in the entire South and Southwest, Houston is a port of entry; -- Dynegy Dynegy Inc. (NYSE: DYN), headquartered in Houston, Texas, provides wholesale power, capacity and ancillary services to utilities, cooperatives, municipalities and other energy companies in 15 states in three key U.S. Inc. (NYSE NYSE See: New York Stock Exchange :DYN dyn abbr. dyne ):
-- First quarter 2006 results benefited from higher volumes in
the Midwest and higher realized prices in both the Midwest and
Northeast regions
-- Comprehensive liability management plan implemented in first
quarter
-- Reduction of debt and tolling obligations of approximately
$1.5 billion
-- Cash flow and earnings estimates for 2006 updated
Dynegy Inc. (NYSE:DYN) today reported a net loss applicable to common stockholders of $4 million or $(0.01) 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 first quarter 2006. This compares to a net loss applicable to common stockholders of $267 million or $(0.70) per diluted share for the first quarter 2005. Financial results for the first quarter 2006 included 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. legal charges totaling $9 million. Financial results for the first quarter 2005 included after-tax charges totaling $265 million, including charges associated with the shareholder class action 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 ($156 million) and the Independence power tolling arrangement 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). ($109 million). "Our first quarter 2006 results demonstrated continued strong operating performance by having well-maintained plants that are ready to run whenever the market needs them," said Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. A. Williamson Wil·liam·son , Mount A peak, 4,382.9 m (14,370 ft) high, in the Sierra Nevada of east-central California. , Chairman and Chief Executive Officer of Dynegy Inc. "Our continued track record of reliable, safe and cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. power plant operations enabled us to benefit from higher realized prices in key business regions, and, in particular, our efficient and reliable 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 coal fleet continued to produce strong volumes of electricity to meet the needs of consumers, despite milder than normal winter weather. "We also launched a comprehensive liability management plan to significantly strengthen the company's financial profile, which will enable us to actively pursue ways to grow our power generation portfolio," Williamson added. "This comprehensive plan, which is substantially complete, deploys cash on hand and new borrowings from the capital markets to further strengthen our capital structure. Benefits include the reduction of debt and tolling obligations of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $1.5 billion since year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. and greater financial flexibility for future growth opportunities. In addition, these initiatives provide the company with an even longer extended debt maturity profile, positioning us to benefit from the anticipated economic and power market recovery. Finally, the fact that we were able to eliminate our restrictive second-lien debt and replace it with more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. represents a unique vote of confidence by the capital markets and our fixed-income investors." Year-Over-Year Comparison A comparison of the company's first quarter 2006 and first quarter 2005 results is set forth below (in millions of dollars, except per share amounts):
1Q 2006 1Q 2005
----------- ----------
Income (loss) from continuing operations before
income taxes $2 $(468)
Income tax benefit (expense) from continuing
operations (3) 174
Income from discontinued operations, net of tax 1 32
Cumulative effect of change in accounting
principle, net of tax 1 --
----------- ----------
Net income (loss) 1 (262)
Less: Preferred stock dividends 5 5
----------- ----------
Net loss applicable to common stockholders $(4) $(267)
Basic loss per share $(0.01) $(0.70)
Diluted loss per share $(0.01) $(0.70)
Power Generation Business Earnings before interest, taxes and depreciation EBITD is an initialism or acronym for Earnings Before Interest, Taxes and Depreciation. See EBITDA. Some people find it useful to know this value for a business. 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 ) from the power generation business was $167 million for the first quarter 2006, compared to $110 million for the first quarter 2005. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was $192 million for the first quarter 2006. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from asset sales totaled $165 million, while capital expenditures were $17 million, and changes in restricted cash and other were $13 million. Free cash flow from the power generation business was an inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of approximately $327 million. Following are power generation results for the Midwest, Northeast “Northeastern” redirects here. For the Boston college, see Northeastern University, Boston. Northeast or north east is the ordinal direction halfway between north and east. It is the opposite of southwest. See boxing the compass. and South segments. Midwest segment EBITDA attributed to the Midwest segment was $138 million in the first quarter 2006, compared to EBITDA of $98 million in the first quarter 2005, due to increased sales volumes and higher realized prices in 2006. First quarter 2005 results included $8 million of general and administrative expenses, which are reported in the Other segment beginning in 2006 and are no longer allocated to the company's individual business segments. Average on-peak market power prices in NI Hub/Com Ed and Cin Hub/Cinergy were essentially flat compared to the first quarter 2005. Sales volumes generated by Midwest facilities rose to 5.4 million megawatt meg·a·watt n. Abbr. MW One million watts. meg  a·watt hours in the first quarter 2006 compared to 5 million megawatt
hours in the first quarter 2005.
Midwest milestones during the first quarter 2006 included completing the acquisition of NRG NRG Energy NRG NRG Energy, Inc. NRG Natural Resources Group NRG New Radiancy Group NRG Network Referral Group NRG Network Resource Grapher NRG Numerics Rapporteur Group NRG Neuroprosthetics Research Group NRG notional requirements generator Energy's 50 percent ownership interest in the Rocky Road natural gas-fired gas-fired adj → de gas gas-fired adj → au gaz gas-fired adj (heater etc) → Gas- peaking facility near Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. . This provides Dynegy with full ownership of the 364-megawatt Rocky Road facility and a related 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. capacity contract. Northeast segment EBITDA for Dynegy's Northeast segment was $34 million in the first quarter 2006, compared to EBITDA of $16 million in the first quarter 2005. Improved results reflect the financial contribution made by the Independence facility, which was acquired in the first quarter 2005, as well as higher realized prices in 2006. In addition, the company opportunistically monetized approximately $10 million of unused emissions emissions npl → émissions fpl emissions npl → Emissionen pl credits largely associated with the Roseton facility, which ran less in the first quarter than forecast due to compressed spark spreads 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). . First quarter 2005 results included $6 million of general and administrative expenses, which are reported in the Other segment beginning in 2006. Average on-peak market prices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Zone G (Roseton and Danskammer facilities) and New York Zone A (Independence facility) were 9 percent and 3 percent higher, respectively, than during the first quarter 2005. In addition, natural gas and fuel oil prices averaged 21 percent and 43 percent higher, respectively, than during the first quarter 2005. Sales volumes generated by Northeast facilities decreased to 1 million megawatt hours during the first quarter 2006 compared to 2 million megawatt hours during the first quarter 2005, largely as a result of decreased production from the Roseton facility. South segment The loss before interest, taxes and depreciation and amortization for the South segment was $5 million during the first quarter 2006, compared to a loss of $4 million during the first quarter 2005. First quarter 2005 results included $3 million of general and administrative expenses, which are reported in the Other segment beginning in 2006. Average on-peak market prices in the Electric Reliability Council of Texas  The Electric Reliability Council of Texas (ERCOT) formed in 1970, as the successor to the Texas Interconected System (TIS). (ERCOT ERCOT Electric Reliability Council Of Texas, Inc. ) were 10 percent higher than during the first quarter
2005, the benefits of which were offset by reduced sales of ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. services from the CoGen Lyondell facility.
Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight volumes generated by South segment facilities decreased from 1.4 million megawatt hours during the first quarter 2005 to 1.1 million megawatt hours during the first quarter 2006. Customer Risk Management Business EBITDA from the Customer Risk Management segment totaled $16 million during the first quarter 2006, compared to a loss of $186 million during the first quarter 2005. First quarter 2006 results included a $29 million benefit from net mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. gains on legacy emissions trading Emissions trading (or cap and trade) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. positions, partially offset by $15 million of pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta legal charges. This segment's prior year results included a $183 million pre-tax charge associated with the Independence toll settlement and reflect the impact of fixed payments on the company's power tolling arrangements in excess of realized margins on power generated and sold. As previously announced during the fourth quarter 2005, Dynegy made a cash payment of approximately $370 million during the first quarter 2006 to terminate Terminate (terminat.exe) was a shareware modem terminal and host program for MS-DOS and compatible operating systems developed from the early to the late 1990s by the Dane Bo Bendtsen. The last release (5. the Sterlington This page is about the name Sterlington. As a Family Name Some families in North America have the surname Sterlington but it doesn't appear to be too common and is quite rare in Europe. tolling arrangement, eliminating approximately $745 million in future capacity payments. Other In the Other segment, which consists primarily of general and administrative expenses and legal and settlement charges, the company recorded a $21 million loss before interest, taxes and depreciation and amortization for the first quarter 2006, compared to a $244 million loss for the first quarter 2005. As of the first quarter 2006, general and administrative expenses are no longer allocated to the individual business segments (with the exception of $15 million of pre-tax legal charges, which have been recorded in the Customer Risk Management segment). The loss in the first quarter 2005 related primarily to a legal reserve associated with the company's shareholder class action litigation, which was settled later in 2005. 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: Interest and Taxes Interest expense totaled $98 million for the quarter ended March 31, 2006, compared to $89 million for the quarter ended March 31, 2005. The increase is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to higher average principal balances in 2006 as a result of the acquisition of Sithe v. i. 1. To sigh. n. 1. A scythe. v. t. 1. To cut with a scythe; to scythe. Energies in February February: see month. 2005 and the increases in LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). . The first quarter 2006 income tax expense 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 was $3 million, compared to an income tax benefit from continuing operations of $174 million for the first quarter 2005. Liquidity As of March 31, 2006, Dynegy's liquidity was approximately $1.9 billion. This consisted of approximately $1.7 billion in cash on hand and $222 million in unused availability under the company's former letter of credit facility. Since March 31, as the company has substantially implemented its comprehensive liability management plan, liquidity has significantly changed due to: --The repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of approximately $1.7 billion of Second Priority Senior Secured Notes along with a premium to redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. this debt early of approximately $200 million; --The addition of proceeds from a $200 million term credit facility; --The addition of proceeds from $750 million of senior unsecured bonds Noun 1. unsecured bond - the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future debenture, debenture bond ; --The increase in the company's $400 million revolving bank credit facility to $470 million; and --Normal sources and uses from operating activities including capital expenditures along with investment banking and legal fees associated with the previously mentioned liability management activities. Because of the magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the of these changes, which were principally driven by the financing activities, as of May 4, Dynegy's liquidity was approximately $1 billion, including $524 million of cash on hand and $489 million of available capacity under the company's revolving and term letter of credit bank facilities. Cash Flow Cash flow from operations, including working capital changes, totaled an outflow of $311 million for the three months ended March 31, 2006. This consisted of a cash inflow of $192 million from the power generation business, which was offset by outflows of $135 million in the Other segment resulting primarily from interest payments and general and administrative expenses. In addition, the Customer Risk Management business had cash outflows of $368 million primarily from the payment to terminate the Sterlington tolling arrangement. Cash flow from investing activities Cash Flow From Investing Activities An item on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent for the three months ended March 31, 2006 totaled $469 million. This consisted of net proceeds from asset sales of $165 million and changes in restricted cash and other of $322 million, partially offset by capital expenditures of $18 million. For the three months ended March 31, 2006, Dynegy's free cash flow (cash outflow from operations plus cash flow from investing activities) was $158 million. 2006 Cash Flow and Earnings Estimates On March 8, 2006, Dynegy provided updated cash flow and earnings estimates for 2006. Those estimates were based on quoted forward commodity price curves as of approximately four weeks earlier on Feb. 7, 2006. In connection with today's announcement, Dynegy is updating its 2006 estimates to reflect quoted forward commodity price curves as of April 11, 2006. These commodity price curves were derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from standard market quotes and are not necessarily indicative indicative: see mood. of management's expectations for commodity price movements during the rest of 2006; rather, they represent commodity price estimates as of April 11, 2006 and are intended to provide a basis on which the effects of future commodity price movements can be assessed by investors and analysts. Dynegy's updated estimates also reflect current estimates and assumptions regarding, among other things, sales volumes, fuel costs and other operational activities, as well as the impact of the company's liability management activities. Expected cash flow and earnings are negatively impacted by the costs related to the company's recently implemented liability management activities. Future benefits of these transactions are expected to include greater financial flexibility, the elimination of restrictive debt covenants, lower future interest costs, and the extension of the company's significant debt maturities to 2011 and beyond. Taking these factors into consideration, estimated EBITDA for the company's power generation business is unchanged from the previous estimate of $565 million to $660 million. The company's estimated free cash flow for 2006 is expected to be an outflow of $65 million to $175 million, compared to the previous estimate of an inflow of $85 million to $195 million. The current 2006 estimated net loss applicable to common stockholders is expected to be $175 million to $240 million, compared to the previously estimated net loss of $65 million to $130 million. The most significant change from the previous estimates for cash flow and earnings, which were established on March 8, relates to the implementation of the company's liability management program. Investor Conference Call/Web Cast Dynegy will discuss its first quarter 2006 financial results during an investor conference call and web cast today at 9 a.m. ET/8 a.m. CT. Participants may access the web cast and the related presentation materials on the "News & Financials" section of www.dynegy.com. About Dynegy Inc. Dynegy Inc. produces and sells electric energy, capacity and ancillary services in key U.S. markets. The company's power generation portfolio consists of more than 12,800 megawatts of baseload, intermediate and peaking power plants Peaking power plants, also known as peaker plants, are power plants that generally run only when there is a high demand, known as peak demand, for electricity. In the United States, this often occurs in the afternoon, especially during the summer months when the air fueled by a mix of coal, fuel oil and natural gas. DYNC Certain statements included in this news release are intended as "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. ." These statements include assumptions, expectations, predictions, intentions or beliefs about future events, particularly the statements concerning the possibility of growth opportunities, indications of a recovering power market environment, future benefits of our liability management activities, and Dynegy's estimated financial results for 2006. Historically, Dynegy's performance has deviated, in some cases materially, from its cash flow and earnings estimates, and Dynegy cautions that actual future results may vary materially from those 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. in any forward-looking statements. While Dynegy would expect to update these estimates on a quarterly basis, it does not intend to update these estimates during any quarter because definitive information regarding its quarterly financial results is not available until after the books for the quarter have been closed. Accordingly, Dynegy expects to provide updates only after it has closed the books and reported the results for a particular quarter, or otherwise as may be required by applicable law. Some of the key factors that could cause actual results to vary materially from those estimated, expected or implied include: changes in commodity prices, particularly for power and natural gas; the effects of competition and weather on the demand for Dynegy's products and services; the impacts of hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. and the strategy of reduced hedging; Dynegy's ability to successfully complete its exit from the Customer Risk Management business and fund the costs associated with this exit; the availability, ability to consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. , and effects of growth opportunities for Dynegy's power generation business; Dynegy's ability to address its substantial leverage on favorable terms; the condition of the capital markets generally and Dynegy's ability to access the capital markets as and when needed; operational factors affecting Dynegy's assets, including blackouts or other unscheduled unscheduled Adjective not planned or intended Adj. 1. unscheduled - not scheduled or not on a regular schedule; "an unscheduled meeting"; "the plane made an unscheduled stop at Gander for refueling" outages; Dynegy's remediation efforts regarding its existing material weakness; Dynegy's ability to fund the projects mandated by the Baldwin Baldwin, cities, United States Baldwin. 1 Uninc. city (1990 pop. 22,719), Nassau co., SE N.Y., on the south shore of Long Island, on Baldwin Bay; settled 1640s. A fishing center and summer resort, it has varied manufactures. consent decree A settlement of a lawsuit or criminal case in which a person or company agrees to take specific actions without admitting fault or guilt for the situation that led to the lawsuit. A consent decree is a settlement that is contained in a court order. ; availability and adequacy of emission EMISSION, med. jur. The act by which any matter whatever is thrown from the body; thus it is usual to say, emission of urine, emission of semen, &c. 2. credits; and uncertainties regarding environmental regulations, litigation and other legal or 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. developments affecting Dynegy's businesses, including litigation relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the western power and natural gas markets and master netting agreement matters. More information about the risks and uncertainties relating to these forward-looking statements are found in Dynegy's SEC filings, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2005, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and its Current Reports, which are available free of charge on the SEC's web site at http://www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . Dynegy expressly disclaims any obligation to update any forward-looking statements contained in this news release 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 that may arise after the date of this release, except as otherwise required by applicable law.
DYNEGY INC.
REPORTED UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Revenues $600 $462
Cost of sales, exclusive of depreciation and
amortization shown separately below (409) (530)
Depreciation and amortization expense (60) (55)
Impairment and other charges (2) 1
General and administrative expenses (51) (263)
--------- ---------
Operating income (loss) 78 (385)
Earnings from unconsolidated investments 2 3
Interest expense (98) (89)
Other income and expense, net 20 3
--------- ---------
Income (loss) from continuing operations
before income taxes 2 (468)
Income tax benefit (expense) (3) 174
--------- ---------
Loss from continuing operations (1) (294)
Income from discontinued operations, net of tax 1 32
Cumulative effect of change in accounting
principle, net of tax 1 -
--------- ---------
Net income (loss) $1 $(262)
--------- ---------
Less: Preferred stock dividends 5 5
--------- ---------
Net loss applicable to common stockholders $(4) $(267)
========= =========
Earnings (loss) before interest, taxes, and
depreciation and amortization (EBITDA) (1) $163 $(243)
Basic earnings (loss) per share:
Loss from continuing operations (2) $(0.01) $(0.79)
Income from discontinued operations - 0.09
Cumulative effect of change in accounting
principle - -
--------- ---------
Basic loss per share $(0.01) $(0.70)
========= =========
Diluted earnings (loss) per share:
Loss from continuing operations (2) $(0.01) $(0.79)
Income from discontinued operations - 0.09
Cumulative effect of change in accounting
principle - -
--------- ---------
Diluted loss per share $(0.01) $(0.70)
========= =========
Basic shares outstanding 400 379
Diluted shares outstanding 526 505
(1) EBITDA is a non-GAAP financial measure. Consolidated EBITDA can be
reconciled to Net income (loss) using the following calculation:
Net income (loss) less Income tax benefit (expense), plus Interest
expense and Depreciation and amortization expense. Management and
some members of the investment community utilize EBITDA to measure
financial performance on an ongoing basis. However, EBITDA should
not be used in lieu of GAAP measures such as net income and cash
flow from operations. A reconciliation of EBITDA to Operating
income (loss) and Net income (loss) for the periods presented is
included below.
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Operating income (loss) $78 $(385)
Add: Depreciation and amortization expense, a
component of operating loss 60 55
Earnings from unconsolidated investments 2 3
Other income and expense, net 20 3
EBITDA from discontinued operations (3) 2 81
Cumulative effect of change in accounting
principle, pre-tax 1 -
--------- ---------
Earnings (loss) before interest, taxes, and
depreciation and amortization (EBITDA) 163 (243)
Depreciation and amortization expense, a
component of operating loss (60) (55)
Depreciation and amortization expense from
discontinued operations - (20)
Interest expense from continuing operations (98) (89)
Interest expense from discontinued operations - (11)
Income tax benefit (expense) from continuing
operations (3) 174
Income tax expense from discontinued
operations (1) (18)
Income tax benefit on cumulative effect of
change in accounting principle - -
--------- ---------
Net income (loss) $1 $(262)
========= =========
(2) See "Reported Unaudited Basic and Diluted Loss Per Share From
Continuing Operations" for a reconciliation of basic loss per
share from continuing operations to diluted loss per share from
continuing operations.
(3) A reconciliation of EBITDA from discontinued operations to Income
from discontinued operations, net of tax for the periods presented
is included below.
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
EBITDA from discontinued operations $2 $81
Depreciation and amortization expense from
discontinued operations - (20)
Interest expense from discontinued operations - (11)
Income tax expense from discontinued
operations (1) (18)
--------- ---------
Income from discontinued operations, net of tax $1 $32
========= =========
DYNEGY INC.
REPORTED UNAUDITED BASIC AND DILUTED LOSS PER SHARE
FROM CONTINUING OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
-------------------
2006 2005
--------- ---------
Loss from continuing operations $(1) $(294)
Less: convertible preferred stock dividends 5 5
--------- ---------
Loss from continuing operations for basic loss per
share (6) (299)
Effect of dilutive securities:
Interest on convertible subordinated debentures 2 2
Dividends on Series C convertible preferred
stock 5 5
--------- ---------
Income (loss) from continuing operations for
diluted loss per share $1 $(292)
========= =========
Basic weighted-average shares 400 379
Effect of dilutive securities:
Stock options and restricted stock 2 2
Convertible subordinated debentures 55 55
Series C convertible preferred stock 69 69
--------- ---------
Diluted weighted-average shares 526 505
========= =========
Loss per share from continuing operations:
Basic $(0.01) $(0.79)
========= =========
Diluted (1) $(0.01) $(0.79)
========= =========
(1) When an entity has a net loss from continuing operations, SFAS No.
128, "Earnings per Share," prohibits the inclusion of potential
common shares in the computation of diluted per-share amounts.
Accordingly, we have utilized the basic shares outstanding amount
to calculate both basic and diluted loss per share for the three
months ended March 31, 2006 and March 31, 2005.
DYNEGY INC.
REPORTED SEGMENTED RESULTS OF OPERATIONS
(UNAUDITED) (IN MILLIONS)
Three Months Ended March 31, 2006
-------------------------------------------------
Power Generation
-------------------- ------ ------ ------ ------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------
Generation $98 $26 $(13) $111
Customer Risk
Management $14 14
Other $(47) (47)
------ ------ ------ ------ ------ ------ ------
Operating income
(loss) 98 26 (13) 14 $- (47) $78
Earnings from
unconsolidated
investments - - 2 - - - 2
Other items, net - 2 - 1 - 17 20
Cumulative effect of
change in accounting
principle, pre-tax - - - - - 1 1
Add: Depreciation and
amortization expense,
a component of
operating income
(loss) 40 6 6 - - 8 60
------ ------ ------ ------ ------ ------ ------
EBITDA from
continuing
operations (1) 138 34 (5) 15 - (21) 161
EBITDA from
discontinued
operations,
pre-tax (2) - - - 1 1 - 2
------ ------ ------ ------ ------ ------ ------
EBITDA (1) $138 $34 $(5) $16 $1 $(21) $163
Depreciation and
amortization expense (60)
Interest expense (98)
------
Pre-tax income 5
Income tax expense (4)
------
Net income $1
======
Three Months Ended March 31, 2005
-------------------------------------------------
Power Generation
-------------------- ------ ----- ------- ------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ----- ------- ------
Generation $61 $11 $(12) $60
Customer Risk
Management $(192) (192)
Other $(253) (253)
------ ------ ------ ------ ----- ------- ------
Operating income
(loss) 61 11 (12) (192) $- (253) $(385)
Earnings from
unconsolidated
investments - - 3 - - - 3
Other items, net - - - 1 - 2 3
Add: Depreciation and
amortization expense,
a component of
operating income
(loss) 37 5 5 1 - 7 55
------ ------ ------ ------ ----- ------- ------
EBITDA from
continuing
operations (1) 98 16 (4) (190) - (244) (324)
EBITDA from
discontinued
operations,
pre-tax (2) - - - 4 77 - 81
------ ------ ------ ------ ----- ------- ------
EBITDA (1) $98 $16 $(4) $(186) $77 $(244) $(243)
Depreciation and
amortization expense (75)
Interest expense (100)
------
Pre-tax loss (418)
Income tax benefit 156
------
Net loss $(262)
======
(1) See Note (1) to "Reported Unaudited Condensed Consolidated
Statements of Operations." EBITDA is a non-GAAP financial measure.
Consolidated EBITDA can be reconciled to Net income (loss) using
the following calculation: Net income (loss) less Income tax
benefit (expense), plus Interest expense and Depreciation and
amortization expense. Management and some members of the
investment community utilize EBITDA to measure financial
performance on an ongoing basis. However, EBITDA should not be
used in lieu of GAAP measures such as net income and cash flow
from operations.
(2) See Note (3) to "Reported Unaudited Condensed Consolidated
Statements of Operations."
DYNEGY INC.
SIGNIFICANT ITEMS
(UNAUDITED) (IN MILLIONS)
Three Months Ended March 31, 2006
------------------------------------------------
Power Generation
-------------------- ------ ------ ------ ------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------
Legal and settlement
charges (1) $- $- $- $(15) $- $- $(15)
------ ------ ------ ------ ------ ------ ------
Total $- $- $- $(15) $- $- $(15)
====== ====== ====== ====== ====== ====== ======
Three Months Ended March 31, 2005
------------------------------------------------
Power Generation
-------------------- ------ ------ ------ ------
GEN-MW GEN-NE GEN-SO CRM NGL OTHER Total
------ ------ ------ ------ ------ ------ ------
Legal and settlement
charges (2) $- $- $- $- $- $(222) $(222)
Independence toll
settlement
charge (3) - - - (183) - - (183)
Discontinued
operations (4) - - - 4 46 - 50
------ ------ ------ ------ ------ ------ ------
Total $- $- $- $(179) $46 $(222) $(355)
====== ====== ====== ====== ====== ====== ======
(1) We recognized a pre-tax loss of approximately $15 million ($9
million after-tax) related to legal and settlement charges. This
loss is included in General and administrative expenses.
(2) We recognized a pre-tax loss of approximately $222 million ($156
million after-tax) related to the settlement of our class action
shareholder lawsuit. This loss is included in General and
administrative expenses.
(3) We recognized a pre-tax loss of approximately $183 million ($109
million after-tax) related to the Independence toll settlement
charge following our acquisition of ExRes SHC, Inc., the parent
company of Sithe Energies, Inc. and Sithe / Independence Power
Partners, L.P. This loss is included in Cost of sales.
(4) We recognized pre-tax income of approximately $50 million ($32
million after-tax) related to discontinued operations. The income
consists primarily of $46 million associated with our NGL segment.
DYNEGY INC.
SUMMARY CASH FLOW INFORMATION
(UNAUDITED) (IN MILLIONS)
Three Months Ended March 31, 2006
------------------------------------------
GEN (1) CRM NGL REG OTHER Total
------- ------ ------ ------ ------ ------
Cash Flow from Operations $192 $(368) $- $- $(135) $(311)
Capital Expenditures (17) - - - (1) (18)
Business Acquisition Costs (40) - - - - (40)
Proceeds from Asset
Sales (2) 205 - - - - 205
Restricted Cash and
Other (3) (13) - - - 335 322
------- ------ ------ ------ ------ ------
Free Cash Flow (4) $327 $(368) $- $- $199 $158
======= ====== ====== ====== ====== ======
Three Months Ended March 31, 2005
------------------------------------------
GEN (1) CRM NGL REG OTHER Total
------- ------ ------ ------ ------ ------
Cash Flow from Operations $91 $(26) $69 $- $(168) $(34)
Capital Expenditures (40) - (10) - (4) (54)
Business Acquisition Costs (120) - - - - (120)
Proceeds from Asset
Sales (5) - - - (5) - (5)
------- ------ ------ ------ ------ ------
Free Cash Flow (4) $(69) $(26) $59 $(5) $(172) $(213)
======= ====== ====== ====== ====== ======
(1) Beginning in the fourth quarter 2005, we report the results of our
power generation business as three separate segments in our
consolidated financial statements: (1) the Midwest segment
(GEN-MW); (2) the Northeast segment (GEN-NE); and (3) the South
segment (GEN-SO). For the purpose of this schedule, GEN includes
the three combined segments.
(2) During the first quarter 2006, we received proceeds of
approximately $205 million from the sale of West Coast Power.
(3) Restricted cash and other primarily relates to the $335 million
return of cash collateral posted for October 2005 LC facility.
(4) Free cash flow is a non-GAAP financial measure. Free cash flow can
be reconciled to operating cash flow using the following
calculation: Operating cash flow plus investing cash flow
(consisting of asset sale proceeds less business acquisition
costs, capital expenditures and changes in restricted cash) equals
free cash flow. We use free cash flow to measure the cash
generating ability of our operating asset-based energy business
relative to our capital expenditure obligations. Free cash flow
should not be used in lieu of GAAP measures with respect to cash
flows and should not be interpreted as available for discretionary
expenditures, as mandatory expenditures such as debt obligations
are not deducted from the measure. A reconciliation of free cash
flow to cash flow from operations by segment for the periods
presented is included above.
(5) During the first quarter 2005, we paid approximately $5 million to
Ameren related to the working capital adjustment for our sale of
Illinois Power.
DYNEGY INC.
OPERATING DATA
Three Months Ended
March 31,
------------------
2006 2005
--------- --------
GEN - MW
Million Megawatt Hours Generated - Gross and Net 5.4 5.0
Average On-Peak Market Power Prices ($/MWh):
Cinergy (Cin Hub) $49 $49
Commonwealth Edison (NI Hub) $50 $49
GEN - NE
Million Megawatt Hours Generated - Gross and Net 1.0 2.0
Average On-Peak Market Power Prices ($/MWh):
New York - Zone G $76 $70
New York - Zone A $60 $58
GEN - SO
Million Megawatt Hours Generated - Gross 1.4 1.8
Million Megawatt Hours Generated - Net 1.1 1.4
Average On-Peak Market Power Prices ($/MWh):
Southern $55 $49
ERCOT $56 $51
SP-15 $58 $56
Average Natural Gas Price - Henry Hub ($/MMBtu) (1) $7.75 $6.39
(1) Calculated as the average of the daily gas prices for the period.
DYNEGY INC.
2006 EARNINGS ESTIMATES (1)
(IN MILLIONS)
GEN-MW GEN-NE GEN-SO Total GEN CRM
--------- --------- --------- --------- ---------
EBITDA (2) $490-540 $80-115 $(5)-5 $565-660 $5
Depreciation and
Amortization (175) (25) (25) (225) -
Interest Expense
Income Tax Benefit
(Expense)
Preferred Stock
Dividends
Net Income (Loss)
Less:
Non-Core Total Core
OTHER Total (5) Business
---------- ---------- ---------- ----------
EBITDA (2) $(100-90) $470-575 $(15) $485-590
Depreciation and
Amortization (10) (235) - (235)
Interest Expense (580) (270) (310)
Income Tax Benefit
(Expense) 127-87 105 22-(18)
Preferred Stock
Dividends (22) - (22)
---------- ---------- ----------
Net Income (Loss) $(240-175) $(180) $(60)-5
========== ========== ==========
2006 CASH FLOW ESTIMATES (1)
(IN MILLIONS)
Less: Total
Non-Core Core
GEN (4) CRM OTHER Total (6) Business
--------- -------- ---------- ---------- -------- --------
Cash Flow
from
Operations $530-630 $(390) $(420-410) $(280-170) $(350) $70-180
Capital
Expendi-
tures (185) - (5) (190) (5) (185)
Proceeds
from Asset
Sales 160 - - 160 160 -
Changes in
Restricted
Cash - - 135 135 135 -
--------- -------- ---------- ---------- -------- --------
Free Cash
Flow (3) $505-605 $(390) $(290-280) $(175-65) $(60) $(115-5)
========= ======== ========== ========== ======== ========
(1) 2006 estimates are presented on a GAAP basis and are based on
quoted forward commodity price curves as of April 11, 2006. Actual
results may vary materially from these estimates based on changes
in commodity prices, among other things, including operational
activities, legal settlements, financing or investing activities
and other uncertain or unplanned items. Core business represents
continuing results, excluding significant items.
(2) EBITDA is a non-GAAP financial measure. Consolidated EBITDA can be
reconciled to Net income (loss) using the following calculation:
Net income (loss) less Income tax benefit, plus Interest expense
and Depreciation and amortization expense. Management and some
members of the investment community utilize EBITDA to measure
financial performance on an ongoing basis. However, EBITDA should
not be used in lieu of GAAP measures such as net income (loss) and
cash flow from operations.
(3) Free cash flow is a non-GAAP financial measure. Free cash flow can
be reconciled to operating cash flow using the following
calculation: Operating cash flow plus investing cash flow
(consisting of asset sale proceeds less business acquisition
costs, capital expenditures and changes in restricted cash) equals
free cash flow. We use free cash flow to measure the cash
generating ability of our operating asset-based energy business
relative to our capital expenditure obligations. Free cash flow
should not be used in lieu of GAAP measures with respect to cash
flows and should not be interpreted as available for discretionary
expenditures, as mandatory expenditures such as debt obligations
are not deducted from the measure. A reconciliation of free cash
flow to cash flow from operations by segment for the periods
presented is included above.
(4) Beginning in the fourth quarter 2005, we report the results of our
power generation business as three separate segments in our
consolidated financial statements: (1) the Midwest segment
(GEN-MW); (2) the Northeast segment (GEN-NE); and (3) the South
segment (GEN-SO). For the purpose of this schedule, GEN includes
the three combined segments.
(5) The following summarizes the items included in Non-core business
in our earnings guidance estimate.
Depreciation Income Tax Net
and Interest Benefit Income
EBITDA Amortization Expense (Expense) (Loss)
----------- ------------- --------- ----------- --------
Legal and
settlement
charges (CRM
segment) $(15) $- $- $5 $(10)
CORP
operating
results
(CORP
segment) - - (270) 100 (170)
----------- ------------- --------- ----------- --------
Total $(15) $- $(270) $105 $(180)
=========== ============= ========= =========== ========
(6) The following summarizes the items included in Non-core business
in our cash flow estimate.
Proceeds
Cash Flow from Changes in Free
from Capital Asset Restricted Cash
Operations Expenditures Sales Cash Flows
----------- ------------- --------- ----------- --------
Sterlington
toll
settlement
payment
(CRM) $(370) $- $- $- $(370)
Development
Capital
Expenditures
(GEN) - (5) - - (5)
Net proceeds
from sale of
West Coast
Power and
acquisition
of Rocky
Road (GEN) - - 160 - 160
Return of
Cash
Collateral
from October
2005 LC
Facility
(OTHER) - - - 335 335
Cash
Collateral
Posted for
April 2006
LC Facility
(OTHER) - - - (200) (200)
Favorable
legal
litigation
settlement
(OTHER) 20 - - - 20
----------- ------------- --------- ----------- --------
Total $(350) $(5) $160 $135 $(60)
=========== ============= ========= =========== ========
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