KANSAS CITY, Mo., Nov. 2, 2006 (PRIMEZONE) -- Aquila, Inc. (NYSE:ILA) today reported net income of $115.7 million for the 2006 third quarter ending September 30, or fully diluted per share earnings of 31 cents, compared to a net loss of $75.7 million for the 2005 third quarter, or a fully diluted per share loss of 20 cents. These results reduced the net loss for the nine-month period ending September 30, 2006 to $40.4 million, or a fully diluted per share loss of 11 cents, compared to a net loss of $102.2 million, or a fully diluted per share loss of 25 cents, for the nine-month period ending September 30, 2005.
"Utility operations continue to improve," said Richard C. Green, Aquila's chairman and chief executive officer. "Through all of the adversity, everyone at Aquila has remained focused on our customers, making sure they receive the energy that fuels their daily lives. Closing several of the remaining transactions in our repositioning plan has been a significant achievement by our employees during 2006. Debt has been reduced by almost 30 percent, strengthening our financial position, and the credit agencies have responded favorably to this reduction."
Significant contributors to current quarter net income were a $71.5 million after-tax gain on the sale of Aquila's Minnesota gas utility business and a $56 million income tax benefit from applying estimated capital gains on the sale of the company's Michigan and Missouri gas utility businesses against capital loss carryforwards. The third quarter 2005 net loss was primarily the result of a $82.3 million loss on the early conversion of the company's Premium Income Equity Securities (PIES).
Total Company EBITDA
Total company EBITDA of $38.9 million for the third quarter of 2006 improved by $55.3 million from the third quarter of 2005. The $20.7 million decrease in third quarter 2006 continuing utility EBITDA discussed below was more than offset by an $83.5 million increase in Corporate and Other EBITDA primarily due to the 2005 loss resulting from the PIES early conversion.
Total company EBITDA for the nine-month period ending September 30, 2006 was a loss of $132 million compared to 2005 year-to-date earnings of $57 million. The third quarter significant factors already discussed and a $218 million loss on the June 2006 assignment of the company's Elwood tolling agreement were the primary causes of the year-to-year EBITDA decrease.
Sales
Continuing operations produced third quarter 2006 sales of $316.6 million, an increase of $15.8 million from the prior year's third quarter. Sales from the company's continuing utility businesses rose $24.1 million for the quarter. Year-to-date 2006 sales increased to $1 billion, a $114.2 million improvement from 2005 sales of $916.4 million. Utility sales accounted for $118.4 million of the nine-month increase.
Segment EBITDA
Continuing electric utility operations in Missouri and Colorado and natural gas utility operations in Iowa, Kansas, Nebraska and Colorado reported third quarter 2006 earnings before interest, taxes, depreciation and amortization (EBITDA) of $59.6 million, down $20.7 million from $80.3 million reported in 2005. Electric Utilities EBITDA decreased $24.4 million from the third quarter of 2005 primarily due to a change in the regulatory treatment of the market value of NYMEX natural gas contracts. Gas Utilities reported an EBITDA increase of $3.7 million, reflecting lower operating cost allocations and a rate settlement in Iowa.
Electric Utilities
Gross profit in the current quarter was $108.4 million, a decrease of $17 million from the third quarter of 2005. This decrease resulted primarily from the change in regulatory treatment of the market value of certain NYMEX natural gas contracts. In accordance with a Missouri rate settlement effective in March 2006, the market value of these contracts was recorded as a regulatory asset or liability beginning in December 2005. However, market value increases totaling $20.7 million for these contracts were recognized as income in the third quarter of 2005.
Also contributing to the electric utility EBITDA decrease was a $3.9 million increase in operation and maintenance expenses due primarily to a $2.3 million increase in the allocation of executive management and central services costs. A change in the methodology for allocating these costs beginning January 1, 2006 resulted in an increased allocation of costs to Electric Utilities and a decreased allocation of costs to Gas Utilities. A $1.2 million increase in labor and benefit costs and a $.4 million increase in insurance costs caused the remainder of the electric utilities operation and maintenance expense increase over the third quarter of 2005.
Gas Utilities
Gross profit in the current quarter was $31.4 million, $1.2 million higher than the third quarter of 2005 primarily due to a rate settlement in Iowa effective in May 2005 on an interim basis and finalized in March 2006. Also contributing to the gas utility EBITDA increase was a $2.1 million decrease in operation and maintenance expenses primarily caused by the executive management and central services cost allocation change mentioned above.
Merchant Services
Merchant Services reported an EBITDA loss of $17 million in the third quarter of 2006, compared to a loss of $9.5 million in the third quarter of 2005. The primary cause of the greater loss in the current quarter was a $9.3 million increase in the company's price reporting litigation reserve.
Corporate and Other
Corporate and Other reported a third quarter 2006 EBITDA loss of $3.7 million, compared to an $87.2 million loss in the third quarter of 2005. In the current quarter Aquila paid $5.5 million in fees mostly associated with prepaying the company's $210 million term loan, while in the prior year the company recorded an $82.3 million loss on the early conversion of the PIES. Contributing to the reduced loss in the current quarter were higher interest income on available cash balances and lower letter of credit fees on the company's credit facilities.
Discontinued Operations
Discontinued Operations reported EBITDA of $140.7 million in the third quarter of 2006, compared to $36.6 million in the third quarter of 2005. Included in discontinued operations are the company's Kansas electric utility operations; its former Michigan, Minnesota, and Missouri gas utility operations; its former Everest Connections telecommunications subsidiary; and its former Goose Creek and Raccoon Creek merchant peaking plants in Illinois.
The company's former gas divisions and Kansas electric held-for-sale utility business reported EBITDA of $141.8 million in the third quarter of 2006, which was a $108.9 million increase from earnings of $32.9 million reported in the third quarter of 2005. A current quarter gain of $122 million on the July 1, 2006 sale of Aquila's Minnesota gas utility assets was the primary cause of the quarter-to-quarter EBITDA increase. Offsetting the gain on sale was a $10.7 million EBITDA decrease due to no longer owning the sold gas utility properties in the third quarter of 2006.
Conference Call, Webcast and Additional Information
Today at 9:30 a.m. Eastern Time, Aquila will host a conference call and webcast in which senior executives will review third quarter 2006 results. Participants will be Chief Executive Officer Richard C. Green, Chief Operating Officer Keith Stamm and Chief Accounting Officer Beth Armstrong.
To access the live webcast via the Internet, 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 Thursday, November 9, 2006 at 800-405-2236 in the United States, and at 303-590-3000 for international callers. Callers need to enter the access code 11074957 when prompted.
Based in Kansas City, Missouri, Aquila operates electric power generation and electric and natural gas transmission and distribution utilities serving approximately 903,265 customers in communities in Colorado, Iowa, Kansas, Missouri and Nebraska. At September 30, 2006, Aquila had total assets of $3.4 billion. More information is available at www.aquila.com.
The Aquila, Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=1753
"EBITDA"
Aquila uses the term "earnings before interest, 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 with generally accepted accounting principles. In addition, the term may not be comparable to similarly titled measures used by other companies.
AQUILA, INC.
Consolidated Statements of Income
---------------------------------
3 Months Ended 9 Months Ended
September 30, September 30,
In millions, except ---------------------------------------
per share amounts 2006 2005 2006 2005
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Sales $ 316.6 $ 300.8 $1,030.6 $ 916.4
Cost of sales 181.8 151.2 661.2 563.4
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Gross profit 134.8 149.6 369.4 353.0
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Operating expenses:
Operation and maintenance
expense 87.8 79.3 240.8 230.6
Taxes other than income taxes 8.5 7.0 22.6 15.8
Restructuring charges .6 -- 5.5 6.6
Net loss on asset sales and
other charges 5.5 82.3 246.9 56.7
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Total operating expenses 102.4 168.6 515.8 309.7
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Other income (expense) 6.5 2.6 14.4 13.7
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Earnings (loss) before
interest, taxes, depreciation
and amortization 38.9 (16.4) (132.0) 57.0
Depreciation and amortization
expense 27.0 26.0 78.5 78.4
Total interest expense 42.7 35.6 124.4 115.5
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Loss from continuing
operations before
income taxes (30.8) (78.0) (334.9) (136.9)
Income tax expense (benefit) (10.2) 2.0 (43.9) (20.1)
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Loss from continuing
operations (20.6) (80.0) (291.0) (116.8)
Earnings from discontinued
operations, net of tax 136.3 4.3 250.6 14.6
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Net income (loss) $ 115.7 $ (75.7) $ (40.4) $ (102.2)
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Weighted average shares
outstanding - diluted 375.8 372.9 375.0 359.5
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Loss per share from
continuing operations
- diluted $ (.05) $ (.21) $ (.78) $ (.29)
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Earnings per share from
discontinued operations
- diluted .36 .01 .67 .04
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Net income (loss) per
share - diluted $ .31 $ (.20) $ (.11) $ (.25)
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AQUILA, INC.
Segment EBITDA Reconciliation to Continuing Operations Pretax Loss
------------------------------------------------------------------
3 Months Ended
September 30,
------------------ Favorable
In millions 2006 2005 (Unfavorable)
--------------------------------------------------------------------
Utilities:
Electric Utilities $ 58.0 $ 82.4 $ (24.4)
Gas Utilities 1.6 (2.1) 3.7
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Total Utilities 59.6 80.3 (20.7)
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Merchant Services (17.0) (9.5) (7.5)
Corporate and Other (3.7) (87.2) 83.5
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Total EBITDA 38.9 (16.4) 55.3
Depreciation and amortization 27.0 26.0 (1.0)
Interest expense 42.7 35.6 (7.1)
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Loss from continuing
operations before income taxes $ (30.8) $ (78.0) $ 47.2
====================================================================
9 Months Ended
September 30,
------------------ Favorable
In millions 2006 2005 (Unfavorable)
--------------------------------------------------------------------
Utilities:
Electric Utilities $ 120.5 $ 139.8 $ (19.3)
Gas Utilities 29.3 19.9 9.4
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Total Utilities 149.8 159.7 (9.9)
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Merchant Services (249.0) (9.8) (239.2)
Corporate and Other (32.8) (92.9) 60.1
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Total EBITDA (132.0) 57.0 (189.0)
Depreciation and
amortization 78.5 78.4 (.1)
Interest expense 124.4 115.5 (8.9)
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Loss from continuing
operations before
income taxes $(334.9) $(136.9) $(198.0)
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AQUILA, INC.
Consolidated Balance Sheets
---------------------------
September 30, December 31,
In millions 2006 2005
---------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 216.5 $ 14.2
Short-term investments 42.5 --
Restricted cash 9.2 10.9
Funds on deposit 116.6 264.9
Accounts receivable, net 195.2 399.7
Price risk management assets 94.8 200.0
Inventories and other current assets 174.2 185.4
Current assets of discontinued operations 25.8 269.0
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Total current assets 874.8 1,344.1
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Utility plant, net 1,773.4 1,741.9
Non-utility plant, net 129.3 135.4
Price risk management assets 60.5 177.7
Goodwill, net 111.0 111.0
Prepaid pension 58.4 68.3
Deferred charges and other assets 163.6 154.4
Non-current assets of discontinued
operations 269.5 897.9
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Total Assets $3,440.5 $4,630.7
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long-term debt $ 18.4 $ 88.3
Short-term debt -- 12.0
Accounts payable 115.0 356.2
Accrued interest and other accrued
liabilities 198.7 249.0
Price risk management liabilities 89.4 164.9
Customer funds on deposit 14.0 74.0
Current liabilities of discontinued
operations 1.2 30.5
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Total current liabilities 436.7 974.9
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Long-term debt, net 1,389.0 1,891.2
Deferred income taxes and credits 103.9 71.5
Price risk management liabilities 50.4 138.9
Deferred credits 165.9 180.7
Non-current liabilities of
discontinued operations 22.5 63.6
Common shareholders' equity 1,272.1 1,309.9
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Total Liabilities and
Shareholders' Equity $3,440.5 $4,630.7
=====================================================================