Avista Corp. Reports Q4 2002, Year-End Earnings
SPOKANE, Wash., Jan. 30 /PRNewswire-FirstCall/ -- Avista Corp. (NYSE: AVA) today reported fourth-quarter 2002 consolidated revenues of $265.3 million and net income available for common stock of $10.9 million, or earnings of $0.23 per diluted share. For the equivalent quarter last year, Avista reported revenues of $318.2 million and a net loss of $8.3 million, or a loss of $0.17 per share.
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For the year 2002, consolidated revenues were $980.4 million and Avista's net income available for common stock was $28.9 million, or $0.60 per diluted share. This compares with 2001 revenues of $1.4 billion and net income of $9.7 million, or $0.20 per diluted share. In accordance with generally accepted accounting principles, revenues for Avista Energy are presented on a net basis instead of gross revenues and resource expense. This change in accounting results in reduced operating revenues and resource costs, but has no impact on Avista's net income or financial condition. All historical financial information has been restated for comparability, as required by the Financial Accounting Standards Board.
The company's business segments reported the following fourth-quarter and full-year performance:
Business Segments: Q4 2002 FY 2002 Avista Utilities $0.23 $0.71 Energy Trading & Marketing $0.06 $0.47 Information & Technology ($0.04) ($0.25) Other ($0.04) ($0.26) SUBTOTAL (continuing operations) $0.21 $0.67 Avista Communications (discontinued operations) $0.02 $0.02 SUBTOTAL (before cumulative effect of accounting change) $0.23 $0.69 Cumulative effect of accounting change* ---- ($0.09) TOTAL -- diluted EPS $0.23 $0.60
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With the adoption of a new accounting standard related to goodwill, Avista took a $4.1 million after-tax impairment in Q1 2002 related to an Avista Ventures subsidiary, resulting in a charge of $0.09 per share.
"Avista recorded substantial progress this past year in its strategy to restore the company's focus on the basics," said Gary G. Ely, Avista Corp. chairman, president and chief executive officer. "Our two principal energy businesses operated profitably, generating solid cash flows. We took advantage of those cash flows to repurchase $204 million of debt -- reducing future interest expense -- achieving a debt-to-equity ratio of approximately 55 percent, better than the average for the nation's utilities, and receiving an upgrade in our credit outlook to stable from Standard & Poor's. With the resolution of an important rate case in the state of Washington, we put in place a mechanism that will enhance the predictability of future earnings. Finally, we made significant progress in resolving the Federal Energy Regulatory Commission investigation of Avista's trading practices.
"We enter 2003 with a commitment to a continued, disciplined focus on getting Avista back to basics," Ely continued. "We intend to concentrate on delivering reliable, low-cost energy, generating enhanced cash flows and continuing our cost-containment measures. We do so mindful of the challenges presented by an uncertain economy and equally uncertain weather conditions."
Regulatory Update
During the fourth quarter, as previously reported, the Federal Energy Regulatory Commission (FERC) staff and Avista filed a joint motion to suspend the procedural schedule and announced that the company and FERC staff had reached an agreement in principle to resolve FERC's investigation into Avista. The FERC trial staff's investigation found no evidence that Avista knowingly engaged in or facilitated any improper energy trading strategy, nor engaged in any efforts to manipulate the western energy markets during 2000 and 2001. The FERC staff found that Avista did not withhold relevant information in the prior inquiries and that Avista cooperated with FERC's investigation.
Chief Administrative Law Judge Curtis Wagner approved the motion to suspend the procedural schedule. Avista and the FERC staff soon expect to file a formal agreement in resolution with Judge Wagner which, if approved by the FERC, would resolve all issues in the investigation. The parties will request that Judge Wagner certify the agreement to the FERC for approval, following a 30-day comment period.
Avista Utilities
Avista Utilities' earnings increased in 2002 compared with 2001. Gross margin for Avista Utilities improved during the fourth-quarter and full-year 2002 compared with the same periods last year. This was a result of increased electric rates that were partially offset by an increase in other operating expenses. Full-year and fourth-quarter 2001 gross margin was reduced due to a one-time $22 million write-off of deferred power costs. Interest expense was reduced during fourth-quarter 2002 due to the repurchase of high-cost debt throughout 2002.
Warmer-than-normal temperatures in the fourth quarter reduced electric loads by 3 percent compared to normal loads. Warm temperatures during the month of December resulted in 7 percent below-normal electric loads.
The most recent measurements show snowpack for the Clark Fork River basin is approximately 60 percent of normal, with projected runoff at 60 percent of normal for 2003. Approximately 80 percent of company-owned hydro generation is on the Clark Fork River. The Spokane River snowpack is 65 percent of normal and projected runoff is 68 percent of normal for 2003. These forecasts assume a trend toward normal precipitation through April 1, when the current snow accumulation season ends.
While Avista anticipates below-normal hydroelectric conditions as it enters 2003, due to drier- and warmer-than-normal weather, the company currently believes it has sufficient generating capacity to cover its load requirements and will choose the most appropriate cost-effective resources to meet its customer needs. Most of the higher costs that are incurred will be covered under the energy recovery mechanism in Washington and a similar power cost adjustment mechanism in Idaho which allow Avista to defer for later recovery 90 percent of the increased costs associated with these below-normal hydroelectric conditions.
The start-up date for the Coyote Springs 2 combined-cycle gas turbine plant located near Boardman, Ore., has been delayed until mid-2003. The transformer that was ordered to replace the original transformer that failed last May was damaged during shipment and has been returned to the manufacturer for repair. Avista has purchased replacement power and does not expect a material financial impact related to the delay.
Energy Trading & Marketing
During the fourth-quarter 2002, the company's unregulated energy trading and marketing business, Avista Energy, delivered its eleventh consecutive quarter of positive earnings.
Avista Energy's earnings in the quarter continued to be affected by several factors, including less volatility in the western wholesale energy markets and fewer creditworthy counter-parties now participating in the electric and natural gas wholesale trading markets.
"Avista Energy's profitable performance can be attributed to our asset- backed optimization of combustion turbines and hydro assets, long-term electric supply contracts, natural gas storage, and electric and natural gas transmission and transportation arrangements. What differentiates Avista Energy from most others in the industry is our team's experience and knowledge of western markets and the assets we optimize," said Ely.
Outlook and Earnings Guidance
Avista reaffirmed its 2003 consolidated corporate earnings outlook of between $0.80 to $1.00 per diluted share. This guidance is prior to any adjustments related to cumulative changes in accounting principles and includes a range of $0.60 to $0.80 for Avista Utilities, $0.20 to $0.30 for the Energy Trading & Marketing segment and a loss of between $0.10 and $0.15 for the Information & Technology businesses.
"There are several factors which could impact our ability to achieve these targets," said Chief Financial Officer and Senior Vice President Malyn K. Malquist. "We continue to see uncertainty and weakness in the wholesale energy markets. At Avista Utilities, we are concerned about the warm weather and lack of snowpack we've experienced so far this year. Like many companies, we also continue to address increasing pension and insurance expenses. We are focused on controlling costs and improving revenues to mitigate these potential negatives, and believe we are on course to meet our 2003 earnings target."
Avista Corp. is an energy company involved in the production, transmission and distribution of energy as well as other energy-related businesses. Avista Utilities is a company operating division that provides electric and natural gas service to customers in four western states. Avista's non-regulated affiliates include Avista Advantage, Avista Energy and Avista Labs. Avista Corp.'s stock is traded under the ticker symbol "AVA" and its Internet address is www.avistacorp.com.
NOTE: | Avista Corp. and the Avista Corp. logo are trademarks of Avista |
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Corporation. All other trademarks mentioned in this document are the property | |
of their respective owners. |
This news release contains forward-looking statements regarding the company's current expectations. Forward-looking statements are all statements other than historical facts. Such statements speak only as of the date of the news release and are subject to a variety of risks and uncertainties, many of which are beyond the company's control, and which could cause actual results to differ materially from the expectations. These risks and uncertainties include, in addition to those discussed herein, all of the factors discussed in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2001, and the Quarterly Report on Form 10-Q for the quarters ended March 31, June 30, and Sept. 30, 2002.
NOTE: | Avista Corp. will host an investor conference call on Jan. 30, 2003, |
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at 10:30 a.m. EST (New York Time). To participate, call 712-257-0400 | |
approximately five minutes in advance to ensure you are connected. The | |
passcode is "Avista." |
A replay of the conference call will be available beginning Jan. 30, at 3 p.m. EST through Sat., Feb. 1, at 11:30 a.m. EST. Call 402-998-1460 to listen to the replay.
A Webcast of this investor conference call will occur simultaneously. To register for the Webcast, please go to www.avistacorp.com
A Webcast replay will be available through 8 p.m. EST on Feb. 6, at www.avistacorp.com
The attached income statement and financial and operating highlights are an integral part of this earnings release.
AVISTA CORPORATION CONSOLIDATED COMPARATIVE STATEMENTS OF INCOME (UNAUDITED) (Dollars in Thousands except Per Share Amounts)
Year Ended Fourth Quarter December 31, 2002 2001 2002 2001 OPERATING REVENUES (Note 1) $265,275 $318,210 $980,446 $1,395,313 OPERATING EXPENSES: Resource costs (Note 1) 128,509 215,399 453,525 849,996 Operations and maintenance 31,506 30,806 122,920 125,656 Administrative and general 30,076 25,374 118,766 119,216 Depreciation and amortization 19,337 17,873 73,275 71,981 Taxes other than income taxes 15,780 15,083 67,273 59,172 Total operating expenses 225,208 304,535 835,759 1,226,021 INCOME FROM OPERATIONS 40,067 13,675 144,687 169,292 OTHER INCOME (EXPENSE): Interest expense (24,661) (29,791) (105,336) (106,480) Capitalized interest -- 3,160 7,486 10,498 Net interest expense (24,661) (26,631) (97,850) (95,982) Other income - net 2,786 1,915 17,467 20,681 Total other income (expense) - net (21,875) (24,716) (80,383) (75,301) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 18,192 (11,041) 64,304 93,991 INCOME TAXES 7,651 (6,434) 29,994 34,386 INCOME (LOSS) FROM CONTINUING OPERATIONS 10,541 (4,607) 34,310 59,605 INCOME (LOSS) FROM DISCONTINUED OPERATIONS (Note 2) 936 (3,055) 1,145 (47,449) NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 11,477 (7,662) 35,455 12,156 CUMULATIVE EFFECT OF ACCOUNTING CHANGE (net of tax) (Note 3) -- -- (4,148) -- NET INCOME (LOSS) 11,477 (7,662) 31,307 12,156 DEDUCT - Preferred stock dividend requirements 578 608 2,402 2,432 INCOME (LOSS) AVAILABLE FOR COMMON STOCK $10,899 $(8,270) $28,905 $9,724 Average common shares outstanding (thousands), Basic 47,978 47,569 47,823 47,417 EARNINGS (LOSS) PER COMMON SHARE, DILUTED: Earnings (loss) per common share from continuing operations $0.21 $(0.11) $0.67 $1.20 Earnings (loss) per common share from discontinued operations (Note 2) 0.02 (0.06) 0.02 (1.00) Earnings (loss) per common share before cumulative effect of accounting change 0.23 (0.17) 0.69 0.20 Loss per common share from cumulative effect of accounting change (Note 3) -- -- (0.09) -- Total earnings (loss) per common share, diluted $0.23 $(0.17) $0.60 $0.20 Dividends paid per common share $0.12 $0.12 $0.48 $0.48 SUPPLEMENTAL INFORMATION INCOME (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT: Avista Utilities $11,595 $(2,496) $36,382 $24,164 Energy Trading and Marketing $3,007 $6,632 $22,425 $63,246 Information and Technology $(2,204) $(3,765) $(12,117) $(19,384) Other $(1,857) $(4,978) $(12,380) $(8,421)
Note 1. In June 2002, the Emerging Issues Task Force reached a partial
consensus on Issue 02-3 regarding the accounting for contracts involved in energy trading and risk management activities. The partial consensus requires that all gains and losses arising from energy trading contracts be presented on a net basis in the income statement beginning in the quarter ended September 30, 2002. Historical comparable periods have been restated. The Company historically presented gains and losses on energy trading contracts on a gross basis. This change in accounting results in reduced operating revenues and resource costs with no impact on the Company's net income or financial condition.
Note 2. In September 2001, the Company decided to dispose of
substantially all of the assets of Avista Communications. The divestiture of operating assets was substantially completed by the end of 2002. Certain liabilities of the operations will not be settled until 2003.
Note 3. Represents the transitional adjustment related to the Company's
adoption of an accounting standard for goodwill. The Company determined that $6.4 million of goodwill related to a subsidiary of Avista Ventures was impaired in accordance with this accounting standard. The Company recorded this impairment (net of tax) as a cumulative effect of accounting change. AVISTA CORPORATION FINANCIAL AND OPERATING HIGHLIGHTS (Dollars in Thousands)
Year Ended Fourth Quarter December 31, 2002 2001 2002 2001 Avista Utilities Retail electric revenues $123,400 $114,700 $463,667 $398,441 Retail kWh sales (in millions) 2,002 2,074 7,584 8,018 Retail electric customers at end of period 320,210 316,694 320,210 316,694 Wholesale electric revenues $12,612 $56,987 $64,082 $480,903 Wholesale kWh sales (in millions) 347 794 2,216 6,262 Other electric revenues $18,954 $17,922 $56,392 $42,860 Total natural gas revenues $90,840 $110,283 $309,823 $308,643 Total therm sales (in thousands) 159,169 162,366 516,491 541,984 Retail natural gas customers at end of period 290,188 284,340 290,188 284,340 Income from operations (pre-tax) $40,589 $19,649 $149,180 $114,927 Energy Trading and Marketing Revenues (Note 1) $10,093 $11,101 $54,207 $134,266 Income from operations (pre-tax) $3,911 $3,676 $29,211 $94,669 Electric sales (millions of kWhs) 9,800 11,369 40,426 47,927 Natural gas sales (thousands of dekatherms) 56,276 68,180 225,983 248,193 Information and Technology Avista Advantage Revenues $4,729 $3,594 $16,911 $13,151 Loss from operations (pre-tax) $(902) $(3,270) $(6,363) $(15,098) Net loss $(702) $(2,698) $(4,253) $(10,748) Avista Labs Revenues $367 $136 $719 $664 Loss from operations (pre-tax) $(2,108) $(3,371) $(12,455) $(14,774) Net loss $(1,502) $(1,067) $(7,864) $(8,636) Other Revenues $4,280 $3,487 $14,645 $16,385 Loss from operations (pre-tax) $(1,423) $(3,009) $(14,886) $(10,432)
Note 1. In June 2002, the Emerging Issues Task Force reached a partial
consensus on Issue 02-3 regarding the accounting for contracts involved in energy trading and risk management activities. The partial consensus requires that all gains and losses arising from energy trading contracts be presented on a net basis in the income statement beginning in the quarter ended September 30, 2002. Historical comparable periods have been restated. The Company historically presented gains and losses on energy trading contracts on a gross basis. This change in accounting results in reduced operating revenues and resource costs with no impact on the Company's net income or financial condition.
SOURCE Avista Corp.
-0- 01/30/2003
/CONTACT: Media: Laurine Jue, +1-509-495-2510, or laurine.jue@avistacorp.com, or Investors: Angela Teed, +1-509-495-2930, or angela.teed@avistacorp.com, both of Avista Corp./
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