ALLETE Reports Third Quarter Results; Raises 2004 Earnings Guidance for Continuing Operations
DULUTH, Minn.--Oct. 2, 20042, 2004--ALLETE, Inc. today reported 2004 year-to-date income from continuing operations of $23.2 million. Excluding a one-time charge of $10.9 million for the early repayment of debt in the third quarter, income from continuing operations was $34.1 million compared to $25.6 million for the first three quarters of 2003.Based on its year-to-date performance and fourth quarter projections, ALLETE has raised its expectation for income from continuing operations (excluding the aforementioned one-time charge) to approximately $38 million for 2004, an increase of 28 percent over 2003.
The debt prepayment charge was incurred as a result of an early retirement of $125 million of long-term debt in July as ALLETE recapitalized in preparation for the spin-off of ADESA. Year-to-date interest expense decreased by about $7 million after-tax compared with the same period last year. Interest was reduced as a result of the debt retired in July and because proceeds of Water Services asset sales were applied to debt repayment in late 2003 and early 2004.
"We are very pleased with how this year is progressing," said ALLETE President and CEO Don Shippar. "Power sales to Minnesota Power's industrial customers have shown healthy increases and our real estate business in Florida is having another solid year of financial performance. The strong operating results, combined with significantly lower interest expense than last year, have helped us absorb anticipated expense increases and an impairment charge associated with our emerging technology portfolio."
ALLETE's quarterly income from continuing operations was primarily affected by the debt prepayment charge. Excluding the charge, income from continuing operations was slightly less than the $10.9 million recorded last year. Energy sales to Minnesota Power industrial customers rose 13 percent from the third quarter of 2003. Compared with last year, the regulated utility business incurred higher pension expense, increased costs associated with a plant outage at Square Butte, and lower power sales to other power suppliers--all of which were anticipated. "All in all, financial results for the regulated utility business exceeded our expectations for the quarter," Shippar said.
Income from discontinued operations includes earnings from ADESA up until its spin-off to ALLETE shareholders on September 20, 2004, ALLETE expenses related to the spin-off, earnings from operations at the Water Services business and gains from the sales of Water Services assets.
A change in an accounting principle used to account for ALLETE's emerging technology investment portfolio led to a $7.8 million retroactive non-cash charge. The charge, recorded in year-to-date results, reflects the change to the equity method of accounting from the cost method for these investments.
ALLETE's corporate headquarters are located in Duluth, Minnesota. ALLETE provides energy services in the upper Midwest and has significant real estate holdings in Florida. More information about the company is available on ALLETE's Web site at www.allete.com.
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ALLETE, Inc.
Consolidated Statement of Income
For the Periods Ended September 30, 2004 and 2003
Millions Except Per Share Amounts
Quarter Ended Nine Months Ended
2004 2003 2004 2003
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Operating Revenue $183.2 $170.1 $582.7 $530.3
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Operating Expenses
Fuel and Purchased Power 71.9 64.9 218.0 197.2
Operating and Maintenance 69.0 55.3 221.3 194.7
Depreciation 12.3 12.6 37.2 38.4
Taxes Other than Income 6.7 7.1 21.5 22.7
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Total Operating Expenses 159.9 139.9 498.0 453.0
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Operating Income from Continuing
Operations 23.3 30.2 84.7 77.3
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Other Income (Expense)
Interest Expense (7.5) (13.2) (25.7) (38.0)
Other (18.4) 0.5 (21.4) 2.4
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Total Other Expense (25.9) (12.7) (47.1) (35.6)
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Income (Loss) from Continuing
Operations Before Income Taxes (2.6) 17.5 37.6 41.7
Income Tax Expense (Benefit) (2.0) 6.6 14.4 16.1
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Income (Loss) from Continuing
Operations Before
Change in Accounting Principle (0.6) 10.9 23.2 25.6
Income from Discontinued Operations -
Net of Tax 13.7 36.7 79.3 110.7
Change in Accounting Principle - Net
of Tax - - (7.8) -
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Net Income $13.1 $47.6 $94.7 $136.3
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Average Shares of Common Stock
Basic 28.5 27.7 28.3 27.5
Diluted 28.6 27.8 28.5 27.6
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Basic Earnings (Loss) Per Share of
Common Stock
Continuing Operations $(0.03) $0.40 $0.82 $0.93
Discontinued Operations 0.48 1.32 2.80 4.02
Change in Accounting
Principle - - (0.28) -
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$0.45 $1.72 $3.34 $4.95
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Diluted Earnings (Loss) Per Share of
Common Stock
Continuing Operations $(0.02) $0.40 $0.82 $0.93
Discontinued Operations 0.47 1.31 2.78 4.00
Change in Accounting
Principle - - (0.27) -
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$0.45 $1.71 $3.33 $4.93
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Dividends Per Share of Common Stock $0.8475 $0.8475 $2.5425 $2.5425
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ALLETE, Inc.
Consolidated Balance Sheet
Millions
Sept. 30, Dec. 31,
2004 2003
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Assets
Current Assets $ 302.6 $ 225.0
Property, Plant and Equipment 885.0 919.3
Investments 190.6 170.1
Discontinued Operations 8.0 1,724.0
Other 63.1 62.9
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Total Assets $ 1,449.3 $ 3,101.3
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Sept. 30, Dec. 31,
2004 2003
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Liabilities and Shareholders' Equity
Current Liabilities $ 74.7 $ 185.5
Long-Term Debt 389.5 514.7
Other Liabilities 314.0 321.9
Discontinued Operations 8.7 619.0
Shareholders' Equity 662.4 1,460.2
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Total Liabilities and Shareholders'
Equity $ 1,449.3 $ 3,101.3
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Quarter Ended Nine Months Ended
September 30, September 30,
ALLETE, Inc. 2004 2003 2004 2003
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Net Income
Millions
Regulated Utility $9.5 $12.2 $32.1 $30.5
Nonregulated Energy
Operations 1.5 2.8 2.6 3.2
Real Estate 1.6 1.9 14.8 11.3
Other (13.2) (6.0) (26.3) (19.4)
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Income (Loss) from Continuing
Operations (0.6) 10.9 23.2 25.6
Income from Discontinued
Operations 13.7 36.7 79.3 110.7
Change in Accounting
Principle - - (7.8) -
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Net Income $13.1 $47.6 $94.7 $136.3
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Diluted Earnings (Loss) Per Share
Continuing Operations $(0.02) $0.40 $0.82 $0.93
Discontinued Operations 0.47 1.31 2.78 4.00
Change in Accounting
Principle - - (0.27) -
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$0.45 $1.71 $3.33 $4.93
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Statistical Data
Kilowatthours Sold
Millions
Regulated Utility
Retail and
Municipals
Residential 233.7 250.2 772.8 787.0
Commercial 334.7 347.5 960.9 963.5
Industrial 1,736.9 1,535.6 5,273.7 4,909.2
Municipals 211.1 231.8 613.9 636.9
Other 19.9 20.5 57.9 59.3
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2,536.3 2,385.6 7,679.2 7,355.9
Other Power
Suppliers 260.2 504.4 645.8 1,012.5
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2,796.5 2,890.0 8,325.0 8,368.4
Nonregulated Energy
Operations 349.4 400.4 1,198.0 1,100.6
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3,145.9 3,290.4 9,523.0 9,469.0
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Notes
On September 20, 2004 ALLETE's common stock was split one-for-three.
All common share and per share amounts have been adjusted for all
periods to reflect the one-for-three reverse stock split.