AES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Nine Months
Ended Ended
($ in millions, except per share September 30, September 30,
amounts) 2004 2003 2004 2003
---------------- ----------------
Revenues $2,423 $2,231 $6,943 $6,134
Cost of sales (1,692) (1,555) (4,884) (4,345)
------- ------- ------- -------
GROSS MARGIN 731 676 2,059 1,789
General and administrative expenses (40) (36) (130) (97)
Other operating expense, net (10) (5) (5) (29)
Asset impairment expense - (75) - (106)
------- ------- ------- -------
OPERATING INCOME 681 560 1,924 1,557
Interest expense (470) (500) (1,423) (1,518)
Interest income 52 82 191 207
Other nonoperating (expense) income,
net (2) 12 (20) 112
Foreign currency transaction (losses)
gains (16) (35) (79) 154
Loss on sale of investments - - (1) -
Equity in earnings of affiliates 18 12 57 57
------- ------- ------- -------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 263 131 649 569
Income tax expense (78) (33) (201) (160)
Minority interest expense, net (52) (36) (174) (77)
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS 133 62 274 332
Income (loss) from operations of
discontinued components (net
of income tax benefit (expense) of
$4, $(28), $8, and $0,
respectively) 7 14 (48) (290)
------- ------- ------- -------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 140 76 226 42
Cumulative effect of accounting
change (net of income tax benefit of
$1) - - - (2)
------- ------- ------- -------
NET INCOME $140 $76 $226 $40
======= ======= ======= =======
DILUTED EARNINGS PER SHARE
Income from continuing operations $0.20 $0.10 $0.42 $0.56
Discontinued operations 0.01 0.02 (0.07) (0.49)
Cumulative effect of accounting
change - - - -
------- ------- ------- -------
Total $0.21 $0.12 $0.35 $0.07
======= ======= ======= =======
Diluted weighted average shares
outstanding (in millions) 651 624 643 588
======= ======= ======= =======
AES CORPORATION
SEGMENT INFORMATION
Quarter Nine Months
Ended Ended
September 30, September 30,
($ in millions) 2004 2003 2004 2003
----------------- ----------------
BUSINESS SEGMENTS
REVENUES
Contract Generation $906 $817 $2,642 $2,268
Competitive Supply 265 230 756 655
Large Utilities 938 908 2,590 2,388
Growth Distribution 314 276 955 823
------- ------- ------- -------
Total revenues $2,423 $2,231 $6,943 $6,134
GROSS MARGIN
Contract Generation $372 $327 $1,057 $903
Competitive Supply 64 59 181 173
Large Utilities 234 244 635 572
Growth Distribution 61 46 186 141
------- ------- ------- -------
Total gross margin $731 $676 $2,059 $1,789
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST
Contract Generation $211 $103 * $609 $414
Competitive Supply 47 37 140 148
Large Utilities 119 127 329 291
Growth Distribution 47 12 86 107
Corporate (161) (148) (515) (391)
------- ------- ------- -------
Total income before income taxes
and minority interest $263 $131 $649 $569
----------------------------------------------------------------------
GEOGRAPHIC SEGMENTS
REVENUES
North America $586 $581 $1,666 $1,634
Caribbean 401 387 1,198 1,107
South America 1,022 907 2,810 2,378
Europe/Africa 235 218 748 663
Asia 179 138 521 352
------- ------- ------- -------
Total revenues $2,423 $2,231 $6,943 $6,134
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST
North America $146 $134 $387 $353
Caribbean 37 82 150 159
South America 150 64 303 276
Europe/Africa 38 (54)* 143 31
Asia 53 53 181 141
Corporate (161) (148) (515) (391)
------- ------- ------- -------
Total income before income taxes
and minority interest $263 $131 $649 $569
*Includes a $76 million asset impairment charge.
AES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
September December
30, 31,
($ in millions, except per share amounts) 2004 2003
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,582 $1,737
Restricted cash 357 288
Short term investments 139 189
Accounts receivable, net of reserves of $253 and
$291, respectively 1,317 1,211
Inventory 388 376
Receivable from affiliates 2 3
Deferred income taxes - current 159 136
Prepaid expenses 115 64
Other current assets 801 677
Current assets of held for sale and discontinued
businesses 250 205
-------- --------
Total current assets 5,110 4,886
PROPERTY, PLANT AND EQUIPMENT
Land 748 733
Electric generation and distribution assets 21,969 21,076
Accumulated depreciation and amortization (5,087) (4,587)
Construction in progress 827 1,278
-------- --------
Property, plant and equipment, net 18,457 18,500
OTHER ASSETS
Deferred financing costs, net 486 430
Investment in and advances to affiliates 683 648
Debt service reserves and other deposits 598 617
Goodwill, net 1,376 1,378
Deferred income taxes - noncurrent 778 781
Long-term assets of held for sale and discontinued
businesses 683 750
Other assets 1,785 1,976
-------- --------
Total other assets 6,389 6,580
-------- --------
TOTAL ASSETS $29,956 $29,966
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,027 $1,225
Accrued interest 447 561
Accrued and other liabilities 1,372 1,156
Current liabilities of held for sale and
discontinued businesses 769 699
Recourse debt-current portion - 77
Non-recourse debt-current portion 1,778 2,769
-------- --------
Total current liabilities 5,393 6,487
LONG-TERM LIABILITIES
Recourse debt 5,470 5,862
Non-recourse debt 11,262 10,930
Deferred income taxes 1,122 1,113
Long-term liabilities of held for sale and
discontinued businesses 19 94
Pension liabilities 900 947
Other long-term liabilities 3,134 3,083
-------- --------
Total long-term liabilities 21,907 22,029
Minority Interest, including discontinued
businesses of $0 and $12, respectively 1,226 805
STOCKHOLDERS' EQUITY
Common stock 6 6
Additional paid-in capital 5,497 5,737
Accumulated deficit (877) (1,103)
Accumulated other comprehensive loss (3,196) (3,995)
-------- --------
Total stockholders' equity 1,430 645
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $29,956 $29,966
======== ========
AES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months
Ended
September 30,
($ in millions) 2004 2003
------- -------
OPERATING ACTIVITIES
Net income $226 $40
Adjustments:
Depreciation and amortization -- continuing and
discontinued operations 609 581
Other non-cash charges 543 165
(Increase) decrease in working capital (269) 300
------- -------
Net cash provided by operating activities 1,109 1,086
INVESTING ACTIVITIES
Property additions and project development costs (598) (878)
Net proceeds from the sale of assets 64 707
Sale (purchase) of short-term investments 42 (25)
Affiliate advances and equity investments 6 -
(Increase) in restricted cash (19) (322)
(Increase) decrease in debt service reserves and
other assets (13) 108
Other investing (4) (16)
------- -------
Net cash used in investing activities (522) (426)
FINANCING ACTIVITIES
(Repayments) under the revolving credit facilities,
net - (228)
Issuance of non-recourse debt and other coupon
bearing securities 1,980 4,120
Repayments of non-recourse debt and other coupon
bearing securities (2,565) (4,200)
Payments for deferred financing costs (81) (106)
(Distributions to) contribution by minority
interests, net (79) 7
Proceeds from sale of common stock 7 335
Other financing (3) (2)
------- -------
Net cash used in financing activities (741) (74)
Effect of exchange rate changes on cash (9) 34
------- -------
Total (decrease) increase in cash and cash
equivalents (163) 620
Decrease in cash and cash equivalents of discontinued
operations and businesses held for sale 8 62
Cash and cash equivalents, beginning 1,737 792
------- -------
Cash and cash equivalents, ending $1,582 $1,474
======= =======
AES CORPORATION
RECONCILIATION OF ADJUSTED EARNINGS PER SHARE (1)
Quarter Nine Months
Ended Ended
September 30, September 30,
($ per share) 2004 2003 2004 2003
----------------- ----------------
Adjusted Earnings Per Share $ 0.21 $ 0.26 $ 0.52 $ 0.45
FAS 133 Mark-to-Market
Gains/(Losses)(2) (0.02) (0.02) (0.07) (0.06)
Currency Transaction Gains/(Losses) 0.01 (0.05) (0.01) 0.19
Net Asset Gains/(Losses and
Impairments) - (0.10) - (0.14)
Debt Retirement Gains/(Losses) - 0.01 (0.02) 0.12
------- ------- ------- -------
Diluted EPS From Continuing
Operations $ 0.20 $ 0.10 $ 0.42 $ 0.56
======= ======= ======= =======
(1) Adjusted earnings per share (a non-GAAP financial measure) is
defined as diluted earnings per share from continuing operations
excluding gains or losses associated with (a) mark-to-market
amounts related to FAS 133 derivative transactions, (b) foreign
currency transaction impacts on the net monetary position related
to Brazil, Venezuela, and Argentina, (c) significant asset gains
or losses due to disposition transactions and impairments, and (d)
early retirement of recourse debt. AES believes that adjusted
earnings per share better reflect the underlying business
performance of the Company, and are considered in the Company's
internal evaluation of financial performance. Factors in this
determination include the variability associated with
mark-to-market gains or losses related to certain derivative
transactions, and periodic strategic decisions to dispose of
certain assets which may influence results in a given period.
Certain reclassifications have been made to prior-period amounts
to conform to the 2004 presentation.
(2) The Nine Months Ended September 30, 2004 includes $(0.03) related
to Chile debt restructuring costs included in interest expense in
the first quarter of 2004.
NOTE: AES revised the definition of adjusted EPS in the second quarter
of 2004 to focus greater attention on only three key currencies
resulting in foreign currency transaction gains or losses on net
monetary positions (those of Brazil, Venezuela, and Argentina).
The prior definition included the effects of all foreign
currencies. In addition, only significant asset gains or losses
due to disposition transactions and impairments are included. The
prior definition included all asset gains or losses due to
disposition transactions and impairments. Finally, the revised
definition reflects the specific tax impact of each amount. The
result is no net effect on the adjusted earnings per share for the
first half of either 2003 or 2004, with some minor reallocation to
the first quarter of both 2003 and 2004, and a $0.03 increase in
the annual adjusted EPS for 2003 from $0.53 to $0.56.
The AES Corporation
Parent Financial Information
----------------------------------------------------------------------
Parent only data: last four quarters
($ in millions) 4 Quarters Ended
September June March December
Total subsidiary distributions & 30, 30, 31, 31,
returns of capital to Parent 2004 2004 2004 2003
------------------------------------ Actual Actual Actual Actual
-------- ------- ------- --------
Subsidiary distributions to Parent $ 953 $1,056 $1,076 $1,008
Net distributions to/(from) QHCs (1) 29 24 2 46
------ ------ ------ ------
Subsidiary distributions 982 1,080 1,078 1,054
Returns of capital distributions to
Parent 130 219 243 242
Net returns of capital distributions
to/(from) QHCs (1) 12 (6) - -
------ ------ ------ ------
Returns of capital distributions 142 213 243 242
Combined distributions & return of
capital received 1,124 1,293 1,321 1,296
Less: combined net distributions &
returns of capital to/(from) QHCs(1) (41) (18) (2) (46)
------ ------ ------ ------
Total subsidiary distributions &
returns of capital to Parent $1,083 $1,275 $1,319 $1,250
====== ====== ====== ======
Parent only data: quarterly
($ in millions) Quarter Ended
September June March December
Total subsidiary distributions & 30, 30, 31, 31,
returns of capital to Parent 2004 2004 2004 2003
------------------------------------ Actual Actual Actual Actual
-------- ------- ------- --------
Subsidiary distributions to Parent $ 209 $ 292 $ 204 $ 248
Net distributions to/(from) QHCs (1) 12 10 - 7
------ ------ ------ ------
Subsidiary distributions 221 302 204 255
Returns of capital distributions to
Parent 110 - 3 17
Net returns of capital distributions
to/(from) QHCs (1) 11 - - 1
------ ------ ------ ------
Returns of capital distributions 121 - 3 18
Combined distributions & return of
capital received 342 302 207 273
Less: combined net distributions &
returns of capital to/(from) QHCs (1) (23) (10) - (8)
------ ------ ------ ------
Total subsidiary distributions &
returns of capital to Parent $ 319 $ 292 $ 207 $ 265
====== ====== ====== ======
Liquidity (2) Balance at
------------------------------------
($ in millions) September June March December
30, 30, 31, 31,
2004 2004 2004 2003
Actual Actual Actual Actual
-------- ------- ------- --------
Cash at Parent $ 525 $ 310 $ 268 $ 865
Availability under revolver 325 331 371 180
Cash at QHCs (1) 13 15 17 26
------ ------ ------ ------
Ending liquidity $ 863 $ 656 $ 656 $1,071
====== ====== ====== ======
(1) The cash held at qualifying holding companies (QHCs) represents
cash sent to subsidiaries of the company domiciled outside of the
US. Such subsidiaries had no contractual restrictions on their
ability to send cash to AES, the parent company. Cash at those
subsidiaries was used for investment and related activities
outside of the US. These investments included equity investments
and loans to other foreign subsidiaries as well as development and
general costs and expenses incurred outside the US. Since the cash
held by these qualifying holding companies is available to the
parent, AES uses the combined measure of subsidiary distributions
to parent and qualified holding companies as a useful measure of
cash available to the parent to meet its international liquidity
needs.
(2) AES believes that unconsolidated parent company liquidity is
important to the liquidity position of AES as a Parent company
because of the non-recourse nature of most of AES's indebtedness.