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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 1, 2003
THE AES CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 333-15487 54-1163725
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
1001 North 19th Street, 20th Floor
Arlington, Virginia 22209
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (703) 522-1315
NOT APPLICABLE
(Former Name or Former Address, if changed since last report)
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Item 5. Other Events and Required FD Disclosure.
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 2003 AND 2002
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Quarter Quarter
Ended Ended
($ in millions, except per share amounts) 3/31/03 3/31/02
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REVENUES:
Sales and services $ 2,223 $ 2,201
OPERATING COSTS AND EXPENSES:
Cost of sales and services 1,621 1,526
Selling, general and administrative expenses 29 28
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Total operating costs and expenses 1,650 1,554
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OPERATING INCOME 573 647
OTHER INCOME AND (EXPENSE):
Interest expense, net (498) (390)
Other income (expense), net 45 (59)
Equity in earnings of affiliates (before income tax) 24 29
Loss on sale of assets - (57)
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INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 144 170
Income tax expense 40 62
Minority interest expense (income) 31 (10)
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INCOME FROM CONTINUING OPERATIONS 73 118
Income from operations of discontinued components
(net of income taxes of $6 and $31, respectively) 22 42
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INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 95 160
Cumulative effect of accounting change
(net of income taxes of $1 and $155, respectively) (2) (473)
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NET INCOME (LOSS) $ 93 $ (313)
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DILUTED EARNINGS PER SHARE:
Income from continuing operations $ 0.13 $ 0.22
Discontinued operations 0.04 0.08
Cumulative effect of accounting change - (0.88)
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Total $ 0.17 $ (0.58)
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Diluted weighted average
shares outstanding (in millions) 561 541
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Business Segment Results
AES's business segments, which include Contract Generation, Large Utilities,
Competitive Supply and Growth Distribution, generated combined income before
income taxes of $253 million for the first quarter of 2003, as compared with
$310 million for the first quarter of 2002. Total income before income taxes,
including the Corporate segment, was $113 million for the first quarter of 2003,
as compared with $180 million for the same period in 2002. On a geographic
basis, income before income taxes from our business segments was generated 47%
from North America, 21% from South America, 16% from Asia, 9% from Europe and
Africa, and 7% from the Caribbean.
Contract Generation
($ in millions) 2003 2002 Variance
---- ---- --------
Segment revenues $728 $653 $75
% of total revenues 33% 30% 3%
Gross margin $291 $270 $21
% of segment revenues 40% 41% (1)%
Income before income taxes $154 $182 $(28)
% of income before income taxes
from segments 61% 59% 2%
Contract Generation consists of our power plants located around the world that
have contractually limited their exposure to commodity price risks (primarily
electricity prices) for a period of at least five years and for 75% or more of
their expected output capacity.
For the first quarter of 2003, Contract Generation revenues were $728 million
and represented 33% of total revenues, an increase of $75 million over the first
quarter of 2002. The most significant contributions continued to be from North
and South America, which in aggregate comprised 57% of Contract Generation
revenue for the quarter as compared to 68% for the same period in 2002. Revenues
were enhanced with the addition of recently completed commercial contract
generation businesses totaling 1,451 mw (added subsequent to the first quarter
of 2002), including Red Oak in New Jersey (832 mw gas), Puerto Rico (454 mw
coal) and Kelanitissa in Sri Lanka (165 mw gas). Revenues also improved at
Warrior Run in Maryland, Los Mina in the Dominican Republic, Merida in Mexico,
Kilroot in Northern Ireland, Tiszai in Hungary, Ebute in Nigeria and Mtkvari in
the Republic of Georgia. These improvements were offset by declines at Shady
Point in Oklahoma due to a step-down in the contracted capacity payment,
Ironwood in Pennsylvania, Uruguaiana and Tiete in Brazil, and the Chigen plants
in China.
The gross margin for the Contract Generation segment was $291 million for the
quarter, an increase of 8% from the first quarter of 2002. Gross margin
increases arose at Warrior Run in Maryland, Uruguaiana and Tiete in Brazil and
Ebute in Nigeria. These increases were offset by declines in gross margin at
Ironwood in Pennsylvania, Shady Point in Oklahoma, the Southland plants in
California and the Chigen plants in China. As a percentage of revenues, the
gross margin for the Contract Generation segment was 40% in the first quarter of
2003, a slight decline from 41% in the first quarter of 2002.
Contract Generation generated $154 million of income before income taxes (or 61%
of the total) for the first quarter of 2003, a decrease from $182 million in the
first quarter of 2002. The Caribbean showed an increase due to the start of
commercial operations at Puerto Rico. Income before taxes was relatively
consistent between periods for Asia and for Europe and Africa. North America
showed a decrease in income before income taxes due to the step-down in the
contracted capacity payment at Shady Point and FAS 133 mark to market losses at
Warrior Run and the Southland plants. South America showed a decrease in income
before income taxes due to a decline at Gener in Chile.
Competitive Supply
($ in millions) 2003 2002 Variance
---- ---- --------
Segment revenues $460 $416 $44
% of total revenues 21% 19% 2%
Gross margin $114 $91 $23
% of segment revenues 25% 22% 3%
Income before income taxes $40 $(31) $71
% of income before income taxes
from segments 16% (10)% 26%
Competitive Supply consists primarily of our power plants selling electricity
directly to wholesale customers in competitive markets and as a result the
profitability of such plants are generally more sensitive to fluctuations in the
market price of electricity, natural gas and coal, in particular.
For the first quarter of 2003, Competitive Supply revenues were $460 million and
represented 21% of total revenues for the quarter. The most significant
contributions continued to be from the competitive markets of the UK and the
U.S. that in aggregate comprised 76% of Competitive Supply revenue for the
quarter. Competitive market prices increased quarter over quarter in New York,
which resulted in increased revenue in our New York plants. Despite lower prices
due to its merchant position, Drax showed increases in its sales volume quarter
over quarter which resulted in increased revenues between periods. Additionally,
other plants showed revenue improvements, including Parana, CTSN, Rio Juramento
and Alicura in Argentina, and Ottana in Italy. An increase also resulted from
the start of commercial operations at Granite Ridge in New Hampshire (720 mw
gas).
The gross margin as a percentage of revenues for our Competitive Supply segment
was 25% in the first quarter of 2003, an increase from 22% in the first quarter
of 2002. Overall, the gross margin for Competitive Supply increased 25% to $114
million. Margins and margin percentages increased in North and South America,
including the New York plants, Deepwater in Texas, Parana, CTSN, Rio Juramento
and Alicura in Argentina, and at our Altai businesses in Kazakhstan. These
increases were partially offset by a decline in gross margin and in gross margin
percentage at Drax in the UK due to lower prices as a result of the loss of the
TXU Hedging Agreement and increased cost of sales due to higher volume.
Competitive Supply generated $40 million of income before income taxes (or 16%
of the total) for the first quarter of 2003, which represents a $71 million
improvement over the same period in 2002. A portion of this increase is
attributable to increased margins, while a portion of the increase relates to
foreign exchange transaction gains recorded at Parana in Argentina in the first
quarter of 2003 due to appreciation of the Argentine Peso as compared to foreign
exchange losses recorded at Parana in the first quarter of 2002 due to the
devaluation which occurred in that period.
Large Utilities
($ in millions) 2003 2002 Variance
---- ---- --------
Segment revenues $699 $766 $(67)
% of total revenues 31% 35% (4)%
Gross margin $164 $232 $(68)
% of segment revenues 23% 30% (7)%
Income before income taxes $69 $134 $(65)
% of income before income taxes
from segments 27% 43% (16)%
The Large Utilities segment is comprised of our large integrated utilities that
serve nearly 7 million customers in North America, the Caribbean and South
America. Businesses include IPALCO in Indiana, EDC in Venezuela and Eletropaulo
in Brazil.
For the first quarter of 2003, revenues for Large Utilities were $699 million
and represented 31% of total revenues for the quarter. Revenues for Large
Utilities decreased $67 million, or 9%, from the first quarter of 2002. The
decrease in revenues is primarily due to the quarter over quarter devaluation of
the Brazilian Real and the Venezuelan Bolivar, which negatively affect the U.S.
Dollar translated revenues of Eletropaulo and EDC, respectively. The decreases
in revenues from Eletropaulo and EDC were offset by a slight increase in
revenues at IPALCO.
The gross margin as a percentage of revenues for our Large Utility segment was
23% for the first quarter of 2003, a decrease from 30% in the first quarter of
2002. This decrease relates to an additional month of lower than average segment
margins at Eletropaulo in the first quarter of 2003 as compared with the first
quarter of 2002, as we began consolidating the results of Eletropaulo in
February 2002. The quarter over quarter devaluation of the Brazilian Real and
the Venezuelan Bolivar also negatively affected the U.S. Dollar translated gross
margins of Eletropaulo and EDC, respectively. These decreases were offset by a
slight increase in the gross margin at IPALCO. Overall, gross margin for Large
Utilities declined to $164 million for the first quarter of 2003 from $232
million in the first quarter of 2002.
Large Utilities generated $69 million of income before income taxes (or 27% of
the total) for the first quarter of 2003, down from $134 million for the same
period in 2002. The decrease relates to a lower gross margin and substantially
reduced foreign currency transaction gains at EDC, both due to the devaluation
in the Venezuelan Bolivar quarter over quarter, and a lower gross margin and
increased interest expense at Eletropaulo.
Growth Distribution
($ in millions) 2003 2002 Variance
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Segment revenues $336 $366 $(30)
% of total revenues 15% 16% (1)%
Gross margin $33 $82 $(49)
% of segment revenues 10% 22% (12)%
Income before income taxes $(10) $25 $(35)
% of income before income taxes
from segments (4)% 8% (12)%
Our Growth Distribution segment, serving nearly 5 million customers, consists of
electricity distribution companies that are generally located in developing
countries or regions where the demand for electricity is expected to grow at a
rate higher than in more developed regions.
For the first quarter of 2003, revenues were $336 million, an 8% decline from
the first quarter of 2002, and represented 15% of total revenues for the
quarter. The Caribbean represents the most significant contributor with 41% of
Growth Distribution revenues, while Europe and Africa represents 32% and South
America contributes the remaining 27%. The decrease in revenues is due primarily
to reductions in Argentina and at Sul in Brazil because of the quarter over
quarter devaluation of the Argentine Peso and the Brazilian Real, respectively.
These reductions were offset in part by increases at Sonel in Cameroon and at
CLESA, CAESS and EEO in El Salvador.
The gross margin as a percentage of revenues for our Growth Distribution segment
was 10% in the first quarter of 2003, a decrease from 22% in the first quarter
of 2002. Gross margin and gross margin percentages declined at Ede Este in the
Dominican Republic, Sul in Brazil and Telasi in the Republic of Georgia. These
declines were partially offset by an increased gross margin at Sonel in
Cameroon. Overall, the gross margin for the Growth Distribution segment
decreased to $33 million for the first quarter of 2003.
Growth Distribution businesses generated a loss before income taxes of $10
million for the first quarter of 2003, down from income of $25 million for the
first quarter of 2002. Income before income taxes declined at Ede Este in the
Dominican Republic due to foreign exchange transaction losses caused by the
devaluation of the Dominican Peso during the first quarter of 2003. Income
before income taxes also declined at Sul in Brazil and Telasi in the Republic of
Georgia. These decreases were partially offset by increases in income before
taxes at Eden, Edes and Edelap, our distribution businesses in Argentina.
THE AES CORPORATION --- Supplemental Data
($ in millions, except Total Assets in billions)
---------------------------2002---------------- --2003--
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
GEOGRAPHIC:
North America
Revenues $ 491 $ 492 $ 570 $ 539 $ 2,092 $ 552
Income before Income Taxes (4) $ 142 $ 144 $ 10 $ - $ 296 $ 120
Caribbean (1)
Revenues $ 367 $ 361 $ 333 $ 381 $ 1,442 $ 398
Income before Income Taxes (4) $ 60 $ 73 $ 42 $ (60) $ 115 $ 16
South America
Revenues $ 793 $ 713 $ 714 $ 690 $ 2,910 $ 681
Income before Income Taxes (4) $ (11) $ (266) $ (290) $ (963) $(1,530) $ 53
Europe/Africa
Revenues $ 450 $ 385 $ 382 $ 469 $ 1,686 $ 485
Income before Income Taxes (4) $ 83 $ 24 $ 11 $(1,148) $(1,030) $ 23
Asia
Revenues $ 100 $ 108 $ 88 $ 96 $ 392 $ 107
Income before Income Taxes (4) $ 36 $ 39 $ 23 $ 18 $ 116 $ 41
Corporate (3)
Income before Income Taxes (4) $ (130) $ (122) $ (102) $ (148) $ (502) $ (140)
SEGMENTS:
Contract Generation
Revenues $ 653 $ 639 $ 603 $ 671 $ 2,566 $ 728
Gross Margin (2) $ 270 $ 259 $ 243 $ 289 $ 1,061 $ 291
Income before Income Taxes (4) $ 182 $ 144 $ 148 $ 142 $ 616 $ 154
Competitive Supply
Revenues $ 416 $ 373 $ 395 $ 454 $ 1,638 $ 460
Gross Margin (2) $ 91 $ 85 $ 94 $ (133) $ 137 $ 114
Income before Income Taxes (4) $ (31) $ (28) $ (158) $(1,277) $(1,494) $ 40
Large Utilities
Revenues $ 766 $ 859 $ 781 $ 732 $ 3,138 $ 699
Gross Margin (2) $ 232 $ 184 $ 200 $ 69 $ 685 $ 164
Income before Income Taxes (4) $ 134 $ 50 $ (174) $ (952) $ (942) $ 69
Growth Distribution
Revenues $ 366 $ 188 $ 308 $ 318 $1,180 $ 336
Gross Margin (2) $ 82 $ (96) $ 48 $ (29) $ 5 $ 33
Income before Income Taxes (4) $ 25 $ (152) $ (20) $ (66) $ (213) $ (10)
Corporate (3)
Income before Income Taxes (4) $ (130) $ (122) $ (102) $ (148) $ (502) $ (140)
ADDITIONAL INFORMATION:
Revenues $2,201 $2,059 $2,087 $ 2,175 $ 8,522 $2,223
Gross Margin (2) $ 675 $ 432 $ 585 $ 196 $ 1,888 $ 602
Gross Margin Percentage (2) 31% 21% 28% 9% 22% 27%
Income before Income Taxes (4) $ 180 $ (108) $ (306) $(2,301) $(2,535) $ 113
Total Assets (billions) $ 40 $ 39 $ 37 $ 34 $ 34 $ 33
Depreciation and Amortization $ 197 $ 199 $ 193 $ 198 $ 787 $ 177
(1) Includes Venezuela and Colombia.
(2) Gross Margin is revenues reduced by cost of sales and services.
(3) Corporate consists of interest expense and selling, general and
administrative expenses. Revenue and Gross Margin for Corporate equal zero.
(4) Amount is net of pre-tax minority interest.
THE AES CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
($ in millions) March 31, 2003 December 31, 2002
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Assets:
Current assets:
Cash and cash equivalents $ 1,163 $ 769
Restricted cash 206 160
Short term investments 239 210
Accounts receivable, net of reserves of $385 and $424, respectively 1,140 1,119
Inventory 387 378
Receivable from affiliates 6 25
Deferred income taxes - current 124 130
Prepaid expenses 107 68
Other current assets 912 950
Current assets of held for sale and discontinued businesses 451 540
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Total current assets 4,735 4,349
Property, Plant and Equipment:
Land 725 702
Electric generation and distribution assets 19,558 18,505
Accumulated depreciation (4,267) (4,070)
Construction in progress 2,620 3,222
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Property, plant and equipment, net 18,636 18,359
Other assets:
Deferred financing costs, net 421 400
Project development costs 6 15
Investment in and advances to affiliates 695 678
Debt service reserves and other deposits 510 508
Goodwill, net 1,375 1,388
Deferred income taxes - noncurrent 979 939
Long-term assets of held for sale and discontinued businesses 3,748 5,856
Other assets 1,764 1,768
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Total other assets 9,498 11,552
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Total Assets $ 32,869 $ 34,260
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Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable $ 1,153 $ 1,130
Accrued interest 495 362
Accrued and other liabilities 1,175 1,148
Current liabilities of held for sale and discontinued businesses 2,752 537
Recourse debt-current portion 26 26
Non-recourse debt-current portion 3,989 3,308
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Total current liabilities 9,590 6,511
Long-term liabilities:
Recourse debt 5,463 5,778
Non-recourse debt 10,030 10,550
Deferred income taxes 957 981
Long-term liabilities of held for sale and discontinued businesses 1,371 5,202
Pension liabilities 1,193 1,166
Other long-term liabilities 2,625 2,617
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Total long-term liabilities 21,639 26,294
Minority interest, including discontinued operations of $41 in 2002 806 818
Company obligated convertible mandatorily redeemable
preferred securities of subsidiary trusts holding
solely junior subordinated debentures of AES 978 978
Stockholders' equity:
Common stock 6 6
Additional paid-in capital 5,349 5,312
Retained earnings (606) (700)
Accumulated other comprehensive loss (4,893) (4,959)
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Total stockholders' equity (144) (341)
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Total Liabilities and Stockholders' Equity $ 32,869 $ 34,260
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THE AES CORPORATION
CAPITAL RESOURCES AND OTHER BALANCE SHEET DATA
($ in billions)
March 31, December 31,
Capitalization: 2003 2002
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Recourse debt $ 5.49 $ 5.80
Non-recourse debt 14.02 13.86
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Total debt 19.51 19.66
Preferred Securities 0.98 0.98
Minority Interest 0.81 0.82
Stockholders' equity (0.14) (0.34)
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Total capitalization $ 21.16 $ 21.12
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Selected Balance Sheet Data by Geographic Region:
Property, Plant Total Non-recourse
March 31, 2003 & Equipment Assets Debt
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North America $ 6.11 $ 7.42 $ 4.26
Caribbean 4.66 6.05 2.56
South America 4.91 9.49 5.35
Europe/Africa 1.45 6.05 0.70
Asia 1.50 2.35 1.15
Discontinued Operations - 0.84 -
Corporate 0.01 0.67 -
December 31, 2002
North America $ 6.13 $ 7.41 $ 4.26
Caribbean 5.13 6.54 2.90
South America 4.28 8.72 4.97
Europe/Africa 1.43 5.95 0.67
Asia 1.38 2.20 1.06
Discontinued Operations - 3.04 -
Corporate 0.01 0.40 -
Selected Balance Sheet Data by Line of Business:
Property, Plant Total Non-recourse
March 31, 2003 & Equipment Assets Debt
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Contract Generation $ 8.94 $ 13.22 $ 7.03
Competitive Supply 2.39 6.48 1.16
Large Utilities 5.70 8.52 4.59
Growth Distribution 1.60 3.14 1.24
Discontinued Operations - 0.84 -
Corporate 0.01 0.67 -
December 31, 2002
Contract Generation $ 8.08 $ 12.14 $ 6.55
Competitive Supply 3.08 7.19 1.43
Large Utilities 5.65 8.45 4.64
Growth Distribution 1.54 3.04 1.24
Discontinued Operations - 3.04 -
Corporate 0.01 0.40 -
Item 9. Regulation FD Disclosure
The following information is furnished pursuant to Item 9, "Regulation FD
Disclosure" and Item 12, "Disclosure of Results of Operations and Financial
Condition." On May 1, 2003, the AES Corporation issued a press release setting
forth the first-quarter 2003 earnings. A copy of the press release is attached
hereto as Exhibit 99.1 and hereby incorporated by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE AES CORPORATION
Date: May 1, 2003 By: /s/ Brian Miller
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Name: Brian Miller
Title: Deputy General Counsel
and Secretary
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
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99.1 Press Release dated May 1, 2003.