ALLETE Reports Second Quarter Earnings
“We remain bullish on our core businesses,” said David Gartzke, ALLETE Chairman, President, and CEO. “We remain committed to our strategy that looks for ways to increase the value of our company.”
Earnings from Automotive Services increased by $8.7 million in the quarter compared with the second quarter of 2001. The 42 percent earnings increase came from mandated goodwill accounting changes, lower interest expense and increased auction efficiency. The receivables portfolio at Automotive Finance Corporation rose by 12 percent for the quarter compared with last year.
Energy Services earnings for the quarter were about the same as last year. While total kilowatt-hour sales were higher than in the second quarter of 2001, weak prices in the wholesale energy market contributed to flat earnings.
For the second quarter, ALLETE recorded a loss of $5.7 million in Investments and Corporate Charges, compared with $9.2 million in income during the same period last year. During the second quarter of 2001, the company realized an $11.1 million gain on its largest real estate transaction ever. Difficult market conditions in the second quarter of 2002 contributed to less than acceptable returns from ALLETE’s securities portfolio, which will be liquidated to eliminate future exposure to market uncertainties. Proceeds from this liquidation will be used to reduce the company’s debt balance.
Water Sale Update
The company remains engaged in discussions relating to the proposed sale of ALLETE Water Services. The Florida Governmental Utility Authority has informed us it may not be taking any action regarding its potential purchase of Florida Water Services assets until September. Meanwhile, ALLETE continues to examine other opportunities for the sale of Florida Water. ALLETE has hired an investment banker to facilitate the sale of Heater Utilities and Georgia Water Services. That sale process is now in progress. The company expects to close both transactions in late 2002 or early 2003.
Earnings Guidance
ALLETE is revising its earnings-per-share estimate for 2002 to be in the $2.00 to $2.10 range excluding the 5 cents of year-to-date exit charges as well as any gain from the sale of Water Services assets. This estimate reflects year-to-date performance, the planned liquidation of the securities portfolio, operating losses incurred prior to the exit from the vehicle transport business, and lower wholesale power prices for the year. The company continues to expect that Automotive Services will grow earnings by 30 percent in 2002 over 2001.
ALLETE's corporate headquarters are located in Duluth, Minnesota. ALLETE’s holdings include ADESA, the second largest wholesale vehicle auction network in North America; AFC, the leading provider of independent auto dealer inventory financing; Minnesota Power, a low-cost electric utility that serves some of the largest industrial customers in the United States; and Florida real estate investments. For more information about ALLETE, visit the company’s Web site at www.allete.com.
The statements contained in this release and statements that ALLETE may make orally in connection with this release that are not historical facts, are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties and investors are directed to the risks discussed in documents filed by ALLETE with the Securities and Exchange Commission.
