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NRG Energy, Inc. Reports Third Quarter 2012 Results And Narrows Guidance To Middle Of Range

Additional Information about the Proposed Transaction and Where You Can Find It

In connection with the proposed merger between NRG and GenOn, NRG filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that includes a joint proxy statement of NRG and GenOn and that also constitutes a prospectus of NRG. The registration statement was declared effective by the SEC on October 5, 2012. NRG and GenOn first mailed the joint proxy statement/prospectus to their respective stockholders on or about October 10, 2012. NRG and GenOn may also file other documents with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS OF NRG AND GENON ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and stockholders may obtain free copies of the joint proxy statement/prospectus and other documents containing important information about NRG and GenOn through the website maintained by the SEC at www.sec.gov. In addition, NRG makes available free of charge at www.nrgenergy.com (in the “Investors” section), copies of materials it files with, or furnish to, the SEC.

Participants In The Merger Solicitation

NRG, GenOn, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of NRG and GenOn in connection with the proposed transaction. Information about the directors and executive officers of NRG is set forth in its proxy statement for its 2012 annual meeting of stockholders, which was filed with the SEC on March 12, 2012. Information about the directors and executive officers of GenOn is set forth in its proxy statement for its 2012 annual meeting of stockholders, which was filed with the SEC on March 30, 2012. Other information regarding the participants in the proxy solicitation can be found in the above-referenced registration statement on Form S-4. These documents can be obtained free of charge from the sources indicated above.

     
 

NRG ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

Three months ended September 30,

Nine months ended September 30,

2012   2011 2012   2011

( In millions, except for per share amounts )

Operating Revenues

Total operating revenues

$2,331 $2,674 $6,359 $6,947
Operating Costs and Expenses

Cost of operations

1,726 2,053 4,618 4,985

Depreciation and amortization

239 238 703 665

Impairment charge on emissions allowance

 

160

 

160

Selling, general and administrative

253 169 681 479

Acquisition-related transaction and integration costs

18 18

Development costs

9 11 26 32

Total operating costs and expenses

2,245 2,631 6,046 6,321
Operating Income 86 43 313 626

Other Income/(Expense)

Equity in earnings of unconsolidated affiliates

4 16 26 26

Impairment charge on investment

(1) (3) (2) (495)

Other income, net

10 5 14 13

Loss on debt extinguishment

(41) (32) (41) (175)

Interest expense

(163) (164) (495) (504)

Total other expense

(191) (178) (498) (1,135)
Loss Before Income Taxes (105) (135) (185) (509)

Income tax benefit

(113) (80) (246) (815)
Net Income/(Loss) 8 (55) 61 306

Less: Net income attributable to noncontrolling interest

9 18
Net Income/(Loss) Attributable to NRG Energy, Inc. (1) (55) 43 306

Dividends for preferred shares

2 2 7 7
(Loss) /Income Available for Common Stockholders ($3) ($57) $36 $299
 
(Loss) Earnings Per Share Attributable to NRG Energy, Inc. Common Stockholders
 

Weighted average number of common shares outstanding — basic

228 240 228 243

Net (Loss)/Income per weighted average common share — basic

($0.01) ($0.24) $0.16 $1.23

Weighted average number of common shares outstanding —diluted

228 240 230 245

Net (Loss)/Income per weighted average common share —diluted

($0.01) ($0.24) $0.16 $1.22
Dividends Per Common Share $0.09 $— $0.09 $—
     
 

NRG ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS (Unaudited)

 

Three months ended September 30,

Nine months ended September 30,

2012   2011 2012   2011
Net Income/(Loss) $8 ($55) $61 $306
Other Comprehensive (Loss)/Income net of tax

Unrealized loss on derivatives, net of income tax benefit of $24, $45, $76 and $131

(43) (76) (132) (225)

Foreign currency translation adjustments, net of income tax benefit (expense) of $0, $16, $1 and $4

1 (27) (1) (5)

Reclassification adjustment for translation gain realized upon sale of Schkopau, net of income tax benefit of $6,$0,$6 and $0

(11) (11)
Available –for-sale securities, net of income tax benefit of ($1), $1, ($1) and $1 2 (1) 2 (2)
Defined benefit plans 1
Other comprehensive loss (51) (104) (142) (231)
Comprehensive ( Loss)/Income (43) (159) (81) 75
Less: Comprehensive income attributable to noncontrolling interest 9 18
Comprehensive (Loss )/Income Attributable to NRG Energy, Inc. (52) (159) (99) 75
Dividends for preferred shares 2 2 7 7
Comprehensive (Loss )/Income available for common stockholders $54 ($161) ($106) $68
   
 

NRG ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

 

September 30, 2012

December 31, 2011

 

(In millions, except shares)

(unaudited)
ASSETS
Current Assets
Cash and cash equivalents

$

1,610

$

1,105

Funds deposited by counterparties 76 258
Restricted cash 237 292
Accounts receivable — trade, less allowance for doubtful accounts of $39 and $23 1,075 834
Inventory 393 308
Derivative instruments 2,677 4,216
Cash collateral paid in support of energy risk management activities 98 311
Prepayments and other current assets 217 273
Total current assets 6,383 7,597
Property, plant and equipment, net of accumulated depreciation of $5,194 and $4,570 15,866 13,621
Other Assets
Equity investments in affiliates 649 640
Note receivable — affiliate and capital leases, less current portion 78 342

Goodwill

1,886

1,886
Intangible assets, net of accumulated amortization of $1,628 and $1,452 1,188 1,419
Nuclear decommissioning trust fund 469 424
Derivative instruments 309 450
Other non-current assets 392 336
Total other assets 4,971 5,497
Total Assets

$

27,220

$

26,715

 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases

$

374

$

87

Accounts payable 1,246 808
Derivative instruments 2,462 3,751
Deferred income taxes 15 127
Cash collateral received in support of energy risk management activities 76 258
Accrued expenses and other current liabilities 604 640
Total current liabilities 4,777 5,671
Other Liabilities
Long-term debt and capital leases 10,968 9,745
Nuclear decommissioning reserve 349 335
Nuclear decommissioning trust liability 277 254
Deferred income taxes 1,092 1,389
Derivative instruments 561 464
Out-of-market commodity contracts 161 183
Other non-current liabilities 896 756
Total non-current liabilities 14,304 13,126
Total Liabilities 19,081 18,797
3.625% convertible perpetual preferred stock (at liquidation value, net of issuance costs) 249 249
Commitments and Contingencies
Stockholders’ Equity
Common stock 3 3
Additional paid-in capital 5,388 5,346
Retained earnings 4,002 3,987
Less treasury stock, at cost — 76,505,718 and 76,664,199 shares, respectively

(1,920)

(1,924)

Accumulated other comprehensive (loss) income (68) 74
Noncontrolling interest 485 183
Total Stockholders’ Equity 7,890 7,669
Total Liabilities and Stockholders’ Equity

$

27,220

$

26,715

   
 

NRG ENERGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

Nine months ended September 30

  2012

 

  2011

(In millions)
Cash Flows from Operating Activities

Net income

$61

$306

Adjustments to reconcile net loss to net cash provided by operating activities:

Distributions and equity in earnings of unconsolidated affiliates 8 8
Depreciation and amortization 703 665
Provision for bad debts 40 41
Amortization of nuclear fuel 29 31
Amortization of financing costs and debt discount/premiums 25 25
Loss on debt extinguishment 8 58
Amortization of intangibles and out-of-market commodity contracts 108 118
Amortization of unearned equity compensation 27 14
Changes in deferred income taxes and liability for uncertain tax benefits

(261)

(829)

Changes in nuclear decommissioning trust liability 25 20
Changes in derivative instruments 360

(201)

Changes in collateral deposits supporting energy risk management activities

213

7
Impairment charge on investment 481
Impairment charge on emission allowances 160
Cash used by changes in other working capital

(288)

 

(236)

Net Cash Provided by Operating Activities

1,058

  668
Cash Flows from Investing Activities
Acquisitions of business, net of cash acquired (40) (352)
Capital expenditures

(2,474)

(1,355)

Increase in restricted cash, net

(96)

(92)

Decrease /(increase) in restricted cash to support equity requirements for U.S. DOE funded projects 151 (316)
(Increase)/decrease in notes receivable

(22)

27
Purchase of emissions allowances (8) (27)
Proceeds from sale of emission allowances 8 6
Investments in nuclear decommissioning trust fund securities

(341)

(314)

Proceeds from sales of nuclear decommissioning trust fund securities 316 294
Proceeds from renewable energy grants 49
Proceeds from sale of assets, net of cash disposed of 137 14
Investments in unconsolidated affiliates (17)
Other (9)  

(29)

Net Cash Used by Investing Activities

(2,329)

 

(2,161)

Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders

(28)

(7)

Payment for treasury stock

(378)

Net payments for settlement of acquired derivatives that include financing elements

(65)

(61)

Sale proceeds and other contributions from noncontrolling interests in subsidiaries 316
Proceeds from issuance of long-term debt 2,541 5,710
Decrease in restricted cash supporting funded letter of credit 1,300
Payment for settlement of funded letter of credit facility (1,300)
Proceeds from issuance of common stock 2
Payment of debt issuance and hedging costs

(30)

(149)

Payments for short and long-term debt

(955)

 

(5,450)

Net Cash Provided/(Used) by Financing Activities 1,779  

(333)

Effect of exchange rate changes on cash and cash equivalents (3)   2
Net Increase/( Decrease) in Cash and Cash Equivalents

505

(1,824)

Cash and Cash Equivalents at Beginning of Period 1,105   2,951
Cash and Cash Equivalents at End of Period $ 1,610  

$ 1,127

                 

Appendix Table A-1: Third Quarter 2012 Regional Adjusted EBITDA ReconciliationThe following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

SouthCentral

  West  

OtherConventional

 

Alt.Energy

  Corp.   Total
Net Income/(Loss)   (300)   299   33   19   35   9   -   (87)   8
Plus:
Net Income Attributable to Non-Controlling Interest - - - - - - (9) - (9)
Income Tax - - - - - - - (113) (113)
Interest Expense 1 - 4 5 1 3 12 137 163
Depreciation, Amortization and ARO Expense 41 116 32 23 4 4 18 4 242
Loss on Debt Extinguishment - - - - - - 41 41
Amortization of Contracts   16   13   -   (6)   -   -   -   -   23
EBITDA (242) 428 69 41 40 16 21 (18) 355
Transaction Costs - - - - - - - 14 14
Legal Settlement - - - 14 - - - - 14
Asset and Investment Write-offs - 7 - - - - - 4 11
MtM losses/(gains) 415 (111) (11) (24) (9) - 3 - 263
                                     
Adjusted EBITDA   173   324   58   31   31   16   24   -   657
                 

Appendix Table A-2: Third Quarter 2011 Regional Adjusted EBITDA ReconciliationThe following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

SouthCentral

  West  

OtherConventional

 

Alt.Energy

  Corp.   Total
Net Income/(Loss)   36   (45)   6   21   27   5   (12)   (93)   (55)
Plus:
Income Tax - - - - - 2 - (82) (80)
Interest Expense 1 - 11 11 - 4 5 132 164
Depreciation, Amortization and ARO Expense 48 118 33 23 2 4 7 4 239
Loss on Debt Extinguishment - - - - - - - 32 32
Amortization of Contracts   25   14   -   (6)   -   -   -   -   33
EBITDA 110 87 50 49 29 15 - (7) 333
Asset and Investment Write-offs - 168 - - - - - 3 171
MtM losses/(gains) 35 (67) (7) (7) 5 - (5) - (46)
                                     
Adjusted EBITDA   145   188   43   42   34   15   (5)   (4)   458
                 

Appendix Table A-3: YTD Third Quarter 2012 Regional Adjusted EBITDA ReconciliationThe following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

SouthCentral

  West  

OtherConventional

 

Alt.Energy

  Corp.   Total
Net Income/(Loss)   504   (202)   (20)   -   42   25   (22)   (266)   61
Plus:
Net Income Attributable to Non-Controlling Interest - - - - - - (18) - (18)
Income Tax - - - - - 4 - (250) (246)
Interest Expense 3 - 13 14 1 10 34 420 495
Depreciation, Amortization and ARO Expense 126 345 97 69 11 12 41 8 709
Loss on Debt Extinguishment - - - - - - 41 41
Amortization of Contracts   83   32   -   (15)   -   1   -   -   101
EBITDA 716 175 90 68 54 52 35 (47) 1,143
Transaction Costs - - - - - - - 23 23
Legal Settlement - - - 14 20 - - - 34
Asset and Investment Write-offs - 8 - - - - - 5 13
MtM losses/(gains) (212) 506 (7) 2 (6) - - - 283
                                     
Adjusted EBITDA   504   689   83   84   68   52   35   (19)   1,496
                 

Appendix Table A-4: YTD Third Quarter 2011 Regional Adjusted EBITDA ReconciliationThe following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

SouthCentral

  West  

OtherConventional

 

Alt.Energy

  Corp.   Total
Net Income/(Loss)   350   193   (13)   46   51   14   (42)   (293)   306
Plus:
Income Tax (3) - - - - 6 - (818) (815)
Interest Expense 3 (16) 38 32 1 12 12 422 504
Depreciation, Amortization and ARO Expense 114 349 90 65 9 11 22 10 670
Loss on Debt Extinguishment - - - - - - - 175 175
Amortization of Contracts   118   43   -   (16)   -   -   -   -   145
EBITDA 582 569 115 127 61 43 (8) (504) 985
Asset and Investment Write-offs - 168 - - - - - 495 663
MtM losses/(gains) (78) (95) (21) (21) (2) - (1) - (218)
                                     
Adjusted EBITDA   504   642   94   106   59   43   (9)   (9)   1,430
       

Appendix Table A-5: YTD Third Quarter 2012 Free Cash Flow before Growth Investments ReconciliationThe following table summarizes the calculation of free cash flow before growth investments and adjusted cash flow from operating activities providing a reconciliation to net cash provided by operating activities

 
($ in millions)

Nine months ended September 30, 2012

Nine months ended September 30, 2011

Net Cash Provided by Operating Activities 1,058 668
Less: Reclassifying of net payments for settlement of acquired derivatives that include financing elements     (65)     (61)
Adjusted Cash Flow from Operating Activities    

993

    607
Maintenance Capital Expenditures (151) (163)
Environmental Capital Expenditures, net (29) (23)
Preferred Dividends     (7)     (7)
Free Cash Flow – Before Growth Investments     806     414

EBITDA and adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of adjusted EBITDA should not be construed as an inference that NRG’s future results will be unaffected by unusual or non-recurring items.

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