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AES Reports Adjusted Earnings Per Share Of $0.36 For Third Quarter 2012 And $0.91 For Year-To-Date 2012; Reaffirms 2012 Guidance Ranges For All Metrics; Increases Cost Savings Target By $45 Million

Stocks in this article: AES

Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Important factors that could affect actual results are discussed in AES’ filings with the Securities and Exchange Commission (the “SEC”), including, but not limited to, the risks discussed under Item 1A “Risk Factors” and Item 7: Management's Discussion & Analysis in AES’ 2011 Annual Report on Form 10-K and in subsequent reports filled with the SEC. Readers are encouraged to read AES’ filings to learn more about the risk factors associated with AES’ business. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Any Stockholder who desires a copy of the Company’s 2011 Annual Report on Form 10-K dated on or about February 24, 2012 with the SEC may obtain a copy (excluding Exhibits) without charge by addressing a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Exhibits also may be requested, but a charge equal to the reproduction cost thereof will be made. A copy of the Form 10-K may be obtained by visiting the Company’s website at www.aes.com.

   
THE AES CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
   
Three Months Ended Nine Months Ended
September 30, September 30,
  2012     2011     2012     2011  
 
(in millions, except per share amounts)
Revenue:
Regulated $ 2,546 $ 2,373 $ 7,375 $ 7,136
Non-Regulated   2,041     1,934     6,144     5,762  
Total revenue   4,587     4,307     13,519     12,898  
Cost of Sales:
Regulated (2,114 ) (1,707 ) (6,267 ) (5,332 )
Non-Regulated   (1,469 )   (1,590 )   (4,478 )   (4,571 )
Total cost of sales   (3,583 )   (3,297 )   (10,745 )   (9,903 )
Gross margin   1,004     1,010     2,774     2,995  
General and administrative expenses (64 ) (90 ) (225 ) (282 )
Interest expense (401 ) (418 ) (1,202 ) (1,137 )
Interest income 89 102 263 293
Other expense (15 ) (76 ) (59 ) (126 )
Other income 7 57 40 107
Gain on sale of investments 30 - 214 7
Goodwill impairment (1,850 ) (17 ) (1,850 ) (17 )
Asset impairment expense (43 ) (130 ) (72 ) (163 )
Foreign currency transaction losses (8 ) (90 ) (110 ) (20 )
Other non-operating expense   -     (82 )   (50 )   (82 )

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES

(1,251 ) 266 (277 ) 1,575
Income tax expense (176 ) (68 ) (519 ) (457 )
Net equity in earnings of affiliates   24     5     48     11  
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,403 ) 203 (748 ) 1,129

Income (loss) from operations of discontinued businesses, net of income tax (benefit) expense of $(2), $(16), $3, and $(22), respectively

3 (28 ) - (44 )

Net gain (loss) from disposal and impairments of discontinued businesses, net of income tax (benefit) expense of $(1), $0, $60, and $0, respectively

  (2 )   -     68     -  
NET INCOME (LOSS) (1,402 ) 175 (680 ) 1,085
Noncontrolling interests:
Less: Income from continuing operations attributable to noncontrolling interests (166 ) (271 ) (407 ) (769 )
Less: Income from discontinued operations attributable to noncontrolling interests   -     (35 )   -     (49 )
Total net income attributable to noncontrolling interests   (166 )   (306 )   (407 )   (818 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ (1,568 ) $ (131 ) $ (1,087 ) $ 267  
 
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION
COMMON STOCKHOLDERS:
Income (loss) from continuing operations, net of tax $ (1,569 ) $ (68 ) $ (1,155 ) $ 360
Income (loss) from discontinued operations, net of tax   1     (63 )   68     (93 )
Net income (loss) $ (1,568 ) $ (131 ) $ (1,087 ) $ 267  
 
BASIC EARNINGS PER SHARE:

Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax

$ (2.10 ) $ (0.09 ) $ (1.52 ) $ 0.46

Income (loss) from discontinued operations attributable to The AES Corporation common stockholders, net of tax

  -  

 

  (0.08 )   0.09     (0.12 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION
COMMON STOCKHOLDERS $ (2.10 ) $ (0.17 ) $ (1.43 ) $ 0.34  
 
DILUTED EARNINGS PER SHARE:

Income (loss) from continuing operations attributable to The AES Corporation common stockholders, net of tax

$ (2.10 ) $ (0.09 ) $ (1.52 ) $ 0.46

Income (loss) from discontinued operations attributable to The AES Corporation common stockholders, net of tax

  -     (0.08 )   0.09     (0.12 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION
COMMON STOCKHOLDERS $ (2.10 ) $ (0.17 ) $ (1.43 ) $ 0.34  
 
DIVIDENDS DECLARED PER COMMON SHARE: $ 0.04   $ -   $ 0.04   $ -  
 
THE AES CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
  September 30,   December 31,
  2012     2011  
 
(Revised) (1)
(in millions, except
share and per share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,943 $ 1,704
Restricted cash 735 478
Short-term investments 873 1,356
Accounts receivable, net of allowance for doubtful accounts of $307 and $273, respectively 2,671 2,534
Inventory 796 785
Deferred income taxes 431 454
Prepaid expenses 226 157
Other current assets 1,009 1,570
Current assets of discontinued operations and held for sale assets   -     191  
Total current assets   8,684     9,229  
NONCURRENT ASSETS
Property, Plant and Equipment:
Land 1,036 1,090
Electric generation, distribution assets and other 31,429 31,073
Accumulated depreciation (9,562 ) (8,944 )
Construction in progress   2,581     1,788  
Property, plant and equipment, net   25,484     25,007  
Other Assets:
Investments in and advances to affiliates 1,334 1,422
Debt service reserves and other deposits 561 876
Goodwill 1,967 3,820
Other intangible assets, net of accumulated amortization of $250 and $164, respectively 462 547
Deferred income taxes 671 715
Other 2,168 2,345
Noncurrent assets of discontinued operations and held for sale assets   25     1,385  
Total other assets   7,188     11,110  
TOTAL ASSETS $ 41,356   $ 45,346  
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,327 $ 2,014
Accrued interest 426 327
Accrued and other liabilities 2,438 3,390
Non-recourse debt, including $294 and $259, respectively, related to variable interest entities 2,324 2,123
Recourse debt 11 305
Current liabilities of discontinued operations and held for sale businesses   -     279  
Total current liabilities   7,526     8,438  
NONCURRENT LIABILITIES
Non-recourse debt, including $1,173 and $1,156, respectively, related to variable interest entities 13,049 13,412
Recourse debt 6,176 6,180
Deferred income taxes 1,417 1,321
Pension and other post-retirement liabilities 1,555 1,729
Other noncurrent liabilities 3,719 3,111
Noncurrent liabilities of discontinued and held for sale businesses   -     1,348  
Total noncurrent liabilities   25,916     27,101  
Contingencies and Commitments (see Note 8)
Cumulative preferred stock of subsidiaries 78 78
EQUITY
THE AES CORPORATION STOCKHOLDERS' EQUITY

Common stock ($0.01 par value, 1,200,000,000 shares authorized; 810,312,922 issued and 743,875,691 outstanding at September 30, 2012 and 807,573,277 issued and 765,186,316 outstanding at December 31, 2011

8 8
Additional paid-in capital 8,540 8,507
Retained earnings (Accumulated deficit) (439 ) 678
Accumulated other comprehensive loss (2,905 ) (2,758 )

Treasury stock, at cost (66,437,231 shares at September 30, 2012 and 42,386,961 shares at December 31, 2011, respectively)

  (780 )   (489 )
Total AES Corporation stockholders' equity 4,424 5,946
NONCONTROLLING INTERESTS   3,412     3,783  
Total equity   7,836     9,729  
TOTAL LIABILITIES AND EQUITY $ 41,356   $ 45,346  
 

(1)

December 31, 2011 balances revised to reflect updated DPL purchase accounting allocation. For further information see our Form 10-Q for the quarter ended September 30, 2012 filed with the SEC.
 
THE AES CORPORATION
SEGMENT INFORMATION (unaudited)
     
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
 
(in millions) (in millions)
REVENUE
Generation - Latin America (1) $ 1,304 $ 1,301 $ 3,871 $ 3,810
Generation - North America 359 334 1,004 1,007
Generation - Europe 245 397 928 1,125
Generation - Asia 191 172 553 449
Utilities - Latin America 1,667 1,898 4,847 5,682
Utilities - North America 796 321 2,206 890
Corporate and Other (2) 297 214 937 788
Intersegment Eliminations (3) (4)   (272 )   (330 )   (827 )   (853 )
 
Total Revenue $ 4,587   $ 4,307   $ 13,519   $ 12,898  
 
GROSS MARGIN
Generation - Latin America (1) $ 439 $ 439 $ 1,265 $ 1,307
Generation - North America 106 92 272 258
Generation - Europe 74 95 349 240
Generation - Asia 61 38 175 136
Utilities - Latin America 91 309 175 821
Utilities - North America 173 71 379 170
Corporate and Other (2) 48 (29 ) 135 51
Intersegment Eliminations (4)   12     (5 )   24     12  
 
Total Gross Margin $ 1,004   $ 1,010   $ 2,774   $ 2,995  
 

(1)

Includes Generation - Latin America - Other and Generation - Tiete.
 

(2)

Corporate and Other includes the Company’s Europe Utilities, Africa Utilities, Africa Generation and Wind Generation operating segments and other renewable projects.
 

(3)

Represents inter-segment eliminations of revenue primarily related to transfers of electricity from Tiete (Generation - Latin America) to Eletropaulo (Utilities - Latin America).
 

(4)

Intersegment eliminations represent eliminations of revenue and gross margin among segments.
 
THE AES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
 
(in millions) (in millions)
OPERATING ACTIVITIES:
Net income (loss) $ (1,402 ) $ 175 $ (680 ) $ 1,085
Adjustments to net income (loss):
Depreciation and amortization 332 325 1,038 947
(Gain) loss from sale of investments and impairment expense 1,873 284 1,802 321
Deferred income taxes 29 (95 ) 101 (67 )
Contingencies 16 (10 ) 51 36
(Gain) loss on the extinguishment of debt - 37 - 52
(Gain) loss on disposal and impairment write-down - discontinued operations 1 1 (130 ) 1
Other (40 ) 154 10 65
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (16 ) (3 ) (191 ) (185 )
(Increase) decrease in inventory 33 (30 ) (10 ) (118 )
(Increase) decrease in prepaid expenses and other current assets 72 (82 ) 90 67
(Increase) decrease in other assets (86 ) (124 ) (379 ) (167 )
Increase (decrease) in accounts payable and other current liabilities 75 454 303 200
Increase (decrease) in income tax payables, net 98 1 (151 ) (151 )
Increase (decrease) in other liabilities   30     49     275     227  
Net cash provided by operating activities   1,015     1,136     2,129     2,313  
INVESTING ACTIVITIES:
Capital expenditures (510 ) (813 ) (1,581 ) (1,832 )
Acquisitions - net of cash acquired (5 ) (1 ) (18 ) (158 )
Proceeds from the sale of businesses, net of cash sold 100 39 432 47
Proceeds from the sale of assets 2 67 4 89
Sale of short-term investments 1,511 1,126 5,116 4,191
Purchase of short-term investments (1,503 ) (1,139 ) (4,764 ) (3,632 )
(Increase) decrease in restricted cash 84 (148 ) 11 (164 )
(Increase) decrease in debt service reserves and other assets (2 ) (287 ) 24 (379 )
Affiliate advances and equity investments - (31 ) 1 (91 )
Proceeds from performance bond - 199 - 199
Proceeds from government grants for asset construction 3 2 120 7
Other investing   (4 )   9     (21 )   (11 )
Net cash used in investing activities   (324 )   (977 )   (676 )   (1,734 )
FINANCING ACTIVITIES:
(Repayments) borrowings under the revolving credit facilities, net (12 ) 1 (322 ) 126
Issuance of recourse debt - - - 2,050
Issuance of non-recourse debt 243 942 822 1,516
Repayments of recourse debt (3 ) (3 ) (8 ) (474 )
Repayments of non-recourse debt (431 ) (721 ) (759 ) (1,489 )
Payments for financing fees (7 ) (79 ) (24 ) (153 )
Distributions to noncontrolling interests (163 ) (276 ) (741 ) (990 )
Contributions from noncontrolling interests - 6 12 6
Financed capital expenditures (18 ) (7 ) (30 ) (13 )
Purchase of treasury stock (70 ) (127 ) (301 ) (225 )
Other financing   (20 )   (9 )   8     (7 )
Net cash (used in) provided by financing activities (481 ) (273 ) (1,343 ) 347
Effect of exchange rate changes on cash 6 (108 ) 9 (79 )
(Increase) decrease in cash of discontinued and held for sale businesses   -     (9 )   120     1  
Total increase (decrease) in cash and cash equivalents 216 (231 ) 239 848
Cash and cash equivalents, beginning   1,727     3,601     1,704     2,522  
Cash and cash equivalents, ending $ 1,943   $ 3,370   $ 1,943   $ 3,370  
SUPPLEMENTAL DISCLOSURES:
Cash payments for interest, net of amounts capitalized

$

241

$

248 $ 1,024 $ 982
Cash payments for income taxes, net of refunds $ 55

$

141 $ 580 $ 647

THE AES CORPORATION

NON-GAAP FINANCIAL MEASURES (unaudited)

       
Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

Reconciliation of Adjusted Earnings Per Share (1) 2012 2011 2012 2011
 
Diluted earnings per share from continuing operations $ (2.09)

$

(0.09)

$(1.51) $ 0.46
 
Unrealized derivative losses (2) - 0.01 0.07 -
Unrealized foreign currency transaction (gains)/losses (3) (0.01) 0.08 (0.01) 0.03
Disposition/acquisition (gains) (0.04) (4) - (0.18) (5) -
Impairment losses 2.50 (6) 0.25 (7) 2.54 (8) 0.28 (9)
Debt retirement losses - 0.03 (10) - 0.04 (11)
         
Adjusted earnings per share $ 0.36

$

0.28

$0.91 $ 0.81
 
(1)   We define adjusted earnings per share (“Adjusted EPS”) as diluted earnings per share from continuing operations excluding gains or losses of the consolidated entity due to (a) mark-to-market amounts related to derivative transactions, (b) unrealized foreign currency gains or losses, (c) significant gains or losses due to dispositions and acquisitions of business interests, (d) significant losses due to impairments, and (e) costs due to the early retirement of debt. The GAAP measure most comparable to Adjusted EPS is diluted earnings per share from continuing operations. AES believes that Adjusted EPS better reflects the underlying business performance of the Company and is considered in the Company’s internal evaluation of financial performance. Factors in this determination include the variability due to mark-to-market gains or losses related to derivative transactions, currency gains or losses, losses due to impairments and strategic decisions to dispose or acquire business interests or retire debt, which affect results in a given period or periods. Adjusted EPS should not be construed as an alternative to diluted earnings per share from continuing operations, which is determined in accordance with GAAP. Beginning with the quarter ended March 31, 2012, the Company refined its process for computing the tax effects of Adjusted EPS items for interim periods. Accordingly, the Company has also reflected the refined process in the comparative three and nine months ended September 30, 2011.
 
(2) Unrealized derivative losses were net of income tax per share of $0.01 and $0.01 in the three months ended September 30, 2012 and 2011 respectively, and $0.04 and $0.01 in the nine months ended September 30, 2012 and 2011, respectively.
 
(3) Unrealized foreign currency transaction (gains)/losses were net of income tax per share of $(0.01) and $0.03 in the three months ended September 30, 2012 and 2011, respectively, and of $(0.01) and $0.00 in the nine months ended September 30, 2012 and 2011, respectively.
 
(4) Amount primarily relates to the gain from the sale of our interest in China of $24 million ($28 million, or $0.04 per share including an income tax credit of $4 million, or $0.00 per share).
 
(5) Amount primarily relates to the gain from the sale of 80% of our interest in Cartagena for $178 million ($106 million or $0.14 per share, net of income tax of $0.09 per share) and China of $24 million ($28 million, or $0.04 per share including an income tax credit of $4 million, or $0.00 per share).
 
(6) Amount primarily relates to the goodwill impairment at DPL of $1.85 billion ($1.85 billion, or $2.46 per share, net of income tax of $0.00 per share), asset impairments of Wind turbines and projects of $36 million ($26 million, or $0.03 per share, net of income tax of $0.01 per share) and at Kelanitissa of $5 million ($3 million or $0.00 per share, net of noncontrolling interest and of income tax of $0.00 per share).
 
(7) Amount includes equity method investment impairment at Chigen, including Yangcheng, of $79 million ($78 million or $0.10 per share, net of income tax of $0.00 per share), asset impairments at Wind of $116 million ($86 million, or $0.11 per share, net of income tax of $0.04 per share), Kelanitissa of $4 million ($4 million or $0.01 per share, net of non-controlling interest), and Bohemia of $9 million ($11 million, and $0.01 per share including an income tax credit of $2 million or $0.00 per share), and goodwill impairment at Chigen of $17 million ($13 million or $0.02 per share, net of income tax of $0.01 per share).
 
(8)

Amount primarily relates to the goodwill impairment at DPL of $1.85 billion ($1.85 billion, or $2.42 per share, net of income tax of $0.00 per share). Amount also includes other-than-temporary impairment of equity method investments in China of $32 million ($26 million or $0.03 per share, net of income tax of $0.01 per share), and at InnoVent of $17 million ($12 million, or $0.02 per share, net of income tax of $0.01 per share), as well as asset impairments of Wind turbines and projects of $40 million ($28 million, or $0.04 per share, net of income tax of $0.02 per share), at Kelanitissa of $17 million ($11 million or $0.01 per share, net of non-controlling interest and income tax of $0.01 per share), and at St. Patrick of $11 million ($8 million, and $0.01 per share, net of income tax of $0.00 per share).

 

(9)

Amount includes equity method investment impairment at Chigen, including Yangcheng, of $79 million ($78 million or $0.10 per share, net of income tax of $0.00 per share), asset impairments at Wind of $116 million ($86 million, or $0.11 per share, net of income tax of $0.04 per share), Kelanitissa of $37 million ($34 million or $0.04 per share, net of non-controlling interest), and Bohemia of $9 million ($11 million, and $0.01 per share including an income tax credit of $2 million or $0.00 per share), and goodwill impairment at Chigen of $17 million ($13 million or $0.02 per share, net of income tax of $0.01 per share).

 
(10) Amount includes loss on retirement of debt at Gener of $38 million ($20 million, or $0.03 per share, net of non-controlling interest and income tax per share of $0.01)
 
(11) Amount includes loss on retirement of debt at IPL of $15 million ($11 million, or $0.01 per share, net of income tax per share of $0.01) and at Gener of $38 million ($20 million, or $0.03 per share, net of non-controlling interest and income tax per share of $0.01).
 
THE AES CORPORATION
NON-GAAP FINANCIAL MEASURES (unaudited)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2012   2011 2012 2011
 
(in millions) (in millions)
Reconciliation of Adjusted Gross Margin (1)
 
Consolidated Gross Margin $ 1,004 $ 1,010 $2,774 $ 2,995
Add: Depreciation and Amortization 327 303 1,019 879
Less: General and Administrative Expenses   (64)   (90)   (225)   (282)
 
Adjusted Gross Margin (1) $ 1,267 $ 1,223 $ 3,568 $ 3,592
           
 
Reconciliation of Proportional Gross Margin (2)
 
Consolidated Gross Margin $ 1,004 $ 1,010 $2,774 $ 2,995
Less: Proportional Adjustment Factor   266   440   711   1,216
 
Proportional Gross Margin (2) $ 738 $ 570 $ 2,063 $ 1,779
           
 
Reconciliation of Proportional Adjusted Gross Margin (1),(2)
 
Consolidated Adjusted Gross Margin $ 1,267 $ 1,223 $3,568 $ 3,592
Less: Proportional Adjustment Factor   336   525   932   1,472
 
Proportional Adjusted Gross Margin (1),(2) $ 931 $ 698 $ 2,636 $ 2,120
           
 
(1)   Adjusted Gross Margin (a non-GAAP financial measure) is defined by the Company as: Gross margin plus depreciation and amortization less general and administrative expenses. AES believes adjusted gross margin is a useful measure for evaluating and comparing the operating performance of its businesses because it includes the direct operating costs of its business including overhead related expenses and excludes potential differences caused by variations in capital structures affecting interest income and expense, tax positions, such as the impact of changes in effective tax rates and the impact of depreciation and amortization expense.
 
(2) See footnote (2) on Guidance Elements for definition of proportional financial metrics.
 
THE AES CORPORATION
NON-GAAP FINANCIAL MEASURES (unaudited)
       
Three Months Ended Nine Months Ended
September 30, September 30,
2012   2011 2012   2011
(in millions) (in millions)

Calculation of Maintenance Capital Expenditures for Free Cash Flow (1) Reconciliation Below:

 
Maintenance Capital Expenditures, $ 215 $ 209 $ 668 $ 645
Environmental Capital Expenditures 19 27 52 59
Growth Capital Expenditures   294   584   891   1,141
 
Total Capital Expenditures $ 528 $ 820 $ 1,611 $ 1,845
           
 

Reconciliation of Proportional Cash Flow from Operating Activities (2)

 
Consolidated Cash Flow from Operating Activities $ 1,015 $ 1,136 $ 2,129 $ 2,313
Less: Proportional Adjustment Factor   (359)   (511)   (685)   (1,075)
 
Proportional Cash Flow from Operating Activities (2) $ 656 $ 625 $ 1,444 $ 1,238
           
 
Reconciliation of Free Cash Flow (1)
 
Consolidated Cash Flow from Operating Activities $ 1,015 $ 1,136 $ 2,129 $ 2,313

Less: Maintenance Capital Expenditures, net of reinsurance proceeds

(211) (214) (654) (639)
Less: Environmental Capital Expenditures   (19)   (27)   (52)   (59)
 
Free Cash Flow (1) $ 785 $ 895 $ 1,423 $ 1,615
           
 
Reconciliation of Proportional Free Cash Flow (1),(2)
 
Proportional Cash Flow from Operating Activities $ 656 $ 625 $ 1,444 $ 1,238

Less: Proportional Maintenance Capital Expenditures net of reinsurance proceeds and Proportional Environmental Capital Expenditures

  155   165   495   474
 
Proportional Free Cash Flow (1),(2) $ 501 $ 460 $ 949 $ 764
           
 
(1)   Free cash flow (a non-GAAP financial measure) is defined as net cash from operating activities less maintenance capital expenditures (including environmental capital expenditures), net of reinsurance proceeds from third parties. AES believes that free cash flow is a useful measure for evaluating our financial condition because it represents the amount of cash provided by operations less maintenance capital expenditures as defined by our businesses, that may be available for investing or for repaying debt.
 
(2) See footnote (2) on Guidance Elements for definition of proportional financial metrics.
 
The AES Corporation
Parent Financial Information
Parent only data: last four quarters        
($ in millions) 4 Quarters Ended
September 30, June 30, March 31, December 31,

Total subsidiary distributions & returns of capital to Parent

2012 2012 2012 2011
Actual Actual Actual Actual
Subsidiary distributions (1) to Parent & QHCs $ 1,252 $ 1,267 $ 1,287 $ 1,337
Returns of capital distributions to Parent & QHCs   143   233   207   152
Total subsidiary distributions & returns of capital to Parent $ 1,395 $ 1,500 $ 1,494 $ 1,489
 
Parent only data: quarterly
($ in millions) Quarter Ended
September 30, June 30, March 31, December 31,

Total subsidiary distributions & returns of capital to Parent

2012 2012 2012 2011
Actual Actual Actual Actual
Subsidiary distributions to Parent & QHCs $ 331 $ 374 $ 176 $ 371
Returns of capital distributions to Parent & QHCs   12   34   83   14
Total subsidiary distributions & returns of capital to Parent $ 343 $ 408 $ 259 $ 385
 
 

Parent Company Liquidity (2)

Balance at
($ in millions) September 30, June 30, March 31, December 31,
2012 2012 2012 2011
Actual Actual Actual Actual
Cash at Parent & Cash at QHCs (3) $ 444 $ 240 $ 133 $ 200
Availability under credit facilities   795   795   778   493
Ending liquidity $ 1,239 $ 1,035 $ 911 $ 693
 
(1)   Subsidiary distributions should not be construed as an alternative to Net Cash Provided by Operating Activities which are determined in accordance with GAAP. Subsidiary distributions are important to the Parent Company because the Parent Company is a holding company that does not derive any significant direct revenues from its own activities but instead relies on its subsidiaries’ business activities and the resultant distributions to fund the debt service, investment and other cash needs of the holding company. The reconciliation of the difference between the subsidiary distributions and the Net Cash Provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons which are both discretionary and non-discretionary in nature. These factors include, but are not limited to, retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries, and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and related holding companies.
 
(2) Parent Company Liquidity is defined as cash at the Parent Company plus availability under corporate credit facilities plus cash at qualified holding companies (QHCs). 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.
 
(3) The cash held at 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 QHCs is available to the Parent, AES uses the combined measure of subsidiary distributions to Parent and QHCs as a useful measure of cash available to the Parent to meet its international liquidity needs.
 
THE AES CORPORATION
2012 FINANCIAL GUIDANCE ELEMENTS (1)
     
2012 Updated Financial Guidance (as of 8/6/2012)

Proportional

Consolidated

Adjustment Factors (2)

Proportional

 
Income Statement Elements
 
Gross Margin $3,600 to 3,800 million $950 million $2,650 to 2,850 million
 
Adjusted Gross Margin (3) $4,725 to 4,925 million $1,300 million $3,425 to 3,625 million
 
Adjusted Earnings Per Share (4) $1.22 to 1.30
 
Cash Flow Elements
 
Net Cash From Operating Activities $2,900 to 3,100 million $975 million $1,925 to 2,125 million
 
Operational Capital Expenditures (a) $1,050 to 1,125 million $300 million $725 to 850 million
 
Environmental Capital Expenditures (b) $100 to 125 million $25 million $75 to 100 million
 
Maintenance Capital Expenditures (a + b) $1,150 to 1,250 million $325 million $800 to 950 million
 
Free Cash Flow (5) $1,700 to 1,900 million $650 million $1,050 to 1,250 million
 
Subsidiary Distributions (6) $1,325 to 1,525 million
 
Parent Free Cash Flow (7) $550 to 650 million
 
Reconciliation of Free Cash Flow
 
Net Cash from Operating Activities $2,900 to 3,100 million $975 million $1,925 to 2,125 million
 
Less: Maintenance Capital Expenditures $1,150 to 1,250 million $325 million $800 to 950 million
 
Free Cash Flow (6) $1,700 to 1,900 million $650 million $1,050 to 1,250 million
 
Reconciliation of Parent Free Cash Flow
 
Subsidiary distributions $1,325 to 1,525 million
 
Less: Cash Interest $450 to 500 million
 
Less: Cash for development, SGA, and taxes $325 to 375 million
 
Parent Free Cash Flow (8) $550 to 650 million
 
Reconciliation of Adjusted Gross Margin
 
Gross Margin $3,600 to 3,800 million $950 million $2,650 to 2,850 million
 
Plus: Depreciation & Amortization $1,400 to 1,500 million $350 million $1,050 to 1,150 million
 
Less: General & Administrative $300 to 350 million   $300 to 350 million
 
Adjusted Gross Margin (3) $4,725 to 4,925 million $1,300 million $3,425 to 3,625 million
 

Reconciliation of Adjusted Pre-Tax Contribution (8)

 

Adjusted Pre-Tax Contribution (8) Before Corporate Charges

$1,900 to 2,100 million
 
Less: Corporate Charges $650 to 750 million
 
Adjusted Pre-Tax Contribution (8) After Corporate Charges $1,250 to 1,350 million
 
(1)   2012 Guidance is based on expectations for future foreign exchange rates and commodity prices as of September 30, 2012.
 
(2) AES is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which may not be wholly-owned by the Company. Accordingly, the Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure). Proportional metrics present the Company’s estimate of its share in the economics of the underlying metric. The Company believes that the Proportional metrics are useful to investors because they exclude the economic share in the metric presented that is held by non-AES shareholders. For example, Net Cash from Operating Activities (Operating Cash Flow) is a GAAP metric which presents the Company’s cash flow from operations on a consolidated basis, including operating cash flow allocable to noncontrolling interests. Proportional Operating Cash Flow removes the share of operating cash flow allocable to noncontrolling interests and therefore may act as an aid in the valuation of the Company. Proportional metrics are reconciled to the nearest GAAP measure. Certain assumptions have been made to estimate our proportional financial measures. These assumptions include: (i) the Company’s economic interest has been calculated based on a blended rate for each consolidated business when such business represents multiple legal entities; (ii) the Company’s economic interest may differ from the percentage implied by the recorded net income or loss attributable to noncontrolling interests or dividends paid during a given period; (iii) the Company’s economic interest for entities accounted for using the hypothetical liquidation at book value method is 100%; (iv) individual operating performance of the Company’s equity method investments is not reflected and (v) inter-segment transactions are included as applicable for the metric presented.
 
(3) Adjusted Gross Margin is reconciled above. Adjusted Gross Margin (a non-GAAP financial measure) is defined by the Company as gross margin plus depreciation and amortization less general and administrative expenses. AES believes adjusted gross margin is a useful measure for evaluating and comparing the operating performance of its businesses because it includes the direct operating costs of its business including overhead related expenses and excludes potential differences caused by variations in capital structures affecting interest income and expense, tax positions, such as the impact of changes in effective tax rates and the impact of depreciation and amortization expense.
 
(4) Adjusted earnings per share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions, (b) unrealized foreign currency gains or losses, (c) significant gains or losses due to dispositions and acquisitions of business interests, (d) significant losses due to impairments, and (e) costs due to the early retirement of debt. The GAAP measure most comparable to Adjusted EPS is diluted earnings per share from continuing operations. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and is considered in the Company's internal evaluation of financial performance. Factors in this determination include the variability due to unrealized gains or losses related to derivative transactions, unrealized foreign currency gains or losses, losses due to impairments and strategic decisions to dispose or acquire business interests or retire debt, which affect results in a given period or periods. Adjusted earnings per share should not be construed as an alternative to diluted earnings per share from continuing operations, which is determined in accordance with GAAP. Non-GAAP financial measure as reconciled in the table.
 
(5) Free Cash Flow is reconciled above. Free cash flow (a non-GAAP financial measure) is defined as net cash from operating activities less maintenance capital expenditures (including environmental capital expenditures), net of reinsurance proceeds from third parties. AES believes that free cash flow is a useful measure for evaluating our financial condition because it represents the amount of cash provided by operations less maintenance capital expenditures as defined by our businesses, that may be available for investing or for repaying debt.
 
(6) Subsidiary distributions should not be construed as an alternative to Net Cash Provided by Operating Activities which are determined in accordance with GAAP. Subsidiary distributions are important to the Parent Company because the Parent Company is a holding company that does not derive any significant direct revenues from its own activities but instead relies on its subsidiaries' business activities and the resultant distributions to fund the debt service, investment and other cash needs of the holding company. The reconciliation of the difference between the subsidiary distributions and the Net Cash Provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons which are both discretionary and non-discretionary in nature. These factors include, but are not limited to, retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries, and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and related holding companies.
 
(7) Parent Free Cash Flow is reconciled above. Parent Free Cash Flow (a non-GAAP financial measure) should not be construed as an alternative to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Parent Free Cash Flow is equal to subsidiary distributions less cash used for dividends, share repurchases, growth investments, recourse debt repayments, and other uses by the Parent Company.
 
(8) Adjusted Pre-Tax Contribution (a non-GAAP financial measure) represents pre-tax income from continuing operations attributable to AES excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions, (b) unrealized foreign currency gains or losses, (c) significant gains or losses due to dispositions and acquisitions of business interests, (d) significant losses due to impairments, and (e) costs due to the early retirement of debt. It includes net equity in earnings of affiliates, on an after-tax basis. The GAAP measure most comparable to Adjusted PTC is income from continuing operations attributable to AES. AES believes that Adjusted PTC better reflects the underlying business performance of the Company and is considered in the Company’s internal evaluation of financial performance. Factors in this determination include the variability due to unrealized gains or losses related to derivative transactions, unrealized foreign currency gains or losses, losses due to impairments and strategic decisions to dispose or acquire business interests or retire debt, which affect results in a given period or periods. Earnings before tax represents the business performance of the Company before the application of statutory income tax rates and tax adjustments, including the affects of tax planning, corresponding to the various jurisdictions in which the Company operates. Adjusted PTC should not be construed as an alternative to income from continuing operations attributable to AES, which is determined in accordance with GAAP.
 




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