Avista (AVA) Q4 2006 earnings summary

Executive summary

• FY06 net income rose to $73.1M from $45.2M, with improved results in the utility, energy marketing and facility-services segments; Other remained loss-making.

• Stronger utility gross margin and a major recovery in energy trading results were the main earnings drivers; normalized hydro output and lower power purchases supported utility performance.

Financial highlights

• Operating revenue was $1,506.3M vs. $1,359.6M; income from operations was $199.9M vs. $152.0M.

• Net income was $73.1M vs. $45.2M; diluted EPS was $1.47 vs. $0.92.

• Utility revenue rose $106.6M to $1,267.9M; utility resource costs increased $82.0M, lifting gross margin $24.6M to $516.3M.

• Operating cash flow increased to $201.5M from $130.2M; total debt declined $112.5M during 2006.

Outlook and guidance

• Utility net income may decline in 2007: no significant rate adjustments expected, the Washington rate filing was dismissed, and an ERM expense is expected versus a 2006 benefit.

• Utility capital expenditures forecast at $180M in 2007 and $180M–$190M annually in 2007–09; 2007 hydro generation forecast at normal levels.

• Forecasts show quarterly electric energy deficits beginning in 2007 and annual deficits in 2010; projected retail electric and gas load growth averages 3.0%–3.5% annually for 2007–10.

• Management expected 2007 operating cash flows and the $320M committed credit line to cover capital spending, maturities, dividends and other commitments.