Friday, July 25, 2014

AEP River Operations posts net earnings (updated twice)

Most of the companies that operate towboats on the Ohio River are privately owned or else they have such a limited number of stockholders that they do not have to disclose financial information to the public. Probably the biggest exception to that is American Electric Power. Although AEP's main business is generating and selling electricity, it also operates a fleet of towboats and barges.

AEP released its second-quarter earnings report this morning. I scanned through it to see that AEP reported earnings of $3 million in its river transportation business in the quarter and $6 million in the first two quarters of the year. Those compare favorably with losses of $9 million in the second quarter of last year and $11 million in the first half.

Company executives had a conference call with investment analysts earlier today. I have not yet listened to a replay. If they said anything about river operations, I'll update this.

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While we're talking corporate finance, you might want to check out this article "Coal Company Pain Accelerates as Bankruptcy Cases Rise".

I dug a little more into the AEP earnings report to pull out information on the River Operations unit. If you do the math, AEP in the first half of this year had $5.8 million in net income on $325.3 million of revenue. That's about 1.8 percent profit (although you never hear an executive use the word "profit"; it's usually "net income" or "earnings"). The beer or cigarettes you buy at a convenience store returns about 20 to 25 percent profit to the store owner, by comparison.

To put it another way, on a 15-barge tow, about a quarter of one barge is profit. The rest goes to expenses and other costs.

Here are the numbers, for those who are interested:

AEP River Operations
(All numbers in millions)
First six months 2014 2013
Total revenues 325.3 249.6
Expenses 309.1 259.7
Maintenance and operations 286.6 239.3
Depreciation and amortization 15.3 15.3
Taxes other than income taxes 7.2 5.1
Operating income 16.2 -10.1
Income before taxes and equity earnings 8.6 -18.5
Interest income 0 0.1
Equity investments -7.6 -8.5
Income taxes 3.4 -7.1
Equity earnings 0.6 0.6
Net income 5.8 -10.8