AGL Resources Reports Net Income up 54 Percent for Second Quarter
ATLANTA, Jul 31, 2003 -- AGL Resources Inc.
(NYSE:ATG) today reported net income of $18.9 million, or $0.30 per
basic share ($0.29 per diluted share), for the second quarter of 2003,
reflecting a 54 percent improvement over comparable quarterly net
income for 2002 of $12.3 million, or $0.22 per basic and diluted
share. Weighted average basic shares outstanding were 63.5 million for
the quarter ended June 30, 2003, an increase of 7.5 million shares, or
about 13.4 percent, from the quarter ended June 30, 2002. Shares
outstanding increased primarily as a result of the Company's 6.4
million share offering completed on February 14, 2003.
"We continue to do our laps in a challenging race, but we were on
target in every business segment during the quarter," said Paula G.
Rosput, chairman, president and chief executive officer of AGL
Resources. "We delivered the promised operating results and took
further steps to strengthen the company financially. Moreover, we
continue to be relentless in searching for new sources of value."
FINANCIAL RESULTS
CONSOLIDATED
Consolidated earnings before interest and taxes (EBIT) for the
quarter were $49.2 million, as compared with $40.2 million in 2002.
The key drivers of the $9.0 million increase in EBIT as compared to
last year were:
-- $9.9 million of increased EBIT from the energy investments
segment, primarily resulting from improved performance at
SouthStar Energy Services and the increase in our SouthStar
ownership interest from 50 percent to 70 percent as a result
of our February 2003 purchase of Dynegy's equity interest in
SouthStar.
-- $2.7 million of higher EBIT from the wholesale services
segment as physical volumes sold during the quarter increased
to 1.7 Bcf/d (billions of cubic feet/day) from 1.4 Bcf/d in
the second quarter of 2002.
-- Decreased EBIT in the distribution operations segment of $3.6
million principally due to higher operating expenses related
to increased corporate overhead costs and increased bad debt
allowances.
The increase in consolidated EBIT was further enhanced by lower
corporate interest expense of $3.0 million for the quarter as a result
of lower average debt balances attributable to the equity offering in
February 2003 and lower working capital needs. This increase in EBIT
and decrease in interest expense, however, was partly offset by higher
income taxes of $5.4 million. Income tax expense increased because of
improved earnings and a higher projected effective state tax rate.
DISTRIBUTION OPERATIONS
The distribution operations segment contributed $44.0 million of
EBIT for the quarter, a $3.6 million decrease as compared to a $47.6
million EBIT contribution in the second quarter of 2002. Distribution
operations performed as expected with respect to growth in operating
margin. Operating margin was $0.5 million higher during the quarter as
compared to 2002 as a result of increases of $1.8 million at Atlanta
Gas Light Company due to the pipeline replacement program and $1.5
million at Virginia Natural Gas due to increased customer usage, as
well as an overall increase in the average number of connected
customers to 1.85 million during the second quarter of 2003 as
compared to 1.84 million in 2002. These increases were offset by lower
operating margins as compared to last year due to an expected decrease
of $0.8 million at Atlanta Gas Light Company resulting from the
performance-based rate plan (effective May 1, 2002), a $0.5 million
decrease resulting from lower industrial customer volumes, lower
service revenues of $0.6 million and $0.8 million in lower carrying
charges on natural gas stored underground resulting from Atlanta Gas
Light Company not owning the natural gas stored underground during the
current quarter as compared to last year when it did own the gas.
This increase in operating margin was offset by an increase in
total operating expenses of $4.1 million, to $92.5 million, for the
quarter as compared with $88.4 million in the same period last year.
The increase in operating expenses in the second quarter of 2003 was
primarily due to increased corporate overhead costs, including higher
building lease costs and increased bad debt expense at Virginia
Natural Gas and Chattanooga Gas Company as a result of higher customer
bills.
WHOLESALE SERVICES
The wholesale services segment, comprised primarily of Sequent,
contributed $0.3 million in EBIT for the quarter as compared to an
EBIT loss of $2.4 million last year, a $2.7 million increase. This
EBIT increase is primarily due to an increase in operating margin of
$3.2 million to $4.1 million for the quarter as compared to $0.9
million in the prior year. Increased operating margin was the result
of a 27% increase in physical volumes sold during the quarter as
compared to second quarter 2002. During the quarter, Sequent increased
the number of counterparties with whom it conducts transactions and
continued its expansion into the Midwest and the upper mid-Atlantic
natural gas markets. The increase in operating margin was partially
offset by an increase in operating expenses of $0.5 million as
compared to the prior year as staffing levels were increased to
support Sequent's growth.
ENERGY INVESTMENTS
The energy investments segment realized EBIT of $6.6 million for
the current quarter as compared to an EBIT loss of $3.3 million in the
same period one year ago. The $9.9 million increase in EBIT is
primarily a result of improved results at SouthStar which contributed
$10.3 million of the increase. $7.5 million of the increase from
SouthStar relates to AGL Resources' share of increased operating
margins and $2.8 million relates to an increase in earnings
contributions from AGL Resources' increased ownership percentage in
SouthStar. The increase at SouthStar was partially offset by decreased
EBIT contributions for the current quarter from AGL Networks due to
increased operating expenses which were partially offset by increased
monthly recurring operating revenues.
CORPORATE
Corporate EBIT remained flat year-over-year. Consolidated interest
expense decreased by $3.0 million for the second quarter of 2003,
principally due to lower average debt balances resulting from the
repayment of debt from proceeds generated by the equity offering in
February 2003, and to lower working capital needs. Consolidated income
taxes increased $5.4 million as compared to the prior year. $4.2
million of this increase is due to higher earnings before income taxes
and $1.2 million is due to an increase in the projected effective tax
rate resulting from new state tax law.
YEAR-TO-DATE RESULTS
For the six months ended June 30, 2003, net income was $70.7
million, or $1.14 per basic share ($1.13 per diluted share), compared
to $62.4 million, or $1.12 per basic share ($1.11 per diluted share),
for the same period in 2002. As reported in the first quarter of 2003,
net income for the six-month period ended June 30, 2003 includes a
$7.8 million after-tax charge resulting from the cumulative effect of
a change in accounting principle resulting from the final provisions
of Emerging Issues Task Force (EITF) 02-03, which rescinded EITF
98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities."
Operating revenues increased $106.0 million for the six months
ended June 30, 2003 from $433.1 million in the prior year to $539.1
million for 2003. This increase resulted primarily from increased
distribution operation revenues of $79.2 million primarily due to
weather-related volumes and revenues at Virginia Natural Gas and from
increased wholesale services revenues of $23.1 million.
Consolidated EBIT for the six months ended June 30, 2003 was
$166.8 million, up $26.3 million from the $140.5 million reported in
the previous year. This increase in EBIT reflects increased EBIT
contributions from all segments of the business. For the six months
ended June 30, 2003, EBIT increased $5.9 million for distribution
operations due to increased operating margins of $6.9 million,
primarily resulting from the weather normalization program and colder
weather in 2003 at Virginia Natural Gas, offset by increased total
operating expenses of $1.1 million. Additionally, for the six months
ended June 30, 2003, wholesale services' EBIT increased $17.5 million,
of which $12.6 million relates to Sequent's first quarter 2003 sale of
substantially all of its inventory balances that were impacted on
January 1, 2003 by the now rescinded EITF 98-10; energy investments'
EBIT increased $1.3 million; and corporate EBIT increased $1.6
million.
Earnings Conference Call Webcast: The AGL Resources second quarter
2003 earnings conference call, scheduled for July 31, 2003, at 9 a.m.
(EDT), can be accessed via the AGL Resources website at
www.aglresources.com. The call will address the Company's financial
results for the quarter and six months ended June 30, 2003, as well as
other general corporate updates. The webcast replay of the call will
be available on the website through the close of business on August 7,
2003.
AGL Resources Inc. (NYSE:ATG) is an Atlanta-based energy services
holding company. Its utility subsidiaries -- Atlanta Gas Light
Company, Virginia Natural Gas and Chattanooga Gas Company -- serve
approximately 1.8 million customers in three states. Houston-based
subsidiary Sequent Energy Management provides asset management
services, including the wholesale trading, marketing, gathering and
transportation of natural gas. As a member of the SouthStar
partnership, AGL Resources markets natural gas to consumers in Georgia
under the Georgia Natural Gas brand. AGL Networks, the company's
telecommunications subsidiary, owns and operates a fiber optic network
in Atlanta and Phoenix. For more information, visit
www.aglresources.com.
This press release contains forward-looking statements. We wish to
caution readers that the assumptions, which form the basis for the
forward-looking statements, include many factors that are beyond our
ability to control or estimate precisely. Those factors include, but
are not limited to, the following: changes in industrial, commercial,
and residential growth in our service territories and those of our
subsidiaries; changes in price and demand for natural gas and related
products; impact of changes in state and federal legislation and
regulation, including various orders of the state public service
commissions and the Federal Energy Regulatory Commission, on the gas
and electric industries and on us, including the impact of Atlanta Gas
Light Company's performance based rate plan; effects and uncertainties
of deregulation and competition, particularly in markets where prices
and providers historically have been regulated, unknown risks related
to nonregulated businesses, and unknown issues such as the stability
of certificated marketers; impact of Georgia's Natural Gas Consumers'
Relief Act of 2002; concentration of credit risk in certificated
marketers and our wholesale services segment's counterparties; excess
network capacity and demand/growth for dark fiber in metro network
areas of AGL Networks' customers; AGL Networks' introduction and
market acceptance of new technologies and products, as well as the
adoption of new networking standards; ability of AGL Networks to
produce sufficient capital to fund its business; ability to negotiate
new contracts with telecommunications providers for the provision of
AGL Networks' dark-fiber services; industry consolidation; performance
of equity and bond markets and the impact on pension fund costs;
impact of acquisitions and divestitures; changes in accounting
policies and practices issued periodically by accounting
standard-setting bodies; direct or indirect effects on our business,
financial condition or liquidity resulting from a change in our credit
ratings or the credit ratings of our competitors or counterparties;
interest rate fluctuations, financial market conditions, and general
economic conditions; uncertainties about environmental issues and the
related impact of such issues; impact of changes in weather upon the
temperature-sensitive portions of our business; and other risks
described in our documents on file with the Securities and Exchange
Commission.
Supplemental Information
Company management evaluates the financial performance and
operational effectiveness of its segments on an earnings before
interest and taxes (EBIT) measure, which includes other income, but
excludes financing costs, including interest and debt expense, income
taxes and the cumulative effect of changes in accounting principles,
each of which we evaluate on a consolidated level. We believe EBIT is
a useful measurement of our performance for you because it provides
information that can be used to evaluate the effectiveness of our
businesses from an operational perspective, exclusive of the costs to
finance those activities and exclusive of income taxes, neither of
which are directly relevant to the efficiency of those operations.
However, EBIT should not be considered an alternative to, or a more
meaningful indicator of our operating performance than operating
income or net income as determined in accordance with accounting
principles generally accepted in the United States of America. In
addition, our EBIT may not be comparable to a similarly titled measure
of another company.
AGL Resources Inc.
Condensed Statements of Consolidated Income
For the Three and Six Months Ended
June 30, 2003 and 2002
(In millions, except per share amounts)
Three Months Six Months
----------------------- -----------------------
6/30 6/30 Fav/ 6/30 6/30 Fav/
2003 2002 (Unfav) 2003 2002 (Unfav)
------- ------- ------- ------- ------- -------
Operating Revenues $186.6 $161.2 $25.4 $539.1 $433.1 $106.0
Cost of Sales 45.4 24.4 (21.0) 194.0 121.5 (72.5)
------- ------- ------- ------- ------- -------
Operating Margin 141.2 136.8 4.4 345.1 311.6 33.5
Total Operating
Expenses 100.3 94.9 (5.4) 202.7 195.7 (7.0)
------- ------- ------- ------- ------- -------
Operating Income 40.9 41.9 (1.0) 142.4 115.9 26.5
Other (Loss) Income 8.3 (1.7) 10.0 24.4 24.6 (0.2)
------- ------- ------- ------- ------- -------
Earnings Before
Interest & Taxes 49.2 40.2 9.0 166.8 140.5 26.3
Interest Expense 18.2 21.2 3.0 38.1 43.9 5.8
------- ------- ------- ------- ------- -------
Earnings Before Income
Taxes 31.0 19.0 12.0 128.7 96.6 32.1
Income Taxes 12.1 6.7 (5.4) 50.2 34.2 (16.0)
------- ------- ------- ------- ------- -------
Income Before
Cumulative Effect of
Change in Accounting
Principle 18.9 12.3 6.6 78.5 62.4 16.1
Cumulative Effect of
Change in Accounting
Principle - - - (7.8) - (7.8)
------- ------- ------- ------- ------- -------
Net Income $18.9 $12.3 $6.6 $70.7 $62.4 $8.3
======= ======= ======= ======= ======= =======
EPS Before Cumulative
Effect of Change in
Accounting Principle
Basic $0.30 $0.22 $0.08 $1.27 $1.12 $0.15
Diluted $0.29 $0.22 $0.07 $1.26 $1.11 $0.15
EPS
Basic $0.30 $0.22 $0.08 $1.14 $1.12 $0.02
Diluted $0.29 $0.22 $0.07 $1.13 $1.11 $0.02
Shares Outstanding
Basic 63.5 56.0 7.5 61.9 55.9 6.0
Diluted 64.2 56.5 7.7 62.4 56.2 6.2
AGL Resources Inc.
EBIT Schedule
For the Three and Six Months Ended
June 30, 2003 and 2002
(In millions, except per share amounts)
Three Months Six Months
--------------------- -----------------------
6/30 6/30 Fav/ 6/30 6/30 Fav/
2003 2002 (Unfav) 2003 2002 (Unfav)
------ ------ ------- ------- ------- -------
Distribution Operations $44.0 $47.6 $(3.6) $124.9 $119.0 $5.9
Wholesale Services 0.3 (2.4) 2.7 21.0 3.5 17.5
Energy Investments 6.6 (3.3) 9.9 22.6 21.3 1.3
Corporate (1.7) (1.7) 0.0 (1.7) (3.3) 1.6
------ ------ ------- ------- ------- -------
Consolidated EBIT 49.2 40.2 9.0 166.8 140.5 26.3
------ ------ ------- ------- ------- -------
Interest Expense 18.2 21.2 3.0 38.1 43.9 5.8
Income Taxes 12.1 6.7 (5.4) 50.2 34.2 (16.0)
------ ------ ------- ------- ------- -------
Income Before Cumulative
Effect of Change in
Accounting Principle 18.9 12.3 6.6 78.5 62.4 16.1
Cumulative Effect of
Change in Accounting
Principle - - - (7.8) - (7.8)
Net Income $18.9 $12.3 $6.6 $70.7 $62.4 $8.3
------ ------ ------- ------- ------- -------
Earnings per Common
Share Before Cumulative
Effect of Change in
Accounting Principle
Basic $0.30 $0.22 $0.08 $1.27 $1.12 $0.15
====== ====== ======= ======= ======= =======
Diluted $0.29 $0.22 $0.07 $1.26 $1.11 $0.15
====== ====== ======= ======= ======= =======
Earnings per Common Share
Basic $0.30 $0.22 $0.08 $1.14 $1.12 $0.02
====== ====== ======= ======= ======= =======
Diluted $0.29 $0.22 $0.07 $1.13 $1.11 $0.02
====== ====== ======= ======= ======= =======
SOURCE: AGL Resources
AGL Resources
Steve Cave, 404-584-3801
http://www.businesswire.com
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