AGL Resources Reports First Quarter Earnings
ATLANTA--April 28, 2004--AGL Resources Inc.
(NYSE: ATG) today reported first quarter 2004 net income of $65.7
million, or $1.02 per basic share, compared with $51.8 million, or
$0.86 per basic share (after the cumulative effect of a change in
accounting principle) reported in the first quarter of 2003. The
change in accounting principle adopted in the first quarter 2003
reflected the final provisions of EITF 02-03 (which required
non-derivative energy trading contracts to be recorded at historical
cost and reported on an accrual, rather than a mark-to-market, basis)
and resulted in a pre-tax charge to the company of $12.6 million that
also had the effect of lowering net income by $7.8 million on a
one-time basis. First quarter 2003 reported results before the
cumulative effect of the accounting change were $59.6 million, or
$0.99 per basic share.
The company's results reflect improved earnings in its
Distribution Operations and Energy Investments segments, which offset
lower earnings in the Wholesale Services segment and increased
corporate expenses for the quarter.
"Investors can count on AGL Resources to keep looking for
improvements," said Paula G. Rosput, Chairman, President and Chief
Executive Officer. "This quarter demonstrates we can maintain our
momentum and continue to deliver sustainable, repeatable earnings in
2004."
QUARTERLY RESULTS BY BUSINESS SEGMENT
Distribution Operations
The Distribution Operations segment contributed EBIT of $82.1
million, compared with $81.0 million reported in first quarter 2003.
The increase in EBIT was primarily the result of increased income due
to customer growth at each of the company's three utilities, an
increase in additional charges for gas stored for marketers, and an
increase in revenue from Atlanta Gas Light's pipeline replacement
program. On a net basis, the company's three utilities had an average
of nearly 11,000 incremental connected customers in the first quarter
2004 as compared to 2003. Total operating expenses for the quarter
were $97.9 million, up from $92.0 million in the same period last
year, primarily as a result of additional pension expense, loss on
retirement of assets, and higher software licensing expense.
Energy Investments
The Energy Investments segment contributed EBIT of $32.2 million
for the first quarter 2004, compared with $16.0 million in the first
quarter 2003, primarily due to strong results from SouthStar Energy
Services. The improved results at SouthStar primarily reflect higher
operating margins, lower hedging costs, and substantially lower bad
debt expense, as well as AGL Resources' expanded ownership in the
joint venture and an amended ownership agreement that provides for AGL
Resources to receive 75 percent of SouthStar's earnings, beginning in
2004. These results were achieved despite first quarter 2004 weather
that was milder than the comparable period in 2003, and reflect the
increased energy use in SouthStar's customer base. During the first
quarter 2003 (effective February 18, 2003, for accounting purposes),
AGL Resources increased its ownership interest in SouthStar from 50
percent to 70 percent.
On March 31, 2004, AGL Resources adopted Financial Accounting
Standards Board (FASB) Interpretation No. (FIN) 46R, Consolidation of
Variable Interest Entities, which resulted in AGL Resources accounting
for its interest in SouthStar under the consolidation method of
accounting beginning January 1, 2004, rather than the equity method
that had previously been used.
Wholesale Services
The Wholesale Services segment contributed $12.3 million in EBIT
for the first quarter 2004, down from $20.7 million for the same
period last year. The $8.4 million decline is primarily the result of
increased sales from lower-cost storage inventory during the first
quarter of 2003, at a time when gas prices were extremely volatile,
compared with lower sales from storage and a higher inventory cost
during the same period in 2004.
Despite lower volatility during first quarter 2004 as compared to
2003, Sequent Energy Management's sales volumes for the quarter were
2.1 Bcf/day, up 8 percent over the same period last year. In addition,
Sequent continued to be active in negotiating and executing asset
management agreements with non-affiliated energy users during first
quarter 2004. Sequent's EBIT contribution for the first quarter of
2004 and its increased asset management activity are consistent with
AGL Resources' plan to refine the repeatable portion of this segment's
performance.
Corporate
The Corporate segment EBIT contribution decreased by $3.8 million
in first quarter 2004 compared to the prior year period. These results
reflect increased corporate costs associated with governance-related
costs attributed to the holding company, as well as increased legal,
consulting and employee-related costs.
INTEREST EXPENSE AND INCOME TAXES
Interest expense for the first quarter 2004 was $15.9 million,
compared with $19.9 million in first quarter 2003. The decrease
reflects favorable interest rates and lower average debt balances
during the period. The company's debt-to-capitalization ratio as of
March 31, 2004, was 52 percent, down substantially from 59 percent as
of December 31, 2003.
First quarter 2004 income taxes were $41.1 million, a $3.0 million
increase over first quarter 2003. The higher income taxes resulted
from higher corporate earnings for the quarter, offset by a decrease
in the effective tax rate.
EARNINGS OUTLOOK
In November 2003, AGL Resources forecasted 2004 full-year earnings
per share between $2.01 and $2.10. The company reaffirms this earnings
guidance for the year.
Earnings Conference Call Webcast: The AGL Resources first quarter
2004 earnings conference call and webcast, scheduled for Wednesday,
April 28, 2004, at 3 p.m. (ET), can be accessed via the investor
relations section of the AGL Resources website at
www.aglresources.com. The webcast replay of the call will be available
on the website through the close of business on Wednesday, May 5,
2004.
AGL Resources Inc. (NYSE: ATG) is an Atlanta-based energy services
holding company. Its utility subsidiaries - Atlanta Gas Light,
Virginia Natural Gas and Chattanooga Gas - serve more than 1.8 million
customers in three states. Houston-based subsidiary Sequent Energy
Management provides natural gas asset management services, including
wholesale trading, marketing, gathering and transportation services as
well as third-party asset management. 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 fiber optic networks
in Atlanta and Phoenix. For more information, visit
www.aglresources.com.
This press release contains forward-looking statements. Company
management cautions readers that the assumptions, which form the basis
for the forward-looking statements, include many factors that are
beyond company management's ability to control or estimate precisely.
Those factors include, but are not limited to, the following: changes
in industrial, commercial, and residential growth in the company's
service territories and those of the company's 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 the company, including the impact of Atlanta Gas Light'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 the company's 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 the
company's business, financial condition or liquidity resulting from a
change in the company's credit ratings or the credit ratings of the
company's 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 the company's business; and other
risks described in the company's documents on file with the Securities
and Exchange Commission.
Supplemental Information
Company management evaluates segment financial performance based
on earnings before interest and taxes (EBIT), which includes the
effects of corporate expense allocations. Items that are not included
in EBIT are financing costs, including debt and interest expense,
income taxes and the cumulative effect of changes in accounting
principles. The company evaluates each of these items on a
consolidated level, and believes EBIT is a useful measurement of our
performance 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 is directly relevant to
the efficiency of those operations.
Operating margin is a non-GAAP measure of income, calculated as
revenues minus cost of gas, excluding operation and maintenance
expense, depreciation and amortization, and taxes other than income
taxes. These items are included in the company's calculation of
operating income. The company believes operating margin is a better
indicator than operating revenues of the top-line contribution
resulting from customer growth, since cost of gas is generally passed
directly through to customers.
EBIT and operating margin should not be considered as alternatives
to, or more meaningful indicators of, the company's 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, the company's EBIT or operating margin
may not be comparable to similarly titled measures of another company.
A reconciliation of non-GAAP financial measures referenced in this
press release and otherwise in the earnings conference call and
webcast is attached to this press release and is available on the
company's website at www.aglresources.com under the "investor
information" section.
AGL Resources Inc.
Condensed Statements of Consolidated Income
For the Three Months Ended
March 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-----------------------------------
3/31/2004 3/31/2003 Fav/(Unfav)
----------- ----------- -----------
Operating Revenues $ 651.0 $ 352.5 $ 298.5
Cost of Gas 392.8 148.6 (244.2)
Operation and Maintenance Expenses 92.9 72.2 (20.7)
Depreciation and Amortization 24.2 22.3 (1.9)
Taxes Other Than Income 7.9 7.9 -
----------- ----------- -----------
Total Operating Expenses 517.8 251.0 (266.8)
----------- ----------- -----------
Operating Income 133.2 101.5 31.7
Equity in Earnings of SouthStar - 14.4 (14.4)
Other Income 0.5 1.7 (1.2)
Minority Interest (11.0) - (11.0)
----------- ----------- -----------
Earnings Before Interest & Taxes 122.7 117.6 5.1
Interest Expense 15.9 19.9 4.0
----------- ----------- -----------
Earnings Before Income Taxes 106.8 97.7 9.1
Income Taxes 41.1 38.1 (3.0)
----------- ----------- -----------
Income Before Cumulative Effect
of Change in Accounting
Principle 65.7 59.6 6.1
Cumulative Effect of Change in
Accounting Principle - (7.8) 7.8
----------- ----------- -----------
Net Income $ 65.7 $ 51.8 $ 13.9
=========== =========== ===========
EPS Before Cumulative Effect of
Change in Accounting Principle
Basic $ 1.02 $ 0.99 $ 0.03
Diluted $ 1.00 $ 0.98 $ 0.02
EPS
Basic $ 1.02 $ 0.86 $ 0.16
Diluted $ 1.00 $ 0.85 $ 0.15
Shares Outstanding
Basic 64.6 60.3 4.3
Diluted 65.4 60.7 4.7
AGL Resources Inc.
EBIT Schedule
For the Three Months Ended
March 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
---------------------------------
3/31/2004 3/31/2003 Fav/(Unfav)
----------- ----------- -----------
Distribution Operations $ 82.1 $ 81.0 $ 1.1
Wholesale Services 12.3 20.7 (8.4)
Energy Investments 32.2 16.0 16.2
Corporate (3.9) (0.1) (3.8)
----------- ----------- -----------
Consolidated EBIT 122.7 117.6 5.1
----------- ----------- -----------
Interest Expense 15.9 19.9 4.0
Income Taxes 41.1 38.1 (3.0)
----------- ----------- -----------
Income Before Cumulative Effect of
Change in Accounting Principle 65.7 59.6 6.1
Cumulative Effect of Change in
Accounting Principle - (7.8) 7.8
----------- ----------- -----------
Net Income $ 65.7 $ 51.8 $13.9
----------- ----------- -----------
Earnings per Common Share Before
Cumulative Effect of Change in
Accounting Principle
Basic $ 1.02 $ 0.99 $0.03
=========== =========== ===========
Diluted $ 1.00 $ 0.98 $0.02
=========== =========== ===========
Earnings per Common Share
Basic $ 1.02 $ 0.86 $0.16
=========== =========== ===========
Diluted $ 1.00 $ 0.85 $0.15
=========== =========== ===========
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
For the Three Months Ended
March 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-----------------------------------
3/31/2004 3/31/2003 Fav/(Unfav)
----------- ----------- -----------
Operating Revenues $ 651.0 $ 352.5 $ 298.5
Cost of Gas 392.8 148.6 (244.2)
----------- ----------- -----------
Operating Margin $ 258.2 $ 203.9 $ 54.3
=========== =========== ===========
CONTACT: AGL Resources Inc., Atlanta
Investor Relations
Steve Cave, 404/584-3801
or
Media Contact
Nick Gold, 404/584-3457
SOURCE: AGL Resources Inc.
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