AGL Resources Reports Second Quarter Earnings
ATLANTA--July 29, 2005--AGL Resources Inc. (NYSE:
ATG) today reported second quarter 2005 net income of $24 million
compared with $21 million reported for the second quarter of 2004, a
$3 million increase. The company's results reflect improved earnings
in its Wholesale Services, Distribution Operations and Energy
Investments operating segments which were offset slightly by lower
earnings in the Retail Energy Operations segment, as well as higher
interest expense during the quarter.
"The double-digit improvement in consolidated earnings in the
second quarter should reinforce investor confidence in our commitment
to drive performance in base and acquired businesses," said Paula
Rosput Reynolds, chairman, president and chief executive officer of
AGL Resources. "Even in a shoulder quarter, with relatively more
seasonality in our northern utilities, we remain solidly on plan for
2005."
The earnings generated $0.31 per basic share ($0.30 per diluted
share) for the current quarter compared with $0.34 per basic share
($0.33 per diluted share), reported for the second quarter of 2004.
These earnings per share results reflect the seasonality in quarterly
earnings contributions inherent in the company's newly-acquired New
Jersey and Maryland utility operations and the effect of the company's
November 2004 11-million share equity offering principally to finance
various acquisitions. Earnings per share for the quarter are based on
weighted average shares outstanding of 77.1 million, while 2004 second
quarter earnings per share were based on weighted average shares
outstanding of 64.8 million.
The company's consolidated earnings before interest and taxes
(EBIT) for the second quarter of 2005 were $64 million, compared with
$51 million in the same period last year.
QUARTERLY RESULTS BY BUSINESS SEGMENT
Distribution Operations
The Distribution Operations segment contributed EBIT of $52
million as compared with $49 million in second quarter 2004, a $3
million or 6 percent year-over-year increase. The performance of the
NUI utility assets (principally Elizabethtown Gas and Florida City
Gas) contributed $2 million of the $3 million increased EBIT.
Operating margin was $179 million for the quarter, up $39 million
or 28 percent from the same period last year, of which $36 million
came from the acquired NUI utilities. Atlanta Gas Light contributed
the remainder of the operating margin increase as a result of higher
revenues from the pipeline replacement program and gas stored for
marketers. Customer growth in the Atlanta Gas Light service territory
offset the second quarter 2005 $1 million reduction in operating
revenues resulting from the June 10, 2005 Settlement Agreement with
the Georgia Public Service Commission (GPSC) resolving Atlanta Gas
Light's 2004-2005 rate case. Total operating expenses increased $36
million or 39 percent as compared to last year, with the addition of
the NUI utilities contributing $35 million of the increase. Atlanta
Gas Light contributed the remainder of the increase principally as a
result of higher depreciation expense.
Retail Energy Operations
The Retail Energy Operations segment, which is comprised of
SouthStar Energy Services, is a new operating segment established in
the first quarter of 2005. Previously, SouthStar was included in the
Energy Investments operating segment. AGL Resources added this new
operating segment in accordance with the requirements of Statement of
Financial Accounting Standard No 131, Disclosures about Segments of an
Enterprise and Related Information, in order to provide more
transparency and visibility into the results and operations of
SouthStar, as well as the results and operations of those businesses
comprising the Energy Investments segment, including Jefferson Island
Storage & Hub (Jefferson Island) and Pivotal Propane of Virginia.
Retail Energy Operations contributed EBIT of $6 million in second
quarter 2005 as compared to $7 million in the comparable prior year
quarter, a decrease of $1 million or 14 percent. The decreased EBIT
was primarily the result of higher operating expenses of $1 million
due to increased marketing activities related to customer acquisition
and care.
Operating margin for SouthStar was flat for the second quarter
2005 as compared to last year. Greater retail spreads on natural gas
sold were offset by lower revenues due to lower usage in 2005 compared
to 2004 as a result of warmer than normal weather in 2005 and
decreased late payment fees resulting from an increase in the minimum
balance (from $10 to $30) on which SouthStar is allowed to charge a
late fee in accordance with new GPSC regulations.
Wholesale Services
The Wholesale Services segment contributed $2 million in EBIT for
the second quarter as compared to a prior year EBIT loss of $5
million. The $7 million quarter-over-quarter EBIT improvement was
driven primarily by a $9 million increase in operating margin offset
by increased operating expenses of $2 million.
The improvement in operating margin in the 2005 quarter was a
result of operating margin being flat in the second quarter of 2004
due to lower volatility and fewer storage arbitrage opportunities for
Sequent Energy Management (Sequent) as compared to a more favorable
pricing and a more volatile natural gas market in the current quarter.
The improved natural gas market conditions in the second quarter of
2005 led to increased operating margin associated with affiliated
asset management and origination activities, including the recognition
of unrealized gains on financial instruments utilized to lock-in
operating margins on natural gas inventory held in storage. Operating
expenses increased during the current quarter as compared to last year
as a result of higher payroll and related benefit costs due to
increased headcount and as a result of higher depreciation expense due
to the implementation of Sequent's new Energy Trading and Risk
Management system that was not in-service in the second quarter of
last year.
Energy Investments
The Energy Investments segment contributed EBIT of $5 million for
the second quarter of 2005 compared with $2 million in the second
quarter of 2004, a $3 million increase driven by $4 million in EBIT
contributions from the 2004 acquisitions of Jefferson Island and the
NUI assets of Saltville Gas Storage Company and Virginia Gas Company,
as well as contributions from Pivotal Propane of Virginia which became
operational in April 2005. AGL Networks also contributed a $2 million
increase in EBIT due to improved operating margins. These
year-over-year EBIT improvements were offset by $3 million in prior
year gains that did not occur this year related to the sale of a
residential and retail development located in Savannah, Georgia and
the sale of the company's remaining investment units in Heritage
Propane.
INTEREST EXPENSE AND INCOME TAXES
Interest expense for the second quarter of 2005 was $26 million,
compared with $16 million in the second quarter of 2004. The $10
million, or 63 percent, increase reflects $8 million of additional
interest expense associated with the NUI and Jefferson Island
acquisition debt and $2 million from higher short-term interest rates.
Average debt outstanding for the second quarter of 2005 was $1.7
billion, a $0.6 billion increase over the prior year quarter's average
outstanding debt of $1.1 billion. The company's debt-to-capitalization
ratio as of June 30, 2005, was 55 percent, slightly up from the 53
percent as of June 30, 2004, but down from 58 percent as of December
31, 2004.
Second quarter 2005 income taxes of $14 million were essentially
flat as compared to the second quarter of 2004.
YEAR-TO-DATE RESULTS
For the six months ended June 30, 2005, net income was $112
million, or $1.45 per basic share ($1.44 per diluted share), compared
with $87 million, or $1.35 per basic share ($1.33 per diluted share),
an increase of $25 million or 29 percent. Weighted average shares
outstanding for the six months ended June 30, 2005, were 77.0 million,
up 19 percent from the 64.7 million in the prior-year period, as a
result of the company's 11 million share equity offering in November
2004 and an additional 1.3 million shares related to the exercise of
stock options.
Operating margins increased $139 million or 33 percent for the six
months ended June 30, 2005, from $423 million in the prior year to
$562 million in 2005. The increase resulted primarily from the 2004
acquisitions of NUI and Jefferson Island and improved margins from
Retail Energy Operations, Energy Investments and Distribution
Operations due to higher pipeline replacement revenue and additional
carrying costs charged to the retail marketers in Georgia for volumes
of gas in storage. Operating margins for the six months ended June 30,
2005 at Wholesale Services were relatively flat as compared to last
year.
Consolidated EBIT for the six months ended June 30, 2005, was $233
million, up $59 million or 34 percent from the previous year, of which
$44 million relates to EBIT contributions from the acquisitions of NUI
and Jefferson Island. The increase also reflects improved
contributions from Distribution Operations, Retail Energy Operations,
Energy Investments and Corporate. Wholesale Services' EBIT decreased
slightly primarily due to increased operating expenses.
2005 EARNINGS OUTLOOK
AGL Resources provided 2005 earnings guidance in the range of
$2.25 to $2.35 per share on January 28, 2005, and later reaffirmed the
guidance on June 10, 2005. Based on year-to-date earnings and a
continued positive outlook for positive results across the business,
AGL Resources again reaffirms the previously provided 2005 earnings
guidance.
Earnings Conference Call Webcast: The AGL Resources second quarter
2005 earnings conference call and webcast, scheduled for Friday, July
29, at 10:30 a.m. (EDT), 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 Friday, August 5. The telephone replay of the
call can be accessed by dialing (888) 286-8010, using passcode
20535798. International callers should dial (617) 801-6888, and use
the same passcode.
About AGL Resources
AGL Resources (NYSE: ATG), an Atlanta-based energy services
holding company, serves 2.3 million customers in six states through
its utility subsidiaries - Atlanta Gas Light, Elizabethtown Gas in New
Jersey, Virginia Natural Gas, Florida City Gas, Chattanooga Gas, and
Elkton Gas in Maryland. A Fortune 1000 company that ranks number 46 in
the Fortune gas and electric utilities sector, AGL Resources reported
2004 revenue of $1.8 billion and net income of $153 million. The
company also owns Houston-based Sequent Energy Management, an asset
manager serving natural gas wholesale customers throughout the East
and Midwest. As a 70 percent owner in the SouthStar partnership, AGL
Resources markets natural gas to customers 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. The company also owns and operates Jefferson
Island Storage & Hub, a high-deliverability natural gas storage
facility near the Henry Hub in Louisiana. For more information, visit
www.aglresources.com.
Forward-Looking Statements
Certain expectations and projections regarding our future
performance referenced in this press release are forward-looking
statements. Forward-looking statements involve matters that are not
historical facts and because these statements involve anticipated
events or conditions, forward-looking statements often include words
such as "anticipate," "assume," "can," "could," "estimate," "expect,"
"forecast,""future," "indicate," "intend," "may," "plan," "predict,"
"project," "seek," "should," "target," "will," "would," or similar
expressions. Our expectations are not guarantees and are based on
currently available competitive, financial and economic data along
with our operating plans. While we believe our expectations are
reasonable in view of the currently available information, our
expectations are subject to future events, risks and uncertainties,
and there are several factors - many beyond our control - that could
cause results to differ significantly from our expectations. Such
events, risks and uncertainties include, but are not limited to,
changes in price, supply and demand for natural gas and related
products, impact of changes in state and federal legislation and
regulation, actions taken by government agencies on rates and other
matters, concentration of credit risk, utility and energy industry
consolidation, impact of acquisitions and divestitures, direct or
indirect effects on AGL Resources' business, financial condition or
liquidity resulting from a change in our credit ratings or the credit
ratings of our counterparties or competitors, interest rate
fluctuations, financial market conditions and general economic
conditions, uncertainties about environmental issues and the related
impact of such issues, impacts of changes in weather upon the
temperature-sensitive portions of the business, acts of war or
terrorism, and other factors which are listed in greater detail in our
filings with the Securities and Exchange Commission, which we
incorporate by reference in this press release. Forward-looking
statements are only as of the date they are made, and we do not
undertake any obligation to update these statements to reflect
subsequent changes.
Supplemental Information
Company management evaluates segment financial performance based
on earnings before interest and taxes (EBIT), which includes the
effects of corporate expense allocations. EBIT is a non-GAAP
(accounting principles generally accepted in the United States of
America) financial measure. 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 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 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 GAAP. In addition, the company's EBIT or operating
margin may not be comparable to similarly titled measures of another
company.
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 Relations
section.
AGL Resources Inc.
Condensed Statements of Consolidated Income
For the Three and Six Months Ended
June 30, 2005 and 2004
(In millions, except per share amounts)
Three Months
----------------------------------
6/30/2005 6/30/2004 Fav/(Unfav)
---------- ---------- -----------
Operating Revenues $ 431 $ 294 $ 137
Cost of Gas 209 129 (80)
Operation and Maintenance Expenses 113 81 (32)
Depreciation and Amortization 33 24 (9)
Taxes Other Than Income 10 7 (3)
---------- ---------- -----------
Total Operating Expenses 365 241 (124)
---------- ---------- -----------
Operating Income 66 53 13
Other Income (Loss) 1 1 -
Minority Interest (3) (3) -
---------- ---------- -----------
Earnings Before Interest & Taxes 64 51 13
Interest Expense 26 16 (10)
---------- ---------- -----------
Earnings Before Income Taxes 38 35 3
Income Taxes 14 14 -
---------- ---------- -----------
Net Income $ 24 $ 21 $ 3
========== ========== ==========
Earnings Per Common Share
Basic $ 0.31 $ 0.34 $ (0.03)
Diluted $ 0.30 $ 0.33 $ (0.03)
Shares Outstanding
Basic 77.1 64.8 12.3
Diluted 77.8 65.6 12.2
Six Months
----------------------------------
6/30/2005 6/30/2004 Fav/(Unfav)
---------- ---------- -----------
Operating Revenues $1,343 $945 $398
Cost of Gas 781 522 (259)
Operation and Maintenance Expenses 228 174 (54)
Depreciation and Amortization 66 48 (18)
Taxes Other Than Income 21 15 (6)
---------- ---------- -----------
Total Operating Expenses 1,096 759 (337)
---------- ---------- -----------
Operating Income 247 186 61
Other Income (Loss) 2 2 -
Minority Interest (16) (14) (2)
---------- ---------- -----------
Earnings Before Interest & Taxes 233 174 59
Interest Expense 52 32 (20)
---------- ---------- -----------
Earnings Before Income Taxes 181 142 39
Income Taxes 69 55 (14)
---------- ---------- -----------
Net Income $112 $87 $25
========== ========== ===========
Earnings Per Common Share
Basic $1.45 $1.35 $0.10
Diluted $1.44 $1.33 $0.11
Shares Outstanding
Basic 77.0 64.7 12.3
Diluted 77.7 65.5 12.2
AGL Resources Inc.
EBIT Schedule
For the Three and Six Months Ended
June 30, 2005 and 2004
(In millions, except per share amounts)
Three Months
----------------------------------
6/30/2005 6/30/2004 Fav/(Unfav)
---------- ---------- -----------
Distribution Operations $ 52 $ 49 $ 3
Retail Energy Operations 6 7 (1)
Wholesale Services 2 (5) 7
Energy Investments 5 2 3
Corporate (1) (2) 1
---------- ---------- ----------
Consolidated EBIT 64 51 13
---------- ---------- ----------
Interest Expense 26 16 (10)
Income Taxes 14 14 -
---------- ---------- ----------
Net Income $ 24 $ 21 $ 3
========== ========== ==========
Earnings per Common Share
Basic $ 0.31 $ 0.34 $ (0.03)
========== ========== ==========
Diluted $ 0.30 $ 0.33 $ (0.03)
========== ========== ==========
Six Months
----------------------------------
6/30/2005 6/30/2004 Fav/(Unfav)
---------- ---------- -----------
Distribution Operations $ 175 $ 131 $ 44
Retail Energy Operations 46 39 7
Wholesale Services 6 7 (1)
Energy Investments 10 2 8
Corporate (4) (5) 1
---------- ---------- ----------
Consolidated EBIT 233 174 59
---------- ---------- ----------
Interest Expense 52 32 (20)
Income Taxes 69 55 (14)
---------- ---------- ----------
Net Income $ 112 $ 87 $ 25
========== ========== ==========
Earnings per Common Share
Basic $ 1.45 $ 1.35 $ 0.10
========== ========== ==========
Diluted $ 1.44 $ 1.33 $ 0.11
========== ========== ==========
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
For the Three and Six Months Ended
June 30, 2005 and 2004
(In millions, except per share amounts)
Three Months
----------------------------------
6/30/2005 6/30/2004 Fav/(Unfav)
---------- ---------- -----------
Operating Revenues $ 431 $ 294 $ 137
Cost of Gas 209 129 (80)
---------- ---------- -----------
Operating Margin $ 222 $ 165 $ 57
========== ========== ==========
Six Months
----------------------------------
6/30/2005 6/30/2004 Fav/(Unfav)
---------- ---------- -----------
Operating Revenues $ 1,343 $ 945 $ 398
Cost of Gas 781 522 (259)
----------------------------------
Operating Margin $ 562 $ 423 $ 139
========== ========== ==========
CONTACT: AGL Resources Inc.
Media Contact:
Nick Gold, 404-584-3457
Cell: 404-275-9501
ngold@aglresources.com
or
Financial Contact:
Brian Little, 404-584-4414
Cell: 404-227-5648
blittle@aglresources.com
www.aglresources.com
SOURCE: AGL Resources Inc.
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