AGL Resources Reports 2005 Earnings Results; Company Increases 2006 Earnings Guidance
ATLANTA--Jan. 26, 2006--AGL Resources (NYSE: ATG)
today reported fiscal year 2005 net income of $193 million, or $2.50
per basic share ($2.48 per diluted share), compared with $153 million,
or $2.30 per basic share ($2.28 per diluted share) in 2004. Earnings
results for 2005 are based on weighted average basic shares
outstanding of 77.3 million, compared to weighted average basic shares
outstanding of 66.3 million in 2004.
The company previously had provided 2005 earnings guidance in the
range of $2.35 to $2.45 per share. However, strong year-end results in
the Wholesale Services segment drove earnings above the guidance
range.
"We had an excellent year in 2005, with solid earnings
contributions from each of our business units," said D. Raymond
Riddle, interim chairman and chief executive officer of AGL Resources.
"I continue to be impressed by the quality of the management team, and
its ability to deliver consistent, repeatable earnings growth and
value to our shareholders."
Fourth-Quarter 2005 Results
For the fourth quarter of 2005, earnings were $0.86 per basic
share ($0.85 per diluted share), compared with $0.64 per basic and
diluted share in the fourth quarter of 2004. Those results were based
on weighted average basic shares outstanding of 77.7 million, compared
to weighted average basic shares outstanding of 70.5 million for the
prior-year period.
The primary driver of the improved quarterly results was
substantially higher margins in the Wholesale Services segment, as a
result of higher volatility and market opportunities during the
quarter as compared to last year, and a decline in forward gas prices.
The Distribution Operations segment also had a strong fourth quarter,
reflecting the addition of a full year of the NUI utilities, as well
as higher pipeline replacement revenues and increased carrying charges
for natural gas stored for marketers at Atlanta Gas Light. The
Corporate segment had improved results due to acquisition-related
expenses incurred in 2004 that were not incurred during 2005.
2005 FULL-YEAR RESULTS BY BUSINESS SEGMENT
Distribution Operations
The Distribution Operations segment's EBIT for 2005 was $299
million, up $52 million from the $247 million contribution in 2004.
Approximately $45 million of the increase reflects the addition of a
full year of the NUI utilities.
Operating margins improved by $174 million, of which approximately
$165 million resulted from the full-year contribution of the NUI
utilities Elizabethtown Gas, Florida City Gas and Elkton Gas -
including $2 million from the Florida and New Jersey appliance
businesses that have now been closed or sold. The remainder was due
primarily to contributions from Atlanta Gas Light, including higher
pipeline replacement revenue ($6 million), higher carrying charges for
natural gas stored for marketers ($3 million) and higher net customer
growth at Atlanta Gas Light. These results were offset by the $5
million annual reduction in operating revenues ordered in June 2005 by
the Georgia Public Service Commission (partial-year impact of $3
million). Total operating expenses increased $124 million, nearly all
of which resulted from the addition of the NUI utilities. Operating
expenses at Atlanta Gas Light, Virginia Natural Gas and Chattanooga
Gas were relatively flat in 2005 as compared to 2004.
The Distribution Operations segment continued to improve its
performance as measured by its key operating metrics. The average
number of end-use customers in 2005 was 2.24 million, compared with
1.88 million in 2004 (excluding the NUI utilities, which AGL Resources
owned for only one month in 2004). On an EBIT-per-customer basis, the
segment improved to $133 for 2005, compared with $131 in 2004.
Retail Energy Operations
Retail Energy Operations, comprised of SouthStar Energy Services,
contributed EBIT of $63 million, an $11 million increase over its $52
million contribution in 2004. The increased EBIT contribution was
driven largely by increased operating margins of $14 million,
primarily the result of higher commodity margins, offset by lower
asset management margins and lower late payment fees relative to last
year.
Total operating expenses in the Retail Energy Operations segment
decreased $1 million, primarily as a result of lower bad debt expense
from collection process improvements. The amount AGL Resources records
for minority interest in SouthStar's earnings increased $4 million due
to higher earnings at SouthStar.
Wholesale Services
The Wholesale Services segment, comprised of Sequent Energy
Management, contributed $49 million in EBIT in 2005, a $25 million
increase over its 2004 results. The increase reflects favorable market
conditions and arbitrage opportunities, as well as the accelerated
recovery of previously reported hedge losses associated with storage
positions in the fourth quarter that originally were anticipated to be
recovered in first quarter 2006.
Operating margin increased by $39 million, due primarily to
storage and transportation opportunities resulting from price
volatility and market disruptions during the third and fourth quarters
of 2005. For the first nine months of 2005, reported operating margin
was similar to that of the same period in 2004. However, during the
third quarter of 2005, while Sequent created substantial economic
value by serving customers during, and following, the Gulf Coast
hurricanes, Sequent's reported operating margin was negatively
impacted by accounting losses associated with its storage hedges as a
result of increases in forward natural gas prices of approximately $6
per MMBtu (million British thermal units). During the fourth quarter,
Sequent continued to experience the effects of the hurricane season as
natural gas prices continued to be volatile, enabling Sequent to
further optimize storage and transportation positions at levels in
excess of the prior year. Additionally, the accelerated recovery of
previously reported hedge losses resulted in the recognition of $18
million of margin during the fourth quarter 2005 that otherwise would
have been recognized in the first quarter 2006, based on a decline of
more than $3 per MMBtu in forward New York Mercantile Exchange (NYMEX)
prices during the quarter.
Operation and maintenance expenses increased $12 million in 2005,
primarily as a result of higher payroll, incentive compensation and
benefit-related costs and the costs of a temporary relocation of
portions of Sequent's operations during Hurricane Rita in the third
quarter 2005. Additionally, depreciation expense increased $1 million
during the year due to the implementation of Sequent's new Energy
Trading and Risk Management system that went into service in late
2004.
Energy Investments
The Energy Investments segment contributed EBIT of $19 million, a
$12 million improvement over the prior year. The increase was driven
primarily by a $9 million higher EBIT contribution from Jefferson
Island Storage & Hub, reflecting the company's full-year ownership of
that asset in 2005. AGL Networks contributed $3 million of the EBIT
increase, while Pivotal Propane, a peaking facility in Virginia, which
began commercial operation in April 2005, contributed $2 million. Also
contributing $2 million to this segment's results were the
Saltville/Virginia Gas assets formerly owned by NUI, which AGL
Resources sold in August 2005 to a subsidiary of Duke Energy
Corporation. These results were offset by a $4 million EBIT
contribution in 2004 from the sale of certain assets related to a real
estate trust and a former propane partnership.
Operating expenses in the Energy Investments segment were $23
million in 2005, a $15 million increase over the prior year.
Approximately $8 million of the increase resulted from NUI's
nonutility businesses, $3 million resulted from Pivotal Jefferson
Island and $1 million was contributed by Pivotal Propane.
Corporate
The Corporate segment is a non-operating segment, and as such,
changes in EBIT amounts reflect the relative changes in various
general and administrative expenses, such as payroll, benefits and
incentives, and outside services.
The Corporate segment's EBIT contribution improved by $5 million
in 2005 relative to the prior year, primarily due to
acquisition-related expenses incurred in 2004 (but not in 2005), the
write-off of certain information technology assets in 2004, and lower
holding company expenses in 2005 due to the prior-year settlement of
certain contractual, employment and insurance claims.
INTEREST EXPENSE AND INCOME TAXES
Interest expense for 2005 was $109 million, $38 million higher
than in 2004. The increase reflects $31 million of additional interest
expense associated with the NUI and Jefferson Island Storage & Hub
acquisition debt and $7 million from higher interest rates and
increased short-term debt balances due to higher natural gas prices in
2005 as compared to 2004. Average debt outstanding for the 12 months
ended December 31, 2005 was $1.8 billion, a $0.5 billion increase over
the prior year's average outstanding debt of $1.3 billion. The
company's debt-to-capitalization ratio as of December 31, 2005, was 58
percent.
2005 income taxes were $117 million, compared with $90 million in
2004. The increase reflects $25 million of additional income taxes due
to higher corporate earnings year-over-year, and $2 million due to an
increase in the effective tax rate, from 37 percent in 2004 to 38
percent in 2005.
2006 EARNINGS OUTLOOK
AGL Resources expects its 2006 earnings to be in the range of
$2.55 to $2.65 per share. This range represents an upward revision to
the earnings guidance the company previously provided for 2006, which
was in the range of $2.45 to $2.55 per share. This earnings
expectation assumes normal weather and average volatility in natural
gas prices. However, changes in these events or other circumstances
the company cannot anticipate could materially impact earnings, and
could result in earnings for 2006 significantly above or below this
outlook.
Earnings Conference Call and Webcast: To gain more insight to the
statements contained herein, the AGL Resources 2005 earnings
conference call and Webcast, scheduled for Thursday, Jan. 26, at 9
a.m. (ET), can be accessed via the Investor Relations section of the
AGL Resources Web site at www.aglresources.com. The Webcast replay of
the call will be available on the Web site through the close of
business on Friday, Feb. 3. The telephone replay of the call can be
accessed by dialing (888) 286-8010, using passcode 28372734.
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 2.2 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. Ranked by Forbes as one of the 10 Best Managed
Utilities and No. 250 in the Forbes Platinum 400 in 2006 as well as a
Fortune 1000 company in 2005, AGL Resources reported revenue of $2.7
billion and net income of $193 million in 2005. 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 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. 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," "outlook," "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; the 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; the impact of changes in weather upon the
temperature-sensitive portions of the business; impacts of natural
disasters such as hurricanes upon the supply and price of natural gas;
acts of war or terrorism; and other factors which are provided in
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 and income taxes.
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 Twelve Months Ended
December 31, 2005 and 2004
(In millions, except per share amounts)
Three Months
------------------------------------
Increase -
12/31/2005 12/31/2004 (Decrease)
----------- ----------- -----------
Operating Revenues $ 993 $ 626 $ 367
Cost of Gas 665 369 296
Operation and Maintenance
Expenses 143 120 23
Depreciation and Amortization 34 28 6
Taxes Other Than Income 10 9 1
----------- ----------- -----------
Total Operating Expenses 852 526 326
----------- ----------- -----------
Operating Income 141 100 41
Other Income (Loss) (3) (2) (1)
Minority Interest (4) (4) -
----------- ----------- -----------
Earnings Before Interest & Taxes 134 94 40
Interest Expense 30 22 8
----------- ----------- -----------
Earnings Before Income Taxes 104 72 32
Income Taxes 38 26 12
----------- ----------- -----------
Net Income $ 66 $ 46 $ 20
=========== =========== ==========
Earnings Per Common Share
Basic $ 0.86 $ 0.64 $ 0.22
Diluted $ 0.85 $ 0.64 $ 0.21
Shares Outstanding
Basic 77.7 70.5 7.2
Diluted 78.2 71.3 6.9
Twelve Months
------------------------------------
Increase -
12/31/2005 12/31/2004 (Decrease)
----------- ----------- -----------
Operating Revenues $ 2,718 $ 1,832 $ 886
Cost of Gas 1,626 995 631
Operation and Maintenance
Expenses 477 377 100
Depreciation and Amortization 133 99 34
Taxes Other Than Income 40 29 11
----------- ----------- -----------
Total Operating Expenses 2,276 1,500 776
----------- ----------- -----------
Operating Income 442 332 110
Other Income (Loss) (1) - (1)
Minority Interest (22) (18) (4)
----------- ----------- -----------
Earnings Before Interest & Taxes 419 314 105
Interest Expense 109 71 38
----------- ----------- -----------
Earnings Before Income Taxes 310 243 67
Income Taxes 117 90 27
----------- ----------- -----------
Net Income $ 193 $ 153 $ 40
=========== =========== ==========
Earnings Per Common Share
Basic $ 2.50 $ 2.30 $ 0.20
Diluted $ 2.48 $ 2.28 $ 0.20
Shares Outstanding
Basic 77.3 66.3 11.0
Diluted 77.8 67.0 10.8
AGL Resources Inc.
EBIT Schedule
For the Three and Twelve Months Ended
December 31, 2005 and 2004
(In millions, except per share amounts)
Three Months
------------------------------------
Increase -
12/31/2005 12/31/2004 (Decrease)
----------- ----------- -----------
Distribution Operations $ 75 $ 68 $ 7
Retail Energy Operations 10 11 (1)
Wholesale Services 49 18 31
Energy Investments 4 6 (2)
Corporate (4) (9) 5
----------- ----------- ----------
Consolidated EBIT 134 94 40
----------- ----------- ----------
Interest Expense 30 22 8
Income Taxes 38 26 12
----------- ----------- ----------
Net Income $ 66 $ 46 $ 20
=========== =========== ==========
Earnings per Common Share
Basic $ 0.86 $ 0.64 $ 0.22
=========== =========== ==========
Diluted $ 0.85 $ 0.64 $ 0.21
=========== =========== ==========
Twelve Months
------------------------------------
Increase -
12/31/2005 12/31/2004 (Decrease)
----------- ----------- -----------
Distribution Operations $ 299 $ 247 $ 52
Retail Energy Operations 63 52 11
Wholesale Services 49 24 25
Energy Investments 19 7 12
Corporate (11) (16) 5
----------- ----------- ----------
Consolidated EBIT 419 314 105
----------- ----------- ----------
Interest Expense 109 71 38
Income Taxes 117 90 27
----------- ----------- ----------
Net Income $ 193 $ 153 $ 40
=========== =========== ==========
Earnings per Common Share
Basic $ 2.50 $ 2.30 $ 0.20
=========== =========== ==========
Diluted $ 2.48 $ 2.28 $ 0.20
=========== =========== ==========
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
For the Three and Twelve Months Ended
December 31, 2005 and 2004
(In millions, except per share amounts)
Three Months
------------------------------------
Increase -
12/31/2005 12/31/2004 (Decrease)
----------- ----------- -----------
Operating Revenues $ 993 $ 626 $ 367
Cost of Gas 665 369 296
----------- ----------- -----------
Operating Margin $ 328 $ 257 $ 71
=========== =========== ==========
Twelve Months
------------------------------------
Increase -
12/31/2005 12/31/2004 (Decrease)
----------- ----------- -----------
Operating Revenues $ 2,718 $ 1,832 $ 886
Cost of Gas 1,626 995 631
----------- ----------- -----------
Operating Margin $ 1,092 $ 837 $ 255
=========== =========== ==========
CONTACT: AGL Resources
Martha Monfried, 404-584-3787
cellular: 404-274-2269
mmonfrie@aglresources.com
or
Financial
Steve Cave, 404-584-3801
scave@aglresources.com
SOURCE: AGL Resources
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