AGL Resources Reports Second Quarter 2006 Earnings Results; Company Reaffirms 2006 Earnings Guidance
ATLANTA--Aug. 2, 2006--AGL Resources Inc. (NYSE:
ATG) today reported second quarter 2006 net income of $19 million,
compared with $24 million reported for the second quarter of 2005. Net
income for the six months ended June 30, 2006 was $129 million, a $17
million increase over the $112 million reported for the six months
ended June 30, 2005. AGL Resources reaffirmed its 2006 full-year
guidance of $2.55 to $2.65 per share based on year-to-date earnings
and a continued positive outlook for the remainder of the year.
"Our second-quarter results reflect the impacts of gas prices,
volatility and weather," said John W. Somerhalder II, president and
chief executive officer of AGL Resources. "Even in light of these
market conditions, we delivered solid results for the quarter and
strong results for the first half of the year, which position us well
to meet our 2006 goals."
The $5 million decrease in second quarter 2006 net income reflects
lower operating margins relative to last year in the Retail Energy
Operations segment (SouthStar Energy Services), largely driven by
lower average customer usage. This was due, in part, to weather that
was more than 50 percent warmer than last year (based on heating
degree days) and the effects of customer conservation. The Energy
Investments segment also experienced lower operating margins, mainly
the result of the loss of operating margin contributions during the
second quarter 2006 as compared to last year from certain assets
acquired as part of the 2004 NUI transaction and later sold in third
quarter of 2005. These decreases were offset by the Wholesale Services
and Distribution Operations businesses, which contributed slightly
higher operating margins during the second quarter of 2006 as compared
to 2005. Second quarter results also were negatively impacted by
higher corporate interest expense than during the same period in 2005,
primarily the result of higher inventory balances.
The earnings generated $0.25 per basic and diluted share for the
second quarter of 2006. The company reported $0.31 per basic share
($0.30 per diluted share) for the second quarter of 2005. The
company's consolidated earnings before interest and taxes (EBIT) for
the second quarter of 2006 were $60 million, a $4 million decrease
from the $64 million in the same period last year.
QUARTERLY RESULTS BY OPERATING SEGMENT
Distribution Operations
The Distribution Operations segment contributed EBIT of $59
million, a $7 million improvement from the same period last year.
Operating margin was $180 million for the quarter, compared with $179
million in second quarter 2005. The increase was due primarily to
higher payments to Atlanta Gas Light by marketers for the carrying
costs of gas in storage. Those margins were offset by lower usage and
warmer weather in Virginia.
Total operating expenses for the quarter were $122 million, down
$6 million from the same period last year. The decrease was driven
primarily by lower payroll and benefits expense as a result of work
force restructuring in 2005.
Retail Energy Operations
The Retail Energy Operations segment's EBIT contribution declined
$6 million compared with results for the second quarter of 2005. The
decrease reflects lower average customer usage, in part due to weather
that was more than 50 percent warmer than during the same period last
year (based on heating degree days). The results also reflect a
decrease in late payment fees, due to an increase in customer payment
arrangements, and higher storage costs, primarily as a result of the
payment of higher gas storage carrying charges.
Total operating expenses were $17 million, compared with $15
million for the second quarter 2005. The increase reflects higher bad
debt expense of approximately $2 million.
Wholesale Services
The Wholesale Services segment contributed $1 million in EBIT for
the second quarter 2006, compared with $2 million during second
quarter 2005. Operating margin improved by $2 million compared to the
prior-year quarter, as a result of more opportunities to capture
storage margins in the current period and the forward markets, as well
as unrealized gains associated with storage hedges. These improved
operating margins were reduced by an $8 million
lower-of-cost-or-market (LOCOM) adjustment during the second quarter
2006 to reduce certain gas inventory values to current market prices.
A similar LOCOM adjustment was not recorded in the second quarter of
2005.
Through Sequent's risk management activities and use of financial
instruments to economically lock in operating margins on gas inventory
held in storage, Sequent expects the majority of the LOCOM adjustments
to be recovered through the segment's earnings during the remainder of
2006 when the gas is physically withdrawn from storage. The improved
operating margin results were offset, however, by a $3 million
increase in operating expenses resulting from higher accruals for
incentive compensation expenses.
Energy Investments
The Energy Investments segment contributed EBIT of $2 million for
the second quarter of 2006, down $3 million from the same period in
2005. Lower operating margins were largely driven by the loss of
operating margin contributions from certain NUI assets acquired in
2004 and subsequently sold in third quarter 2005.
The decrease was offset in part by higher operating margin at
Jefferson Island Storage & Hub due to increased interruptible margin
opportunities. Operating expenses decreased $1 million year-over-year.
INTEREST AND INCOME TAXES
Interest expense for the second quarter 2006 was $29 million, up
$3 million over the same period in 2005. The increase reflects higher
average debt outstanding as well as the impact of rising short-term
interest rates. Average debt outstanding for the second quarter 2006
increased $262 million. Increased gas inventory accounts for nearly
the entire increase in debt compared to the second quarter of 2005.
Second quarter 2006 income taxes were $12 million, compared to $14
million during the prior-year quarter. The decrease is primarily due
to lower corporate earnings for the quarter.
YEAR-TO-DATE RESULTS
For the six months ended June 30, 2006, earnings were $1.66 per
basic share ($1.65 per diluted share), compared with $1.45 per basic
share ($1.44 per diluted share), for the prior-year period. Operating
margins increased $44 million, or 8 percent, primarily due to strong
results from the Retail Energy Operations and Wholesale Services
segments. Those results were offset by lower margins in the
Distribution Operations and Energy Investments segments. Consolidated
EBIT for the six months ended June 30, 2006 was $267 million, a 15
percent improvement over the $233 million reported for the same period
last year.
Earnings Conference Call and Webcast: The AGL Resources second
quarter 2006 earnings conference call and webcast, scheduled for Aug.
2, 2006, at 4:30 p.m. (ET), can be accessed via the investor relations
section of the AGL Resources Web site at www.aglresources.com. Members
of the investment community can participate on the call by dialing
866/700-0133 (in the United States) or 617/213-8831 (outside the
United States), and using the confirmation code, 49555114.
A replay of the conference call webcast will be available on the
Web site for seven days following the call. The telephone replay of
the call can be accessed by dialing 888/286-8010 (in the United
States) or 617/801-6888 (outside the United States), and using
confirmation code, 90300149.
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 as well as No. 647 on
the Fortune 1000 and No. 40 in the Fortune gas and electric utilities
sector in 2006, 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 Pivotal 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 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 Web site 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, 2006 and 2005
(In millions, except per share amounts)
Three Months Six Months
------------------------- -------------------------
-------- -------- ------- -------- -------- -------
Fav/ Fav/
6/30/06 6/30/05 (Unfav) 6/30/06 6/30/05 (Unfav)
-------- -------- ------- -------- -------- -------
Operating
Revenues $ 436 $ 431 $ 5 $ 1,480 $ 1,343 $ 137
Cost of Gas 219 209 (10) 874 781 (93)
Operation and
Maintenance
Expenses 113 113 - 230 228 (2)
Depreciation and
Amortization 34 33 (1) 68 66 (2)
Taxes Other Than
Income 10 10 - 20 21 1
-------- -------- ------- -------- -------- -------
Total Operating
Expenses 376 365 (11) 1,192 1,096 (96)
-------- -------- ------- -------- -------- -------
Operating Income 60 66 (6) 288 247 41
Other Income
(Loss) - 1 (1) (2) 2 (4)
Minority Interest - (3) 3 (19) (16) (3)
-------- -------- ------- -------- -------- -------
Earnings Before
Interest & Taxes 60 64 (4) 267 233 34
Interest Expense 29 26 (3) 59 52 (7)
-------- -------- ------- -------- -------- -------
Earnings Before
Income Taxes 31 38 (7) 208 181 27
Income Taxes 12 14 2 79 69 (10)
-------- -------- ------- -------- -------- -------
Net Income $ 19 $ 24 $ (5)$ 129 $ 112 $ 17
======== ======== ======= ======== ======== =======
Earnings Per
Common Share
Basic $ 0.25 $ 0.31 $ (0.06)$ 1.66 $ 1.45 $ 0.21
Diluted $ 0.25 $ 0.30 $ (0.05)$ 1.65 $ 1.44 $ 0.21
Shares
Outstanding
Basic 77.7 77.1 0.6 77.8 77.0 0.8
Diluted 78.1 77.8 0.3 78.2 77.7 0.5
AGL Resources Inc.
EBIT Schedule
For the Three and Six Months Ended
June 30, 2006 and 2005
(In millions, except per share amounts)
Three Months Six Months
------------------------- -------------------------
-------- -------- ------- -------- -------- -------
Fav/ Fav/
6/30/06 6/30/05 (Unfav) 6/30/06 6/30/05 (Unfav)
-------- -------- ------- -------- -------- -------
Distribution
Operations $ 59 $ 52 $ 7 $ 182 $ 175 $ 7
Retail Energy
Operations - 6 (6) 54 46 8
Wholesale
Services 1 2 (1) 33 6 27
Energy
Investments 2 5 (3) 4 10 (6)
Corporate (2) (1) (1) (6) (4) (2)
-------- -------- ------- -------- -------- -------
Consolidated EBIT 60 64 (4) 267 233 34
-------- -------- ------- -------- -------- -------
Interest Expense 29 26 (3) 59 52 (7)
Income Taxes 12 14 2 79 69 (10)
-------- -------- ------- -------- -------- -------
Net Income $ 19 $ 24 $ (5)$ 129 $ 112 $ 17
======== ======== ======= ======== ======== =======
Earnings per
Common Share
Basic $ 0.25 $ 0.31 $ (0.06)$ 1.66 $ 1.45 $ 0.21
======== ======== ======= ======== ======== =======
Diluted $ 0.25 $ 0.30 $ (0.05)$ 1.65 $ 1.44 $ 0.21
======== ======== ======= ======== ======== =======
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
For the Three and Six Months Ended
June 30, 2006 and 2005
(In millions, except per share amounts)
Three Months Six Months
------------------------- -------------------------
-------- -------- ------- -------- -------- -------
Fav/ Fav/
6/30/06 6/30/05 (Unfav) 6/30/06 6/30/05 (Unfav)
-------- -------- ------- -------- -------- -------
Operating
Revenues $ 436 $ 431 $ 5 $ 1,480 $ 1,343 $ 137
Cost of Gas 219 209 (10) 874 781 (93)
-------- -------- ------- -------- -------- -------
Operating Margin $ 217 $ 222 $ (5)$ 606 $ 562 $ 44
======== ======== ======= ======== ======== =======
CONTACT: AGL Resources, Atlanta
Financial
Steve Cave, 404-584-3801
cell: 678-642-4258
scave@aglresources.com
or
Media
Robin Keegan, 404-584-3946
cell: 404-783-1758
rkeegan@aglresources.com
SOURCE: AGL Resources
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