AGL Resources Reports 2004 Earnings Results; Company Revises 2005 Earnings Guidance Upward
ATLANTA--Jan. 28, 2005--AGL Resources Inc.
(NYSE:ATG) today reported fiscal year 2004 net income of $153 million,
or $2.30 per basic share ($2.28 per diluted share), compared with $128
million, or $2.03 per basic share ($2.01 per diluted share) in 2003.
As a result of the company's 11-million share equity offering in
November 2004, earnings results for the year are based on weighted
average shares outstanding of 66.3 million, while 2003 results were
based on weighted average shares outstanding of 63.1 million. Current
shares outstanding are 76.8 million.
The company previously had provided updated earnings guidance for
2004 in the range of $2.10 to $2.17 per share. However, earnings were
significantly higher than the range because of stronger-than-expected
contributions from the company's Wholesale Services business and its
acquisition of NUI Corporation, which closed on November 30. The
company's results also reflect strong performance in the Energy
Investments segment and lower interest expense, which offset higher
corporate expenses and income taxes.
"Our unusually strong performance for the year is a good indicator
that we keep our eye on the ball," said Paula Rosput Reynolds,
chairman, president and chief executive officer of AGL Resources. "We
ran the base businesses well, are integrating our acquisitions at
record speed, and have demonstrated that our related energy businesses
can be important earnings contributors in times of exceptional
volatility. While every element of our performance is not repeatable,
and we still have regulatory issues to resolve, we are revising our
2005 base earnings guidance upward."
For the fourth quarter of 2004, earnings were $0.64 per basic and
diluted share, compared with $0.54 per basic and diluted share in the
fourth quarter of 2003. Improved earnings contributions in each
operating segment drove fourth-quarter 2004 results. The primary
driver, however, was substantially higher margins in Wholesale
Services, as a result of a decline in forward gas prices that enabled
Sequent Energy Management to capture approximately $5 million in value
from forward storage transactions in the fourth quarter, rather than
in first quarter 2005 as anticipated.
2004 RESULTS BY BUSINESS SEGMENT
Distribution Operations
The Distribution Operations segment's EBIT for 2004 was $247
million, equal to 2003 results. For comparison purposes, however, the
Distribution Operations segment's EBIT contribution in 2004 was up $13
million, after excluding the effect of a net $13 million pre-tax gain
on the sale of company property and a related charitable contribution
in 2003. 2004 EBIT includes a $7 million contribution from NUI.
Operating margins improved by $42 million, primarily as a result
of the acquisition of NUI ($25 million) and an approximately 2 percent
increase in the total number of average connected customers at Atlanta
Gas Light, Chattanooga Gas and Virginia Natural Gas. Operating
expenses increased $29 million in 2004 relative to 2003, primarily as
a result of NUI ($19 million) and increased costs related to
information technology projects, regulatory activities (including
Sarbanes-Oxley compliance) and depreciation expense, offset by
decreased bad debt expense and a decrease in costs associated with
post-retirement benefits.
The Distribution Operations business continued to strengthen its
performance relative to key operating metrics. The average number of
end-use customers in 2004 was 1.88 million, compared with 1.84 million
in 2003 (these numbers exclude NUI's utilities). On an
EBIT-per-customer basis, the segment improved to $130 for the full
year 2004, compared with $127 in 2003.
Wholesale Services
The Wholesale Services segment contributed $24 million in EBIT in
2004, compared with $20 million in 2003. The $4 million increase is
primarily the result of unusually strong fourth-quarter 2004 results,
reflecting the accelerated recognition of margins associated with
storage positions that originally were anticipated to be liquidated in
first quarter 2005. The accelerated margin recognition resulted in
$0.05 per share of earnings in the fourth quarter that otherwise would
have been recognized in first quarter 2005. Primarily as a result of
the decline in forward gas prices at the end of December 2004, and the
positive mark-to-market impact that decline had on the futures
contracts Sequent utilizes to economically hedge its storage
positions, approximately $18 million of Sequent's full-year EBIT
contribution was generated in the fourth quarter 2004.
Sequent also continued to increase its volumes and business
transaction activity in 2004. Full-year volumes were up 20 percent,
from 1.75 Bcf per day in 2003 to 2.10 Bcf per day in 2004. New peaking
and third-party asset management transactions also contributed to
strong results for the year. Sequent's operating expenses for 2004
were $29 million, compared with $20 million in 2003. The increase was
due primarily to increased personnel and increased costs associated
with the implementation of a new energy trading and risk management
system and Sarbanes-Oxley 404 compliance.
Energy Investments
The Energy Investments segment contributed EBIT of $59 million in
2004, a 37 percent increase over the segment's $43 million
contribution in 2003. The primary driver of this segment's results was
the performance of SouthStar Energy, which contributed $53 million in
EBIT in 2004, compared with $46 million in 2003. The improved results
at SouthStar mainly reflect higher commodity margins and decreased bad
debt expense during the year.
Energy Investments' EBIT contribution increased due to higher
contributions from AGL Networks and the acquisition of Jefferson
Island Storage and Hub in October 2004.
SouthStar's results are now consolidated with AGL Resources'
financial statements. During the quarter ended March 31, 2004, AGL
Resources adopted Financial Accounting Standards Board (FASB)
Interpretation No. (FIN) 46R, Consolidation of Variable Interest
Entities, which resulted in our consolidation of SouthStar's financial
results with AGL Resources' financial statements beginning January 1,
2004.
To facilitate year-over-year comparisons, our Form 8-K filing
(including management's discussion of selected financial data) today
with the Securities and Exchange Commission includes unaudited pro
forma condensed consolidated balance sheet and income statement
information, presented as if SouthStar's balances were consolidated
with AGL Resources' results as of December 31, 2003.
Corporate
The Corporate segment EBIT contribution decreased by $4 million in
2004, primarily the result of costs associated with information
technology projects, Sarbanes-Oxley 404 compliance and merger and
acquisition related expenses.
INTEREST EXPENSE AND INCOME TAXES
Interest expense for 2004 was $71 million, $4 million lower than
in 2003. A favorable interest rate environment and the issuance of
lower-interest, long-term debt combined to lower the company's
interest expense in 2004 relative to the previous year.
2004 income taxes were $90 million, a net increase of $3 million
over 2003. The increase reflects $8 million of additional income taxes
due to higher corporate earnings year-over-year, offset by a $5
million decrease in income taxes due to a decrease in the effective
tax rate, from 39 percent in 2003 to 37 percent in 2004. The decline
in the effective tax rate is primarily the result of the income tax
adjustments recorded in the third quarter of 2004 in connection with
our annual comparison of our filed tax returns to the related income
tax accruals."
2005 EARNINGS OUTLOOK
In 2005, AGL Resources expects its earnings to be in the range of
$2.25 to $2.35 per share. The company had previously provided 2005
earnings guidance in the range of $2.20 to $2.30 per share.
Earnings Conference Call Webcast: The AGL Resources 2004
full-year/fourth quarter earnings conference call and webcast,
scheduled for Friday, January 28, 2005, at 9 a.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 Friday,
February 4. The telephone replay of the call can be accessed by
dialing (888) 286-8010, using passcode 79485387. International callers
should dial (617) 801-6888, and use the same passcode.
About AGL Resources
AGL Resources (NYSE: ATG) is an Atlanta-based energy services
holding company and was named 2003 Gas Company of the Year by Platts
Global Energy Awards. The company's utility subsidiaries - Atlanta Gas
Light, Elizabethtown Gas in New Jersey, Virginia Natural Gas in
Norfolk, Florida City Gas, Chattanooga Gas, and Elkton Gas in Maryland
- serve 2.2 million customers in six states. Houston-based subsidiary,
Sequent Energy Management, is involved in natural gas asset management
and optimization, producer services, wholesale marketing and risk
management activities. 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. The company also owns and operates Jefferson
Island Storage & Hub, a high-deliverability natural gas storage
facility near the Henry Hub in Louisiana, and Virginia Gas, a natural
gas storage pipeline and distribution company in southwestern Virginia
and a high-deliverability salt cavern storage facility in Saltville,
Virginia. 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. Officers may also make verbal statements to analysts,
investors, regulators, the media and others that are forward-looking.
Forward-looking statements involve matters that are not historical
facts, such as projections of our financial performance, management's
goals and strategies for our business and assumptions regarding the
foregoing. Because these statements involve anticipated events or
conditions, forward-looking statements often include words such as
"anticipate," "assume," "can," "could," "estimate," "expect,"
"forecast," "indicate," "intend," "may," "plan," "predict,"
"project,"future," "seek," "should," "target," "will," "would," or
similar expressions. Do not unduly rely on forward-looking statements.
They represent our expectations about the future and are not
guarantees. Our expectations are based on currently available
competitive, financial and economic data along with our operating
plans. While we believe that 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. In addition to the important
factors described in this press release and in our filings with the
Securities and Exchange Commission, which we incorporate by reference
in this press release, the following are among the important factors
that could cause our business, results of operations or financial
condition in the future to differ significantly from those expressed
in the forward-looking statements:
-- changes in industrial, commercial and residential growth in
AGL Resources' service territories;
-- changes in price, supply and demand for natural gas and
related products;
-- impact of changes in state and federal legislation and
regulation, including orders of various state public service
commissions and of the Federal Energy Regulatory Commission on
the gas and electric industries and on AGL Resources;
-- actions taken by government agencies, including decisions on
base rate increase requests by state regulators;
-- the ultimate impact of the Sarbanes-Oxley Act of 2002 and any
future changes in accounting regulations or practices in
general with respect to public companies, the energy industry
or AGL Resources' operations specifically;
-- the enactment of new accounting standards, or interpretations
of existing accounting standards, by the Financial Accounting
Standards Board or the Securities and Exchange Commission, or
SEC, that could impact the way AGL Resources records revenues,
assets and liabilities, which in turn could adversely affect
reported results of operations;
-- the enactment of new auditing standards, or interpretations of
existing auditing standards, by the Public Company Accounting
Oversight Board which could adversely affect AGL Resources'
ability to comply with the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002;
-- effects and uncertainties of deregulation and competition,
particularly in markets where prices and providers
historically have been regulated, and unknown issues following
deregulation such as the stability of the Georgia retail gas
market, including risks related to energy marketing and risk
management;
-- concentration of credit risk in marketers that are
certificated by the Georgia Public Service Commission to sell
retail natural gas in Georgia, as well as concentration of
credit risk in customers of our wholesale services segment;
-- utility and energy industry consolidation;
-- performance of equity and bond markets and the impact on
pension and post-retirement funding costs;
-- impact of acquisitions and divestitures, including:
-- the risk that the businesses of NUI Corporation and/or
Pivotal Jefferson Island Storage & Hub, LLC will not be
integrated successfully with AGL Resources or that such
integrations may be more difficult, time-consuming or
costly than expected;
-- material deficiencies in NUI's internal controls that AGL
Resources must address and resolve;
-- revenues following the acquisitions may be lower than
expected;
-- expected revenue synergies and cost savings from these two
acquisitions may not be fully realized or realized within
the expected time frame;
-- 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;
-- impact of ongoing investigations and litigation;
-- impact of changes in prices on the margins achievable in the
unregulated retail gas marketing business;
-- increases in competition in the markets served by AGL
Resources;
-- the availability and price of insurance;
-- the general effects of deregulation of the energy markets,
including industry restructuring and unbundling of services;
-- the ability to attract and retain key executives and
employees;
-- fluctuations in energy commodity prices;
-- acts of war or terrorism;
-- AGL Resources' ability to control operating expenses and to
achieve efficiencies in its existing and acquired operations;
-- AGL Resources' ability to continue to modernize its current
and acquired distribution infrastructures as scheduled and
budgeted; and
-- other risks described in AGL Resources' documents on file with
the SEC.
There also may be other factors that could cause results to differ
significantly from our expectations. 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.
Any required 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 and Twelve Months Ended
December 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-------------------------------------
12/31/2004 12/31/2003 Fav/(Unfav)
Operating Revenues $ 626 $ 279 $ 347
Cost of Gas 368 117 (251)
Operation and Maintenance
Expenses 118 75 (43)
Depreciation and Amortization 28 23 (5)
Taxes Other Than Income 10 7 (3)
----------- ----------- -------------
Total Operating Expenses 524 222 (302)
Gain on Sale of Caroline Street
Campus - - -
----------- ----------- -------------
Operating Income 102 57 45
Equity in Earnings of SouthStar - 17 (17)
Minority Interest (4) - (4)
Other Income (Loss) (2) 1 (3)
Contribution to AGL Resources
Private Foundation, Inc. (2) - (2)
----------- ----------- -------------
Earnings Before Interest & Taxes 94 75 19
Interest Expense 22 18 (4)
----------- ----------- -------------
Earnings Before Income Taxes 72 57 15
Income Taxes 26 22 (4)
----------- ----------- -------------
Income Before Cumulative Effect
of Change in Accounting
Principle 46 35 11
Cumulative Effect of Change in
Accounting Principle - - -
----------- ----------- -------------
Net Income $ 46 $ 35 $ 11
=========== =========== =============
EPS Before Cumulative Effect of
Change in Accounting Principle
Basic $ 0.64 $ 0.54 $ 0.10
Diluted $ 0.64 $ 0.54 $ 0.10
EPS
Basic $ 0.64 $ 0.54 $ 0.10
Diluted $ 0.64 $ 0.54 $ 0.10
Shares Outstanding
Basic 70.5 64.3 6.2
Diluted 71.3 65.2 6.1
Twelve Months
------------------------------------
12/31/2004 12/31/2003 Fav/(Unfav)
Operating Revenues $ 1,832 $ 983 $ 849
Cost of Gas 994 339 (655)
Operation and Maintenance
Expenses 375 283 (92)
Depreciation and Amortization 99 91 (8)
Taxes Other Than Income 30 28 (2)
----------- ----------- -------------
Total Operating Expenses 1,498 741 (757)
Gain on Sale of Caroline Street
Campus - 16 (16)
----------- ----------- -------------
Operating Income 334 258 76
Equity in Earnings of SouthStar - 46 (46)
Minority Interest (18) - (18)
Other Income (Loss) - 2 (2)
Contribution to AGL Resources
Private Foundation, Inc. (2) (8) 6
----------- ----------- -------------
Earnings Before Interest & Taxes 314 298 16
Interest Expense 71 75 4
----------- ----------- -------------
Earnings Before Income Taxes 243 223 20
Income Taxes 90 87 (3)
----------- ----------- -------------
Income Before Cumulative Effect
of Change in Accounting
Principle 153 136 17
Cumulative Effect of Change in
Accounting Principle - (8) 8
----------- ----------- -------------
Net Income $ 153 $ 128 $ 25
=========== =========== =============
EPS Before Cumulative Effect of
Change in Accounting Principle
Basic $ 2.30 $ 2.16 $ 0.14
Diluted $ 2.28 $ 2.14 $ 0.14
EPS
Basic $ 2.30 $ 2.03 $ 0.27
Diluted $ 2.28 $ 2.01 $ 0.27
Shares Outstanding
Basic 66.3 63.1 3.2
Diluted 67.0 63.7 3.3
AGL Resources Inc.
EBIT Schedule
For the Three and Twelve Months Ended
December 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-------------------------------------
12/31/2004 12/31/2003 Fav/(Unfav)
Distribution Operations $ 68 $ 65 $ 3
Wholesale Services 18 (2) 20
Energy Investments 17 16 1
Corporate (9) (4) (5)
----------- ----------- -------------
Consolidated EBIT 94 75 19
----------- ----------- -------------
Interest Expense 22 18 (4)
Income Taxes 26 22 (4)
----------- ----------- -------------
Income Before Cumulative Effect
of Change in Accounting
Principle 46 35 11
Cumulative Effect of Change in
Accounting Principle - - -
----------- ----------- -------------
Net Income $ 46 $ 35 $ 11
----------- ----------- -------------
Earnings per Common Share Before
Cumulative Effect of Change in
Accounting Principle
Basic $ 0.64 $ 0.54 $ 0.10
=========== =========== =============
Diluted $ 0.64 $ 0.54 $ 0.10
=========== =========== =============
Earnings per Common Share
Basic $ 0.64 $ 0.54 $ 0.10
=========== =========== =============
Diluted $ 0.64 $ 0.54 $ 0.10
=========== =========== =============
Twelve Months
-------------------------------------
12/31/2004 12/31/2003 Fav/(Unfav)
Distribution Operations $ 247 $ 247 $ -
Wholesale Services 24 20 4
Energy Investments 59 43 16
Corporate (16) (12) (4)
----------- ----------- -------------
Consolidated EBIT 314 298 16
----------- ----------- -------------
Interest Expense 71 75 4
Income Taxes 90 87 (3)
----------- ----------- -------------
Income Before Cumulative Effect
of Change in Accounting
Principle 153 136 17
Cumulative Effect of Change in
Accounting Principle - (8) 8
----------- ----------- -------------
Net Income $ 153 $ 128 $ 25
----------- ----------- -------------
Earnings per Common Share Before
Cumulative Effect of Change in
Accounting Principle
Basic $ 2.30 $ 2.16 $ 0.14
=========== =========== =============
Diluted $ 2.28 $ 2.14 $ 0.14
=========== =========== =============
Earnings per Common Share
Basic $ 2.30 $ 2.03 $ 0.27
=========== =========== =============
Diluted $ 2.28 $ 2.01 $ 0.27
=========== =========== =============
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
For the Three and Twelve Months Ended
December 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-------------------------------------
12/31/2004 12/31/2003 Fav/(Unfav)
Operating Revenues $ 626 $ 279 $ 347
Cost of Gas 368 117 (251)
----------- ----------- -------------
Operating Margin $ 258 $ 162 $ 96
=========== =========== =============
Twelve Months
-------------------------------------
12/31/2004 12/31/2003 Fav/(Unfav)
Operating Revenues $ 1,832 $ 983 $ 849
Cost of Gas 994 339 (655)
----------- ----------- -------------
Operating Margin $ 838 $ 644 $ 194
=========== =========== =============
CONTACT: AGL Resources, Inc., Atlanta
Investor Relations:
Brian Little, 404-584-4414
or
Media Relations:
Nick Gold, 404-584-3457
cell: 404-275-9501
ngold@aglresources.com
www.aglresources.com
SOURCE: AGL Resources, Inc.
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