AGL Resources Reports First Quarter 2006 Earnings
ATLANTA, May 03, 2006 -- AGL Resources (NYSE:ATG) today reported first quarter
2006 net income of $110 million or $1.42 per basic share ($1.41 per
diluted share), compared with $88 million or $1.15 per basic share
($1.14 per diluted share) reported for the first quarter of 2005.
The company's improved results primarily reflect strong earnings
contributions from both its Wholesale Services and Retail Energy
Operations segments. Contributions from the Distribution Operations
segment were flat year-over-year and results from the Energy
Investments segment were down slightly. Corporate interest and income
tax expenses were higher relative to the prior-year quarter.
"AGL Resources is off to a strong start this year," said John W.
Somerhalder II, president and chief executive officer of AGL
Resources. "Effective management of storage and transportation
capacity in a volatile market drove our improved earnings in the
wholesale asset management and retail marketing business. Our utility
distribution operations' earnings were flat, which is exemplary given
the weather and market conditions."
QUARTERLY RESULTS BY OPERATING SEGMENT
Distribution Operations
The Distribution Operations segment contributed earnings before
interest and taxes (EBIT) of $123 million, essentially the same as its
reported EBIT for the first quarter 2005. Operating margin was $245
million for the quarter, down from $253 million during the same period
last year. Approximately $7 million of the decline in operating margin
reflects decreased margins at all of our utilities except Atlanta Gas
Light primarily as a result of reduced consumption due to warmer
weather and conservation due to higher energy prices this winter.
Operating margins at Atlanta Gas Light were relatively flat compared
to last year due to a $1 million reduction in operating revenues
resulting from the Georgia Public Service Commission's June 2005 rate
order offset by higher charges for natural gas stored for marketers
largely due to higher natural gas prices.
Total operating expenses for the quarter were $122 million, down
$8 million from the same period last year. Lower payroll expenses and
gains associated with sales of certain properties drove the decrease,
despite being somewhat offset by increased bad debt expense.
Retail Energy Operations
The Retail Energy Operations segment is comprised of SouthStar
Energy Services, our retail marketing business that serves end-use
customers in the deregulated Georgia market. The segment contributed
EBIT of $54 million, compared with $40 million for the first quarter
2005. The increased EBIT contribution reflects increased operating
margins, driven primarily by the improved optimization of storage and
transportation assets and higher commodity margins resulting from
volatility in natural gas prices during the quarter.
Total operating expenses were $6 million higher than in the first
quarter 2005 primarily due to higher bad debt expense, outside
services costs associated with technology projects, and compensation
costs driven primarily by higher earnings. The Retail Energy
Operations segment also made a $2 million charitable donation to
assist Georgia customers during the winter heating season. The amount
AGL Resources recorded for minority interest in SouthStar's earnings
increased $6 million due to higher earnings at SouthStar.
Wholesale Services
The Wholesale Services segment contributed $32 million in EBIT for
the first quarter 2006, an increase of $28 million over the same
period last year. The increase reflects the positive impact of forward
NYMEX prices moving downward during the quarter, resulting in the
accounting recognition of mark-to-market gains on Sequent's storage
hedges. Market volatility during the first quarter 2006 enabled
Sequent to capture storage margin opportunities in both the cash-month
and forward markets. In addition, Sequent's first quarter 2006
earnings were positively impacted by the recovery of $10 million of
value carried over from 2005 associated with previously recognized
inventory hedge losses of $7 million and lower-of-cost-or-market
inventory adjustments of $3 million.
Operating expenses in the Wholesale Services segment were $11
million for the first quarter 2006, a $4 million increase over the
same period last year. The increase is related primarily to higher
compensation expenses resulting from operational and financial growth.
Energy Investments
The Energy Investments segment contributed EBIT of $2 million for
the first quarter 2006, down $3 million from the first quarter 2005.
The decrease was driven by the August 2005 sale of certain Virginia
Gas and Saltville Gas Storage assets that were originally acquired
with the November 2004 acquisition of the NUI Corporation. Pivotal
Jefferson Island Storage & Hub's EBIT contribution decreased slightly
due to lower operating margins resulting from decreased interruptible
margin opportunities and slightly higher compressor related operating
expenses. These results were offset somewhat by higher contributions
from the Pivotal Propane plant in Virginia, which was not in service
during the first quarter 2005.
Interest And Income Tax Expenses
Interest expense for the first quarter 2006 was $30 million, up $4
million over the same period in 2005. The increase reflects $3 million
from higher average debt outstanding, and $1 million from higher
short-term interest rates and higher short-term debt balances due to
higher gas inventory levels relative to first quarter 2005. Average
debt outstanding for the first quarter 2006 was approximately $2
billion, a $175 million increase over the prior year quarter's average
debt outstanding balance of $1.8 billion. This increase is a function
of higher natural gas inventory levels compared to the prior period.
The company's debt-to-capitalization ratio as of March 31, 2006, was
55 percent, down from 59 percent on Dec. 31, 2005 but up slightly from
53 percent on March 31, 2005.
First quarter 2006 income taxes were $67 million, a $12 million
increase over the prior-year quarter. The increase is primarily due to
higher corporate earnings for the quarter offset by a lower effective
tax rate of 37.7 percent for the current quarter versus 38.2 percent
for the first quarter 2005.
Earnings Conference Call and Webcast: The AGL Resources first
quarter 2006 earnings conference call and webcast, scheduled for May
3, 2006, at 4 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
800/901-5247 (in the United States) or 617/786-4501 (outside the
United States) and using the confirmation code 61638986.
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 37249888.
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 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 Web site at www.aglresources.com under the Investor
Relations section.
AGL Resources
Condensed Statements of Consolidated Income
For the Three Months Ended
March 31, 2006 and 2005
(In millions, except per share amounts)
Three Months
-----------------------------------
3/31/2006 3/31/2005 Fav/(Unfav)
----------- ----------- -----------
Operating Revenues $ 1,047 $ 912 $ 135
Cost of Gas 658 572 (86)
Operation and Maintenance Expenses 117 115 (2)
Depreciation and Amortization 34 33 (1)
Taxes Other Than Income 10 11 1
----------- ----------- -----------
Total Operating Expenses 819 731 (88)
----------- ----------- -----------
Operating Income 228 181 47
Other Income (Loss) (2) 1 (3)
Minority Interest (19) (13) (6)
----------- ----------- -----------
Earnings Before Interest & Taxes 207 169 38
Interest Expense 30 26 (4)
----------- ----------- -----------
Earnings Before Income Taxes 177 143 34
Income Taxes 67 55 (12)
----------- ----------- -----------
Net Income $ 110 $ 88 $ 22
=========== =========== ===========
Earnings Per Common Share
Basic $ 1.42 $ 1.15 $ 0.27
Diluted $ 1.41 $ 1.14 $ 0.27
Shares Outstanding
Basic 77.9 76.9 1.0
Diluted 78.2 77.6 0.6
AGL Resources
EBIT Schedule
For the Three Months Ended
March 31, 2006 and 2005
(In millions, except per share amounts)
Three Months
-----------------------------------
3/31/2006 3/31/2005 Fav/(Unfav)
----------- ----------- -----------
Distribution Operations $ 123 $ 123 $ -
Retail Energy Operations 54 40 14
Wholesale Services 32 4 28
Energy Investments 2 5 (3)
Corporate (4) (3) (1)
----------- ----------- -----------
Consolidated EBIT 207 169 38
----------- ----------- -----------
Interest Expense 30 26 (4)
Income Taxes 67 55 (12)
----------- ----------- -----------
Net Income $ 110 $ 88 $ 22
=========== =========== ===========
Earnings per Common Share
Basic $ 1.42 $ 1.15 $ 0.27
=========== =========== ===========
Diluted $ 1.41 $ 1.14 $ 0.27
=========== =========== ===========
AGL Resources
Reconciliation of Operating Margin to Operating Revenues
For the Three Months Ended
March 31, 2006 and 2005
(In millions)
Three Months
-----------------------------------
3/31/2006 3/31/2005 Fav/(Unfav)
----------- ----------- -----------
Operating Revenues $ 1,047 $ 912 $ 135
Cost of Gas 658 572 (86)
----------- ----------- -----------
Operating Margin $ 389 $ 340 $ 49
=========== =========== ===========
SOURCE: AGL Resources
AGL Resources, Atlanta
Financial Contact
Steve Cave, 404-584-3801
cell: 678-642-4258
scave@aglresources.com
or
Media Contact
Robin Keegan, 404-584-3946
cell: 404-783-1758
rkeegan@aglresources.com
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