AGL Resources Reports First Quarter 2006 Earnings.ATLANTA Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. -- AGL Resources AGL Resources, Inc. is a Fortune 1000, Forbes 2000 energy services holding company. Their principal business is distribution of natural gas in Florida, Georgia, Maryland, New Jersey, Tennessee and Virginia, providing gas for more than 2.2 million customers. (NYSE NYSE See: New York Stock Exchange :ATG ATG antithymocyte globulin. lymphocyte immune globulin (antithymocyte globulin equine, ATG, ATG equine, LIG) Atgam Pharmacologic class: Immunoglobulin Therapeutic class: Immunosuppressant ) today reported first quarter 2006 net income of $110 million or $1.42 per basic share ($1.41 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. 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 In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income (EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ) of $123 million, essentially the same as its reported EBIT for the first quarter 2005. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: 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 Atlanta Gas Light Company (AGLC), commonly known as Atlanta Gas Light, is the largest natural gas wholesaler in the Southeast U.S., and is the AGL in AGL Resources. It was founded in 1856 and is headquartered in Atlanta, as is AGL Resources. 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 operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. resulting from the Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. Public Service Commission's June June: see month. 2005 rate order offset by higher charges for natural gas stored for marketers largely due to higher natural gas prices. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. 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 SouthStar (born ca. 1980 in Hawaii as Robert Campman) is an Asian American hip-hop artist who is best known for his music in the hip-hop duo Smilez and Southstar based in Orlando, Florida. Southstar is Chinese/Filipino-American. 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 optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. 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 See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). prices moving downward during the quarter, resulting in the accounting recognition of mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. gains on Sequent's storage hedges. Market volatility during the first quarter 2006 enabled Sequent (Sequent Computer Systems, Inc., Beaverton, OR, www.sequent.com) A computer company founded in 1983 by 17 ex-employees of Intel that specialized in multiprocessing systems for the client/server environment. 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 Virginia, state, United States Virginia, state of the south-central United States. It is bordered by the Atlantic Ocean (E), North Carolina and Tennessee (S), Kentucky and West Virginia (W), and Maryland and the District of Columbia (N and NE). Gas and Saltville Gas Storage assets that were originally acquired with the November 2004 acquisition of the NUI (1) (Network User Interface) A user interface for a computer attached to the network. The NUI is designed to work with remote applications and files as easily as local files. 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 compressor, machine that decreases the volume of air or other gas by the application of pressure. Compressor types range from the simple hand pump and the piston-equipped compressor used to inflate tires to machines that use a rotating, bladed element to achieve 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 Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. and higher short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. 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 Investor relations The process by which the corporation communicates with its investors. 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ) 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 Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). . 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 (programming) AGL - (Atelier de Genie Logiciel) French for IPSE. Networks, the company's telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. 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 Henry Hub is the pricing point for natural gas futures contracts traded on the New York Mercantile Exchange (NYMEX). It is a point on the natural gas pipeline system in Erath, Louisiana. It is owned by Sabine Pipe Line LLC. in Louisiana Louisiana (ləwē'zēăn`ə, l  ē'–), state in the S central United States. It is bounded by Mississippi, with the Mississippi R. . For more information,
visit www.aglresources.com.Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. 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 temperature-sensitive living organisms that are sensitive to air temperatures outside of a narrow range, e.g. virus vaccine that does not replicate at deep body temperature, but does replicate in the respiratory tract. portions of the business; impacts of natural disasters such as hurricanes upon the supply and price of natural gas; acts of war Tom Clancy's Op-Center: Acts of War is a technothriller by Jeff Rovin Plot introduction The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. 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 UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, ) 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 Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . 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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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
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