AGL Resources Reports First Quarter Earnings.Business Editors ATLANTA--(BUSINESS WIRE)--April 28, 2004 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. Inc. (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 2004 net income of $65.7 million, or $1.02 per basic share, compared with $51.8 million, or $0.86 per basic share (after the cumulative effect of a change in accounting principle) reported in the first quarter of 2003. The change in accounting principle adopted in the first quarter 2003 reflected the final provisions of EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation 02-03 (which required non-derivative energy trading contracts to be recorded at historical cost and reported on an accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. , rather than a mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. , basis) and resulted in a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge to the company of $12.6 million that also had the effect of lowering net income by $7.8 million on a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. basis. First quarter 2003 reported results before the cumulative effect of the accounting change were $59.6 million, or $0.99 per basic share. The company's results reflect improved earnings in its Distribution Operations and Energy Investments segments, which offset lower earnings in the Wholesale Services segment and increased corporate expenses for the quarter. "Investors can count on AGL Resources to keep looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. improvements," said Paula PAULA Possession of Alcohol Under the Legal Age G. Rosput, Chairman, President and Chief Executive Officer. "This quarter demonstrates we can maintain our momentum and continue to deliver sustainable, repeatable earnings in 2004." QUARTERLY RESULTS BY BUSINESS SEGMENT Distribution Operations The Distribution Operations segment contributed EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). of $82.1 million, compared with $81.0 million reported in first quarter 2003. The increase in EBIT was primarily the result of increased income due to customer growth at each of the company's three utilities, an increase in additional charges for gas stored for marketers, and an increase in revenue from 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. Gas Light's pipeline replacement program. On a net basis, the company's three utilities had an average of nearly 11,000 incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. connected customers in the first quarter 2004 as compared to 2003. 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 $97.9 million, up from $92.0 million in the same period last year, primarily as a result of additional pension expense, loss on retirement of assets, and higher software licensing expense. Energy Investments The Energy Investments segment contributed EBIT of $32.2 million for the first quarter 2004, compared with $16.0 million in the first quarter 2003, primarily due to strong results from 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. The improved results at SouthStar primarily reflect higher operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: , lower hedging costs, and substantially lower bad debt expense, as well as AGL (programming) AGL - (Atelier de Genie Logiciel) French for IPSE. Resources' expanded ownership in the joint venture and an amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. ownership agreement that provides for AGL Resources to receive 75 percent of SouthStar's earnings, beginning in 2004. These results were achieved despite first quarter 2004 weather that was milder than the comparable period in 2003, and reflect the increased energy use in SouthStar's customer base. During the first quarter 2003 (effective February February: see month. 18, 2003, for accounting purposes), AGL Resources increased its ownership interest in SouthStar from 50 percent to 70 percent. On March 31, 2004, AGL Resources adopted Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). ) Interpretation No. (FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. ) 46R, Consolidation of Variable Interest Entities, which resulted in AGL Resources accounting for its interest in SouthStar under the consolidation method of accounting beginning January 1, 2004, rather than the equity method that had previously been used. Wholesale Services The Wholesale Services segment contributed $12.3 million in EBIT for the first quarter 2004, down from $20.7 million for the same period last year. The $8.4 million decline is primarily the result of increased sales from lower-cost storage inventory during the first quarter of 2003, at a time when gas prices were extremely volatile, compared with lower sales from storage and a higher inventory cost during the same period in 2004. Despite lower volatility during first quarter 2004 as compared to 2003, 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. Energy Management's sales volumes for the quarter were 2.1 Bcf/day, up 8 percent over the same period last year. In addition, Sequent continued to be active in negotiating and executing asset management agreements with non-affiliated energy users during first quarter 2004. Sequent's EBIT contribution for the first quarter of 2004 and its increased asset management activity are consistent with AGL Resources' plan to refine the repeatable portion of this segment's performance. Corporate The Corporate segment EBIT contribution decreased by $3.8 million in first quarter 2004 compared to the prior year period. These results reflect increased corporate costs associated with governance-related costs attributed to the holding company, as well as increased legal, consulting and employee-related costs. INTEREST EXPENSE AND INCOME TAXES Interest expense for the first quarter 2004 was $15.9 million, compared with $19.9 million in first quarter 2003. The decrease reflects favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. interest rates and lower average debt balances during the period. The company's debt-to-capitalization ratio as of March 31, 2004, was 52 percent, down substantially from 59 percent as of December 31, 2003. First quarter 2004 income taxes were $41.1 million, a $3.0 million increase over first quarter 2003. The higher income taxes resulted from higher corporate earnings for the quarter, offset by a decrease in the effective tax rate. EARNINGS OUTLOOK In November 2003, AGL Resources forecasted 2004 full-year earnings per share between $2.01 and $2.10. The company reaffirms this earnings guidance for the year. Earnings Conference Call Webcast: The AGL Resources first quarter 2004 earnings conference call and webcast, scheduled for Wednesday, April 28, 2004, at 3 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 website at www.aglresources.com. The webcast replay of the call will be available on the website through the close of business on Wednesday, May 5, 2004. AGL Resources Inc. (NYSE: ATG) is an Atlanta-based energy services holding company. Its utility subsidiaries - 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. , 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). Natural Gas and Chattanooga Gas - serve more than 1.8 million customers in three states. Houston-based subsidiary Sequent Energy Management provides natural gas asset management services, including wholesale trading, marketing, gathering and transportation services as well as third-party asset management. As a member of the SouthStar partnership, AGL Resources markets natural gas to consumers in 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. under the Georgia Natural Gas brand. AGL 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. For more information, visit www.aglresources.com. This press release contains 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. . Company management cautions readers that the assumptions, which form the basis for the forward-looking statements, include many factors that are beyond company management's ability to control or estimate precisely. Those factors include, but are not limited to, the following: changes in industrial, commercial, and residential growth in the company's service territories and those of the company's subsidiaries; changes in price and demand for natural gas and related products; impact of changes in state and federal legislation and regulation, including various orders of the state public service commissions and the Federal Energy Regulatory Commission The Federal Energy Regulatory Commission (FERC) is the United States federal agency with jurisdiction over electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. , on the gas and electric industries and on the company, including the impact of Atlanta Gas Light's performance based rate plan; effects and uncertainties of deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. and competition, particularly in markets where prices and providers historically have been regulated, unknown risks related to nonregulated businesses, and unknown issues such as the stability of certificated marketers; impact of Georgia's Natural Gas Consumers' Relief Act of 2002; concentration of credit risk in certificated marketers and the company's wholesale services segment's 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. ; excess network capacity and demand/growth for dark fiber in metro network areas of AGL Networks' customers; AGL Networks' introduction and market acceptance of new technologies and products, as well as the adoption of new networking standards; ability of AGL Networks to produce sufficient capital to fund its business; ability to negotiate new contracts with telecommunications providers for the provision of AGL Networks' dark-fiber services; industry consolidation; performance of equity and bond markets and the impact on pension fund costs; impact of acquisitions and divestitures; changes in accounting policies and practices issued periodically by accounting standard-setting bodies; direct or indirect effects on the company's business, financial condition or liquidity resulting from a change in the company's credit ratings or the credit ratings of the company's competitors or counterparties; interest rate fluctuations, financial market conditions, and general economic conditions; uncertainties about environmental issues and the related impact of such issues; 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 company's business; and other risks described in the company's documents on file with the Securities and Exchange Commission. Supplemental Information Company management evaluates segment financial performance based on 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), which includes the effects of corporate expense allocations. 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 of income, 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 operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of the top-line 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 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, . In addition, the company's EBIT or operating margin may not be comparable to similarly titled measures of another company. A 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 Months Ended
March 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-----------------------------------
3/31/2004 3/31/2003 Fav/(Unfav)
----------- ----------- -----------
Operating Revenues $ 651.0 $ 352.5 $ 298.5
Cost of Gas 392.8 148.6 (244.2)
Operation and Maintenance Expenses 92.9 72.2 (20.7)
Depreciation and Amortization 24.2 22.3 (1.9)
Taxes Other Than Income 7.9 7.9 -
----------- ----------- -----------
Total Operating Expenses 517.8 251.0 (266.8)
----------- ----------- -----------
Operating Income 133.2 101.5 31.7
Equity in Earnings of SouthStar - 14.4 (14.4)
Other Income 0.5 1.7 (1.2)
Minority Interest (11.0) - (11.0)
----------- ----------- -----------
Earnings Before Interest & Taxes 122.7 117.6 5.1
Interest Expense 15.9 19.9 4.0
----------- ----------- -----------
Earnings Before Income Taxes 106.8 97.7 9.1
Income Taxes 41.1 38.1 (3.0)
----------- ----------- -----------
Income Before Cumulative Effect
of Change in Accounting
Principle 65.7 59.6 6.1
Cumulative Effect of Change in
Accounting Principle - (7.8) 7.8
----------- ----------- -----------
Net Income $ 65.7 $ 51.8 $ 13.9
=========== =========== ===========
EPS Before Cumulative Effect of
Change in Accounting Principle
Basic $ 1.02 $ 0.99 $ 0.03
Diluted $ 1.00 $ 0.98 $ 0.02
EPS
Basic $ 1.02 $ 0.86 $ 0.16
Diluted $ 1.00 $ 0.85 $ 0.15
Shares Outstanding
Basic 64.6 60.3 4.3
Diluted 65.4 60.7 4.7
AGL Resources Inc.
EBIT Schedule
For the Three Months Ended
March 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
---------------------------------
3/31/2004 3/31/2003 Fav/(Unfav)
----------- ----------- -----------
Distribution Operations $ 82.1 $ 81.0 $ 1.1
Wholesale Services 12.3 20.7 (8.4)
Energy Investments 32.2 16.0 16.2
Corporate (3.9) (0.1) (3.8)
----------- ----------- -----------
Consolidated EBIT 122.7 117.6 5.1
----------- ----------- -----------
Interest Expense 15.9 19.9 4.0
Income Taxes 41.1 38.1 (3.0)
----------- ----------- -----------
Income Before Cumulative Effect of
Change in Accounting Principle 65.7 59.6 6.1
Cumulative Effect of Change in
Accounting Principle - (7.8) 7.8
----------- ----------- -----------
Net Income $ 65.7 $ 51.8 $13.9
----------- ----------- -----------
Earnings per Common Share Before
Cumulative Effect of Change in
Accounting Principle
Basic $ 1.02 $ 0.99 $0.03
=========== =========== ===========
Diluted $ 1.00 $ 0.98 $0.02
=========== =========== ===========
Earnings per Common Share
Basic $ 1.02 $ 0.86 $0.16
=========== =========== ===========
Diluted $ 1.00 $ 0.85 $0.15
=========== =========== ===========
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
For the Three Months Ended
March 31, 2004 and 2003
(In millions, except per share amounts)
Three Months
-----------------------------------
3/31/2004 3/31/2003 Fav/(Unfav)
----------- ----------- -----------
Operating Revenues $ 651.0 $ 352.5 $ 298.5
Cost of Gas 392.8 148.6 (244.2)
----------- ----------- -----------
Operating Margin $ 258.2 $ 203.9 $ 54.3
=========== =========== ===========
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