AGL Resources Reports Second Quarter 2006 Earnings Results; Company Reaffirms 2006 Earnings Guidance.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. 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 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 June: see month. 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 Year-to-date (YTD) The period beginning at the start of the calendar year up to the current 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 Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: relative to last year in the Retail Energy Operations segment (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), 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 Heating degree day (HDD) and cooling degree day (CDD) are quantitative indices demonstrated to reflect demand for energy to heat or cool houses and businesses. These indices are derived from daily temperature observations and power demand. ) 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 (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. 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 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 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 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). ) 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 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. by marketers for the carrying costs Carrying costs Costs that increase with increases in the level of investment in current assets. of gas in storage. Those margins were offset by lower usage and warmer weather in 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). . 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 $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 restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). 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 Payments made to satisfy expenses incurred as a result of ownership of property, such as land taxes and mortgage payments. Disbursements paid to creditors, in addition to interest, for extending credit. Consumer Protection laws require full disclosure of all 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 Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. associated with storage hedges. These improved operating margins were reduced by an $8 million lower-of-cost-or-market (LOCOM LOCOM Lower of Cost or Market (inventory valuation method/rule) LOCOM Lake Oswego Communications (Oregon emergency dispatch) ) 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 (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. 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 Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. 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 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. . 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 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 866/700-0133 (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 617/213-8831 (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 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 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 (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 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 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 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 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
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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
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