AGL Resources Reports First Quarter 2011 Earnings
ATLANTA, May 3, 2011 /PRNewswire via COMTEX/ --
- Diluted earnings per share (EPS) of $1.59 versus $1.73 in first
quarter 2010; Non-GAAP diluted EPS of $1.63 excludes Nicor
Inc. merger expenses
- First quarter 2011 EBIT of $239 million compared to $255 million in
2010; $21 million of decline due to reduced non-cash hedge gains
- Nicor
Inc. proposed merger remains on track to close in second half of 2011
AGL Resources Inc. (NYSE: AGL) today reported first
quarter net income of $124 million, or $1.60 per basic share ($1.59 per diluted
share), compared to net income of $134 million, or $1.74 per basic share ($1.73
per diluted share), reported for the same period last year. Excluding the
effect of $0.04 per share of costs related to the proposed merger announced in December
2010 with Nicor Inc., the first quarter 2011 non-GAAP
EPS was $1.64 per basic share and $1.63 per diluted share.
"We are pleased with our solid performance during
the first quarter of the year. Results in our largest segment - distribution
operations - increased by 4 percent as we are now operating under new rate
programs in Atlanta and Chattanooga relative to last year," said John W. Somerhalder II, AGL Resources Chairman, President and Chief
Executive Officer. "Our proposed merger with Nicor
remains on track. Last month we received antitrust clearance from the
Department of Justice and our registration statement with the Securities and
Exchange Commission was declared effective. On April 28, the Illinois Commerce
Commission staff and other interveners filed testimony related to the merger,
and we will be formulating our response over the coming weeks. The transition
teams from AGL Resources and Nicor continue to meet
regularly to ensure that we will be well-positioned for efficient integration
when we close the transaction later this year."
Said Andrew W. Evans, AGL Resources Executive Vice
President and Chief Financial Officer, "Our first quarter results
demonstrate AGL Resources' resilience in the face of continued weakness in the
housing markets and persistently low natural gas price volatility. Our
distribution operations segment improved year over year, and we also saw
stronger commercial activity at Sequent relative to last year, offset primarily
by lower non-cash hedge gains in the first quarter of 2011." Continued
Evans, "We successfully issued $500 million in 30-year senior notes during
the quarter, $300 million of which was used to repay senior notes that matured
in January, with the remaining $200 million to be used to fund a portion of the
financing required for our proposed merger with Nicor.
We continue to maintain a strong balance sheet, ample liquidity and good access
to the capital markets."
FIRST QUARTER 2011 BUSINESS SEGMENT RESULTS
Distribution Operations
The distribution operations segment contributed EBIT
(earnings before interest and taxes) of $141 million for the first quarter of
2011, compared to $136 million for the same period in 2010. Operating margin
increased $11 million, primarily driven by higher revenues at Atlanta Gas Light
of $9 million as a result of the rate decision in October 2010 and higher
regulatory infrastructure program revenues. Additionally, Elizabethtown Gas'
revenues increased by $3 million as a result of higher regulatory
infrastructure program revenues. These improvements were offset by lower
operating margin at Florida City Gas of $1 million primarily due to warmer
weather.
Operating expenses increased $5 million relative to
the prior-year period, driven mainly by higher compensation and benefit costs
as well as an increase in depreciation expenses.
Retail Energy Operations
The retail energy operations segment, consisting of SouthStar Energy Services, contributed EBIT of $68 million
for the first quarter of 2011, compared to $74 million for the same period in
2010. Operating margin declined by $7 million, primarily driven by a decrease
of $4 million resulting from lower average customer usage resulting from
weather that was 25 percent warmer than last year's first quarter. Additionally,
SouthStar experienced a $2 million decrease relating
to the increase in the number of customers switching to less profitable retail
pricing plans, reflecting the increased competitiveness of the retail pricing
market for natural gas in Georgia. Operating expenses decreased $1 million,
mainly due to lower bad debt expenses.
Wholesale Services
The wholesale services segment, consisting primarily
of Sequent Energy Management, contributed $33 million in EBIT in first quarter
of 2011, compared to $43 million reported for the first quarter of 2010.
Operating margin decreased $9 million for the first quarter of 2011 as compared
to the prior-year period. During the quarter, Sequent experienced an $8 million
increase in commercial activity compared to the prior first quarter. These
gains were offset by a $21 million decline in non-cash storage and
transportation hedge gains ($22 million during the first quarter of 2010
compared to $1 million during the first quarter of 2011). Storage hedge gains
declined by $11 million and transportation hedge gains declined by $10 million.
Hedge gains are affected primarily by the cost of natural gas and by changes in
transportation basis spreads in the period.
Additionally, Sequent recorded an immaterial natural
gas inventory valuation adjustment (lower-of-cost-or market, or LOCOM
adjustment) during the first quarter of 2011, as compared to a required $4
million adjustment during the first quarter of 2010.
Operating expenses increased $1 million compared to
the prior-year period, mainly due to increased incentive compensation and other
expenses.
Sequent has $11 million in economic value locked-in at
March 31, 2011 compared with $6 million at the same point last year. This
economic value is expected to be recognized as operating revenues in 2011 and
2012 when the projected storage withdrawals occur. This withdrawal schedule can
change in response to changes in market conditions, including changes in
forward NYMEX natural gas prices.
Energy Investments
The energy investments segment contributed EBIT of $1
million for the first quarter of 2011, compared to EBIT of $3 million during
the prior-year period. The decrease largely reflects a lack of earnings
contribution following the divestiture of the AGL Networks business that was
sold on July 1, 2010. AGL Networks contributed $3 million in EBIT in the first
quarter last year.
INTEREST EXPENSE AND INCOME TAXES
Net interest expense for the first quarter of 2011 was
$29 million, up $1 million from the first quarter of 2010. The increase in
interest expense resulted from higher average debt outstanding, primarily the
result of the additional long-term debt issuance in March 2011.
Income taxes for the first quarter of 2011 were $76
million, a $6 million decrease compared to the first quarter of 2010,
reflecting lower consolidated earnings for the quarter relative to the prior
year.
2011 EARNINGS OUTLOOK
AGL Resources continues to expect its 2011 earnings to
be in the range of $3.10 to $3.20 per diluted share. This earnings expectation
assumes normal weather and average volatility in natural gas prices and
excludes all effects from the proposed merger with Nicor.
However, unanticipated changes in these events or other circumstances could
materially impact earnings, and could result in earnings for 2011 significantly
above or below this outlook.
EARNINGS CONFERENCE CALL/WEBCAST
AGL Resources will hold a conference call to discuss
its first quarter 2011 results on May 3 at 4 p.m. Eastern Daylight Savings Time.
The conference call will be webcast, and can be accessed via the Investor
Relations section of the company's Web site (http://www.aglresources.com/), or by dialing 800/706-7741 in the United States or 617/614-3471
outside the United States. The confirmation code is 63099180. A replay of the
conference call will be available by dialing 888/286-8010 in the United States
or 617/801-6888 outside the United States, with a confirmation code of
35063031. A replay of the call also will be available on the Investor Relations
section of the company's Web site for seven days following the call.
About AGL Resources
AGL Resources (NYSE: AGL), an Atlanta-based energy
services company, serves approximately 2.3 million customers in six states. The
company also owns Houston-based Sequent Energy Management, an asset manager
serving natural gas wholesale customers throughout North America. As an
85-percent owner in the SouthStar partnership, AGL
Resources markets natural gas to consumers in Georgia under the Georgia Natural
Gas brand. The company also owns and operates Jefferson Island Storage &
Hub, a high-deliverability natural gas storage facility near the Henry Hub in Louisiana
and Golden Triangle Storage in Texas. For more information, visit http://www.aglresources.com/.
Forward-Looking Statements
Certain expectations and projections regarding our
future performance referenced in this press release, in other reports or
statements we file with the SEC or otherwise release to the public, and on our
website, are forward-looking statements. Senior officers and other employees
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 statements regarding our future
operations, prospects, strategies, financial condition, economic performance
(including growth and earnings), industry conditions and demand for our
products and services. Because these statements involve anticipated events or
conditions, forward-looking statements often include words such as
"anticipate," "assume," "believe,"
"can," "could," "estimate," "expect,"
"forecast," "future," "goal,"
"indicate," "intend," "may," "outlook,"
"plan," "potential," "predict,"
"project," "seek," "should," "target,"
"would," or similar expressions. Forward-looking statements contained
in this press release include, without limitation, the quote from John W. Somerhalder II and Andrew W. Evans and the information
under the heading "2011 Earnings Outlook." 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
including changes related to climate change; actions taken by government
agencies on rates and other matters; concentration of credit risk; utility and
energy industry consolidation; the impact on cost and timeliness of
construction projects by government and other approvals, development project
delays, adequacy of supply of diversified vendors, unexpected change in project
costs, including the cost of funds to finance these projects; the impact of
acquisitions and divestitures; direct or indirect effects on our 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, including recent disruptions in the
capital markets and lending environment and the current economic downturn;
general economic conditions; uncertainties about environmental issues and the
related impact of such issues; the impact of changes in weather, including
climate change, on the temperature-sensitive portions of our business; the
impact of natural disasters such as hurricanes on 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 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 and on operating margin. EBIT is a non-GAAP
(accounting principles generally accepted in the United States of America)
financial measure that includes operating income, other income and expenses.
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
operating 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.
In addition, in this press release AGL Resources has
presented its earnings per share excluding expenses incurred with respect to
the proposed Nicor merger. As the company does not
routinely engage in transactions of the magnitude of the proposed Nicor merger, and consequently does not regularly incur
transaction-related expenses of correlative size, the company believes
presenting EPS excluding Nicor merger expenses
provides investors with an additional measure of AGL Resources' core operating
performance.
EBIT, operating margin and EPS excluding merger
expenses should not be considered as alternatives to, or more meaningful
indicators of, the company's operating performance than operating income, net
income attributable to AGL Resources Inc. or EPS as determined in accordance
with GAAP. In addition, the company's EBIT, operating margin and non-GAAP EPS
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 http://www.aglresources.com/ under
the Investor Relations section.
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AGL Resources
Inc.
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Condensed
Consolidated Statements of Income
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|
|
For the
Three Months Ended
|
|
|
March 31, 2011 and 2010
|
|
|
Unaudited
|
|
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(In
millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
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|
|
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|
|
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|
|
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3/31/2011
|
|
3/31/2010
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|
Fav/(Unfav)
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|
|
|
|
|
|
|
|
Operating
Revenues
|
$878
|
|
$1,003
|
|
$(125)
|
|
|
|
|
|
|
|
Cost
of Gas
|
455
|
|
571
|
|
116
|
|
|
|
|
|
|
|
Operation and Maintenance Expenses
|
131
|
|
125
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|
(6)
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|
|
|
|
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Depreciation and Amortization
|
41
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|
40
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(1)
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|
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Taxes Other Than Income Taxes
|
13
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|
14
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1
|
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Total
Operating Expenses
|
640
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|
750
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(110)
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Operating
Income
|
238
|
|
253
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(15)
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|
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Other Income
|
1
|
|
2
|
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(1)
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|
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|
|
|
|
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Earnings Before Interest
& Taxes
|
239
|
|
255
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(16)
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Interest Expense, Net
|
29
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|
28
|
|
(1)
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|
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|
|
|
|
|
|
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|
Earnings Before Income
Taxes
|
210
|
|
227
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|
(17)
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|
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Income Tax Expense
|
76
|
|
82
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
134
|
|
145
|
|
(11)
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|
|
|
|
|
|
|
|
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Less Net Income Attributable to the Noncontrolling Interest
|
10
|
|
11
|
|
1
|
|
|
Net Income Attributable to AGL Resources Inc.
|
$124
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|
$134
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$(10)
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Earnings Per Common Share
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|
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Basic
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$1.60
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$1.74
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$(0.14)
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Diluted
|
$1.59
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|
$1.73
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$(0.14)
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|
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Weighted Average Shares
Outstanding
|
|
|
|
|
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Basic
|
77.7
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|
77.2
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(0.5)
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Diluted
|
78.0
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77.6
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(0.4)
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|
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AGL Resources
Inc.
|
|
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EBIT Schedule
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For the
Three Months Ended
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March 31, 2011 and 2010
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|
|
Unaudited
|
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(In
millions, except per share amounts)
|
|
|
|
|
|
|
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|
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Three Months
|
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|
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|
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|
|
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|
|
3/31/2011
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3/31/2010
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Fav/(Unfav)
|
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Distribution
Operations
|
$141
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$136
|
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$5
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Retail Energy Operations
|
68
|
|
74
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(6)
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Wholesale Services
|
33
|
|
43
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|
(10)
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Energy Investments
|
1
|
|
3
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(2)
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Corporate
|
(4)
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(1)
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(3)
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Consolidated EBIT
|
239
|
|
255
|
|
(16)
|
|
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Interest Expense, Net
|
29
|
|
28
|
|
(1)
|
|
|
Income Tax Expense
|
76
|
|
82
|
|
6
|
|
|
Net
Income
|
134
|
|
145
|
|
(11)
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|
|
|
|
|
|
|
|
|
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Less Net Income Attributable to the Noncontrolling Interest
|
10
|
11
|
1
|
|
Net Income Attributable to AGL Resources Inc.
|
$124
|
$134
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$(10)
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|
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Earnings per Common Share
|
|
|
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Basic
|
$1.60
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|
$1.74
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$(0.14)
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Diluted
|
$1.59
|
|
$1.73
|
|
$(0.14)
|
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|
|
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|
|
|
|
|
|
|
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AGL Resources
Inc.
|
|
|
Reconciliation
of Operating Margin to Operating Revenues
|
|
|
For the
Three Months Ended
|
|
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March 31, 2011 and 2010
|
|
|
Unaudited
|
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
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|
|
3/31/2011
|
|
3/31/2010
|
|
Fav/(Unfav)
|
|
|
|
|
|
|
|
|
|
|
Operating
Revenues
|
$878
|
|
$1,003
|
|
$(125)
|
|
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Cost
of Gas
|
455
|
|
571
|
|
116
|
|
|
Operating
Margin
|
$423
|
|
$432
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|
$(9)
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SOURCE:
AGL Resources Inc.