AGL Resources Inc has added
a news release to its website.
Title: AGL
Resources Reports First Quarter 2012 Earnings
Date(s): 1-May-2012 7:30 AM
For a complete listing of our news releases, please click here
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- Diluted
earnings per share (EPS) of $1.11 versus $1.59 in first quarter 2011; excluding
Nicor merger-related expenses, adjusted diluted EPS of $1.16 for 2012
compared to $1.63 for 2011
- Record
first quarter 2012 warmth resulted in an estimated $0.11 diluted EPS
decline when compared to normal weather at the distribution and retail segments
- First
quarter 2012 includes the results of Nicor as the merger closed in
December 2011
- First
quarter 2012 EBIT of $266 million compared to $239 million in 2011
ATLANTA, May 1,
2012 -- AGL Resources Inc. (NYSE: GAS) today reported first quarter net income
of $130 million, or $1.12 per basic share ($1.11 per diluted share), compared
to net income of $124 million, or $1.60 per basic share ($1.59 per diluted
share), reported for the same period last year. Excluding the 2012 effect of
$0.05 per share, and the 2011 effect of $0.04 per share, related to merger
expenses, adjusted EPS for the first quarter of 2012 was $1.16 per diluted
share and $1.63 per diluted share for the first quarter of 2011.
"The
unprecedented weather conditions during the first quarter of the year clearly
impacted our earnings, particularly at Nicor Gas and our retail operations in
Georgia. However, weather normalization programs and decoupling at our other
major utilities helped to stabilize our performance. While our wholesale
business also experienced negative impacts from warmer than normal weather, our
transportation positions were well-hedged and our storage positions look
strong, with seasonal spreads improving." said John W. Somerhalder II, AGL
Resources Chairman, President and Chief Executive Officer. "The Nicor
integration remains on track and staffing across the organization is largely
complete. As always, we continue to focus on maintaining our track record of
safe, efficient operations."
"On a GAAP
basis, the primary year-over-year driver of our first quarter earnings is
clearly the addition of Nicor's businesses, whose results are not reflected in
first quarter 2011 comparisons. However, the key factor influencing operating
performance was historically warm weather during the first quarter of 2012. Had
we experienced normal (10-year average) weather at our distribution and retail
segments, we believe our diluted EPS would have been higher by approximately
$0.11," said Andrew W. Evans, AGL Resources Executive Vice President and
Chief Financial Officer. "Though operating margin suffered due to weather,
we have been able to effectively control costs and are running in-line with expense
expectations for the year. In addition, our interest expense for the quarter
was consistent with projections, and our credit metrics, balance sheet and
liquidity position remain strong."
During the
three months ended March 31, 2012, weather across AGL Resources' service
territories was 21% warmer than normal. This resulted in a significantly
reduced demand for natural gas and negatively impacted distribution operations
and retail operations. The weather in Illinois, impacting Nicor Gas, was
19% warmer than normal. Georgia also experienced 32% warmer than normal
weather. This warmer weather reduced our expected earnings before interest and
tax (EBIT) by $13 million at distribution operations and by $8 million at
retail operations when compared to the 10-year average. Commercial activity at
the wholesale segment was also negatively impacted by the historically warm
weather.
FIRST
QUARTER 2012 OPERATING SEGMENT RESULTS
Distribution
Operations
The
distribution operations segment, which consists of our seven utilities,
contributed EBIT of $194 million for the first quarter of 2012, an increase of
38% compared to $141 million for the same period in 2011. The increase in EBIT
was primarily attributed to a $51 million contribution from the addition of
Nicor Gas. EBIT at the legacy AGL Resources' utilities, excluding Nicor Gas,
was favorable by $2 million relative to the first quarter of 2011.
Retail
Operations
The retail
operations segment, which consists of SouthStar Energy Services, Nicor
Services, Nicor Solutions and Nicor Advanced Energy, contributed EBIT of $60
million for the first quarter of 2012, a decrease of 12% compared to $68
million for the same period in 2011. EBIT declined primarily as a result of
warmer than normal weather which negatively impacted year-over-year EBIT by $8
million. In addition, the retail operations segment recorded a $3 million
natural gas inventory valuation lower-of-cost-or-market (LOCOM) adjustment.
The retail segment did not record a similar inventory adjustment in the
first quarter of 2011. These decreases were partially offset by a
reduction of transportation and gas costs and higher retail price spreads.
Wholesale
Services
The wholesale
services segment, consisting primarily of Sequent Energy Management, reported
EBIT of $19 million in the first quarter of 2012, a decrease of 42% compared to
$33 million reported for the first quarter of 2011. Operating margin decreased
$16 million, or 32%, for the first quarter of 2012 compared to the prior-year
period. During the quarter, the wholesale services segment experienced a $21
million decrease in commercial activity compared to the prior first quarter,
primarily driven by historically warm weather and lower storage and
transportation spreads. Additionally, the wholesale segment recorded an $18
million natural gas inventory valuation LOCOM adjustment during the first
quarter of 2012 resulting from natural gas price declines in the period. A
similar adjustment was not recorded in the first quarter of 2011. These
declines were offset by an increase in storage hedge gains of $19 million and a
change in the value on transportation hedges of $4 million compared to the same
period in 2011. Hedge gains are affected primarily by changes in the price of
natural gas and by changes in transportation basis spreads in the period.
Sequent has $19
million in storage-related economic value locked-in at March 31, 2012 compared
with $11 million at the same point last year and $3 million at the end of 2011.
This economic value is expected to be recognized as operating revenues in 2012
and 2013 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.
Midstream
Operations
The midstream
operations segment, consisting primarily of our natural gas storage facilities
including Jefferson Island Storage and Hub, Golden Triangle Storage and Central
Valley Gas Storage, contributed EBIT of $3 million in the first quarter of
2012, compared to EBIT of $2 million contributed in 2011. The year-to-year
improvement is due primarily to hedge gains net of inventory valuation LOCOM at
Central Valley Gas Storage for volumes of natural gas related to bringing the
facility into service.
Cargo
Shipping
Our cargo
shipping segment consists primarily of Tropical Shipping, a containerized cargo
shipping company serving the Bahamas and Caribbean regions, and Seven Seas, a
domestic cargo insurance company. The cargo shipping segment contributed EBIT
of $1 million in the first quarter of 2012.
INTEREST
EXPENSE AND INCOME TAXES
Net interest
expense for the first quarter of 2012 was $47 million, up $18 million from the
first quarter of 2011. The increase in interest expense resulted from higher
average debt outstanding, primarily the result of the long-term debt issued
during 2011 in connection with the Nicor merger.
Income taxes
for the first quarter of 2012 were $80 million, a $4 million increase compared
to the first quarter of 2011, as a result of higher consolidated earnings for
the quarter relative to the prior year.
2012
EARNINGS OUTLOOK
AGL Resources
provides earnings per share guidance estimates based on normal weather, among
other assumptions. The historically warm weather experienced during the first
quarter of 2012 may lead to EPS results for the full year that are below our
previously indicated guidance range of $2.80 to $2.95 per diluted share.
Unanticipated
changes in these events or other circumstances could materially impact
earnings, and could result in earnings for 2012 significantly above or below
this outlook. Factors that could cause such changes are described below in
Forward-Looking Statements and in other company documents on file with the
Securities and Exchange Commission.
EARNINGS
CONFERENCE CALL/WEBCAST
AGL Resources
will hold a conference call to discuss its first quarter 2012 results on May 1
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 (www.aglresources.com), or by dialing 866.383.8003 if calling from the
U.S., or 617.597.5330 if dialing from outside of the U.S. (Passcode: 57339818).
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 (Passcode:
47945796). 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: GAS) is an Atlanta-based energy services holding company with operations
in natural gas distribution, retail operations, wholesale services, midstream
operations and cargo shipping. As the nation's largest natural gas-only
distributor based on customer count, AGL Resources serves approximately 4.5
million utility customers through its regulated distribution subsidiaries in
seven states. The company also serves more than one million retail customers
through its SouthStar Energy Services joint venture and Nicor National, which
market natural gas and related home services. Other non-utility businesses
include asset management for natural gas wholesale customers through Sequent
Energy Management, ownership and operation of natural gas storage facilities,
and ownership of Tropical Shipping, one of the largest containerized cargo
carriers serving the Bahamas and Caribbean region. AGL Resources is a member of
the S&P 500 Index. For more information, visit 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
quotes from John W. Somerhalder II and Andrew W. Evans, our expected
storage-related economic value and projected storage withdrawal schedule, and
our 2012 earnings outlook and related expectations and assumptions.
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,
including the Nicor merger; the limits on natural gas pipeline capacity; 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 disruptions in the capital markets and lending environment and the
current economic uncertainty; 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; the outcome of litigation; 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
goods sold, and revenue taxes, 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 and revenue
taxes are generally passed directly through to customers.
In addition, in
this press release AGL Resources has presented a non-GAAP measure of adjusted
earnings per share (EPS), which excludes expenses incurred with respect to the
Nicor merger. As the company does not routinely engage in transactions of
the magnitude of the Nicor merger, and consequently does not regularly incur
transaction and integration-related expenses of correlative size, the company
believes presenting EPS excluding Nicor merger-related expenses provides
investors with an additional measure of AGL Resources' core operating
performance. AGL Resources also expects to record certain merger-related
expenses in 2012 and will exclude nonrecurring integration-related expenses
from its 2012 adjusted results. Examples of such expenses related to the
merger and integration are: employee severance, relocation, consulting
services, temporary labor and certain travel costs. We also discuss the impact
to diluted EPS due to warmer than normal weather in the first quarter of 2012.
EBIT, operating
margin and adjusted EPS 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
adjusted 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.
AGL Resources Inc.
Condensed Consolidated Statements of Income
(Unaudited)
|
Three Months
Ended
|
|
In millions, except per share amounts
|
3/31/12
|
3/31/11
|
Fav / (Unfav)
|
|
Operating
revenues
|
$1,404
|
$878
|
$526
|
|
Operating
expenses
|
|
|
|
|
Cost of goods sold
|
719
|
455
|
(264)
|
|
Operation and maintenance
|
245
|
126
|
(119)
|
|
Depreciation and amortization
|
104
|
41
|
(63)
|
|
Taxes other than income taxes
|
64
|
13
|
(51)
|
|
Nicor merger expenses
|
10
|
5
|
(5)
|
|
Total
operating expenses
|
1,142
|
640
|
(502)
|
|
Operating
income
|
262
|
238
|
24
|
|
Other income
|
4
|
1
|
3
|
|
Earnings before interest and taxes
|
266
|
239
|
27
|
|
Interest expense, net
|
47
|
29
|
(18)
|
|
Earnings before
income taxes
|
219
|
210
|
9
|
|
Income tax expense
|
80
|
76
|
(4)
|
|
Net
income
|
139
|
134
|
5
|
|
Less net income attributable to the noncontrolling
interest
|
9
|
10
|
1
|
|
Net income attributable to AGL
Resources Inc.
|
$130
|
$124
|
$6
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
Basic
|
$1.12
|
$1.60
|
$(0.48)
|
|
Diluted
|
$1.11
|
$1.59
|
$(0.48)
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
Basic
|
116.7
|
77.7
|
(39.0)
|
|
Diluted
|
117.0
|
78.0
|
(39.0)
|
|
AGL Resources Inc.
EBIT Schedule
For the Three Months Ended March 31, 2012 and 2011
(Unaudited)
|
Three Months
Ended
|
|
In millions, except per share amounts
|
3/31/12
|
3/31/11
|
Fav / (Unfav)
|
|
Distributions
Operations
|
$194
|
$141
|
$53
|
|
Retail Operations
|
60
|
68
|
(8)
|
|
Wholesale Services
|
19
|
33
|
(14)
|
|
Midstream Operations
|
3
|
2
|
1
|
|
Cargo
Shipping
|
1
|
-
|
1
|
|
Corporate/Other
|
(11)
|
(5)
|
(6)
|
|
Consolidated EBIT
|
266
|
239
|
27
|
|
Interest expenses, net
|
47
|
29
|
(18)
|
|
Income tax expense
|
80
|
76
|
(4)
|
|
Net
income
|
139
|
134
|
5
|
|
Less net income attributable to the noncontrolling
interest
|
9
|
10
|
1
|
|
Net income attributable to AGL
Resources Inc.
|
$130
|
$124
|
$6
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
Basic
|
$1.12
|
$1.60
|
$(0.48)
|
|
Diluted
|
$1.11
|
$1.59
|
$(0.48)
|
|
AGL Resources Inc.
Reconciliation of Operating Margin to Operating Revenues
(Unaudited)
|
Three Months
Ended
|
|
In
millions
|
3/31/12
|
3/31/11
|
Fav / (Unfav)
|
|
Operating
revenues
|
$1,404
|
$878
|
$526
|
|
Cost of goods sold
|
(719)
|
(455)
|
(264)
|
|
Revenue
tax expense
|
(41)
|
-
|
(41)
|
|
Operating
margin
|
$644
|
$423
|
$221
|
|
AGL Resources Inc.
Reconciliation of Earnings per Share to Adjusted per Share and 1Q12
Weather Normalization
(Unaudited)
|
|
|
Three months
ended March 31, 2012
|
|
Three months
ended March 31, 2011
|
Basic earnings per share - as reported
|
|
$1.12
|
|
$1.60
|
Transaction costs of Nicor merger
|
|
0.05
|
|
0.04
|
Basic earnings per share - as
adjusted
|
|
$1.17
|
|
$1.64
|
|
|
|
|
|
|
|
|
|
Three months
ended March 31, 2012
|
|
Three months
ended March 31, 2011
|
Diluted earnings per share - as reported
|
|
$1.11
|
|
$1.59
|
Transaction costs of Nicor merger
|
|
0.05
|
|
0.04
|
Diluted earnings per share - as
adjusted
|
|
$1.16
|
|
$1.63
|
Three months
ended
March 31, 2012
|
Consolidated AGL Resources
|
in
millions
|
Operating
Income
|
$
262
|
Other income
|
4
|
EBIT
|
$
266
|
Impact
of weather normalization
|
21
|
EBIT
as adjusted
|
$
287
|
Impact of weather normalization
(net of tax)
|
$
13
|
Diluted earnings per share impact
- as adjusted
|
$
0.11
|
Contacts:
Financial
Sarah Stashak
Director - Investor Relations
Office: 404-584-4577
Cell: 404-895-7634
sstashak@aglresources.com
Media
Annette Martinez
Director - External
Relations
Office: 630-388-2781
Cell: 630-918-2321
amartinez@aglresources.com