AGL Resources Reports Third Quarter
2012 Earnings
Diluted GAAP earnings
per share (EPS) of $0.08 versus loss per share of $(0.04) in third quarter
2011
- Excluding Nicor merger-related
expenses, adjusted diluted non-GAAP EPS of $0.09 for third quarter 2012
compared to $0.02 for third quarter 2011
- First nine-months 2012 diluted
EPS of $1.48 (GAAP)/$1.56 (non-GAAP), compared to diluted EPS of $1.78
(GAAP)/$1.99 (non-GAAP) for same period 2011
- Storage hedge losses related to
rising natural gas prices result in $0.08 negative 3Q12 earnings impact;
earnings expected to be realized in future periods when natural gas
inventory is withdrawn from storage
- 2012 financial results include
Nicor's operations as the merger closed in December 2011
ATLANTA,
November 1, 2012 -- AGL Resources Inc. (NYSE: GAS) today reported third quarter
2012 net income of $9 million, or $0.08 per basic and diluted share, compared
to a net loss of $3 million, or $(0.04) per basic and diluted share, reported
for the same period last year. Excluding merger-related expenses of $0.01 per
share in 2012 and $0.06 per share in 2011, adjusted EPS was $0.09 for the third
quarter of 2012 and $0.02 per diluted share for the third quarter of 2011. On a
GAAP basis, the primary year-over-year driver of 2012 earnings is the addition
of Nicor's businesses, whose results are not reflected in 2011 comparisons.
Year-to-date
through September 30, 2012, net income was $173 million, or $1.48 per basic and
diluted share, compared to net income of $139 million, or $1.79 per basic share
and $1.78 per diluted share for the same period in 2011. Excluding
merger-related expenses, adjusted EPS year-to-date through September 30, 2012
was $1.56 per diluted share compared to $1.99 per diluted share for the same
period last year. Year-to-date EPS was negatively impacted by $0.13 due to
warmer than normal weather experienced in 2012, as well as third quarter 2012
losses of $0.08 associated with movement in hedges of storage and
transportation positions.
"While
market fundamentals including warmer than normal weather and increased pension
expense have created a challenging operating environment for us this year, we
have managed to effectively control costs across each of our business units and
maintain a robust level of infrastructure investment at our regulated
utilities. Our wholesale services segment has created nearly $60 million in
economic value since this time last year and we expect to realize that value
over the coming quarters," said John W. Somerhalder II, chairman,
president and chief executive officer of AGL Resources. "To date our
integration efforts related to the Nicor transaction have been very successful,
and we have delivered on efficiencies across the entire organization. We will
continue to pursue initiatives that help to offset the fundamentals impacting
many of our businesses."
2012 OPERATING SEGMENT RESULTS
Distribution Operations
The
distribution operations segment, which consists of our seven utilities,
contributed EBIT of $80 million for the third quarter of 2012, an increase of
$10 million compared to EBIT of $70 million for the same period in 2011. The
increase was primarily the result of a $15 million contribution from the
addition of Nicor Gas.
Year-to-date
through September 30, 2012, the distribution operations segment contributed
EBIT of $374 million, an increase of $89 million compared to EBIT of $285
million for the same period in 2011. The increase was primarily the result of
an $86 million contribution from the addition of Nicor Gas. The previously
described warmer than normal weather experienced in the first half of 2012
negatively affected EBIT in the Distribution Operations segment by $16 million.
Retail Operations
The retail
operations segment, which consists of SouthStar Energy Services and several
Nicor retail businesses that provide energy-related products and services,
contributed EBIT of $5 million for the third quarter of 2012, an increase of
$10 million compared to an EBIT loss of $5 million for the same period in 2011.
The increase was primarily a result of the addition of Nicor's retail
businesses and increased margins resulting from reduced transportation and gas
costs and lower bad debt expense at SouthStar.
Year-to-date
through September 30, 2012, the retail operations segment contributed EBIT of
$79 million, an increase of $15 million compared to EBIT of $64 million for the
same period in 2011. The increase year-over-year is due primarily to the
addition of Nicor's retail businesses, as well as increased margins from
reduced transportation and gas costs and higher commercial asset optimization
at SouthStar. These improvements were partially offset by a $9 million
year-over-year EBIT decline resulting from the significantly warmer weather
experienced during 2012 as compared to the prior-year period.
Wholesale Services
The wholesale
services segment, consisting primarily of Sequent Energy Management, reported
an EBIT loss of $23 million in the third quarter of 2012, compared to an EBIT
loss of $37 million for the same period in 2011. Commercial activity increased
$38 million compared to the third quarter of the prior year, in part driven by
the absence of losses associated with pipeline constraints in the Marcellus
shale region recorded in the third quarter of 2011, as well as the absence of
credit losses associated with a customer that filed for bankruptcy during the
third quarter of 2011. As a result of rising gas prices, Sequent recorded
storage hedge losses of $15 million during the third quarter of 2012, compared
to storage hedge gains of $14 million in the third quarter of 2011. Hedge gains
and losses are affected primarily by changes in the price of natural gas and by
changes in transportation basis spreads in the period.
Year-to-date
through September 30, 2012, the wholesale services segment reported an EBIT
loss of $13 million, compared to a loss of $9 million for the same period in
2011. The year-to-date results were primarily due to changes in the value of
hedges of storage and transportation positions, partially offset by an increase
in commercial activity.
As the price of
natural gas increased during the third quarter, Sequent recorded hedge losses
on its portfolio of storage assets, adding an equivalent value to the
storage-related rollout value locked-in at September 30, 2012. Further, higher
seasonal price differentials (summer 2012 to winter 2012 - 2013) during the
third quarter 2012 provided additional opportunities for Sequent to improve its
storage positions. Sequent's storage rollout schedule as of September 30, 2012
was $65 million on 58 billion cubic feet (Bcf) of natural gas inventory. This
compares to $6 million at the same point last year. The rollout value is
expected to be recognized as operating revenues in 2012 and 2013 when projected
withdrawals occur. This withdrawal schedule can change in response to changes
in market conditions, including changes in forward NYMEX natural gas prices,
and this value is expected to be partially offset by lower operating revenues
from Sequent's forward transportation portfolio as compared to last year.
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, as well as Magnolia pipeline, contributed EBIT of $1 million
in the third quarter of 2012, compared to $2 million for the same period in
2011.
Year-to-date
through September 30, 2012, the midstream operations segment EBIT of $6 million
was consistent with the same period in 2011.
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. This segment reported an EBIT loss of $1 million in
the third quarter of 2012, and year-to-date through September 30, 2012.
INTEREST EXPENSE AND INCOME TAXES
Interest
expense for the third quarter of 2012 was $45 million, an increase of $14
million from the third quarter of 2011. The increase resulted from higher
average debt outstanding, primarily the result of the additional long-term debt
issued during 2011 in connection with the Nicor merger and the additional debt
assumed following the closing of the merger transaction. Interest expense
year-to-date 2012 was $137 million, an increase of $45 million compared to the
prior year due to the same factors that influenced the third quarter.
Income taxes
for the third quarter of 2012 were $6 million, an $8 million increase compared
to the third quarter of 2011. Year-to-date income taxes through September 30,
2012 were $106 million, $21 million higher than the same period in 2011. The
increase for both periods was due to higher consolidated earnings for 2012
relative to the prior year due to the addition of Nicor's businesses.
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
half of 2012 and hedge gains and losses through the first nine months of 2012
have been factored into our guidance range, which we have revised to be in the
range of $2.60 to $2.75 per diluted share. However, fourth quarter 2012 weather
and changes in the value of our storage and transportation portfolios could
impact this guidance range.
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 third quarter 2012 results on
November 1 at 9 a.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 866.383.8009 if
calling from the U.S., or 617.597.5342 if dialing from outside the U.S.
(Passcode: 87750312). A replay of the conference call will be available
by dialing 888.286.8010 in the United States or 617.801.6888 outside the U.S.
(Passcode: 54228177). 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 regions. 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
quote from John W. Somerhalder II, when we expect to realize the economic value
created by our storage-related business, our 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 operating margin
and earnings before interest and taxes (EBIT), which include the effects of
corporate expense allocations. EBIT is a non-GAAP (accounting principles
generally accepted in the United States of America) financial measure that
includes operating income and other income and expenses. Items that are not
included in EBIT are income taxes and financing costs, including debt and
interest expense, each of which the company evaluates on a consolidated
basis. The company believes EBIT is a useful measurement of its
performance because it provides information that can be used to evaluate the
effectiveness of its 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, certain taxes other than income taxes, Nicor
merger expenses and gains or losses on the sale of assets, if any. 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 nine months ended
September 30, 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 September 30,
|
|
Nine Months Ended
September 30,
|
In millions, except per share amounts
|
2012
|
2011
|
Fav / (Unfav)
|
|
2012
|
2011
|
Fav / (Unfav)
|
Operating
revenues (include revenue taxes of $8 million and $63 million for the three
and nine months in 2012).
|
$ 614
|
$ 295
|
$319
|
|
$2,704
|
$ 1,548
|
$1,156
|
Operating expenses
|
|
|
|
|
|
|
|
Cost of goods sold
|
215
|
112
|
(103)
|
|
1,174
|
701
|
(473)
|
Operation and maintenance
|
212
|
103
|
(109)
|
|
675
|
351
|
(324)
|
Depreciation and amortization
|
104
|
43
|
(61)
|
|
310
|
126
|
(184)
|
Nicor merger expenses (1)
|
2
|
2
|
-
|
|
15
|
12
|
(3)
|
Taxes
other than income taxes
|
27
|
11
|
(16)
|
|
123
|
36
|
(87)
|
Total operating expenses
|
560
|
271
|
(289)
|
|
2,297
|
1,226
|
(1,071)
|
Operating income
|
54
|
24
|
30
|
|
407
|
322
|
85
|
Other income
|
6
|
1
|
5
|
|
19
|
4
|
15
|
Earnings before interest and taxes
|
60
|
25
|
35
|
|
426
|
326
|
100
|
Interest expense, net
|
45
|
31
|
(14)
|
|
137
|
92
|
(45)
|
Earnings (loss) before income taxes
|
15
|
(6)
|
21
|
|
289
|
234
|
55
|
Income tax expense (benefit)
|
6
|
(2)
|
(8)
|
|
106
|
85
|
(21)
|
Net income (loss)
|
9
|
(4)
|
13
|
|
183
|
149
|
34
|
Less net
income (loss) attributable to the noncontrolling interest
|
0
|
(1)
|
(1)
|
|
10
|
10
|
-
|
Net income (loss) attributable to AGL Resources Inc.
|
$9
|
$(3)
|
$12
|
|
$ 173
|
$ 139
|
$34
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
Basic
|
$0.08
|
$ (0.04)
|
$0.12
|
|
$ 1.48
|
$ 1.79
|
$(0.31)
|
Diluted
|
$0.08
|
$(0.04)
|
$0.12
|
|
$ 1.48
|
$ 1.78
|
$(0.30)
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
|
|
|
|
|
|
Basic
|
117.1
|
78.1
|
(39.0)
|
|
116.9
|
77.9
|
(39.0)
|
Diluted
|
117.5
|
78.1
|
(39.4)
|
|
117.3
|
78.4
|
(38.9)
|
|
|
|
|
|
|
|
|
(1)
Nicor merger expenses shown are related to O&M expense. Adjusted earnings
per share reflecting merger costs for 2011 periods also include incremental
debt issuance costs and interest expense related to financing the cash portion
of the purchase consideration in advance of the merger closing date. For a more
detailed explanation of merger costs, please refer to Note 3 of the AGL
Resources Form 10-Q as filed on 11/1/12.
AGL Resources
Inc.
EBIT Schedule
(Unaudited)
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
In millions, except per share amounts
|
2012
|
2011
|
Fav / (Unfav)
|
|
2012
|
2011
|
Fav / (Unfav)
|
Distributions operations
|
$80
|
$70
|
$ 10
|
|
$374
|
$285
|
$89
|
Retail operations
|
5
|
(5)
|
10
|
|
79
|
64
|
15
|
Wholesale services
|
(23)
|
(37)
|
14
|
|
(13)
|
(9)
|
(4)
|
Midstream operations
|
1
|
2
|
(1)
|
|
6
|
6
|
0
|
Cargo shipping
|
(1)
|
0
|
(1)
|
|
(1)
|
0
|
(1)
|
Corporate/other
|
(2)
|
(5)
|
3
|
|
(19)
|
(20)
|
1
|
Consolidated EBIT
|
60
|
25
|
35
|
|
426
|
326
|
100
|
Interest expenses, net
|
45
|
31
|
(14)
|
|
137
|
92
|
(45)
|
Income tax expense (benefit)
|
6
|
(2)
|
(8)
|
|
106
|
85
|
(21)
|
Net income (loss)
|
9
|
(4)
|
13
|
|
183
|
149
|
34
|
Less net income (loss)
attributable to the noncontrolling interest
|
-
|
(1)
|
(1)
|
|
10
|
10
|
0
|
Net income (loss) attributable to
AGL Resources Inc.
|
$9
|
$(3)
|
$12
|
|
$173
|
$139
|
$34
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share
|
|
|
|
|
|
|
|
Basic
|
$0.08
|
$(0.04)
|
$0.12
|
|
$1.48
|
$1.79
|
$(0.31)
|
Diluted
|
$0.08
|
$(0.04)
|
$0.12
|
|
$1.48
|
$1.78
|
$(0.30)
|
AGL Resources Inc.
Reconciliation of Operating Margin to
Operating Revenues
(Unaudited)
|
Three Months Ended September 30,
|
|
Nine Months Ended
September 30,
|
In millions
|
2012
|
2011
|
Fav / (Unfav)
|
|
2012
|
2011
|
Fav / (Unfav)
|
Operating revenues
|
$614
|
$
295
|
$319
|
|
$2,704
|
$ 1,548
|
$1,156
|
Cost of goods sold
|
(215)
|
(112)
|
(103)
|
|
(1,174)
|
(701)
|
(473)
|
Revenue tax expense
|
(8)
|
0
|
(8)
|
|
(62)
|
0
|
(62)
|
Operating margin
|
$391
|
$183
|
$208
|
|
$1,468
|
$ 847
|
$621
|
AGL Resources
Inc.
Reconciliation
of Earnings per Share to Adjusted Earnings per Share
(Unaudited)
|
|
|
Three months ended September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Basic
earnings (loss) per share - as reported
|
|
$0.08
|
|
$ (0.04)
|
|
$1.48
|
|
$ 1.79
|
Transaction costs of Nicor merger
(per share)
|
|
0.01
|
|
0.06
|
|
0.08
|
|
0.21
|
Basic earnings per share - as
adjusted
|
|
$0.09
|
|
$ 0.02
|
|
$1.56
|
|
$ 2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
Diluted earnings (loss) per
share - as reported
|
|
$0.08
|
|
$(0.04)
|
|
$1.48
|
|
$ 1.78
|
Transaction costs of Nicor merger
(per share)
|
|
0.01
|
|
0.06
|
|
0.08
|
|
0.21
|
Diluted earnings per share - as
adjusted
|
|
$0.09
|
|
$ 0.02
|
|
$1.56
|
|
$ 1.99
|
|
|
|
|
|
|
|
|
|
|
|
|
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