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ATLANTA--Oct. 30, 2003--AGL Resources Inc.
(NYSE:ATG) today reported net income of $22.2 million, or $0.35 per
basic share ($0.34 per diluted share), for the third quarter of 2003,
compared with $9.4 million, or $0.17 per basic and diluted share,
reported in the third quarter of last year. After deducting a pre-tax
$7.9 million, or $0.08 per basic share, net impact related to a gain
on the sale of company property and charitable contribution to a
private foundation, earnings for the quarter were $0.27 per basic
share. Weighted average basic shares outstanding were 64.0 million for
the quarter ended September 30, 2003, an increase of 7.8 million
shares, or 13.9 percent, from the quarter ended September 30, 2002.
"Our third quarter results illustrate the steady contribution and
maturity of our businesses," said Paula G. Rosput, chairman, president
and chief executive officer of AGL Resources. "We're still a distance
from the finish line, but we've found our groove."
FINANCIAL RESULTS
CONSOLIDATED
Consolidated earnings before interest and taxes (EBIT) for the
quarter were $55.7 million, as compared with $36.0 million in 2002.
The key drivers of the $19.7 million increase in EBIT as compared to
last year were:
-- $7.9 million of increased EBIT, net from the closing on the
sale of the company's 34-acre Caroline Street campus partly
offset by a donation to the AGL Resources Private Foundation,
Inc. The company recorded a gain of $15.9 million on the sale
of the Caroline Street campus of which $21.5 million of the
gain was related to the distribution operations segment, and a
$5.6 million loss was in the company's corporate segment. In
connection with the closing, the company contributed $8.0
million to the AGL Resources Private Foundation, Inc., a
non-profit foundation that makes charitable contributions to
qualified tax-exempt organizations within the communities of
the company's customers and office locations.
-- $7.2 million of increased EBIT from the energy investments
segment, primarily from improved performance at SouthStar
Energy Services and the increase in AGL Resources' ownership
interest in the partnership from 50 percent in 2002 to 70
percent in 2003.
-- $6.0 million increased EBIT at corporate, excluding the loss
associated with the disposal of the Caroline Street assets,
primarily due to a loss recognized in the third quarter of
last year associated with the termination of an automated
meter reading contract.
-- $1.0 million of decreased EBIT in the distribution operations
segment, excluding the gain on the sale of the Caroline Street
campus and the contribution to the private foundation,
principally due to higher operating expenses related to
increased corporate overhead costs partly offset by higher
operating margins.
-- $0.4 million lower EBIT in the wholesale services segment
principally due to decreased operating margins partially
offset by lower operating expenses.
Net income for 2003 reflects lower corporate interest expense of
$2.2 million for the quarter as a result of lower average debt
balances attributable to the equity offering in February 2003. The
increase in EBIT and lower interest expense was partly offset by
higher income taxes of $9.1 million resulting from the higher pre-tax
earnings and a higher projected effective state tax rate in 2003.
DISTRIBUTION OPERATIONS
The distribution operations segment contributed $57.5 million of
EBIT for the quarter, a $12.5 million increase as compared to the
third quarter of 2002. The increase is primarily due to $13.5 million,
net from the sale of the Caroline Street campus and the private
foundation contribution. Excluding the impact of these two
transactions, distribution operations continued to perform as expected
with continued growth in operating margin. Operating margin was $1.9
million higher during the quarter as compared to 2002 primarily as a
result of increases from higher average usage per connected customer
and an overall increase in the average number of connected customers
to 1.815 million during the third quarter of 2003 versus 1.799 million
connected customers in 2002.
This increase in operating margin was offset by an increase in
total operating expenses of $3.0 million, to $88.3 million, for the
quarter as compared with $85.3 million in the same period last year.
The increase in operating expenses in the third quarter of 2003 was
primarily due to increased corporate overhead costs, which included
higher building lease costs and general business insurance costs, as
well as an increase in benefit costs, primarily related to pension and
postretirement benefit plans.
WHOLESALE SERVICES
The wholesale services segment, comprised primarily of Sequent
Energy Management, contributed $0.9 million in EBIT for the quarter as
compared to EBIT of $1.3 million last year, a $0.4 million decrease.
This EBIT decrease is primarily due to a decline in operating margin
of $1.1 million to $4.3 million for the quarter as compared to $5.4
million in the prior year. The lower operating margin was primarily
the result of decreased volatility during the third quarter of 2003
due to mild weather. This compares to the third quarter of 2002 when
warmer weather in the Northeast and two hurricanes in the Gulf of
Mexico increased volatility in the gas markets and led to increased
margins at Sequent.
The third quarter 2003 decreases were offset by an approximately
4.0 percent increase in physical volumes sold during the quarter as
compared to third quarter 2002 resulting from Sequent's continued
efforts to increase the number of counterparties with whom it conducts
transactions and to expand into the Midwest and the upper mid-Atlantic
natural gas markets. The decrease in operating margin was partially
offset by a decrease in operating expenses of $1.0 million as compared
to the prior year primarily due to a net decrease in employee related
compensation costs.
ENERGY INVESTMENTS
The energy investments segment realized EBIT of $4.0 million for
the current quarter as compared to an EBIT loss of $3.2 million in the
same period last year, an increase of $7.2 million. Earnings from
SouthStar were $7.5 million higher in 2003 than in 2002. Earnings were
$5.9 million higher as a result of higher operating margins and
reduced operating and bad debt expenses at SouthStar and $1.6 million
higher from the increase in our ownership percentage in SouthStar in
2003.
CORPORATE
Corporate EBIT improved slightly year-over-year by $0.4 million
from an EBIT loss of $7.1 million in the third quarter of 2002 to an
EBIT loss of $6.7 million for the current quarter. The improvement was
primarily due to recognition of a $6.4 million loss in the third
quarter of last year associated with the termination of an automated
meter reading contract offset by a loss during the current year
quarter of $5.6 million associated with the disposal of the Caroline
Street campus.
Consolidated interest expense decreased by $2.2 million for the
third quarter of 2003, principally due to lower average debt balances
resulting from the repayment of debt from proceeds generated by the
company's equity offering in February 2003. Consolidated income taxes
increased $9.1 million as compared to the prior year. Of this
increase, $7.8 million is the result of higher earnings, while $1.3
million is the result of an increase in the projected effective tax
rate resulting from new state tax law in Georgia.
YEAR-TO-DATE RESULTS
For the nine months ended September 30, 2003, net income was $92.9
million, or $1.48 per basic share ($1.47 per diluted share), compared
to $71.8 million, or $1.28 per basic share ($1.27 per diluted share),
for the same period in 2002. After deducting the pre-tax $7.9 million
(pre tax) net impact related to the sale of the company's Caroline
Street campus and contribution to the private foundation, net income
for the nine months ended September 30, 2003 was $88.1 million or
$1.41 per basic ($1.39 per diluted share).
As reported in the first quarter of 2003, net income for the
nine-month period ended September 30, 2003 includes a $7.8 million
after-tax charge resulting from the cumulative effect of a change in
accounting principle resulting from the final provisions of Emerging
Issues Task Force (EITF) 02-03, which rescinded EITF 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk
Management Activities."
Operating revenues increased $79.3 million for the nine months
ended September 30, 2003 from $626.1 million in the prior year to
$705.4 million for 2003. This increase resulted primarily from
increased distribution revenues of $52.1 million, mainly the result of
weather-related volumes and revenues at Virginia Natural Gas and from
increased wholesale services and energy investment revenues of $23.2
million and $3.7 million, respectively.
Consolidated EBIT for the nine months ended September 30, 2003 was
$222.5 million, up $46.0 million from the $176.5 million reported in
the previous year. This increase in EBIT reflects increased EBIT
contributions from all segments of the business. For the nine months
ended September 30, 2003, EBIT increased $18.4 million for
distribution operations due to the gain on the sale of the Caroline
Street campus net of the private foundation contribution, increased
operating margins of $8.8 million, primarily resulting from the
weather normalization program and colder weather in 2003 at Virginia
Natural Gas, offset by increased total operating expenses of $4.1
million. Additionally, for the nine months ended September 30, 2003,
wholesale services' EBIT increased $17.1 million, of which $12.6
million relates to Sequent's first quarter 2003 sale of substantially
all of its inventory balances that were impacted on January 1, 2003 by
the now rescinded EITF 98-10; energy investments' EBIT increased $8.5
million due primarily to increased earnings from SouthStar; and
corporate EBIT increased $2.0 million.
EARNINGS OUTLOOK
In January 2003, AGL Resources provided earnings guidance for 2003
in the range of $1.85 to $1.90 per share. As a result of the improved
performance year-to-date relative to 2002 results, the company is
increasing its 2003 guidance to a range of $1.91 to $1.96 per share.
"Our business units have performed well this quarter and
throughout this year, and we expect to sustain that momentum in the
fourth quarter," said Richard T. O'Brien, executive vice president and
chief financial officer of AGL Resources. "As a result, and given our
current assumptions for the balance of 2003, we expect our results for
the year to be better than when we issued guidance in January 2003."
Earnings Conference Call Webcast: The AGL Resources third-quarter
2003 earnings conference call, scheduled for October 30, 2003, at 9
a.m. (EDT), can be accessed via the AGL Resources website at
www.aglresources.com. The call will address the Company's financial
results for the quarter and nine months ended September 30, 2003, as
well as other general corporate updates. The webcast replay of the
call will be available on the website through the close of business on
November 6, 2003.
AGL Resources Inc. (NYSE: ATG) is an Atlanta-based energy services
holding company. Its utility subsidiaries - Atlanta Gas Light Company,
Virginia Natural Gas and Chattanooga Gas Company - 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.
As a member of the SouthStar partnership, AGL Resources markets
natural gas to consumers in Georgia under the Georgia Natural Gas
brand. AGL Networks, the company's telecommunications 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. 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, on the gas and electric industries and
on the company, including the impact of Atlanta Gas Light Company's
performance based rate plan; effects and uncertainties of deregulation
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; 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 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 the financial performance and
operational effectiveness of its segments on an earnings before
interest and taxes (EBIT) measure, which includes other income, but
excludes financing costs, including interest and debt expense, income
taxes and the cumulative effect of changes in accounting principles,
each of which company management evaluates on a consolidated level.
Company management believes EBIT is a useful measurement of the
company's performance because it provides information that can be used
to evaluate the effectiveness of the company's businesses from an
operational perspective, exclusive of the costs to finance those
activities and exclusive of income taxes, neither of which are
directly relevant to the efficiency of those operations. However, EBIT
should not be considered an alternative to, or a more meaningful
indicator of the company's operating performance than operating income
or net income as determined in accordance with accounting principles
generally accepted in the United States of America. In addition, the
company's EBIT may not be comparable to a similarly titled measure of
another company.
AGL Resources Inc.
Condensed Statements of Consolidated Income
For the Three and Nine Months Ended
September 30, 2003 and 2002
(In millions, except per share amounts)
Three Months
--------------------------------------
---------- -------------- ------------
9/30/2003 9/30/2002 Fav/(Unfav)
---------- -------------- ------------
Operating Revenues $166.3 $193.0 $(26.7)
Cost of Sales 29.2 57.0 27.8
---------- -------------- ------------
Operating Margin 137.1 136.0 1.1
Total Operating Expenses 94.8 97.6 2.8
Gain on Sale of Caroline
Street Campus 15.9 - 15.9
---------- -------------- ------------
Operating Income 58.2 38.4 19.8
Contribution to AGL Resources
Private Foundation, Inc. (8.0) - (8.0)
Other (Loss) Income 5.5 (2.4) 7.9
---------- -------------- ------------
Earnings Before Interest &
Taxes 55.7 36.0 19.7
Interest Expense 19.2 21.4 2.2
---------- -------------- ------------
Earnings Before Income Taxes 36.5 14.6 21.9
Income Taxes 14.3 5.2 (9.1)
---------- -------------- ------------
Income Before Cumulative
Effect of Change in
Accounting Principle 22.2 9.4 12.8
Cumulative Effect of Change in
Accounting Principle - - -
---------- -------------- ------------
Net Income $22.2 $9.4 $12.8
========== ============== ============
EPS Before Cumulative Effect
of Change in Accounting
Principle
Basic $0.35 $0.17 $0.18
Diluted $0.34 $0.17 $0.17
EPS
Basic $0.35 $0.17 $0.18
Diluted $0.34 $0.17 $0.17
Shares Outstanding
Basic 64.0 56.2 7.8
Diluted 64.8 56.6 8.2
Nine Months
---------------------------------
---------- ---------- -----------
9/30/2003 9/30/2002 Fav/(Unfav)
---------- ---------- -----------
Operating Revenues $705.4 $626.1 $79.3
Cost of Sales 223.2 178.5 (44.7)
---------- ---------- -----------
Operating Margin 482.2 447.6 34.6
Total Operating Expenses 297.5 293.3 (4.2)
Gain on Sale of Caroline Street
Campus 15.9 - 15.9
---------- ---------- -----------
Operating Income 200.6 154.3 46.3
Contribution to AGL Resources
Private Foundation, Inc. (8.0) - (8.0)
Other (Loss) Income 29.9 22.2 7.7
---------- ---------- -----------
Earnings Before Interest & Taxes 222.5 176.5 46.0
Interest Expense 57.3 65.3 8.0
---------- ---------- -----------
Earnings Before Income Taxes 165.2 111.2 54.0
Income Taxes 64.5 39.4 (25.1)
---------- ---------- -----------
Income Before Cumulative
Effect of Change in
Accounting Principle 100.7 71.8 28.9
Cumulative Effect of Change in
Accounting Principle (7.8) - (7.8)
---------- ---------- -----------
Net Income $92.9 $71.8 $21.1
========== ========== ===========
EPS Before Cumulative Effect
of Change in Accounting
Principle
Basic $1.61 $1.28 $0.33
Diluted $1.59 $1.27 $0.32
EPS
Basic $1.48 $1.28 $0.20
Diluted $1.47 $1.27 $0.20
Shares Outstanding
Basic 62.6 56.0 6.6
Diluted 63.2 56.4 6.8
AGL Resources Inc.
EBIT Schedule
For the Three and Nine Months Ended
September 30, 2003 and 2002
(In millions, except per share amounts)
Three Months
---------------------------------
---------- ---------- -----------
9/30/2003 9/30/2002 Fav/(Unfav)
---------- ---------- -----------
Distribution Operations $57.5 $45.0 $12.5
Wholesale Services 0.9 1.3 (0.4)
Energy Investments 4.0 (3.2) 7.2
Corporate (6.7) (7.1) 0.4
---------- ---------- -----------
Consolidated EBIT 55.7 36.0 19.7
---------- ---------- -----------
Interest Expense 19.2 21.4 2.2
Income Taxes 14.3 5.2 (9.1)
---------- ---------- -----------
Income Before Cumulative Effect of
Change in Accounting Principle 22.2 9.4 12.8
Cumulative Effect of Change in
Accounting Principle - - -
---------- ---------- -----------
Net Income $22.2 $9.4 $12.8
---------- ---------- -----------
Earnings per Common Share Before
Cumulative Effect of Change
in Accounting Principle
Basic $0.35 $0.17 $0.18
========== ========== ===========
Diluted $0.34 $0.17 $0.17
========== ========== ===========
Earnings per Common Share
Basic $0.35 $0.17 $0.18
========== ========== ===========
Diluted $0.34 $0.17 $0.17
========== ========== ===========
Nine Months
---------------------------------
---------- ---------- -----------
9/30/2003 9/30/2002 Fav/(Unfav)
---------- ---------- -----------
Distribution Operations $182.4 $164.0 $18.4
Wholesale Services 21.9 4.8 17.1
Energy Investments 26.6 18.1 8.5
Corporate (8.4) (10.4) 2.0
---------- ---------- -----------
Consolidated EBIT 222.5 176.5 46.0
---------- ---------- -----------
Interest Expense 57.3 65.3 8.0
Income Taxes 64.5 39.4 (25.1)
---------- ---------- -----------
Income Before Cumulative Effect of
Change in Accounting Principle 100.7 71.8 28.9
Cumulative Effect of Change in
Accounting Principle (7.8) - (7.8)
---------- ---------- -----------
Net Income $92.9 $71.8 $21.1
---------- ---------- -----------
Earnings per Common Share Before
Cumulative Effect of Change
in Accounting Principle
Basic $1.61 $1.28 $0.33
========== ========== ===========
Diluted $1.59 $1.27 $0.32
========== ========== ===========
Earnings per Common Share
Basic $1.48 $1.28 $0.20
========== ========== ===========
Diluted $1.47 $1.27 $0.20
========== ========== ===========
CONTACT: AGL Resources Inc.
Steve Cave, 404-584-3801 (Financial)
Director, Investor Relations
Nick Gold, 404-584-3457 (Media)
Director, Community Affairs
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