AGL Resources Reports Fourth Quarter and Year-End 2012 Earnings

Wed Feb 6, 2013 8:00am EST

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*2012 diluted GAAP earnings per share (EPS) of $2.31 versus diluted GAAP EPS of $2.12 in 2011
*Adjusted diluted non-GAAP EPS of $2.46 for 2012 compared to $2.92 for same period 2011, excluding
Nicor merger-related expenses and additional Nicor Gas PBR litigation accrual
*Fourth quarter diluted GAAP EPS of $0.84 versus diluted GAAP EPS of $0.37 in fourth quarter 2011
*Adjusted diluted non-GAAP EPS of $0.91 for fourth quarter 2012 compared to $0.94 for fourth
quarter 2011, excluding Nicor merger-related expenses and additional PBR accrual
*Primary drivers of year-over-year performance for both 2012 and 4Q12 are the addition of Nicor's
businesses in December 2011, warmer-than-normal weather and mark-to-market hedge movements
*2012 financial results include twelve months of Nicor's operations compared to 22 days of
financial results included in 2011
*Diluted Earnings Per Share for 2013 expected to be in the range of $2.50 - $2.70; Excluding
wholesale services segment, 2013 diluted EPS expected to be $2.40-$2.50


ATLANTA, February 6, 2013 - AGL Resources Inc. (NYSE: GAS) today reported 2012 net income of $271
million, or $2.32 per basic and $2.31 per diluted share, compared to net income of $172 million,
or $2.14 per basic share and $2.12 per diluted share, reported in 2011. Excluding Nicor
merger-related expenses and an additional accrual related to the Nicor Gas performance-based rate
(PBR) litigation issue, 2012 adjusted EPS was $2.46 per diluted share compared to $2.92 per
diluted share for 2011. 

The primary drivers of the year-over-year decline in adjusted EPS include:


*Historically warmer-than-normal weather at the distribution operations and retail operations
segments that resulted in an $0.18 reduction to EPS;
*Mark-to-market changes on storage and transportation positions held at wholesale services that
were $34 million lower than 2011, resulting in a reduction to EPS of $0.17;
*Interest expense that was $48 million higher in 2012 than 2011; and
*A higher number of diluted weighted-average shares outstanding in 2012 (117.5 million) vs. 2011
(80.9 million) as a result of the Nicor merger.
*These factors were offset by reduced 2012 incentive compensation expense of $17 million pre-tax,
which had a positive $0.09 impact on EPS.


Fourth quarter 2012 net income was $98 million, or $0.84 per basic and diluted share, compared to
net income of $33 million, or $0.37 per basic and diluted share, reported for the same period last
year. Excluding merger-related expenses and the additional PBR litigation accrual, adjusted EPS
was $0.91 for the fourth quarter of 2012 and $0.94 per diluted share for the fourth quarter of
2011.

"Our financial performance in 2012 was weaker than expected due primarily to the record warm
weather experienced across much of the country, as well as continued challenges in our unregulated
businesses. On an operational basis, however, we continued our solid track record of
cost-effectively maintaining and improving the safety and reliability of the pipeline systems
across our seven regulated utilities," said John W. Somerhalder II, chairman, president and chief
executive officer of AGL Resources. "We have confidence in the strength of our regulated
businesses as we move into 2013 and we will continue to seek further expense reduction and revenue
growth opportunities across our utility operations. However, due to weak market fundamentals at
many of our unregulated subsidiaries and persistent inflationary pressures across all of our
businesses, we believe it is appropriate to reset baseline earnings expectations for 2013. As
such, our 2013 diluted earnings per share guidance ranges are $2.50 to $2.70 on a consolidated
basis and $2.40 to $2.50 excluding wholesale services."

2012 OPERATING SEGMENT RESULTS

Distribution Operations

The distribution operations segment, which consists of our seven utilities, contributed EBIT of
$532 million in 2012, an increase of $120 million compared to EBIT of $412 million in 2011. The
increase was primarily the result of increased EBIT from Nicor Gas of $105 million and increased
revenues from regulatory infrastructure programs. In addition, excluding Nicor Gas, operating
expenses were lower by $7 million due in part to reduced incentive compensation, because the
company did not achieve corporate earnings targets. The previously described warmer-than-normal
weather experienced in 2012 negatively affected EBIT in the distribution operations segment by $24
million, as did the $8 million additional accrual related to the Nicor PBR litigation.

During the fourth quarter of 2012, the distribution operations segment contributed EBIT of $158
million compared to EBIT of $127 million for the same period in 2011. As with the full year, the
addition of Nicor Gas, increased revenue from regulatory infrastructure programs, reduced
incentive compensation, warmer-than-normal weather and the additional PBR accrual were the drivers
of quarterly performance.

Retail Operations

The retail operations segment, which includes the company's retail commodity and services
businesses, contributed EBIT of $116 million in 2012, an increase of $23 million compared to EBIT
of $93 million in 2011. The increase was due primarily to the addition of Nicor's retail
businesses. In addition, margin at SouthStar improved as a result of lower transportation and gas
costs and higher commercial asset optimization. These improvements are partially offset by a $9
million EBIT decline resulting from the warmer-than-normal weather experienced during 2012 as
compared to the prior year. 

During the fourth quarter of 2012, the retail operations segment contributed EBIT of $37 million,
an increase of $8 million compared to $29 million for the same period in 2011. The increase was
primarily a result of the addition of Nicor's retail businesses and increased margins at
SouthStar.

Wholesale Services

The wholesale services segment, consisting primarily of Sequent Energy Management, reported an
EBIT loss of $3 million in 2012, a decrease of $8 million compared to EBIT of $5 million in 2011.
The results are primarily due to a $34 million reduction in the value of hedges on storage and
transportation positions, partially offset by a decrease of $22 million in required
lower-of-cost-or-market (LOCOM) inventory adjustments. 

During the fourth quarter of 2012, the wholesale services segment contributed EBIT of $10 million
compared to $14 million for the same period in 2011. Commercial activity increased $19 million
compared to the fourth quarter of 2011 due in part to the absence of the Marcellus constraint
issue that negatively impacted fourth quarter 2011 EBIT. Additionally, the higher commercial
activity was driven by storage withdrawals. Sequent recorded hedge losses of $22 million during
the fourth quarter of 2012 associated with its transportation positions, compared to
transportation hedge gains of $11 million in the fourth quarter of 2011. Sequent recorded storage
hedge gains of $20 million during the fourth quarter of 2012, compared to $30 million in the
fourth quarter of 2011. 

Sequent's storage rollout schedule as of December 31, 2012 is $27 million on 51 billion cubic feet
(Bcf) of natural gas inventory. This compares to $3 million at the same point last year. The
rollout value is expected to be recognized as operating revenues in 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. In addition, Sequent expects $7
million of transportation hedge losses reported in 2012 to roll into 2013.

Midstream Operations

The midstream operations segment, consisting primarily of our natural gas storage facilities,
contributed EBIT of $10 million in 2012 compared to EBIT of $9 million in 2011.

During the fourth quarter of 2012, the midstream operations segment contributed EBIT of $4
million, compared to $3 million for the same period in 2011. 

Cargo Shipping

The cargo shipping segment contributed $8 million of EBIT in 2012 and $9 million during the fourth
quarter compared to an immaterial amount for the 22 days following the close of the merger with
Nicor for the period ending December 31, 2011.

INTEREST EXPENSE AND INCOME TAXES




Interest expense for 2012 was $184 million, an increase of $48 million compared to $136 million in
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. In the fourth quarter of
2012, interest expense was $47 million, an increase of $3 million from the fourth quarter of 2011.

Income tax expense for 2012 was $164 million compared to $125 million in 2011. Income taxes for
the fourth quarter of 2012 were $58 million, an $18 million increase compared to the fourth
quarter of 2011. The increase for both periods was primarily due to higher consolidated earnings
for 2012 relative to the prior year, due to the addition of Nicor's businesses. The income tax
rate was 37.7% for 2012.

2013 EARNINGS OUTLOOK

AGL Resources expects its consolidated 2013 earnings to be in the range of $2.50 to $2.70 per
diluted share. Excluding the wholesale services segment, the company expects diluted EPS to be in
the range of $2.40 to $2.50.

Key assumptions for consolidated EPS guidance include:

*Normal weather
*Exclusion of mark-to-market impacts (applies to the consolidated range)
*Interest expense of $190 million to $194 million
*Pension expense of $56 million to $63 million, net of capitalizations
*Average diluted shares outstanding of 118.5 million
*Effective tax rate of 37.9%
*Continued low volatility in natural gas prices
*Successful implementation of regulatory infrastructure and rate programs
*Approximate quarterly earnings contribution percentages:
 Specific EBIT expectations for each segment are:

*Distribution Operations: $530 million to $550 million
*Retail Operations: $125 million to $135 million 
*Wholesale Services: $25 million to $35 million
*Cargo Shipping: $10 million to $20 million 
*Midstream Operations: $(3) million to $3 million
*Corporate: $(12) million to $(10) million


Unanticipated changes in these events or other circumstances could materially impact earnings, and
could result in earnings for 2013 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 fourth quarter and year-end 2012 results
on February 6, 2013 at 9 a.m. Eastern 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 866.202.4683 if calling from the U.S., or 617.213.8846 if dialing from outside the U.S.
(Passcode: 20801385). 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: 99873302). 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 1.5 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 quote from John W. Somerhalder II, statements regarding when we expect to recover
our transportation hedge losses, when we expect to realize the economic value created by our
storage-related business, our projected storage withdrawal schedule, our segment EBIT expectations
for 2013 and our 2013 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 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. 

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 and
expenses regarding an additional accrual for the Nicor Gas PBR litigation issue. 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. Additionally, the Company has
excluded the additional accrual for the Nicor Gas PBR litigation issue as it was a one-time cost
that is not expected to be recurring. Details related to these adjustments are included in the
management discussion and analysis section of the Annual Report on Form 10-K. Examples of such
expenses related to the merger and integration are: employee severance, relocation, consulting
services, temporary labor and certain travel costs. 

EBIT and adjusted EPS should not be considered as alternatives to, or more meaningful indicators
of, the company's operating performance than net income attributable to AGL Resources Inc. or EPS
as determined in accordance with GAAP. In addition, the company's EBIT 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. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

                                                                                                                                                              Three Months Ended                 Twelve Months Ended        
                                                                                                                                                                 
December 31,                      
December 31,           
 In millions, except per share amounts                                                                                                                    2012     2011   Fav / (Unfav)      2012     2011   Fav / (Unfav)  
 Operating revenues (include revenue taxes of $23, and $86, for the three and twelve months in 2012 and $9, for the three and twelve months in 2011.).  $1,218       $790           $428     $3,922   $2,338         $1,584 
 Operating expenses                                                                                                                                                                                                         
 Cost of goods sold                                                                                                                                     617           396          (221)    1,791      1,097     (694)      
 Operation and maintenance                                                                                                                              246           150      (96)          921         501     (420)      
 Depreciation and amortization                                                                                                                          105            60      (45)          415         186     (229)      
 Nicor merger expenses (1)                                                                                                                              5              45       40            20          57       37       
 Taxes other than income taxes                                                                                                                          42             21      (21)          165          57     (108)      
 Total operating expenses                                                                                                                               1,015         672     (343)         3,312      1,898    (1,414)     
 Operating income                                                                                                                                       203           118       85           610         440      170       
 Other income                                                                                                                                           5               3       2             24           7       17       
 Earnings before interest and taxes                                                                                                                     208           121       87           634         447      187       
 Interest expense, net                                                                                                                                  47             44      (3)           184         136      (48)      
 Earnings before income taxes                                                                                                                           161            77       84           450         311      139       
 Income tax expense                                                                                                                                     58             40      (18)          164         125      (39)      
 Net income                                                                                                                                             103            37       66           286         186      100       
 Less net income attributable to the noncontrolling interest                                                                                            5               4      (1)            15          14      (1)       
 Net income attributable to AGL Resources Inc.                                                                                                            $98         $33      $65             $271     $172            $99 
                                                                                                                                                                                                                            
 Earnings per common share                                                                                                                                                                                                  
 Basic                                                                                                                                                     $0.84    $0.37 $0.47               $2.32    $2.14 $0.18          
 Diluted                                                                                                                                                   $0.84    $0.37 $0.47               $2.31    $2.12 $0.19          
                                                                                                                                                                                                                            
 Weightedaverage shares outstanding                                                                                                                                                                                         
 Basic                                                                                                                                                     117.2     87.8 (29.4)              117.0     80.4 (36.6)         
 Diluted                                                                                                                                                   117.7     88.4 (29.3)              117.5     80.9 (36.6)         
                                                                                                                                                                                                                            


(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-K as filed on February 6, 2013. 



AGL Resources Inc. and Subsidiaries

EBIT Schedule 

(Unaudited)

                                                                    Three Months Ended                 Twelve Months Ended        
                                                                       
December 31,                      
December 31,           
 In millions, except per share amounts                          2012     2011   Fav / (Unfav)      2012     2011   Fav / (Unfav)  
 Distributions operations                                       $158       $127      $31           $532      $ 412      $120      
 Retail operations                                               37          29       8            116          93       23       
 Wholesale services                                              10          14      (4)           (3)           5      (8)       
 Midstream operations                                            4            3       1             10           9       1        
 Cargo shipping                                                  9            -       9             8            -       8        
 Corporate/other                                                (10)       (52)             42     (29)       (72)       43       
 Consolidated EBIT                                              208         121             87     634         447      187       
 Interest expenses, net                                          47          44            (3)     184         136      (48)      
 Income tax expense                                              58          40           (18)     164         125      (39)      
 Net income                                                     103          37             66     286         186      100       
 Less net income attributable to the noncontrolling interest     5            4            (1)      15          14      (1)       
 Net income attributable to AGL Resources Inc.                  $98         $33            $65       $271     $172            $99 
                                                                                                                                  
 Earnings per common share                                                                                                        
 Basic                                                           $0.84    $0.37 $0.47            $2.32       $2.14          $0.18 
 Diluted                                                         $0.84    $0.37 $0.47            $2.31       $2.12          $0.19 


AGL Resources Inc. and Subsidiaries

Reconciliation of Earnings per Share to Adjusted Earnings per Share 

 (Unaudited)

                                                            Three months ended December 31,              Twelve months ended      
                                                                                                            
December  31,        
                                                       2012                            2011            2012               2011    
 Basic  earnings per share - as reported                $0.84                             $   0.37      $2.32            $   2.14 
 Additional accrual for Nicor Gas PBR issue              0.04                                 0.00       0.04                0.00 
 Transaction costs of Nicor merger (per share)           0.03                                 0.57       0.11                0.80 
 Basic earnings per share - as adjusted                 $0.91                          $      0.94      $2.47           $    2.94 
                                                                                                                                  
                                                            Three months ended December 31,              Twelve months ended      
                                                                                                            
December 31,         
                                                           2012                            2011        2012               2011    
 Diluted  earnings per share - as reported                       $0.84                       $0.37      $2.31            $   2.12 
 Additional accrual for Nicor Gas PBR issue                       0.04                        0.00       0.04                0.00 
 Transaction costs of Nicor merger (per share)                    0.03                        0.57       0.11                0.80 
 Diluted earnings per share - as adjusted                        $0.91                    $   0.94      $2.46            $   2.92 


Contacts:
Financial
Sarah Stashak
Director, Investor Relations
Office: 404-584-4577
Cell: 404-433-9248
sstashak@aglresources.com mailto:sstashak@aglresources.com Media
Annette Martinez
Director, External Relations
Office: 630-388-2781 
Cell:     630-918-2321
amartinez@aglresources.com mailto:amartinez@aglresources.com


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