AGL Resources Reports Full-Year and Fourth-Quarter 2008 Results



    
    -- 2008 diluted earnings per share (EPS) of $2.84 versus $2.72 in 2007

    -- Fourth-quarter 2008 diluted EPS of $0.97 versus $0.86 for the same
    period in 2007

    -- 2009 earnings guidance established in the range of $2.65 to $2.75 per
    diluted share

    
    ATLANTA, Feb. 5 /CNW/ -- AGL Resources today reported 2008 diluted
earnings per share of $2.84, compared with $2.72 per share for the same period
in 2007.
    2008 results were driven primarily by stronger performance in the
company's wholesale services, energy investments and corporate segments, as
well as lower interest expense relative to the prior year.
    "Our strong performance in 2008 is a direct result of continuing to focus
on the fundamentals of our business," said John W. Somerhalder II, AGL
Resources' chairman, president and chief executive officer.  "We take a
long-term view of managing our business, and despite the near-term challenges
of a receding economy, we are taking steps now to build a stronger foundation
for future growth.  For 2009, we have established what we believe to be
realistic expectations for the year, given the current environment, and our
team is extremely focused on achieving those goals."
    
    2008 RESULTS BY BUSINESS SEGMENT
    Distribution Operations
    
    The distribution operations segment reported 2008 segment EBIT (earnings
before interest and taxes) of $329 million, compared with $338 million in
2007.  Operating margin was down $2 million, primarily due to lower customer
usage, partially offset by higher pipeline replacement revenues at Atlanta Gas
Light and Elizabethtown Gas and customer growth.  On a consolidated basis, the
distribution operations segment had year-over-year customer growth of 0.1
percent in 2008, compared with 0.9 percent growth in 2007.
    Operating expenses increased $8 million, primarily due to increased
incentive compensation costs as well as higher depreciation and bad debt
expense.  These increases were offset partially by lower pension, outside
services and marketing expenses relative to the prior year.
    
    Retail Energy Operations
    
    The retail energy operations segment (SouthStar Energy Services)
contributed EBIT of $57 million in 2008, compared to $83 million in 2007.
Operating margin declined $39 million year-over-year, primarily due to $24
million in lower-of-cost-or-market (LOCOM) natural gas inventory valuation
adjustments recorded in the third and fourth quarters of 2008 to reduce the
weighted average cost of inventory to market value.  These adjustments
resulted from the significant decline in natural gas prices during those two
quarters.  There was no similar adjustment recorded in 2007.  The decrease in
operating margin also reflects a 3 percent decrease in average customer count
and lower contributions during the first quarter of 2008 related to the
management of storage and transportation assets, largely due to rising
commodity prices and reduced opportunities.  These decreases were partially
offset by higher operating margins in Ohio and Florida, an increase in average
customer usage for the year and colder weather in 2008 as compared to last
year.
    Operating expenses for 2008 were down $2 million relative to 2007,
reflecting lower marketing and outside services expenses, partially offset by
higher bad debt expense primarily driven by higher operating revenues.
    Minority interest decreased $10 million as a result of lower operating
income in 2008 as compared to 2007.
    
    Wholesale Services
    
    The wholesale services segment, consisting primarily of Sequent Energy
Management, contributed EBIT of $60 million in 2008, compared with $34 million
in 2007.  Operating margin increased $45 million year-over-year.  The increase
includes a $35 million increase in reported hedge gains for the year, as well
as a $25 million increase in commercial activity.  These increases were
partially offset by a $36 million increase in the required LOCOM natural gas
inventory valuation adjustments for the year, net of $21 million in higher
estimated hedging recoveries during the period.
    Operating expenses increased $19 million in 2008 relative to the prior-
year period.  The increase was driven primarily by increased payroll and
benefits costs associated with growth of the business and higher incentive
compensation expenses associated with the earnings performance.
    
    Energy Investments
    
    The energy investments segment contributed EBIT of $19 million in 2008,
compared to $15 million in 2007.  Operating margin increased $10 million,
primarily due to higher contributions from AGL Networks related to a network
expansion project and higher revenues at Jefferson Island Storage & Hub as a
result of increased interruptible margin opportunities.
    Operating expenses increased $6 million, primarily due to the AGL
Networks' expansion project, increased business development costs and higher
legal and depreciation expenses at Jefferson Island.
    
    INTEREST EXPENSE
    
    Interest expense was $115 million for 2008, compared to $125 million in
2007.  The decrease is primarily due to lower short-term interest rates,
partially offset by higher average debt outstanding.  2007 interest expense
also included a $3 million premium paid for the early redemption of $75
million in junior subordinated debentures.
    
    INCOME TAX EXPENSE
    
    Income tax expense for 2008 was $132 million, compared with $127 million
for 2007.  The increase was primarily due to higher consolidated earnings and
a slightly higher effective tax rate as compared to the prior year.
    
    COMMON SHARES OUTSTANDING
    
    Earnings per share for the year ended Dec. 31, 2008 reflect a 1 percent
decline in weighted average diluted shares outstanding primarily as a result
of the company's share repurchase program.
    
    DIVIDEND INCREASE
    
    AGL Resources also announced that its board of directors approved an
increase of $0.04 per share in the annual dividend rate, to an indicated
annual dividend of $1.72 per share.  The new rate is effective with the
dividend payable March 1, 2009 to shareholders of record at the close of
business on Feb. 13, 2009.  The dividend payment will mark the 245th
consecutive quarterly dividend the company has paid since 1948.
    
    2009 EARNINGS OUTLOOK
    
    AGL Resources expects its fiscal year 2009 earnings results to be in the
range of $2.65 to $2.75 per diluted share.  This expectation assumes normal
weather and no material impact to earnings from the effect of forward natural
gas price movements on storage and transportation hedges in the wholesale
services segment, and no material impact to earnings from the effect of lower-
of-cost-or-market natural gas inventory valuation adjustments in the retail
energy operations and wholesale services segments.
    Changes in these factors, as well as other circumstances or events the
company cannot currently anticipate, could result in earnings for fiscal 2009
that are above or below this outlook. The factors that could cause such
material changes are described more fully in the "Forward Looking Statements"
section of this press release and in the company's SEC filings.
    
    EARNINGS CONFERENCE CALL/WEBCAST
    
    AGL Resources will host its fourth-quarter/year-end 2008 earnings
conference call and webcast on Thursday, Feb. 5, 2009, at 9 a.m. Eastern Time.
The webcast can be accessed via the Investor Relations section of the AGL
Resources Web site at www.aglresources.com, or by dialing 866/730-5767 in the
United States or 857/350-1591 outside the United States. The confirmation code
is 97438877. A replay of the conference call will be available by dialing
888/286-8010 in the United States or 617/801-6888 outside the United States,
with a confirmation code of 64630445. 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:   ATG), an Atlanta-based energy services company,
serves approximately 2.3 million customers in six states. The company also
owns Houston-based Sequent Energy Management, an asset manager serving natural
gas wholesale customers throughout North America. As a 70 percent owner in the
SouthStar partnership, AGL Resources markets natural gas to consumers in
Georgia under the Georgia Natural Gas brand. The company also owns and
operates Jefferson Island Storage & Hub, a high-deliverability natural gas
storage facility near the Henry Hub in Louisiana. For more information, visit
www.aglresources.com.
    
    Forward-Looking Statements
    
    Certain expectations and projections regarding our future performance
referenced in this press release are forward-looking statements. Forward-
looking statements involve matters that are not historical facts and 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," "predict," "project," "seek,"
"should," "target," "will," "would," or similar expressions. Our expectations
are not guarantees and are based on currently available competitive, financial
and economic data along with our operating plans. While we believe our
expectations are reasonable in view of the currently available information,
our expectations are subject to future events, risks and uncertainties, and
there are several factors - many beyond our control - that could cause results
to differ significantly from our expectations.
    Such events, risks and uncertainties include, but are not limited to,
changes in price, supply and demand for natural gas and related products; the
impact of changes in state and federal legislation and regulation, including
any changes related to climate change; actions taken by government agencies on
rates and other matters; concentration of credit risk; utility and energy
industry consolidation; impact of acquisitions and divestitures; direct or
indirect effects on AGL Resources' business, financial condition or liquidity
resulting from a change in our credit ratings, the credit ratings of our
counterparties or competitors or the continued disruption in the credit
markets; interest rate fluctuations; financial market conditions and general
economic conditions; uncertainties about environmental issues and the related
impact of such issues; the impact of changes in weather upon the temperature-
sensitive portions of the business; impacts of natural disasters such as
hurricanes upon the supply and price of natural gas; acts of war or terrorism;
and other factors which are provided in detail in our filings with the
Securities and Exchange Commission, which we incorporate by reference in this
press release. Forward-looking statements are only as of the date they are
made, and we do not undertake to update these statements to reflect subsequent
changes.
    
    Supplemental Information
    
    Company management evaluates segment financial performance based on
earnings before interest and taxes (EBIT), which includes the effects of
corporate expense allocations and on operating margin. EBIT is a non-GAAP
(accounting principles generally accepted in the United States of America)
financial measure. Items that are not included in EBIT are financing costs,
including debt and interest expense and income taxes. The company evaluates
each of these items on a consolidated level and believes EBIT is a useful
measurement of our performance because it provides information that can be
used to evaluate the effectiveness of our businesses from an operational
perspective, exclusive of the costs to finance those activities and exclusive
of income taxes, neither of which is directly relevant to the efficiency of
those operations.
    Operating margin is a non-GAAP measure calculated as operating revenues
minus cost of gas, excluding operation and maintenance expense, depreciation
and amortization, and taxes other than income taxes. These items are included
in the company's calculation of operating income. The company believes
operating margin is a better indicator than operating revenues of the
contribution resulting from customer growth, since cost of gas is generally
passed directly through to customers.
    EBIT and operating margin should not be considered as alternatives to, or
more meaningful indicators of, the company's operating performance than
operating income or net income as determined in accordance with GAAP. In
addition, the company's EBIT and operating margin 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 website at
www.aglresources.com under the Investor Relations section.



    
                                        AGL Resources Inc.
                           Condensed Statements of Consolidated Income
                              For the Three and Twelve Months Ended
                                    December 31, 2008 and 2007
                                            Unaudited
                             (In millions, except per share amounts)
    

    
                            Three Months                 Twelve Months
    

    
                     12/31/    12/31/      Fav/     12/31/   12/31/    Fav/
                      2008      2007     (Unfav)     2008     2007   (Unfav)
    

    
    Operating                              $120
     Revenues          $805      $685              $2,800   $2,494      $306
    

    
    Cost of Gas         461       382       (79)    1,654    1,369      (285)
    

    
    Operation and
     Maintenance
     Expenses           135       117       (18)      472      451       (21)
    

    
    Depreciation and
     Amortization        40        36        (4)      152      144        (8)
    

    
    Taxes Other Than
     Income              11        10        (1)       44       41        (3)
    

    
    Total Operating
     Expenses           647       545      (102)    2,322    2,005      (317)
    

    
    Operating Income    158       140        18       478      489       (11)
    Other Income
     (Loss)               -         3        (3)        6        4         2
    

    
    Minority Interest    (8)       (6)       (2)      (20)     (30)       10
    

    
    Earnings Before
     Interest & Taxes   150       137        13       464      463         1
    Interest Expense     30        33         3       115      125        10
    

    
    Earnings Before
     Income Taxes       120       104        16       349      338        11
    Income Taxes         46        38        (8)      132      127        (5)
    

    
    Net Income          $74       $66        $8      $217     $211        $6
    

    
    Earnings Per
     Common Share
          Basic       $0.97     $0.86     $0.11     $2.85    $2.74     $0.11
          Diluted     $0.97     $0.86     $0.11     $2.84    $2.72     $0.12
    Shares
     Outstanding
          Basic        76.5      76.1      (0.4)     76.3     77.1       0.8
          Diluted      76.7      76.4      (0.3)     76.6     77.4       0.8
    



    
                                        AGL Resources Inc.
                                           EBIT Schedule
                               For the Three and Twelve Months Ended
                                    December 31, 2008 and 2007
                                             Unaudited
                              (In millions, except per share amounts)
    

    
                             Three Months                Twelve Months
    

    
                       12/31/   12/31/    Fav/     12/31/    12/31/    Fav/
                        2008     2007   (Unfav)     2008      2007   (Unfav)
    

    
    Distribution
     Operations          $90      $96       $(6)    $329      $338       $(9)
    Retail Energy
     Operations           22       16         6       57        83       (26)
    Wholesale Services    38       18        20       60        34        26
    Energy Investments     1        8        (7)      19        15         4
    Corporate             (1)      (1)        -       (1)       (7)        6
    Consolidated EBIT    150      137        13      464       463         1
    Interest Expense      30       33         3      115       125        10
    Income Taxes          46       38        (8)     132       127        (5)
    Net Income           $74      $66        $8     $217      $211        $6
    

    
    Earnings per
     Common Share
    Basic              $0.97    $0.86     $0.11    $2.85     $2.74     $0.11
    Diluted            $0.97    $0.86     $0.11    $2.84     $2.72     $0.12
    



    
                                      AGL Resources Inc.
                   Reconciliation of Operating Margin to Operating Revenues
                             For the Three and Twelve Months Ended
                                  December 31, 2008 and 2007
                                           Unaudited
                                         (In millions)
    

    
                          Three Months                  Twelve Months
    

    
                   12/31/     12/31/     Fav/     12/31/    12/31/     Fav/
                    2008       2007    (Unfav)     2008      2007    (Unfav)
    

    
    Operating
     Revenues       $805       $685      $120    $2,800     $2,494      $306
    Cost of Gas      461        382       (79)    1,654      1,369      (285)
    Operating
     Margin         $344       $303       $41    $1,146     $1,125       $21

    




For further information:

For further information: Financial, Steve Cave, +1-404-584-3801, Cell:
+1-678-642-4258, scave@aglresources.com, or Media, Tami Gerke,
+1-404-584-3873, Cell: +1-404-558-2307, tgerke@aglresources.com Web Site:
http://www.aglresources.com

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