AGL Resources Reports 2007 Earnings Results

    ATLANTA, Feb. 7 /CNW/ -- AGL Resources Inc. (NYSE:   ATG) today reported
fiscal 2007 net income of $211 million, or $2.74 per basic share ($2.72 per
diluted share), compared to $212 million, or $2.73 per basic share ($2.72 per
diluted share) reported for the prior year.
    The $1 million decrease in net income resulted from lower operating
margins in the wholesale services business, driven by lower volatility in the
natural gas market during the year.  These lower results were offset partially
by increased earnings contributions from the distribution operations, retail
energy operations and energy investments segments.  The $0.01 per basic share
improvement in earnings per share (EPS) reflects a reduction in the average
number of shares outstanding as a result of the company's share repurchase
    "Each of our business units performed well throughout the year from an
operations standpoint," said John W. Somerhalder II, AGL Resources' chairman,
president and chief executive officer.  "However, the lack of volatility in
the natural gas market during the year resulted in our wholesale services'
margins being lower than we anticipated.  The lower wholesale results were
substantially offset by strong performances year-over-year in each of our
other three operating segments."
    Distribution Operations
    The distribution operations segment's earnings before interest and taxes
(EBIT) increased $28 million to $338 million in 2007.  The increase reflects a
$13 million increase in operating margin that resulted primarily from the net
addition of 21,000 new customers in 2007, a 0.9 percent growth rate for the
year as compared to 2006.  A $2 million increase in base rates at Chattanooga
Gas and a $2 million increase in Atlanta Gas Light pipeline replacement
revenues also contributed to the increase in operating margin.
    Operating expenses decreased $14 million compared with the prior year.
The primary drivers of the lower operating expenses were decreased incentive
compensation related to earnings results below our expectations; lower health
care and pension expense; lower outside service expense; and a reduction in
customer service expense.  These decreases were offset partially by higher
depreciation expense in 2007 and higher gains on asset sales recorded in 2006
as compared to 2007.
    The distribution operations segment continued to improve its performance
as measured by its key operating metrics.  On an EBIT-per-customer basis, the
segment improved to $149 for 2007, compared with $138 in 2006.  Operation and
maintenance expenses per customer declined to $145 in 2007, as compared to
$156 in 2006.
    Retail Energy Operations
    The retail energy operations segment, consisting of SouthStar Energy
Services, contributed EBIT of $83 million in 2007, compared to $63 million in
2006.  Operating margin increased $32 million, reflecting higher average
customer usage, an increase in the average customer count (approximately 7,000
additional customers or a 1.3 percent increase), higher late payment fees and
additional margin from entry into the Ohio market.  Operating margin also was
positively impacted by the combination of higher retail price spreads and
contributions from the optimization of storage and transportation assets and
commodity risk management activities.  In addition, retail energy operations
was required to record a lower-of-cost-or-market (LOCOM) adjustment of $6
million in 2006 to reduce its weighted average inventory cost to market value.
The segment was not required to record a similar adjustment in 2007, resulting
in an increase in operating margin as compared to the prior year.
    Operating expenses increased $7 million, reflecting higher payroll and
incentive compensation costs, increased customer care and marketing costs and
higher depreciation expense.  The higher expenses were offset partially by
lower bad debt expense in 2007 as compared to the prior year.
    Minority interest increased $7 million as a result of higher operating
income in 2007 as compared with 2006.  Additionally, $2 million of the
segment's year-over-year EBIT increase reflects a charitable contribution made
in 2006.
    Wholesale Services
    The wholesale services segment, consisting primarily of Sequent Energy
Management, contributed $34 million in EBIT in 2007, a $56 million decrease
from its 2006 results.  The decrease primarily reflects a significant
reduction in commercial activity associated with lower volatility in the
natural gas market throughout the year.
    Operating margin decreased $62 million year-over-year from the prior
year's record levels.  The decrease reflects a $36 million reduction in
reported hedge gains and a $46 million reduction in commercial activity due to
milder weather, reduced inventory storage spreads and lower market volatility.
These decreases were offset partially by a $20 million reduction in the
required LOCOM adjustments to natural gas inventories for the year ended
December 31, 2007, net of estimated hedging recoveries in 2007 and 2006.
    Sequent's operating expenses decreased $6 million, primarily the result
of lower incentive compensation costs due to lower earnings results, partially
offset by higher payroll, benefits and other costs associated with continued
expansion of the business.
    Energy Investments
    The energy investments segment's EBIT contribution increased to $15
million in 2007, as compared with $10 million in 2006.  Operating margin
increased $4 million, primarily from higher firm and interruptible revenues at
Jefferson Island Storage & Hub, and a contract for the provision of dark-fiber
services signed by AGL Networks with a major telecommunications carrier.
Operating expenses decreased $1 million, primarily due to lower development
    Interest expense for 2007 was $125 million, $2 million higher than in
2006.  The increase primarily reflects higher short-term interest rates and a
$3 million premium paid for the early redemption of $75 million of notes
payable, which was recorded as interest expense in 2007.  The increase was
offset partially by lower average debt balances, primarily from reduced
commercial paper borrowings for most of 2007.
    Income taxes decreased $2 million in 2007, primarily due to lower
consolidated earnings and a slightly lower effective tax rate.
    For the fourth quarter of 2007, net income was $66 million, or $0.86 per
basic and diluted share, compared with $47 million, or $0.60 per basic and
diluted share during the prior-year period.  The increase was driven by higher
earnings in each operating segment as compared to the prior-year quarter.
    AGL Resources also announced that its board of directors approved an
increase of $0.04 per share, or 2.4 percent, in the annual dividend rate, to
an indicated annual dividend of $1.68 per share.  The new rate is effective
with the dividend payable March 1, 2008 to shareholders of record on February
15, 2008.
    AGL Resources expects its 2008 earnings to be in the range of $2.75 to
$2.85 per share.  This earnings expectation assumes normal weather and average
volatility in natural gas prices.
    AGL Resources will host its year-end 2007 earnings conference call and
webcast on Thursday, February 7, 2008, at 9 a.m. Eastern Time.  The webcast
can be accessed via the Investor Relations section of the AGL Resources Web
site at, or by dialing 866/770-7146 (in the United
States) or 617/213-8068 (outside the United States), and using the
confirmation code 98787042.  The webcast replay of the call will be available
on the Web site through the close of business on Thursday, February 14, 2008.
The telephone replay of the call can be accessed by dialing (888) 286-8010,
using passcode 52816586.  International callers should dial (617) 801-6888 and
use the same passcode.
    About AGL Resources
    AGL Resources (NYSE:   ATG), an Atlanta-based energy services company,
serves more than 2.2 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
    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; 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
or the credit ratings of our counterparties or competitors; 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 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 or 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 under the Investor Relations section.

                                      AGL Resources Inc.
                         Condensed Statements of Consolidated Income
                            For the Three and Twelve Months Ended
                                  December 31, 2007 and 2006
                           (In millions, except per share amounts)

                            Three Months                 Twelve Months
                                           Fav/                          Fav/
                   12/31/2007 12/31/2006 (Unfav) 12/31/2007 12/31/2006 (Unfav)

    Operating Revenues   $685       $707   $(22)     $2,494     $2,621 

    Cost of Gas           382        418     36       1,369      1,482    113

    Operation and
     Expenses             117        132     15         451        473     22

    Depreciation and
     Amortization          36         37      1         144        138     (6)

    Taxes Other
     Than Income           10         10      -          41         40     (1)

    Total Operating
     Expenses             545        597     52       2,005      2,133    128

    Operating Income      140        110     30         489        488      1
    Other Income (Loss)     3          1      2           4         (1)     5

    Minority Interest      (6)        (4)    (2)        (30)       (23)   

    Earnings Before
     Interest & Taxes     137        107     30         463        464     (1)
    Interest Expense       33         32     (1)        125        123     (2)

    Earnings Before
     Income Taxes         104         75     29         338        341     (3)
    Income Taxes           38         28    (10)        127        129      2

    Net Income            $66        $47    $19        $211       $212   

    Earnings Per
     Common Share
          Basic         $0.86      $0.60  $0.26       $2.74      $2.73  $0.01
          Diluted       $0.86      $0.60  $0.26       $2.72      $2.72     $-
    Shares Outstanding
          Basic          76.1       77.4    1.3        77.1       77.6    0.5
          Diluted        76.4       77.7    1.3        77.4       78.0    0.6

                                      AGL Resources Inc.
                                         EBIT Schedule
                             For the Three and Twelve Months Ended
                                  December 31, 2007 and 2006
                            (In millions, except per share amounts)

                            Three Months                 Twelve Months
                                           Fav/                          Fav/
                   12/31/2007 12/31/2006 (Unfav) 12/31/2007 12/31/2006 (Unfav)

     Operations           $96        $78    $18        $338       $310    $28

    Retail Energy
     Operations            16         11      5          83         63     20

    Wholesale Services     18         17      1          34         90   

    Energy Investments      8          3      5          15         10      5

    Corporate              (1)        (2)     1          (7)        (9)     2

    Consolidated EBIT     137        107     30         463        464    

    Interest Expense       33         32     (1)        125        123    

    Income Taxes           38         28    (10)        127        129      2

    Net Income            $66        $47    $19        $211       $212   

    Earnings per
     Common Share
          Basic         $0.86      $0.60  $0.26       $2.74      $2.73  $0.01
          Diluted       $0.86      $0.60  $0.26       $2.72      $2.72     $-

                                    AGL Resources Inc.
                 Reconciliation of Operating Margin to Operating Revenues
                           For the Three and Twelve Months Ended
                                December 31, 2007 and 2006
                                       (In millions)

                            Three Months                 Twelve Months
                                           Fav/                          Fav/
                   12/31/2007 12/31/2006 (Unfav) 12/31/2007 12/31/2006 (Unfav)

    Operating Revenues   $685       $707   $(22)     $2,494     $2,621 

    Cost of Gas           382        418     36       1,369      1,482    113

    Operating Margin     $303       $289    $14      $1,125     $1,139  

For further information:

For further information: Financial, Steve Cave, +1-404-584-3801, 
+1-678-642-4258 (cell),, or Media, Jack Holt, 
+1-404-584-4255, +1-404-217-0284 (cell), Web Site:

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