OREANDA-NEWS. AGL Resources Inc. (NYSE: GAS) today reported first quarter 2016 net income, excluding merger expenses, of $184 million, or $1.53 per diluted share, compared to $193 million, or $1.62 per share, for the same period in 2015. Net income excluding merger expenses and wholesale services was $157 million, or $1.30 per diluted share, compared to $159 million, or $1.34 per share.

"Despite warmer-than-normal weather in the first quarter of this year, performance at each business segment surpassed our expectations driven by our infrastructure investment programs, higher customer usage, lower expenses and an effective weather hedging program," said Andrew W. Evans, AGL Resources' President and Chief Executive Officer. "In addition to solid first quarter business performance, we have made significant progress on our pending merger with Southern Company. We have obtained state regulatory approvals in California, Georgia, Virginia, and Maryland. While we still have pending applications in Illinois and New Jersey, we are pleased with our progress and continue to expect the transaction to close in the second half of 2016."

Earnings per Share (EPS):

    Three Months Ended March 31,
Per share information   2016   2015
Diluted EPS - consolidated   $ 1.51     $ 1.62  
Add: merger expenses   0.02     -  
Diluted EPS - adjusted for merger expenses   1.53     1.62  
Less: wholesale services   0.23     0.28  
Diluted EPS - adjusted for merger expenses and wholesale services   $ 1.30     $ 1.34  

Earnings Before Interest and Taxes (EBIT):

    Three Months Ended March 31,        
In millions   2016   2015   Variance   Contribution
Distribution operations(1)   $ 234     228   6     65%
Retail operations(1)   80     87     (7 )   23%
Wholesale services   44     56     (12 )   12%
Midstream operations   (1 )   (2 )   1     -%
 Other (1)(2)   (6 )   (2 )   (4 )   -%
Total   351     $ 367     (16 )   100%
Total - excluding merger expenses   $ 354     $ 367     (13 )    

  1. Warmer-than-normal weather, net of the impact of weather hedging, impacted results by $(5) million in Q1 2016, compared to a $17 million impact from colder-than-normal weather in Q1 2015.

  2. EBIT for Q1 2016 includes merger expenses of $3 million.

Excluding merger expenses, for the quarter ended March 31, 2016, the primary driver of the $13 million quarter-over-quarter decrease in EBIT was lower commercial activity driven by lower price volatility in the wholesale services segment.

Excluding wholesale services and merger expenses, first quarter 2016 EBIT decreased by $1 million due primarily to the following:

  • Increased operating margin from infrastructure replacement programs of $17 million in the distributions operations segment; and

  • Increased non-weather consumption of $7 million in the distribution operations segment due to higher usage and customer growth; offset by

  • A $22 million negative weather impact, net of the impact of hedges and related costs, in the distribution operations and retail operations segments due to warmer-than-normal weather during 2016, compared to colder-than-normal weather in 2015; and

  • Higher depreciation expense in the distribution operations segment of $6 million due to additional assets placed in service.

INTEREST EXPENSE, INCOME TAXES AND NONCONTROLLING INTEREST

  • Interest expense for the first quarter of 2016 was $47 million, an increase of $3 million compared to the first quarter of 2015, due to interest associated with our senior note issuance in Q4 2015.

  • Income tax expense for the first quarter of 2016 was $111 million, a decrease of $(7) million compared to the first quarter of 2015 due to lower earnings.

  • Net income attributable to noncontrolling interest was $11 million and $12 million for the first quarter of 2016 and 2015, respectively. This reflects the 15% share of earnings attributable to the company's SouthStar Energy Services joint venture partner.

SOUTHERN COMPANY / AGL RESOURCES MERGER UPDATES

The proposed merger is subject to approval by certain regulatory authorities and other customary closing conditions. To date, the proposed merger has been approved by the Maryland Public Service Commission, the Georgia Public Service Commission, the California Public Utilities Commission, the Virginia State Corporation Commission and our shareholders. The company expects the transaction to close in the second half of 2016.

AGL Resources has suspended its earnings conference calls due to the proposed merger and related regulatory filings and approval processes, which are pending in several jurisdictions. A presentation with earnings highlights will be posted in the Investor Relations section of www.aglresources.com.

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 and midstream operations. AGL Resources serves approximately 4.5 million utility customers through its regulated distribution subsidiaries in seven states. The company also serves over one million retail customers through its SouthStar Energy Services joint venture and Pivotal Home Solutions, which market natural gas and related home services. Other non-utility businesses include asset management for natural gas wholesale customers through Sequent Energy Management and ownership and operation of natural gas storage facilities. AGL Resources is a Fortune 500 company and a member of the S&P 500 Index.