UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification Number
- ------------- ----------------------------------- ---------------------
1-14174 AGL RESOURCES INC. 58-2210952
(A Georgia Corporation)
817 West Peachtree Street, N.E.
Suite 1000
Atlanta, Georgia 30308
404-584-9470
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 2001.
Common Stock, $5.00 Par Value
Shares Outstanding at March 31, 2001 .............................. 54,394,101
AGL RESOURCES INC.
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2001
Table of Contents
Item Page
Number Number
------ ------
PART I -- FINANCIAL INFORMATION
1 Financial Statements (Unaudited)
Condensed Statements of Consolidated Income 3
Condensed Consolidated Balance Sheets 4 & 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
2 Management's Discussion and Analysis of Results of 15
Operations and Financial Condition
3 Quantitative and Qualitative Disclosure About Market Risk 30
PART II -- OTHER INFORMATION
1 Legal Proceedings 31
2 Changes in Securities and Use of Proceeds 31
3 Defaults Upon Senior Securities 31
4 Submission of Matters to a Vote of Security Holders 31
5 Other Information 31
6 Exhibits and Reports on Form 8-K 31
SIGNATURE 32
Page 2 of 32
AGL RESOURCES INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED
MARCH 31, 2001 AND 2000
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Six Months
----------------- ----------------
2001 2000 2001 2000
---- ---- ---- ----
Operating Revenues $ 350.6 $ 160.1 $ 645.4 $ 342.4
Cost of Sales 174.4 30.7 305.1 85.3
----------------- ----------------
Operating Margin 176.2 129.4 340.3 257.1
Other Operating Expenses 111.6 91.9 220.4 186.1
----------------- ----------------
Operating Income 64.6 37.5 119.9 71.0
Other Income 42.2 12.4 47.4 19.3
----------------- ----------------
Income Before Interest and Income Taxes 106.8 49.9 167.3 90.3
Interest Expense and Preferred Stock Dividends
Interest expense 23.9 12.4 47.1 24.6
Dividends on preferred stock of subsidiary 1.6 1.6 3.1 3.1
----------------- ----------------
Total Interest Expense and Preferred
Stock Dividends 25.5 14.0 50.2 27.7
----------------- ----------------
Income Before Income Taxes 81.3 35.9 117.1 62.6
Income Taxes 29.0 13.2 42.3 22.8
----------------- ----------------
Net Income $ 52.3 $ 22.7 $ 74.8 $ 39.8
================= ================
Earnings per Common Shares
Basic $ 0.96 $ 0.41 $ 1.38 $ 0.71
Diluted $ 0.96 $ 0.41 $ 1.37 $ 0.71
Weighted Average number of Common
Shares Outstanding
Basic 54.3 55.5 54.2 56.2
Diluted 54.6 55.5 54.5 56.2
Cash Dividends Paid Per Share of
Common Stock $ 0.27 $ 0.27 $ 0.54 $ 0.54
See notes to condensed consolidated financial statements.
Page 3 of 32
AGL RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
March 31, September 30,
ASSETS 2001 2000
- -------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $ 12.2 $ 2.0
Receivables
Gas (less allowance for uncollectible accounts of $3.6
at March 31, 2001 and $3.1 at September 30, 2000) 84.4 29.9
Other (less allowance for uncollectible accounts of $8.5
at March 31, 2001 and $5.2 at September 30, 2000) 7.8 13.4
Unbilled revenues 26.0 1.7
Refundable income taxes - 8.1
Inventories
Natural gas stored underground 49.8 27.7
Liquefied natural gas 4.2 2.1
Materials and supplies 8.6 6.2
Other 1.3 1.2
Other current assets 6.5 7.4
- -------------------------------------------------------------------------------------------------------
Total current assets 200.8 99.7
- -------------------------------------------------------------------------------------------------------
Property, Plant and Equipment
Utility plant 2,940.3 2,371.5
Less accumulated depreciation 975.9 791.8
- -------------------------------------------------------------------------------------------------------
Utility plant - net 1,964.4 1,579.7
- -------------------------------------------------------------------------------------------------------
Non-utility property 91.7 88.2
Less accumulated depreciation 33.1 30.4
- -------------------------------------------------------------------------------------------------------
Non-utility property - net 58.6 57.8
- -------------------------------------------------------------------------------------------------------
Total property, plant and equipment - net 2,023.0 1,637.5
- -------------------------------------------------------------------------------------------------------
Deferred Debits and Other Assets
Unrecovered environmental response costs 201.2 164.6
Investments in joint ventures 107.1 78.8
Goodwill, net of amortization of $1.0 149.3 -
Other 79.8 39.3
- -------------------------------------------------------------------------------------------------------
Total deferred debits and other assets 537.4 282.7
- -------------------------------------------------------------------------------------------------------
Total Assets $ 2,761.2 $ 2,019.9
=======================================================================================================
See notes to condensed consolidated financial statements.
Page 4 of 32
AGL RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
March 31, September 30,
LIABILITIES AND CAPITALIZATION 2001 2000
- ------------------------------------------------------------------------------------------------
Current Liabilities
Short-term debt $ 366.3 $ 141.2
Accounts payable - trade 80.8 34.0
Other accrued liabilities 36.0 20.2
Interest 23.1 21.5
Wages and salaries 21.1 15.3
Deferred customer collections 21.0 -
Current portion of long-term debt - 20.0
Customer deposits 13.9 1.8
Other current liabilities 70.7 30.8
- ------------------------------------------------------------------------------------------------
Total current liabilities 632.9 284.8
- ------------------------------------------------------------------------------------------------
Accumulated Deferred Income Taxes 250.7 249.6
- ------------------------------------------------------------------------------------------------
Long-Term Liabilities
Accrued environmental response costs 144.8 111.7
Accrued postretirement benefits costs 34.1 31.9
Accrued pension costs 11.6 6.7
- ------------------------------------------------------------------------------------------------
Total long-term liabilities 190.5 150.3
- ------------------------------------------------------------------------------------------------
Deferred Credits
Unamortized investment tax credit 22.5 23.2
Regulatory tax liability 18.2 15.5
Other 8.7 11.3
- ------------------------------------------------------------------------------------------------
Total deferred credits 49.4 50.0
- ------------------------------------------------------------------------------------------------
Capitalization
Long-term debt 890.0 590.0
Subsidiary obligated mandatorily redeemable
preferred securities 74.3 74.3
Common stockholders' equity, $5 par value,
shares issued of 57.8 at March 31, 2001
and September 30, 2000 732.9 687.1
Less shares held in treasury, at cost
3.4 at March 31, 2001 and 3.8 at September 30, 2000 (59.5) (66.2)
- ------------------------------------------------------------------------------------------------
Total capitalization 1,637.7 1,285.2
- ------------------------------------------------------------------------------------------------
Total Liabilities and Capitalization $ 2,761.2 $ 2,019.9
================================================================================================
See notes to condensed consolidated financial statements.
Page 5 of 32
AGL RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2001 AND 2000
(IN MILLIONS)
(UNAUDITED)
Six Months
------------------
2001 2000
- -----------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income $ 74.8 $ 39.8
Adjustments to reconcile net income to net cash flow
from operating activities
Depreciation and amortization 51.1 43.1
Deferred income taxes 19.9 19.1
Gain on sale of Utilipro (10.9) -
Other (0.7) (2.6)
- -----------------------------------------------------------------------------------------------
134.2 99.4
Changes in certain assets and liabilities
Receivables (56.9) 5.8
Accounts payable 24.9 (3.9)
Deferred customer collections 21.0 -
Purchased gas adjustments 14.2 5.0
Customer deposits 12.1 (5.4)
Accrued taxes 6.7 (16.1)
Inventories 6.4 38.2
Accrued interest 1.7 (4.6)
Gas cost credits - (35.9)
Other-net (56.2) (10.0)
- -----------------------------------------------------------------------------------------------
Net cash flow provided by operating activities 108.1 72.5
- -----------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Borrowings of long-term debt 300.0 -
Net payments and borrowings of short-term debt 225.1 79.5
Net sale (purchase) of treasury shares 5.5 (51.8)
Payments of long-term debt (20.0) (20.0)
Dividends paid on common stock (26.8) (26.1)
- -----------------------------------------------------------------------------------------------
Net cash flow provided by (used in) financing activities 483.8 (18.4)
- -----------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Acquisition of Virginia Natural Gas, net of cash acquired (539.7) -
Sale of Utilipro, net 17.7 -
Cash received from (provided to) joint ventures 4.2 (9.4)
Utility plant expenditures (65.4) (68.7)
Non-utility expenditures (2.2) (3.0)
Other 3.7 0.6
- -----------------------------------------------------------------------------------------------
Net cash used in investing activities (581.7) (80.5)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 10.2 (26.4)
Cash and cash equivalents at beginning of period 2.0 32.9
- -----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12.2 $ 6.5
===============================================================================================
Cash Paid During the Period for
Interest $ 46.4 $ 29.2
Income taxes $ 7.0 $ 16.6
See notes to condensed consolidated financial statements.
Page 6 of 32
AGL RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Nature of Our Business
AGL Resources Inc. is the registered public utility holding company for:
. Atlanta Gas Light Company ("AGLC"), a natural gas local distribution
utility;
. Virginia Natural Gas, Inc. ("VNG"), a natural gas local distribution
utility;
. Chattanooga Gas Company ("Chattanooga"), a natural gas local
distribution utility;
. AGL Energy Services, Inc. ("AGLE"), a wholesale energy services
company;
. AGL Services Company ("AGLS"), a service company established in
accordance with the Public Utilities Holding Company Act of 1935
("PUHCA");
. AGL Capital Corporation, a financing subsidiary; and
. Several other non-utility subsidiaries.
AGL Resources Inc. and its subsidiaries are collectively referred to as "AGL
Resources."
Effective October 1, 2000, AGL Resources acquired all of the outstanding common
stock of VNG, a wholly owned subsidiary of Consolidated Natural Gas Company and
an indirect subsidiary of Dominion Resources, Inc. for a purchase price of
approximately $540 million.
The acquisition of VNG was accounted for as a purchase for financial accounting
purposes and as a result VNG's operations were consolidated with AGL Resources
beginning October 1, 2000. The excess purchase price over the fair value of the
assets acquired and liabilities assumed was allocated to goodwill, which will be
amortized over 40 years. The allocation of the purchase price and acquisition
costs to the assets acquired and liabilities assumed is preliminary at March 31,
2001, and is subject to change.
With the addition of VNG's customer base of approximately 241,000, AGL Resources
is now the second largest natural gas-only distributor in the United States,
serving more than 1.8 million customers. VNG is headquartered in Norfolk,
Virginia, and serves customers in the Hampton Roads region of southeastern
Virginia.
Effective March 2, 2001, AGL Resources sold substantially all of the assets of
Utilipro, Inc. ("Utilipro") to Alliance Data Systems Corporation for $17.7
million, resulting in a pre-tax gain of $10.9 million. AGL Resources recorded
the gain related to the sale of Utilipro as Other Income.
In the opinion of management, the unaudited condensed consolidated financial
statements included herein reflect all normal recurring adjustments necessary
for a fair statement of the results of the interim periods reflected. These
interim financial statements and notes are condensed as permitted by the
instructions to Form 10-Q, and should be read in conjunction with the financial
statements and the notes included in the annual report on Form 10-K of AGL
Resources for the fiscal year ended September 30, 2000. As a result of the
seasonal nature of a portion of AGL Resources' businesses, the results of
operations for the three month period are not necessarily indicative of results
of operations for a twelve month period.
Page 7 of 32
1. Nature of Our Business (continued)
Management makes estimates and assumptions when preparing financial statements
under accounting principles generally accepted in the United States of America.
Those estimates and assumptions affect various matters, including:
. Reported amounts of assets and liabilities in our Condensed
Consolidated Balance Sheets as of the dates of the financial statements;
. Disclosure of contingent assets and liabilities as of the dates of the
financial statements; and
. Reported amounts of revenues and expenses in our Condensed Statements of
Consolidated Income during the reported periods.
Those estimates involve judgments with respect to, among other things, future
economic factors that are difficult to predict and are beyond management's
control. Consequently, actual amounts could differ from our estimates.
Certain amounts in financial statements of prior years have been reclassified to
conform to the presentation of the current year.
2. Significant Accounting Policies
For a summary of AGL Resources' accounting policies, please refer to AGL
Resources' Annual Report on Form 10-K for the year ended September 30, 2000.
Rate Structure
As required by the Georgia Public Service Commission ("GPSC"), in July 1998 AGLC
began billing marketers for each residential customer's distribution costs in
equal monthly installments. As required by the GPSC, effective February 1, 2001,
AGLC implemented a seasonal rate design for the calculation of each residential
customer's annual Straight Fixed Variable ("SFV") capacity charge, which is
billed to certificated marketers and reflects the historic volumetric usage
pattern for the entire residential class. Generally, this change should result
in residential customers being billed by the certificated marketers for a higher
capacity charge in the winter months and a lower charge in the summer months.
This requirement has an operating cashflow impact, but does not change AGLC's
revenue recognition. As a result, AGLC continues to recognize its residential
SFV capacity revenues for financial reporting purposes in equal monthly
installments. Any difference between the billings under the new seasonal rate
design and the SFV revenue recognized is deferred and will be reconciled on an
annual basis. As of March 31, 2001, AGLC had deferred customer collections of
approximately $21.0 million (included as a current asset or current liability in
the Condensed Consolidated Balance Sheets and excluded from the Condensed
Statements of Consolidated Income) related to the difference between the
billings under the new seasonal rate design and the SFV revenue recognized.
VNG and Chattanooga continue to employ a rate structure that includes a
volumetric rate design that allows recovery of costs through gas usage.
Additional significant accounting policies effective October 1, 2000 as a result
of the acquisition of VNG include:
Regulation of the Utility Business
The Virginia State Corporation Commission ("VSCC") regulates VNG with respect to
the rates, maintenance of accounting records and various other matters.
Consistent with AGLC and Chattanooga, generally the same accounting policies and
practices utilized by non-regulated companies are utilized by VNG for financial
reporting under accounting principles generally accepted in the United States of
America. However, sometimes the VSCC orders an accounting treatment different
from that used by non-regulated companies to determine rates charged to the
VNG's customers. Additionally, at the consummation of the VNG acquisition, AGL
Resources registered with the Securities and Exchange Commission as a holding
company under the Public Utility Holding Company Act of 1935, as amended.
Page 8 of 32
2. Significant Accounting Policies (continued)
Revenue Recognition
Revenues from sales and transportation services are recognized in the same
period in which the related volumes are delivered to customers. Revenues from
VNG's business are based on rates approved by the VSCC. The Company bills and
recognizes sales revenues from residential and certain commercial and industrial
customers on the basis of scheduled meter readings. In addition, revenues are
recorded for estimated deliveries of gas, not yet billed to these customers,
from the meter reading date to the end of the accounting period. For wholesale
and other commercial and industrial customers, revenues are based upon actual
deliveries to the end of the period.
Cost of Sales
VNG charges its customers for the natural gas they consume using purchased gas
adjustment ("PGA") mechanisms set by the VSCC. Under the PGA, VNG defers
(included as a current asset or current liability in the Condensed Consolidated
Balance Sheets and excluded from the Condensed Statements of Consolidated
Income) the difference between the utility's actual cost of gas and what it
collected from customers in a given period. Then, VNG either bills or refunds to
its customers the deferred amount.
Depreciation Expense
Depreciation for VNG is computed by applying composite, straight-line rates
approved by the VSCC to the investment of depreciable property. The composite
straight-line depreciation rate was approximately 2.9% for utility property
excluding transportation equipment as of March 31, 2001.
Allowance for Funds Used During Construction ("AFUDC")
Construction projects in Virginia are financed with borrowed funds and equity
funds. The VSCC allows VNG to record the cost of those funds as part of the cost
of construction projects on AGL Resources' Consolidated Balance Sheets and as
AFUDC in the Statements of Consolidated Income. AFUDC for VNG is calculated
based upon a rate authorized by the VSCC.
Inventory
VNG's gas inventories are stated at the weighted average costing method.
Materials and supplies inventories are stated at lower of average cost or
market.
Chattanooga changed its costing method for its gas inventories from last-in,
first-out to weighted average cost effective October 1, 2000. In management's
opinion, the weighted average inventory costing method provides for a better
matching of costs and revenue from the sale of gas and is more consistent with
AGLC and VNG. Because Chattanooga recovers all of its gas costs through a PGA
mechanism, there was not a cumulative effect resulting from the change in the
inventory costing method.
Page 9 of 32
3. Earnings Per Common Share and Common Stockholders' Equity
Basic earnings per common share are computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per common share reflect the potential dilution
that could occur when common share equivalents are added to common shares
outstanding. Diluted earnings per common share are calculated quarterly and the
number of incremental shares to be included at year-end is the weighted average
of each quarterly calculation. AGL Resources' common share equivalents are
derived from performance units whose future issuance is contingent upon the
satisfaction of certain performance criteria and stock options whose exercise
prices were less than the average market price of the common shares for the
respective periods. Performance units totaling 10,488 and 27,046 qualified as
common stock equivalents as of March 31, 2001 and 2000, respectively. Included
in the weighted average number of common shares outstanding are 336,224 and
20,528 incremental shares that qualified as common stock equivalents for the
three month periods ended March 31, 2001 and 2000, respectively, because the
exercise prices of those options were less than the average market price of the
common shares for the respective periods.
During the three month periods ended March 31, 2001 and 2000, AGL Resources
issued 186,045 shares and 149,449 shares of common stock out of treasury,
respectively, under ResourcesDirect, a direct stock purchase and dividend
reinvestment plan; the Retirement Savings Plus Plan ("RSP Plan"); the Long-Term
Stock Incentive Plan ("LTSIP"), the Long-Term Incentive Plan ("LTIP"); and the
Non-Employee Directors Equity Compensation Plan ("Directors Plan"). During the
six month periods ended March 2001 and 2000, AGL Resources issued 381,809 shares
and 307,925 shares of common stock out of treasury, respectively, under
ResourcesDirect; the RSP Plan; the LTSIP, the LTIP; and the Directors Plan.
4. Accounting for Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133, as
amended by SFAS 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities" establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. AGL Resources adopted SFAS 133 on
October 1, 2000. For the three month and six month periods ended March 31, 2001
AGL Resources' recorded losses of approximately $.8 million and $1.2 million,
respectively, related to the effect from the application of SFAS 133.
(The remainder of this page was intentionally left blank.)
Page 10 of 32
5. Environmental Matters
Before natural gas was widely available in the Southeast, AGLC manufactured gas
from coal and other fuels. Those manufacturing operations were known as
manufactured gas plants ("MGP"), which AGLC ceased operating in the 1950s.
Because of recent environmental concerns, AGLC is required to investigate
possible environmental contamination at those plants and, if necessary, clean up
any contamination.
AGLC has been associated with nine MGP sites in Georgia and three in Florida.
Based on investigations to date, AGLC believes that some cleanup is likely at
most of the sites. In Georgia, the state Environmental Protection Division
("EPD") supervises the investigation and cleanup of MGP sites. In Florida, the
U.S. Environmental Protection Agency has that responsibility.
By March 31, 2001, AGLC had obtained approval from EPD of Corrective Action
Plans for the nine Georgia MGP sites. In addition, the Company recently entered
into a Consent Order for cleanup of the MGP site in St. Augustine, Florida, and
received a Record of Decision for one portion of the MGP site in Sanford,
Florida. As these cleanup options and plans continue to develop, AGLC will be
able to prepare better estimates of the range of costs associated with each
site. As actual cleanup contracts are entered into, the Company should be able
to provide a more specific estimate of the likely costs of its MGP program.
Although the range of costs for each site has been refined as a result of
greater certainty in the cleanup alternatives, at this time there still remains
considerable variability in available cost estimates. In addition, the nature of
the predicted cleanups has caused an increase of $33.1 million in the lower end
of the range of possible future costs for the MGP program. By estimating, where
possible, AGLC's share of investigation and cleanup costs at these sites, AGLC
estimates that the remaining cost of future actions at its MGP sites will be
within a range of $144.8 to $186.6 million. AGLC cannot at this time identify
any single number within this range as a better estimate of its likely future
costs, because its actual future investigation and cleanup costs may still be
affected by a number of contingencies that cannot be quantified at this time.
Consequently, as of March 31, 2001, AGLC has recorded the lower end of the
range, or $144.8 million, as a liability and a corresponding regulatory asset.
AGLC has two ways of recovering investigation and cleanup costs. First, the
Georgia Public Service Commission ("GPSC") has approved an environmental
response cost recovery rider. This rider allows the recovery of costs of
investigation, testing, cleanup, and litigation. Because of that rider, AGLC has
recorded a regulatory asset for actual and projected future costs related to
investigation and cleanup, to be recovered from the rate payers in future years.
During the three month and six month periods ended March 31, 2001, AGLC
recovered $3.4 million and $6.7 million, respectively, through its environmental
response cost recovery rider. The regulatory asset and corresponding liability,
each increased by $33.1 million due to the increase in estimated costs.
The second way AGLC can recover costs is by exercising the legal rights AGLC
believes it has to recover a share of its costs from other potentially
responsible parties, typically former owners or operators of the MGP sites. AGLC
has been actively pursuing those recoveries. There were no material recoveries
during the three month and six month periods ended March 31, 2001.
(The remainder of this page was intentionally left blank.)
Page 11 of 32
6. Segment Information
AGL Resources is organized into two operating segments: Utility and Non-utility.
Management evaluates segment performance based on net income, which includes the
effects of corporate expense allocations. There were no material inter-segment
sales during the three month and six month periods ended March 31, 2001 or 2000.
Three Months Ended March 31, 2001 March 31, 2000
- ------------------ ------------------------------------ ------------------------------------
(Millions of Dollars) Utility Non-utility Total Utility Non-utility Total
----------- ----------- --------- ----------- ----------- ---------
Operating Revenues $346.6 $ 4.0 $350.6 $145.8 $14.3 $160.1
Depreciation and
Amortization 21.7 2.7 24.4 18.6 2.9 21.5
Interest Expense 10.0 13.9 23.9 11.0 1.4 12.4
Interest Income 0.1 0.1 0.2 0.1 - 0.1
Equity in the Net Income of
Joint Ventures - 31.1 31.1 - 10.4 10.4
Income Tax Expense 22.7 6.3 29.0 9.3 3.9 13.2
Net Income 39.7 12.6 52.3 16.3 6.4 22.7
Capital Expenditures 31.7 1.3 33.0 35.0 1.4 36.4
Six Months Ended March 31, 2001 March 31, 2000
- ---------------- ------------------------------------ ------------------------------------
(Millions of Dollars) Utility Non-utility Total Utility Non-utility Total
----------- ----------- --------- ----------- ----------- ---------
Operating Revenues $637.3 $ 8.1 $645.4 $317.1 $25.3 $342.4
Depreciation and
Amortization 45.2 5.3 50.5 35.9 6.3 42.2
Interest Expense 21.2 25.9 47.1 22.9 1.7 24.6
Interest Income 0.3 0.1 0.4 0.2 0.2 0.4
Equity in the Net Income of
Joint Ventures - 35.8 35.8 - 15.2 15.2
Income Tax Expense 41.9 0.4 42.3 19.3 3.5 22.8
Net Income 71.5 3.3 74.8 33.9 5.9 39.8
Capital Expenditures 65.4 2.2 67.6 68.7 3.0 71.7
Balance as of March 31, 2001 March 31, 2000
- ------------- ------------------------------------ ------------------------------------
(Millions of Dollars) Utility Non-utility Total Utility Non-utility Total
----------- ----------- --------- ----------- ----------- ---------
Identifiable Assets $2,542.9 $ 78.1 $2,621.0 $1,866.3 $74.8 $1,941.1
Investments in Joint Ventures - 107.1 107.1 0.4 78.4 78.8
Page 12 of 32
7. Debt
In connection with the acquisition of VNG, AGL Resources established a $900
million commercial paper program through AGL Capital Corporation; a 100% owned
financing subsidiary. AGL Resources' commercial paper consists of short-term
unsecured promissory notes with maturities ranging from overnight to 270 days.
AGL Resources' commercial paper program is fully supported by bank back-up
credit lines. On October 6, 2000, AGL Resources issued $660 million in
commercial paper, the proceeds of which were used to finance the VNG acquisition
and to refinance existing short-term debt. As of March 31, 2001, $533.7 million
remained available for borrowing under the commercial paper program. The
weighted average interest rate on short-term debt outstanding was 6.3% and 6.5%
for the three month and six month periods ended March 31, 2001, respectively.
On October 6, 2000, AGL Resources Inc., and AGL Capital Corporation entered into
a Credit Agreement with several lenders ("Lenders") for whom SunTrust Bank
("SunTrust") is acting as Administrative Agent. Pursuant to the Credit
Agreement, the Lenders agree to make available to AGL Capital Corporation, upon
demand, up to $900 million (the "Revolving Commitment"). This Credit Agreement
has been entered into in support of AGL Resources' commercial paper program. The
Revolving Commitment may be borrowed, repaid and reborrowed in the form of
Eurodollar loans, adjustable rate loans (based on SunTrust's Prime Rate, or
based on the Federal Funds Effective Rate plus 1%), letters of credit (up to $50
million), or, in certain circumstances, fixed rate loans for a defined period
agreed upon by AGL Capital Corporation and the Lenders. The Revolving Commitment
expires on October 5, 2001 (the "Revolving Termination Date"). Loans outstanding
on the Revolving Termination Date, up to a maximum aggregate principal amount of
$200 million, may be converted into Term Loans. All Term Loans will mature in
one installment on the date that is one year from the Revolving Termination
Date. Currently, there are no outstanding loans under the Credit Agreement.
Management believes available credit will be sufficient to meet working capital
needs both on a short-term and long-term basis. However, capital needs depend on
many factors, and AGL Resources may seek additional financing through debt or
equity offerings in the private or public markets at any time.
On February 23, 2001, AGL Capital Corporation, as Issuer, AGL Resources Inc., as
Guarantor, and the Bank of New York, as Trustee, issued $300 million of senior
notes ("Senior Notes") under an indenture dated February 20, 2001. The Senior
Notes bear interest at an annual rate of 7.125%. Interest is payable on January
14 and July 14, beginning July 14, 2001 with interest accruing from March 1,
2001. The Senior Notes mature on January 14, 2011. AGL Resources fully and
unconditionally guarantees the Senior Notes. The proceeds from the issuance
were used to refinance a portion of the existing short-term debt under the
commercial paper program. Management expects to obtain additional long-term
financing in fiscal 2001 to further replace portions of the outstanding
commercial paper.
Page 13 of 32
8. Pro Forma Data
The following unaudited pro forma financial data has been prepared as if the
acquisition of VNG took place on October 1, 1999, the beginning of AGL
Resources' fiscal year. This pro forma financial data is presented for
informational purposes and is not necessarily indicative of future operations
(in millions, except per share data).
Three Months Ended Six Months Ended
March 31, 2000 March 31, 2000
-------------- --------------
Revenue $ 254.3 $ 498.8
Net Income $ 29.6 $ 44.5
Earnings per Common Share - Basic $ 0.53 $ 0.79
Earnings per Common Share - Diluted $ 0.53 $ 0.79
9. Supplemental Cash Flow Information
The following is the sources and uses of cash associated with the acquisition of
VNG (in millions):
Sources of Funds received for the acquisition:
Issuance of commercial paper $539.7
======
Uses of Funds for the acquisition:
The acquisition, net of cash acquired $532.2
Transaction fees and expenses 7.5
------
Total $539.7
======
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Page 14 of 32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 allows public companies to
provide cautionary remarks about forward-looking statements that they make in
documents that are filed with the Securities and Exchange Commission ("SEC").
Forward-looking statements in our Management's Discussion and Analysis include,
but are not limited to, statements about the following:
. Deregulation;
. State and Federal regulation;
. Business prospects;
. Industry trends;
. Concentration of credit risk;
. Environmental investigations and cleanups;
. Quantitative and qualitative disclosures about market risk;
. Virginia Natural Gas acquisition;
. Propane operations; and
. Changes required by the Public Utility Holding Company Act of 1935
("PUHCA").
Important factors that could cause our actual results to differ substantially
from those in the forward-looking statements include, but are not limited to,
the following:
. Industrial, commercial, and residential growth in the service
territories of AGL Resources and its subsidiaries;
. Changes in price and demand for natural gas and related products;
. Impact of changes in state and federal legislation and regulation on
both the gas and electric industries;
. 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;
. Concentration of credit risk in certificated marketers;
. Industry consolidation;
. Impact of acquisitions and divestitures;
. Changes in accounting policies and practices issued periodically by
accounting standard-setting bodies;
. Interest rate fluctuations, financial market conditions, and economic
conditions, generally;
. Uncertainties about environmental issues and the related impact of
such issues;
. Impact of changes in weather upon the temperature sensitive portions
of the business; and
. Other factors and the related impact of such factors.
Nature of Our Business
AGL Resources Inc. is the registered public utility holding company for:
. Atlanta Gas Light Company ("AGLC"), a natural gas local distribution
utility;
. Virginia Natural Gas, Inc. ("VNG"), a natural gas local distribution
utility;
. Chattanooga Gas Company ("Chattanooga"), a natural gas local
distribution utility;
. AGL Energy Services, Inc. ("AGLE"), a wholesale energy services
company;
. AGL Services Company ("AGLS"), a service company established in
accordance with PUHCA;
. AGL Capital Corporation, a financing subsidiary; and
. Several other non-utility subsidiaries.
AGL Resources and its subsidiaries are collectively referred to as "AGL
Resources."
Page 15 of 32
Nature of Our Business (continued)
AGLC conducts its primary business, the distribution of natural gas, in Georgia
including Atlanta, Athens, Augusta, Brunswick, Macon, Rome, Savannah, and
Valdosta. Chattanooga distributes natural gas in the Chattanooga and Cleveland
areas of Tennessee. VNG distributes natural gas in the Hampton Roads region of
Virginia. The Georgia Public Service Commission ("GPSC") regulates AGLC; the
Tennessee Regulatory Authority ("TRA") regulates Chattanooga and the Virginia
State Corporation Commission ("VSCC") regulates VNG. AGLE provides wholesale
energy services for AGL Resources' regulated and unregulated operations, as well
as for unaffiliated retail gas marketers.
As of March 31, 2001, AGLC, VNG, and Chattanooga comprised substantially all of
AGL Resources' assets, revenues, and operating income. The operations and
activities of AGLC, VNG, Chattanooga, and AGLE, collectively, are referred to as
the "utility." The utility's total other operating expenses include costs
allocated from AGLS.
As of March 31, 2001, AGL Resources owned or had an interest in the following
non-utility businesses:
. SouthStar Energy Services LLC ("SouthStar"), a joint venture among a
subsidiary of AGL Resources and subsidiaries of Dynegy Holdings, Inc.
and Piedmont Natural Gas Company. SouthStar markets natural gas and
related services to residential and small commercial customers in
Georgia and to industrial customers in the Southeast. SouthStar began
marketing natural gas to customers in Georgia during the first quarter
of fiscal 1999 under the trade name Georgia Natural Gas Services;
. AGL Investments, Inc., which directly or indirectly owns or manages
certain non-utility businesses including:
. AGL Propane Services, Inc. ("Propane") has a 22.36% ownership
interest in US Propane LLC ("US Propane"). US Propane owns 34% of
Heritage Propane Partners ("Heritage Propane") which engages in
the sale of propane and related products and services in 28
states; and
. AGL Networks, LLC ("AGL Networks"), which will install, and lease
to third-party operators, conduit and fiber optic cable. AGL
Networks was formed on August 15, 2000 for the purpose of
partnering with other telecommunications companies to serve
Atlanta's rapidly growing demand for high-speed network capacity.
On April 17, 2001, the GPSC voted unanimously to grant AGL
Networks' Competitive Local Exchange Carrier License, which
grants AGL Networks the rights to construct the last mile
connectivity and provide dark fiber network services in the State
of Georgia.
. AGL Peaking Services, Inc., which owns a 50% interest in Etowah LNG
Company, LLC ("Etowah"), a joint venture with Southern Natural Gas
Company. Etowah was formed for the purpose of constructing, owning,
and operating a liquefied natural gas peaking facility; and
. AGL Capital Corporation, which was established to finance the
acquisition of VNG, refinance existing short-term debt and provide
working capital to AGL Resources and its subsidiaries through a
commercial paper program, issuance of Senior Notes and other financing
mechanisms.
Effective March 2, 2001, AGL Resources sold substantially all of the assets of
Utilipro, Inc. ("Utilipro") to Alliance Data Systems Corporation for $17.7
million, resulting in a pre-tax gain of $10.9 million. AGL Resources recorded
the gain related to the sale of Utilipro as Other Income.
Page 16 of 32
Results of Operations
Three month Periods Ended March 31, 2001 and 2000
- -------------------------------------------------
In this section, the results of operations for the three month periods ended
March 31, 2001 and 2000 are compared.
Operating Margin Analysis
- -------------------------
(Dollars in Millions)
Three Months Ended
---------------------------------
March 31, 2001 March 31, 2000 Favorable/(Unfavorable)
-------------- -------------- -----------------------
Operating Revenues
Utility $346.6 $145.8 $200.8 137.7 %
Non-utility 4.0 14.3 (10.3) (72.0)%
--------------- ---------------- ----------
Total $350.6 $160.1 $190.5 119.0 %
=============== ================ ==========
Cost of Sales
Utility $174.2 $25.0 $(149.2) (596.8)%
Non-utility 0.2 5.7 5.5 96.5 %
--------------- ---------------- ----------
Total $174.4 $30.7 $(143.7) (468.1)%
=============== ================ ==========
Operating Margin
Utility $172.4 $120.8 $51.6 42.7 %
Non-utility 3.8 8.6 (4.8) (55.8)%
--------------- ---------------- ----------
Total $176.2 $129.4 $46.8 36.2 %
=============== ================ ==========
Utility. Utility operating revenues increased $200.8 million and cost of sales
increased $149.2 million primarily due to the following factors:
. Total average customers for the three month period ended March 31,
2001 as compared to the same period last year increased from 1,531,000
customers to 1,807,000. The increase is attributable to the addition
of approximately 241,000 customers as a result of the VNG acquisition
and customer growth in Georgia and Tennessee of approximately 34,000
customers;
. Operating revenue of $139.9 million contributed by VNG and cost of
sales of $96.8 million incurred by VNG as a result of closing the VNG
acquisition ahead of schedule effective October 1, 2000 in order to
take advantage of the winter-heating season. There were 1,929 degree
days incurred by VNG during the three month period ended March 31,
2001 as compared to the 30-year normal degree days for the three month
period ended March 31, 2001 of 1,876;
. Chattanooga's operating revenues increased $17.4 million and cost of
sales increased $17.9 million as a result of 1,818 degree days as
compared to 1,462 degree days during the same period last year and
higher natural gas commodity costs during the three month period ended
March 31, 2001;
. AGLE's operating revenues increased $33.2 million and cost of sales
increased $25.6 million as a result of wholesale energy services sales
activity during the three month period ended March 31, 2001; and
. AGLC's operating revenues increased $10.4 million and cost of sales
increased $8.7 million as a result of an increase in marketer demand
above expectation due to increased customer demand and increased
customer growth during the three month period ended March 31, 2001 as
compared to the same period last year.
Page 17 of 32
Results of Operations (continued)
The utility operating margin increased to $172.4 million for the three months
ended March 31, 2001 from $120.8 million for the same period last year. The
increase of $51.6 million was a result of the addition of VNG, wholesale energy
services sales activity, colder weather and customer growth, as noted above.
Non-utility. Non-utility operating revenues decreased to $4.0 million for the
three months ended March 31, 2001 from $14.3 million for the same period last
year. Non-utility cost of sales decreased to $.2 million for the three months
ended March 31, 2001 from $5.7 million for the same period last year. The
decrease of $10.3 million in operating revenues and $5.5 in cost of sales was
primarily due to the change in reporting for AGL Propane as a result of the
transaction with Heritage Partners in August, 2000. As a joint venture, Propane
is accounted for under the equity method and its financial results are now
reported in other income rather than operating revenues and cost of sales. Non-
utility operating margin decreased to $3.8 million for the three months ended
March 31, 2001 from $8.6 million for the same period last year. The decrease of
$4.8 million was the result of the factors noted above.
Total Other Operating Expenses Analysis
- ---------------------------------------
(Dollars in Millions)
Six Months Ended
----------------------------------
March 31, 2001 March 31, 2000 Favorable/(Unfavorable)
--------------- -------------- -----------------------
Total Other Operating Expenses
Utility $100.1 $85.2 $(14.9) (17.5)%
Non-utility 11.5 6.7 (4.8) (71.6)%
--------------- -------------- ---------
Total $111.6 $91.9 $(19.7) (21.4)%
=============== ============== =========
Total Other Operating Expenses
- ------------------------------
Total other operating expenses increased to $111.6 million for the three months
ended March 31, 2001 from $91.9 million for the same period last year, an
increase of 21.4%.
Utility. Utility total other operating expenses increased $14.9 million as
compared with the same period last year primarily due to expenses related to VNG
not incurred in the three months ended March 31, 2000. The increase in expenses
from VNG were offset by lower labor costs, continued implementation of cost
controls, continued work management process improvements, and other savings as a
result of AGL Resources' operational excellence initiatives. The variances were
primarily reflected in the following areas:
. An increase of $9.9 million in operating and maintenance expenses
related to VNG;
. An increase of $3.4 million in depreciation and amortization expense
related to VNG;
. An increase of $1.2 million in taxes other than income related to VNG;
. An increase of $1.3 million in operating and maintenance expense related
to increased activity in AGLE's wholesale energy business;
. These increases were offset by a decrease of $4.1 million in payroll and
benefit related expenses as a result of reduced staffing levels at AGLC.
Page 18 of 32
Results of Operations (continued)
Non-utility. Non-utility total other operating expenses decreased $4.8 million
as compared with the same period last year primarily due the following:
. A decrease of $3.0 million in total other operating expenses related to
the Propane joint venture which is now accounted for under the equity
method of accounting as compared to the consolidation method of
accounting;
. A decrease of $2.1 million in operating expenses related to Utilipro's
payroll and outside service expenses as a result reduced staffing levels
related to the Utilipro sale transaction;
. These decreases were offset by a $1.1 million increase in unaffiliated
marketer related reserves.
Other Income
- ------------
Other income totaled $42.2 million for the three months ended March 31, 2001,
compared with other income of $12.4 million for the same period last year. The
increase in other income of $29.8 million is primarily due to the following:
. An increase of $15.7 million related to SouthStar primarily as a result
of weather in the Georgia service area being approximately 18% colder
and an increase in the number of customers served than the same period
last year;
. An increase of $10.9 million as a result of the gain on sale related to
the Utilipro sales transaction; and
. An increase of $.8 million related to the Propane joint venture that is
now accounted for under the equity method of accounting as compared to
the consolidation method of accounting.
Interest Expense
- ----------------
Interest expense increased to $23.9 million for the three months ended March 31,
2001 from $12.4 million for the same period last year. The increase of $11.5
million was primarily a result of increased amounts of debt outstanding during
the period related to the issuance of the Senior Notes and the commercial paper
program that was used primarily to finance the acquisition of VNG.
Income Taxes
- ------------
Income tax expense increased to $29.0 million for the three months ended March
31, 2001 from $13.2 million for the same period last year. The increase in
income taxes of $15.8 million was due primarily to an increase in income before
income taxes of $45.4 million compared to the same period last year. The
effective tax rate (income tax expense expressed as a percentage of pretax
income) for the three months ended March 31, 2001 was 35.7% as compared to 36.8%
for the same period last year.
Net Income
- ----------
For the three month period ended March 31, 2001, net income was $52.3 million or
$.96 per basic and diluted share. For the three month period ended March 31,
2000, net income was $22.7 million or $.41 per basic and diluted share. The
increase in net income of $29.6 million is a result of the accelerated
integration of VNG, continued customer growth, improved performance by the
wholesale energy services business, colder weather, lower labor costs, continued
implementation of cost controls, continued work management process improvements
and other savings as a result of AGL Resources' operational excellence
initiatives.
Core Earnings
- -------------
For the three month period ended March 31, 2001, core earnings (net income
excluding one-time items), excluding the gain on sale related to the Utilipro
transaction, were $45.2 million or $.83 per basic and diluted share. For the
three month period ended March 31, 2000, core earnings were $22.7 million or
$.41 per basic and diluted share. During the three month period ended March 31,
2000 there were no one-time items recorded. The increase in core earnings of
$22.5 million is a result of the accelerated integration of VNG, continued
customer growth, improved performance by the wholesale energy services business,
colder weather, lower labor costs, continued implementation of cost controls,
continued work management process improvements and other savings as a result of
AGL Resources' operational excellence initiatives.
Page 19 of 32
Six month Periods Ended March 31, 2001 and 2000
- -----------------------------------------------
In this section, the results of operations for the six month periods ended March
31, 2001 and 2000 are compared.
Operating Margin Analysis
- -------------------------
(Dollars in Millions)
Six Months Ended
----------------------------------
March 31, 2001 March 31, 2000 Favorable/(Unfavorable)
--------------- -------------- -----------------------
Operating Revenues
Utility $637.3 $317.1 $320.2 101.0 %
Non-utility 8.1 25.3 (17.2) (68.0)%
--------------- -------------- ---------
Total $645.4 $342.4 $303.0 88.5 %
=============== ============== =========
Cost of Sales
Utility $305.0 $76.8 $(228.2) (297.1)%
Non-utility 0.1 8.5 8.4 98.8 %
--------------- -------------- ---------
Total $305.1 $85.3 $(219.8) (257.7)%
=============== ============== =========
Operating Margin
Utility $332.3 $240.3 $ 92.0 38.3 %
Non-utility 8.0 16.8 (8.8) (52.4)%
--------------- -------------- ---------
Total $340.3 $257.1 $ 83.2 32.4 %
=============== ============== =========
Utility. Utility operating revenues increased $320.2 million and cost of sales
increased $228.2 million primarily due to the following factors:
. Total average customers for the six month period ended March 31, 2001 as
compared to the same period last year increased from 1,514,000 customers
to 1,791,000. The increase is attributable to the addition of
approximately 239,000 customers as a result of the VNG acquisition and
customer growth in Georgia and Tennessee of approximately 38,000
customers;
. Operating revenue of $256.9 million contributed by VNG and cost of sales
of $174.8 million incurred by VNG as a result of closing the VNG
acquisition ahead of schedule effective October 1, 2000 in order to take
advantage of the winter-heating season. There were 3,360 degree days
actually incurred by VNG during the six month period ended March 31,
2001 as compared to the 30-year normal degree days for the six month
period ended March 31, 2001 of 3,007;
. Chattanooga's operating revenues increased $34.5 million and cost of
sales increased $34.4 million as a result of 3,272 degree days as
compared to 2,465 degree days during the same period last year and
higher natural gas commodity costs during the six month period ended
March 31, 2001; and
. AGLC's operating revenues increased $28.2 million and cost of sales
increased $25.9 million as a result of an increase in marketer demand
above expectation due to increased customer demand and increased
customer growth during the six month period ended March 31, 2001 as
compared to same period last year.
Page 20 of 32
Results of Operations (continued)
The utility operating margin increased to $332.3 million for the six months
ended March 31, 2001 from $240.3 million for the same period last year. The
increase of $92.0 million was a result of the addition of VNG, colder weather
and customer growth, as noted above.
Non-utility. Non-utility operating revenues decreased to $8.1 million for the
six months ended March 31, 2001 from $25.3 million for the same period last
year. Non-utility cost of sales decreased to $0.1 million for the six months
ended March 31, 2001 from $8.5 million for the same period last year. The
decrease of $17.2 million in operating revenues and $8.4 in cost of sales was
primarily due to the change in reporting for AGL Propane as a result of the
propane transaction with Heritage Partners in August, 2000. As a joint venture,
Propane is accounted for under the equity method and its financial results are
now reported in other income rather than operating revenues and cost of sales.
Non-utility operating margin decreased to $8.0 million for the six months ended
March 31, 2001 from $16.8 million for the same period last year. The decrease of
$8.8 million was the result of the factors noted above.
Total Other Operating Expenses Analysis
- ---------------------------------------
(Dollars in Millions)
Six Months Ended
-----------------------------------
March 31, 2001 March 31, 2000 Favorable/(Unfavorable)
---------------- --------------- -----------------------
Total Other Operating Expenses
Utility $198.2 $167.0 ($31.2) (18.7%)
Non-utility 22.2 19.1 (3.1) (16.2%)
--------------- --------------- ---------
Total $220.4 $186.1 ($34.3) (18.4%)
=============== =============== =========
Total Other Operating Expenses
- ------------------------------
Total other operating expenses increased to $220.4 million for the six months
ended March 31, 2001 from $186.1 million for the same period last year, an
increase of 18.4%.
Utility. Utility total other operating expenses increased $31.2 million as
compared with the same period last year primarily due to expenses related to VNG
not incurred in the six months ended March 31, 2000. The increase in expenses
from VNG were offset by lower labor costs, continued implementation of cost
controls, continued work management process improvements, and other savings as a
result of AGL Resources' operational excellence initiatives. The variances were
primarily reflected in the following areas:
. An increase of $19.7 million in operating and maintenance expenses
related to VNG;
. An increase of $9.0 million in depreciation and amortization expense
related to VNG;
. An increase of $5.6 million in taxes other than income related to VNG;
. These increases were offset by a decrease of $7.3 million in payroll and
benefit related expenses as a result of reduced staffing levels at AGLC.
Page 21 of 32
Results of Operations (continued)
Non-utility. Non-utility total other operating expenses decreased $3.1 million
as compared with the same period last year primarily due the following:
. A decrease of $5.6 million in total other operating expenses related to
the Propane joint venture which is now accounted for under the equity
method of accounting as compared to the consolidation method of
accounting;
. A decrease of $3.2 million in operating expenses related to Utilipro's
payroll and outside service expenses as a result reduced staffing levels
related to the Utilipro sale transaction;
. These decreases were offset by a $2.9 million increase in unaffiliated
marketer related reserves.
Other Income
- ------------
Other income totaled $47.4 million for the six months ended March 31, 2001,
compared with other income of $19.3 million for the same period last year. The
increase in other income of $28.1 million is primarily due to the following:
. An increase of $16.0 million related to SouthStar primarily as a result
of weather in the Georgia service area being approximately 32% colder
and an increase in the number of customers served than the same period
last year;
. An increase of $10.9 million as a result of the gain on sale related to
the Utilipro sales transaction;
. An increase of $3.0 million related to the Propane joint venture that is
now accounted for under the equity method of accounting as compared to
the consolidation method of accounting;
. These increases were offset by a decrease of $2.0 million as a result of
increased management reserves related to SouthStar account receivables.
Interest Expense
- ----------------
Interest expense increased to $47.1 million for the six months ended March 31,
2001 from $24.6 million for the same period last year. The increase of $22.5
million was primarily a result of increased amounts of debt outstanding during
the period related to the issuance of the Senior Notes and the commercial paper
program that was used primarily to finance the acquisition of VNG.
Income Taxes
- ------------
Income tax expense increased to $42.3 million for the six months ended March 31,
2001 from $22.8 million for the same period last year. The increase in income
taxes of $19.5 million was due primarily to an increase in income before income
taxes of $54.5 million compared to the same period last year. The effective tax
rate (income tax expense expressed as a percentage of pre-tax income) for the
six months ended March 31, 2001 was 36.1% as compared to 36.4% for the same
period last year.
Net Income
- ----------
For the six month period ended March 31, 2001, net income was $74.8 million or
$1.38 per basic share and $1.37 per diluted share. For the six month period
ended March 31, 2000, net income was $39.8 million or $.71 per basic and diluted
share. The increase in net income of $35.0 million is a result of the
accelerated integration of VNG, continued customer growth, improved performance
by the wholesale energy services business, colder weather, lower labor costs,
continued implementation of cost controls, continued work management process
improvements and other savings as a result of AGL Resources' operational
excellence initiatives.
Core Earnings
- -------------
For the six month period ended March 31, 2001, core earnings (net income
excluding one-time items), excluding the gain on sale related to the Utilipro
transaction, were $67.7 million or $1.25 per basic share and $1.24 per diluted
share. For the six month period ended March 31, 2000, core earnings were $39.8
million or $.71 per basic and diluted share. During the six month period ended
March 31, 2000 there were no one-time items recorded. The increase in core
earnings of $27.9 million is a result of the accelerated integration of VNG,
continued customer growth, improved performance by the wholesale energy services
business, colder weather, lower labor costs, continued implementation of cost
controls, continued work management process improvements and other savings as a
result of AGL Resources' operational excellence initiatives.
Page 22 of 32
Financial Condition
Seasonality of Business
- -----------------------
AGLC has Straight Fixed Variable ("SFV") rates for its gas delivery service,
which eliminates the seasonality of both revenues and expenses. However, the
operations of VNG, SouthStar, Chattanooga, as well as AGL Resources' propane
operations, are seasonal, and those businesses will likely experience greater
profitability in the winter months than in the summer months.
Financing
- ---------
In October 2000, AGL Resources established a $900 million commercial paper
program through AGL Capital Corporation. AGL Resources' commercial paper
consists of short-term unsecured promissory notes with maturities ranging from
overnight to 270 days. AGL Resources' commercial paper program is fully
supported by bank back-up credit lines. On October 6, 2000, AGL Resources issued
$660 million in commercial paper, the proceeds of which were used to finance the
VNG acquisition and to refinance existing short-term debt.
Short-term debt decreased $352.3 million to $366.3 million as of March 31, 2001
from $718.6 million as of December 31, 2000.
On February 23, 2001, AGL Resources issued $300 million of Senior Notes through
AGL Capital Corporation. These senior notes mature in January 2011, have an
interest rate of 7.125% and are fully and unconditionally guaranteed by AGL
Resources. The proceeds from the issuance were used to refinance a portion of
the existing short-term debt under the commercial paper program. As of March 31,
2001, $533.7 million remained available for borrowing under the commercial paper
program.
The weighted average interest rate on short-term debt outstanding was 6.3% and
6.5% for the three month and six month periods ended March 31, 2001,
respectively. Management expects to obtain additional long-term financing in
fiscal 2001 to replace a portion of the remaining outstanding commercial paper.
Operating cash flow increased to $108.1 million for the six months ended March
31, 2001 as compared to $72.5 million for the same period last year. The
increase of $35.6 million was primarily due to increases in other current
liabilities of $49.5 million, decreases in gas cost credits of $35.9 million,
increases in accounts payable of $28.8 million, increases in customer deposits
of $17.5 million, and increases in Purchased Gas Adjustments of $9.2 million.
This increase was offset by increases in accounts receivable of $62.7 million,
and increases of $46.2 million in other-net.
Management believes available credit will be sufficient to meet working capital
needs both on a short- and long-term basis. However, capital needs depend on
many factors and AGL Resources may seek additional financing through debt or
equity offerings in the private or public markets at any time.
Industry Trend
- --------------
Historically, there has been lower gas consumption during the spring and summer
months, and suppliers were able to increase natural gas storage reserves for
consumption during the next winter. Consumers' natural gas demand for home
heating systems and gas appliances continues to increase. In addition, power
companies are now using more natural gas to run turbines to produce electricity.
As a result, consumer demand for natural gas has grown sharply across the
nation.
This increase in demand and consumption patterns has occurred at a faster rate
than has supply. Accordingly, this dynamic forces suppliers to buy natural gas
on the open market during winter months, resulting in an expected increase in
natural gas prices over the near term.
Page 23 of 32
Concentration of Credit Risk
- ----------------------------
AGLC has concentration of credit risk related to the provision of services to
certificated marketers. At September 30, 1998 (prior to deregulation), AGLC
billed approximately 1.4 million end-use customers in Georgia for its services.
In contrast, at March 31, 2001, AGLC billed 9 certificated and active marketers
in Georgia for services, which, in turn, billed end-use customers.
Several factors are designed to mitigate the risks to AGL Resources of the
increased concentration of credit that has resulted from deregulation. First, in
order to obtain a certificate from the GPSC, a certificated marketer must
demonstrate to the GPSC, among other things, that it possesses satisfactory
financial and technical capability to render the certificated service. Second,
AGLC has instituted certain practices and imposed certain requirements designed
to reduce credit risk. These include:
. Pursuant to AGLC's tariff, each certificated marketer is required to
maintain security for its obligations to AGLC in an amount equal to at
least two times the marketer's estimated maximum monthly bill and in the
form of a cash deposit, letter of credit, surety bond or guaranty from a
creditworthy guarantor; and
. Intrastate delivery service is billed in advance rather than in arrears.
For the three month and six month period ended March 31, 2001, the three largest
certificated marketers based on customer count, one of which was SouthStar,
accounted for approximately 35% and 36% of AGL Resources' operating revenues,
respectively. From October 1, 2000 through March 31, 2001, only gas receivables
attributable to Chattanooga and Virginia were due from end-use customers.
AGLC also faces potential credit risk in connection with assignments to
certificated marketers of interstate pipeline transportation and storage
capacity. Although AGLC has assigned this capacity to the certificated
marketers, in the event that the certificated marketers fail to pay the
interstate pipelines for the capacity, the interstate pipelines would in all
likelihood seek repayment from AGLC. This risk is mitigated somewhat by the fact
that the interstate pipelines require the certificated marketers to maintain
security for their obligations to the interstate pipelines arising out of the
assigned capacity.
On October 26, 1999, Peachtree Natural Gas, LLC ("Peachtree"), the then fifth
largest certificated marketer in Georgia based on customer count, filed for
protection under Chapter 11 of the United States Bankruptcy Code. As of the date
of Peachtree's bankruptcy filing, Peachtree owed AGLC approximately $14 million
for pre-petition delivery service and other services and charges. This amount
represented approximately 16% of AGL Resources' total gas receivables at March
31, 2001. AGLC holds $11 million of surety bonds as security for Peachtree's
obligations. The amount owed to AGLC does not include amounts owed by Peachtree
to interstate pipelines for assigned capacity. Based upon proofs of claim filed
by interstate pipelines in Peachtree's bankruptcy proceeding, as of the date of
Peachtree's filing, Peachtree owed interstate pipelines approximately $2.5
million for assigned capacity. In December 1999, Shell Energy Services Company,
L.L.C. began serving the firm customers formerly served by Peachtree. AGLC has
been paid in full for all post-petition delivery and other services provided by
AGLC to Peachtree. Peachtree has filed a declaratory judgment action against
AGLC to determine who has right, title and interest in and to approximately $6.2
million, constituting the proceeds of the sale of certain natural gas inventory.
In management's opinion, this marketer bankruptcy will not have a material
adverse effect on AGL Resources' financial condition or results of operations.
Page 24 of 32
Capital Expenditures
- --------------------
Capital expenditures for construction of distribution facilities, purchase of
equipment, and other general improvements were $67.6 million (net of retirements
of $1.1 million) for the six month period ended March 31, 2001 as compared to
$71.7 million (net of retirements of $7.8 million) for the six month period
ended March 31, 2000. The decrease of $4.1 million is primarily attributable to
a $15.8 million decrease in utility capital expenditures as compared to the same
period last year as a result of accelerating AGLC's mandatory pipeline
replacement program in fiscal 2000 and a $2.9 million decrease in non-utility
related capital expenditures. These decreases were partially offset by utility
capital expenditures incurred by VNG of $7.9 million and a decrease in
retirements of $6.7 million. Excluding VNG and retirements, capital expenditures
decreased 24% over the same period last year. Typically, funding for capital
expenditures is provided through a combination of internal and external sources.
Common Stock
- ------------
During the six month period ended March 31, 2001, AGL Resources issued 381,809
shares of common stock out of treasury under ResourcesDirect, a direct stock
purchase and dividend reinvestment plan; the Retirement Savings Plus Plan; the
Long-Term Stock Incentive Plan; the Long-Term Incentive Plan; and the Non-
Employee Directors Equity Compensation Plan.
During fiscal 2000, AGL Resources repurchased the entire 3.6 million shares
authorized under the repurchase program. As a result, the average number of
shares outstanding for the six month period ended March 31, 2001 as compared to
March 31, 2000 decreased to 54.2 million from 56.2 million, respectively.
Ratios
- ------
As of March 31, 2001, AGL Resources' capitalization ratios consisted of:
. 18.3% short-term debt;
. 44.4% long-term debt (excluding current portion);
. 3.7% preferred securities; and
. 33.6% common equity.
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Page 25 of 32
State Regulatory Activity
Rate Structure. As required by the GPSC, in July 1998 AGLC began billing
marketers for each residential customer's distribution costs in equal monthly
installments. As required by the GPSC, effective February 1, 2001, AGLC
implemented a seasonal rate design for the calculation of each residential
customer's annual SFV capacity charge, which is billed to certificated marketers
and reflects the historic volumetric usage pattern for the entire residential
class. Generally, this change should result in residential customers being
billed by the certificated marketers for a higher capacity charge in the winter
months and a lower charge in the summer months. This requirement has an
operating cashflow impact, but does not change AGLC's revenue recognition. As a
result, AGLC continues to recognize its residential SFV capacity revenues for
financial reporting purposes in equal monthly installments. Any difference
between the billings under the new seasonal rate design and the SFV revenue
recognized is deferred and will be reconciled on an annual basis. As of March
31, 2001, AGLC had deferred customer collections of approximately $21.0 million
(included as a current asset or current liability in the Condensed Consolidated
Balance Sheets and excluded from the Condensed Statements of Consolidated
Income) related to the difference between the billings under the new seasonal
rate design and the SFV revenue recognized.
VNG and Chattanooga continue to employ a rate structure that includes a
volumetric rate design that allows recovery of costs through gas usage.
To help offset the initial impact of the seasonal rate design on end-use
customers, the GPSC approved a $40 million disbursement from the Universal
Service Fund ("USF") to residential customers, which occurred in February and
March 2001. These disbursements had no effect on AGL Resources' earnings.
AGL Networks. On April 17, 2001 the GPSC voted unanimously to grant AGL
Networks' Competitive Local Exchange Carrier License, which grants AGL Networks
the rights to construct the last mile connectivity and provide dark fiber
network services in the State of Georgia.
AGLC Pipeline Safety. On January 8, 1998, the GPSC issued procedures and set a
schedule for hearings about alleged pipeline safety violations. On July 21,
1998, the GPSC approved a settlement between AGLC and the staff of the GPSC that
details a 10-year pipeline replacement program for approximately 2,300 miles of
cast iron and bare steel pipe. Over that 10-year period, AGLC will recover from
end-use customers, through billings to certificated marketers, the costs related
to the program net of any cost savings from the program. In addition to the
program being ahead of schedule at March 31, 2001, the program is operating
under its established budget as a result of efficiencies in engineering,
bidding, construction and project management.
During the six months ended March 31, 2001, approximately 114 miles of pipe were
replaced pursuant to the program. During that period, AGLC's capital
expenditures and operation and maintenance expenses related to the program were
approximately $21.5 million and $2.7 million, respectively. All such amounts
will be recovered through a combination of SFV rates and a pipeline safety
revenue rider. On October 1, 1999, AGLC began recovering costs of the program
through the pipeline safety revenue rider. The amount recovered during the six
months ended March 31, 2001 was approximately $.9 million.
Since the inception of the pipeline replacement program, AGLC has completed
replacing approximately 609 miles or 26% of the 2,300 mile requirement.
Transition to Competition Costs. On October 19, 1999, the GPSC approved an order
allowing AGLC to defer certain transition to competition costs for fiscal 2000
which AGLC considered to be "stranded" as a result of deregulation. In
accordance with the GPSC order, AGLC deferred approximately $10 million in
stranded costs for fiscal 2000. These stranded costs are recorded as a
regulatory asset on AGLC's balance sheet and are being amortized over a five-
year period beginning October 1, 1999. Of the total transition to competition
costs, AGLC amortized $.5 million and $1.0 million during the three month and
six month periods ended March 31, 2001, respectively, leaving a net balance of
$4.9 million at March 31, 2001.
Page 26 of 32
State Regulatory Activity (continued)
Emergency Order. On January 17, 2001, the GPSC established emergency rulemaking
regarding winter disconnections for residential gas users. This rulemaking is in
response to the high wholesale gas rates and abnormally cold weather experienced
in Georgia. Under the emergency rules adopted by the GPSC, residential
disconnections for non-payment were suspended until April 1, 2001. Effective
April 1, 2001 AGL Resources began performing residential disconnections as
requested by marketers. The GPSC's previous rule restricted disconnections for
24 hours when the forecasted weather was below 32 degrees. This rule was revised
to restrict disconnections for 72 hours when the forecasted weather was below 32
degrees. In addition, the GPSC removed restrictions requiring delinquent bills
to be paid to a residential customer's existing marketer before a switch was
allowed to a competing marketer. Previously, a residential customer's account
with their existing marketer had to be settled before they were allowed to
switch to a competing marketer. Management does not believe that this rule
change will have a material adverse effect on AGL Resources' financial condition
or results of operations.
Weather Normalization. The TRA has authorized the use of a weather normalization
adjustment rider ("WNAR") to offset the impact of unusually cold or warm weather
on customer billings and operating margin. As a result, Chattanooga's rates are
adjusted up when weather is warmer than normal, and down when weather is colder
than normal.
VNG Acquisition. In addition to approving AGL Resources' acquisition of VNG on
July 28, 2000, the VSCC issued an order on September 25, 2000, approving
transactions between VNG and other subsidiaries of AGL Resources. The September
order permits the use of AGLS to provide VNG with shared support services
including legal, regulatory, finance, accounting, engineering, gas control, and
capacity planning services. Recovery of the costs associated with such services
will continue to be subject to the rate and regulatory authority of the VSCC.
On November 30, 2000 the VSCC entered an order permitting VNG to obtain gas
procurement and asset management services from AGLE. The agreement covers a
period of five years commencing December 1, 2000 and includes a provision
allowing VNG's customers and AGLE to share in any revenues generated through the
management of VNG's gas assets.
Federal Regulatory Activity
FERC Order 637: Transition Costs Settlement Agreements. The Federal Energy
Regulatory Commission ("FERC") issued Order No. 637 on February 9, 2000, which
revises the FERC's rules governing the operations of the utility's interstate
pipeline suppliers. Among other things, the FERC:
. On an experimental basis through September 30, 2002, permitted holders
of firm pipeline capacity to release the capacity to other customers at
a price greater than the pipeline's maximum rate for the same capacity;
. Authorized pipelines to propose different rates for services rendered
during periods of peak usage, and to propose rates that would differ
based on the length of a customer's contract; and
. Declined, for the present time, to permit pipelines and their customers
to establish individually negotiated terms and conditions of service
that depart from generally applicable pipeline tariff rules.
Page 27 of 32
Federal Regulatory Activity (continued)
On May 19, 2000, the FERC issued order No. 637-A, granting and denying rehearing
in part of order No. 637, and making clarifying adjustments to its final rule.
Among other things, the FERC clarified that all capacity release transactions of
more than one month must be subject to posting and bidding as long as waiver of
the maximum rate ceiling is in effect, thereby eliminating the exemption from
posting and bidding that previously applied to certain transactions, including
rollovers of monthly pre-arranged capacity release transactions set at the
maximum tariff rate. On July 26, 2000, the FERC issued Order No. 637-B, denying
rehearing and granting clarification or Order No. 637-A, as well as other
aspects of its final rule. Among other things, the FERC denied the requests for
hearing of its ruling in Order No. 637-A requiring that all capacity release
transactions of more than one month must be subject to posting and bidding as
long as waiver of the maximum rate ceiling is in effect. Petitions for review of
these orders are pending in federal court. The interstate pipeline suppliers of
AGLC, Chattanooga and VNG have made filings at the FERC in order to comply with
the new rule and the Company is participating in the various Order No. 637
compliance proceedings at FERC involving these suppliers. AGL Resources cannot
predict how these revisions may affect its utility operations.
The FERC has required the utility, as well as other interstate pipeline
customers, to pay transition costs associated with the separation of the
pipeline suppliers' transportation and gas supply services. Based on its
pipeline suppliers' filings with the FERC, the utility has determined that the
total portion of its transition costs from all of its pipeline suppliers was
$108.1 million. As of September 30, 2000, all of those costs had been incurred
and were being recovered from the utility's customers under rates charged for
the distribution of gas.
AGLC is involved in four Transcontinental Gas Pipe Line Corporation rate cases,
which concern rates in effect since September 1, 1995, as well as proposed
changes to take effect prospectively. These rate proceedings are at various
stages of litigation before the FERC, and none of these proceedings are final.
At the present time, AGLC cannot predict the effect of these proceedings on
rates or operations.
On October 31, 2000, the FERC accepted, subject to refund and the outcome of a
technical conference proceeding, and suspended until April 1, 2001, Dominion
Transmission, Inc.'s ("DTI") proposal to collect certain additional under-
recovered, transportation-related costs through its annual Transportation Cost
Rate Adjustment ("TCRA") mechanism. Numerous parties filed protests including
AGLC. The FERC expressed concern about the atypical operation of the TCRA
mechanism and directed that a technical conference be held to address the issues
raised by the filing. A technical conference was held on January 11, 2001 and
post technical conference comments have been submitted. DTI has been actively
pursuing settlement negotiations with intervenors since the conclusion of the
comment period. AGLC and VNG have been participating in these negotiations.
Page 28 of 32
Environmental Matters
Before natural gas was widely available in the Southeast, AGLC manufactured gas
from coal and other fuels. Those manufacturing operations were known as
manufactured gas plants ("MGP"), which AGLC ceased operating in the 1950s.
Because of recent environmental concerns, AGLC is required to investigate
possible environmental contamination at those plants and, if necessary, clean up
any contamination.
AGLC has been associated with nine MGP sites in Georgia and three in Florida.
Based on investigations to date, AGLC believes that some cleanup is likely at
most of the sites. In Georgia, the state Environmental Protection Division
("EPD") supervises the investigation and cleanup of MGP sites. In Florida, the
U.S. Environmental Protection Agency has that responsibility.
By March 31, 2001, AGLC had obtained approval from EPD of Corrective Action
Plans for the nine Georgia MGP sites. In addition, the Company recently entered
into a Consent Order for cleanup of the MGP site in St. Augustine, Florida, and
received a Record of Decision for one portion of the MGP site in Sanford,
Florida. As these cleanup options and plans continue to develop, AGLC will be
able to prepare better estimates of the range of costs associated with each
site. As actual cleanup contracts are entered into, the Company should be able
to provide a more specific estimate of the likely costs of its MGP program.
Although the range of costs for each site has been refined as a result of
greater certainty in the cleanup alternatives, at this time there still remains
considerable variability in available cost estimates. In addition, the nature of
the predicted cleanups has caused an increase of $33.1 million in the lower end
of the range of possible future costs for the MGP program. By estimating, where
possible, AGLC's share of investigation and cleanup costs at these sites, AGLC
estimates that the remaining cost of future actions at its MGP sites will be
within a range of $144.8 to $186.6 million. AGLC cannot at this time identify
any single number within this range as a better estimate of its likely future
costs, because its actual future investigation and cleanup costs may still be
affected by a number of contingencies that cannot be quantified at this time.
Consequently, as of March 31, 2001, AGLC has recorded the lower end of the
range, or $144.8 million, as a liability and a corresponding regulatory asset.
AGLC has two ways of recovering investigation and cleanup costs. First, the
Georgia Public Service Commission ("GPSC") has approved an environmental
response cost recovery rider. This rider allows the recovery of costs of
investigation, testing, cleanup, and litigation. Because of that rider, AGLC has
recorded a regulatory asset for actual and projected future costs related to
investigation and cleanup, to be recovered from the rate payers in future years.
During the three month and six month periods ended March 31, 2001, AGLC
recovered $3.4 million and $6.7 million, respectively, through its environmental
response cost recovery rider. The regulatory asset and corresponding liability,
each increased by $33.1 million due to the increase in estimated costs.
The second way AGLC can recover costs is by exercising the legal rights AGLC
believes it has to recover a share of its costs from other potentially
responsible parties, typically former owners or operators of the MGP sites. AGLC
has been actively pursuing those recoveries. There were no material recoveries
during the three month and six month periods ended March 31, 2001.
Page 29 of 32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Market Risk
- -----------
AGL Resources is exposed to market risks associated with interest rates and
commodity prices. Management, at the direction of the Board of Directors to
monitor and manage these market risks, has established comprehensive risk
management policies. AGL Resources' Risk Management Committee is responsible for
the overall approval of risk management policies and the delegation of approval
and authorization levels. The Risk Management Committee is comprised of senior
executives who monitor market risk positions, corporate exposures, credit
exposures and overall results of AGL Resources' risk management activities.
Interest Rate Risk
- ------------------
AGL Resources' exposure to market risk related to changes in interest rates
relates primarily to its borrowing activities. A hypothetical 10% increase or
decrease in interest rates related to AGL Resources' variable rate debt ($366.3
million outstanding as of March 31, 2001) would not have a material effect on
results of operations or financial condition over the next 12 months. The fair
value of AGL Resources' long-term debt and capital securities also are affected
by changes in interest rates. A hypothetical 10% increase or decrease in
interest rates would not have a material effect on the estimated fair value of
AGL Resources' long-term debt or capital securities. The fair value of
outstanding long-term debt and capital securities changed from $590 million at
December 31, 2000 to $890 million at March 31, 2001 as a result of the issuance
of long-term debt. During the three months ended March 31, 2001, AGL Resources
repaid $300 million of short-term commercial paper debt through the issuance of
long-term Senior Notes.
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Page 30 of 32
PART II -- OTHER INFORMATION
"Part II -- Other Information" is intended to supplement information contained
in the Annual Report on Form 10-K for the fiscal year ended September 30, 2000,
and should be read in conjunction therewith.
ITEM 1. LEGAL PROCEEDINGS
With regard to legal proceedings, AGL Resources is a party, as both plaintiff
and defendant, to a number of suits, claims and counterclaims on an ongoing
basis. (See State Regulatory Activity, Federal Regulatory Activity, and
Environmental Matters contained in Item 2 of Part I under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition.") Management believes that the outcome of all litigation in which it
is involved will not have a material adverse effect on the consolidated
financial statements of AGL Resources.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
The annual meeting of shareholders was held in Atlanta, Georgia on January 26,
2001. At the annual meeting, the shareholders elected the following two director
nominees, as set forth in AGL Resources' Proxy Statement. The number of votes
"For" and "Withheld" for each nominee is as follows:
Nominee For Withheld
- ------------------- ----------- --------
D. Raymond Riddle 45,593,664 628,919
Felker W. Ward, Jr. 45,537,993 584,590
Directors whose term of office continued after the annual meeting are: Frank
Barron, Jr., Otis A. Brumby, Jr., Robert S. Jepson, Jr., Wyck A. Knox, Jr.,
Dennis M. Love, D. Raymond Riddle, Paula G. Rosput, and Felker W. Ward, Jr.
Directors who retired from the Board after the Annual Meeting are Betty L.
Siegel and Ben J. Tarbutton, Jr.
ITEM 5. OTHER INFORMATION
Information related to State Regulatory Activity, Federal Regulatory Activity,
and Environmental Matters is contained in Item 2 of Part I under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
On March 1, 2001, AGL Resources Inc. filed a Current Report on Form 8-K
dated February 23, 2001, reporting information pursuant to Item 5 (Other
Events) and Item 7(c) (Exhibits) of Form 8-K.
Page 31 of 32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGL Resources Inc.
----------------------------
(Registrant)
Date: May 4, 2001 /s/ Elizabeth J. White
----------------------------
Elizabeth J. White
Vice President & Controller
(Principal Accounting and
Financial Officer)
Page 32 of 32