|
Nicor Inc. has added a news release to its Investor Relations website. Title: Nicor Announces 2008 Preliminary Earnings and 2009 Annual Outlook
Date: 2/25/2009 7:30:00 AM
For a complete listing of our news releases, please click here
NAPERVILLE, Ill.--(BUSINESS WIRE)--Feb. 25, 2009--
Nicor Inc. (NYSE: GAS) today reported twelve months ended December 31,
2008, preliminary net income, operating income and diluted earnings per
common share were $119.5 million, $185.0 million and $2.63,
respectively. This compares to net income, operating income and diluted
earnings per common share for the same period in 2007 of $135.2 million,
$206.5 million and $2.99, respectively.
Results for the twelve months ended December 31, 2007 were favorably
impacted by a first quarter reduction to the company�s previously
established reserve for its mercury inspection and repair program and
mercury-related cost recoveries aggregating approximately $8 million
pretax ($.11 per share after-tax). Absent the impact of these items, the
twelve-month results for 2007 would have been approximately $2.88 per
share.
Earnings for the twelve months ended December 31, 2008, compared to
2007, reflect the absence of the aforementioned mercury items. Earnings
for the twelve-month period in 2008 reflect lower operating income in
the company�s gas distribution business, shipping business and other
energy-related businesses and lower corporate operating results.
Excluding the mercury-related items, 2008 operating income in the
company�s gas distribution business was higher than 2007. The
twelve-months-ended comparisons also reflect higher income on equity
investments in 2008, partially offset by higher interest expense.
�Given the challenging economic environment, our businesses performed
well,� said Russ Strobel, Nicor�s Chairman, President and Chief
Executive Officer. �While benefitting from colder weather in 2008, our
gas distribution business was, as we anticipated, negatively impacted by
increases in operating costs, including bad debt expense. Our shipping
business delivered solid results, especially after consideration of the
impacts the economic slowdown and increased competition had on volumes
shipped. Our other energy-related ventures produced results that were
near our expectations and we continue to be pleased with the economics
of those businesses. Looking ahead, we expect consolidated 2009
financial results to continue to be pressured by the current economic
environment and increased operating costs. Cost increases were a primary
driver for our filing for rate relief in April 2008, and 2008 results
and estimates for 2009 confirm the need for that relief. Obtaining
appropriate rate relief at our gas distribution business is critical to
maintaining the strong financial condition of the utility that has
enabled us, for decades, to deliver low-cost / high value service to our
customers. Significantly, even with full rate relief, Nicor Gas would
continue to have the lowest distribution rates, by far, among major
Illinois gas utilities.�
For the fourth quarter of 2008, preliminary net income, operating income
and diluted earnings per common share were $47.9 million, $71.9 million
and $1.05, respectively. This compares to net income, operating income
and diluted earnings per common share for the fourth quarter in 2007 of
$55.5 million, $77.2 million and $1.22, respectively.
Earnings for the fourth quarter of 2008, compared to 2007, reflect lower
operating income in the company�s other energy-related businesses as
well as lower corporate operating results, partially offset by higher
operating income in the company�s gas distribution business and shipping
business.
Details regarding twelve months ended December 31, 2008 and fourth
quarter 2008 preliminary financial results compared to 2007 follow:
Gas distribution operating income decreased $4.3 million for the
twelve months ended December 31, 2008 compared to the prior-year
period. The twelve-month results reflected:
The absence of mercury-related reserve adjustments and recoveries
recorded last year ($8.0 million).
Higher operating and maintenance costs ($24.8 million) due
primarily to higher bad debt expense and higher payroll and
benefit-related costs; partially offset by recoveries of
previously incurred costs (relating to a recovery of costs
associated with the prior year environmental investigation and
legal cost recoveries from a counterparty with whom the company
previously did business during the performance based-rate plan
timeframe).
Higher depreciation expense ($5.3 million) and lower gains on
property sales ($1.2 million).
Partially offsetting these negative factors was increased natural
gas deliveries due to colder weather in 2008 (approximately $15
million) and the impact of customer interest (approximately $12
million).
Gas distribution operating income increased $0.6 million for the
fourth quarter of 2008 compared to the prior-year period. The quarter
reflected:
Higher operating and maintenance costs ($13.8 million). Factors
contributing to the variance included higher bad debt expense and
higher payroll and benefit-related costs.
Higher depreciation expense ($1.2 million).
Offsetting these negative factors was increased natural gas
deliveries due to colder weather (approximately $8 million) and
the impact of customer interest (approximately $4 million).
Shipping operating income decreased $6.1 million for the twelve months
ended December 31, 2008 compared to the prior-year period due to
higher operating costs partially offset by higher operating revenues.
Shipping operating income increased $1.7 million for the fourth
quarter compared to the prior-year period due to higher operating
revenues, partially offset by higher operating costs. Increased
operating revenues for both periods, compared to 2007, were
attributable to higher average rates (due primarily to surcharges for
fuel); partially offset by lower volumes shipped. Increased operating
costs for the twelve months ended December 31, 2008 compared to the
prior year period were primarily attributable to higher
transportation-related costs, due in large part to increased fuel
costs. Increased operating costs for the fourth quarter, compared to
the same period in 2007, were attributable to higher wages and
benefits.
Other energy ventures operating income decreased $8.7 million for the
twelve months ended December 31, 2008 compared to the prior-year
period due primarily to lower operating income in the company�s
wholesale natural gas marketing business; partially offset by higher
operating income in the company�s retail energy-related products and
services businesses. Other energy ventures operating income decreased
$5.5 million for the fourth quarter 2008 compared to the prior-year
period due to lower operating results in the company�s wholesale
natural gas marketing business and retail energy-related products and
services businesses.Lower operating income for the full
year and fourth quarter of 2008, compared to 2007, in the company�s
wholesale natural gas marketing business was due primarily to
unfavorable changes in valuations of derivative instruments used to
hedge purchases and sales of natural gas inventory and lower results
from risk management activities associated with hedging the product
risks of the utility-bill management contracts offered by the
company�s retail energy-related products and services businesses. When
compared to the prior periods, the costing of physical sales activity
was favorable for the twelve months ended December 31, 2008, but was
unfavorable for the fourth quarter of 2008.The company�s
wholesale natural gas marketing business uses derivatives to mitigate
commodity price risk in order to substantially lock-in the profit
margin that will ultimately be realized. A source of commodity price
risk arises as the wholesale natural gas marketing business purchases
and holds natural gas in storage to earn a profit margin from its
ultimate sale. However, gas stored in inventory is required to be
accounted for at the lower of weighted-average cost or market, whereas
the derivatives used to reduce the risk associated with a change in
the value of the inventory are carried at fair value, with changes in
fair value recorded in operating results in the period of change. In
addition, the wholesale natural gas marketing business also uses
derivatives to mitigate the commodity price risks of the utility-bill
management products offered by the company�s energy-related products
and services businesses. The gains and losses associated with the
utility-bill management products are recognized in the months that the
services are provided. However, the underlying derivatives used to
hedge the price exposure are carried at fair value. For those
derivatives that don�t meet the requirements for hedge accounting, the
changes in fair value are recorded in operating results in the period
of change. As a result, earnings are subject to volatility as the fair
value of derivatives change. The volatility resulting from this
accounting can be significant from period to period.Improved
operating results for the twelve months ended December 31, 2008, as
compared to 2007, in the company�s retail energy-related products and
services businesses were due to lower operating costs, partially
offset by lower operating revenues. Decreased operating costs were due
primarily to lower average costs associated with utility-bill
management contracts, attributable primarily to product mix. Decreased
operating revenues were due to lower average revenue per utility-bill
management contract, also attributable to product mix.Lower
fourth quarter 2008 operating results, as compared to 2007, in the
company�s retail energy-related products and services businesses were
due to higher operating costs partially offset by higher operating
revenues. Higher operating costs were due to higher average costs
associated with utility-bill management contracts. Higher operating
revenues were attributable to higher average revenue per utility-bill
management contract.
Corporate operating results decreased $2.4 million for the twelve
months ended December 31, 2008 compared to the prior year period due
to a $6.2 million pretax negative weather-related impact associated
with certain of the company�s retail utility-bill management products,
compared to a $0.1 million pretax positive weather impact in the 2007
twelve-month period, partially offset by recoveries of previously
incurred legal costs of $3.1 million pretax recorded in the second
quarter of 2008. Corporate operating results decreased $2.1 million in
the fourth quarter of 2008 compared to the prior year period due
primarily to a $2.5 million pretax negative weather-related impact
associated with certain of the company�s retail utility-bill
management products. Under terms of a corporate swap agreement,
benefits or costs resulting from variances in normal weather
associated with retail energy-related products are recorded primarily
in corporate operating results.
The twelve months ended December 31, 2008 and fourth quarter 2008
financial results compared to the same periods in 2007 were negatively
impacted by higher interest expense. The full year 2008 results,
compared to 2007, also reflect higher pretax net equity investment
income. Higher interest expense in 2008, compared to 2007, was due to
the absence of a $9.6 million pretax benefit of a settlement with the
Internal Revenue Service, recognized in the fourth quarter of 2007,
related to the timing of certain deductions taken as part of a change
in accounting method on the company�s 2002 tax return. Excluding the
impact of this item, interest expense decreased $7.4 million and $2.7
million for the twelve months ended December 31, 2008 and fourth
quarter 2008, respectively, compared to the prior-year periods due to
lower average borrowing rates, partially offset by higher average
borrowing levels.
Rate Case Proceedings
On April 29, 2008, the company�s gas distribution business, Nicor Gas,
filed with the Illinois Commerce Commission (ICC) for an overall
increase in rates. The company�s filing, as updated, requests a revenue
increase of $140.4 million for a rate of return on rate base of 9.27 %,
which reflects an 11.15% cost of common equity. The requested rate
increase is needed to recover higher operating costs and increased
capital investments.
In a press release on February 10, 2009, the Company announced that the
Administrative Law Judges (ALJs) of the ICC issued a proposed order
recommending an increase in base revenues of approximately $68.8 million
and a return on rate base of 7.57 %, which reflects a 10.17 % cost of
common equity. Additionally, the proposed order recommends the approval
of two new rate adjustment mechanisms: a volume balancing rider that
would adjust rates to recover fixed costs and an energy efficiency rider
that would fund energy efficiency programs. The proposed order is a
recommendation by the ALJs. Nicor Gas and other parties to the
proceeding will have the opportunity to file written briefs to identify
points where they agree or disagree with the proposed order. After
considering these briefs, the ALJs may modify the proposed order prior
to submitting their recommendation to the ICC commissioners. The ICC
commissioners will then make the final decision on Nicor Gas� rate
increase request and that decision may differ from the ALJs�
recommendation. That final decision is expected to be issued no later
than March 25, 2009. Rates would be effective prospectively.
2009 Earnings Outlook
The level of earnings for 2009 is dependent significantly on the gas
distribution business� pending rate case. As noted above, new rates
would become effective prospectively after the final order. Based on the
rate relief proposed in the aforementioned ALJs� order of $68.8 million,
the company estimates 2009 diluted earnings per common share will be in
the range of $2.45 to $2.65. Rate relief awarded by the ICC may differ
substantially from the ALJs� order. Consistent with prior guidance, the
annual outlook excludes, among other things, any future impacts
associated with the ICC�s Performance-Based Rate plan/Purchased Gas
Adjustment review, other contingencies, or changes in tax law. The
company also indicated that its estimate does not reflect the additional
variability in earnings due to fair value accounting adjustments in its
businesses and other impacts that could occur because of future
volatility in the natural gas markets. While these items could
materially affect 2009 earnings, they are not currently estimable. The
company's 2009 estimate assumes normal weather for remainder of the year.
The company�s annual earnings outlook for 2009, noted above, compared to
2008 reflects lower expected results in the company�s gas distribution
and shipping businesses and higher results in its other energy-related
businesses.
The company will provide updates to its annual earnings outlook only as
part of its quarterly and annual earnings� releases.
Conference Call
As previously announced, the company will hold a conference call to
discuss its twelve-months-ended and fourth quarter 2008 financial
results, and 2009 outlook. The conference call will be this morning,
Wednesday, February 25, 2009 at 8:30 a.m. central, 9:30 a.m. eastern
time. To hear the conference call live, please log on to Nicor�s
corporate web site at www.nicor.com,
choose �Investor� and then select the webcast icon on the �Overview�
page. A replay of the call will be available until 10:30 a.m. central
time, Thursday, March 12, 2009. To access the recording, call (888)
286-8010, or (617) 801-6888 for callers outside the United States, and
enter reservation number 96029676. The call will also be archived on
Nicor�s corporate website for 90 days.
Nicor Inc. (NYSE: GAS) is a holding company and is a member of the
Standard & Poor�s 500 Index. Its primary business is Nicor Gas, one of
the nation�s largest natural gas distribution companies. Nicor owns
Tropical Shipping, a containerized shipping business serving the
Caribbean region and the Bahamas. In addition, the company owns and has
an equity interest in several energy-related businesses. For more
information, visit the Nicor web site at www.nicor.com.
Caution Concerning Forward-Looking
Statements
This document includes certain forward-looking statements about the
expectations of Nicor and its subsidiaries and affiliates. Although
Nicor believes these statements are based on reasonable assumptions,
actual results may vary materially from stated expectations. Such
forward-looking statements may be identified by the use of
forward-looking words or phrases such as �anticipate,� �believe,�
�expect,� �intend,� �may,� �planned,� �potential,� �should,� �will,�
�would,� �project,� �estimate,� �ultimate,� or similar phrases. Actual
results may differ materially from those indicated in the company�s
forward-looking statements due to the direct or indirect effects of
legal contingencies (including litigation) and the resolution of those
issues, including the effects of an ICC review, and undue reliance
should not be placed on such statements.
Other factors that could cause materially different results include, but
are not limited to, weather conditions; natural disasters; natural gas
and other fuel prices; fair value accounting adjustments; inventory
valuation; health care costs; insurance costs or recoveries; legal
costs; borrowing needs; interest rates; credit conditions; economic and
market conditions; accidents, leaks, equipment failures, service
interruptions, environmental pollution, and other operating risks;
tourism and construction in the Bahamas and Caribbean region; energy
conservation; legislative and regulatory actions; tax rulings or audit
results; asset sales; significant unplanned capital needs; future
mercury-related charges or credits; changes in accounting principles,
interpretations, methods, judgments or estimates; performance of major
customers, transporters, suppliers and contractors; labor relations; and
acts of terrorism.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release. Nicor undertakes no obligation to publicly release any revision
to these forward-looking statements to reflect events or circumstances
after the date of this release.
Nicor Inc.
PRELIMINARY CONSOLIDATED STATEMENTS
OF OPERATIONS
Unaudited (millions, except per share data)
Three months ended
Twelve months ended
December 31
December 31
2008
2007
2008
2007
Operating revenues
Gas distribution
$ 876.5
$ 748.8
$ 3,206.9
$ 2,627.5
Shipping
116.4
110.3
425.2
403.9
Other energy ventures
72.5
85.5
230.3
244.5
Corporate and eliminations
(24.6
)
(25.1
)
(85.8
)
(99.6
)
Total operating revenues
1,040.8
919.5
3,776.6
3,176.3
Operating expenses
Gas distribution
Cost of gas
664.9
558.1
2,427.8
1,906.5
Operating and maintenance
82.1
68.3
294.6
269.8
Depreciation
42.4
41.2
170.9
165.6
Taxes, other than income taxes
46.1
40.8
189.4
166.9
Mercury-related costs (recoveries), net
.6
-
.6
(8.0
)
Property sale gains
(.6
)
-
(.8
)
(2.0
)
Shipping
96.2
91.8
385.9
358.5
Other energy ventures
59.8
67.3
205.0
210.5
Other corporate expenses and eliminations
(22.6
)
(25.2
)
(81.8
)
(98.0
)
Total operating expenses
968.9
842.3
3,591.6
2,969.8
Operating income (1)
71.9
77.2
185.0
206.5
Interest expense, net of amounts capitalized
10.5
3.6
40.1
37.9
Equity investment income, net
2.2
1.9
9.4
6.3
Interest income
1.9
1.7
8.8
8.8
Other income, net
.6
.4
.7
.6
Income before income taxes
66.1
77.6
163.8
184.3
Income tax expense, net of benefits
18.2
22.1
44.3
49.1
Net income
$ 47.9
$ 55.5
$ 119.5
$ 135.2
Average shares of common stock outstanding
Basic
45.3
45.2
45.3
45.2
Diluted
45.4
45.3
45.4
45.3
Earnings per average share of common stock
Basic
$ 1.06
$ 1.23
$ 2.64
$ 2.99
Diluted
1.05
1.22
2.63
2.99
(1) Operating income (loss) by business segment
Gas distribution
$ 41.0
$ 40.4
$ 124.4
$ 128.7
Shipping
20.2
18.5
39.3
45.4
Other energy ventures
12.7
18.2
25.3
34.0
Corporate and eliminations
(2.0
)
.1
(4.0
)
(1.6
)
$ 71.9
$ 77.2
$ 185.0
$ 206.5
Nicor Inc.
Gas Distribution Statistics
Three months ended
Twelve months ended
December 31
December 31
2008
2007
2008
2007
Operating revenues (millions)
Sales
Residential
$ 603.8
$ 523.8
$ 2,176.2
$ 1,791.4
Commercial
149.3
120.7
551.4
426.2
Industrial
16.0
12.8
61.9
47.6
769.1
657.3
2,789.5
2,265.2
Transportation
Residential
12.4
9.7
40.9
31.1
Commercial
27.3
23.0
82.2
76.7
Industrial
9.6
9.0
38.3
37.5
Other
1.7
.6
25.7
10.6
51.0
42.3
187.1
155.9
Other revenues
Revenue taxes
42.4
35.6
174.0
149.6
Environmental cost recovery
2.9
2.9
9.7
10.9
Chicago Hub
2.8
5.9
11.3
19.0
Other
8.3
4.8
35.3
26.9
56.4
49.2
230.3
206.4
$ 876.5
$ 748.8
$ 3,206.9
$ 2,627.5
Deliveries (Bcf)
Sales
Residential
71.8
64.6
214.4
201.8
Commercial
17.5
14.8
54.7
48.7
Industrial
1.9
1.6
6.4
5.7
91.2
81.0
275.5
256.2
Transportation
Residential
9.3
6.8
25.6
19.7
Commercial
31.4
26.9
93.1
84.6
Industrial
27.2
27.8
103.9
107.8
67.9
61.5
222.6
212.1
159.1
142.5
498.1
468.3
Customers at end of period (thousands)
Sales
Residential
1,760
1,789
Commercial
130
128
Industrial
8
7
1,898
1,924
Transportation
Residential
222
191
Commercial
53
54
Industrial
5
5
280
250
2,178
2,174
Other statistics
Degree days
2,349
2,057
6,348
5,756
Colder (warmer) than normal (1)
13
%
(1
%)
9
%
(1
%)
Average gas cost per Mcf sold
$ 7.24
$ 6.83
$ 8.76
$ 7.36
(1) Normal weather for Nicor Gas' service territory, for purposes
of this report, is considered to be 5,830 degree days per year.
Nicor Inc.
Shipping Statistics
Three months ended
Twelve months ended
December 31
December 31
2008
2007
2008
2007
Twenty-foot equivalent units (TEUs) shipped (thousands)
50.8
54.4
197.1
206.6
Revenue per TEU
$ 2,291
$ 2,027
$ 2,158
$ 1,955
At end of period
Ports served
25
26
Vessels operated
17
19
Source: Nicor Inc.
Nicor Inc.Contact: Kary Brunner, re: N-1007630 388-2529orMedia
Contact: Richard Caragol630 388-2686
|