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Nicor Inc. has added a news release to its Investor Relations website. Title: Nicor Announces 2008 Preliminary Second Quarter Earnings and Affirms 2008 Annual Outlook
Date: 8/4/2008 6:00:00 AM
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NAPERVILLE, Ill.--(BUSINESS WIRE)--Aug. 4, 2008--Nicor Inc.
(NYSE:GAS) today reported second quarter 2008 preliminary net income,
operating income and diluted earnings per common share of $28.9
million, $40.6 million and $.64, respectively. This compares to net
income, operating income and diluted earnings per common share for the
second quarter in 2007 of $18.0 million, $29.9 million and $.40,
respectively.
Earnings for the second quarter 2008, compared to 2007, reflect
improved operating results in the company's gas distribution business
and other energy-related businesses, and higher corporate operating
income, partially offset by lower operating results in the company's
shipping business. The quarter period comparisons also reflect higher
income on equity investments and lower interest expense in 2008.
For the six months ended June 30, 2008, preliminary net income,
operating income and diluted earnings per common share were $70.3
million, $103.8 million and $1.55, respectively. This compares to net
income, operating income and diluted earnings per common share for the
same period in 2007 of $65.2 million, $106.5 million and $1.44,
respectively.
Results for the six months ended June 30, 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 six-month results for 2007 would have been approximately $1.34 per
share.
Earnings for the six months ended June 30, 2008, compared to 2007,
reflect the absence of the aforementioned mercury items. Earnings for
the six-month period in 2008 also reflect higher operating results in
the company's gas distribution business (before consideration of the
mercury-related items) and other energy-related businesses, and
improved corporate operating results, partially offset by lower
operating results in the company's shipping business. The
six-months-ended comparisons also reflect lower interest expense and
higher income on equity investments in 2008.
"We are pleased with our consolidated year-to-date results,
particularly considering cost pressures in our gas distribution
business created by high natural gas prices, and the challenging
economic environment faced by our shipping business," said Russ M.
Strobel, Nicor's Chairman, President and Chief Executive Officer. "We
expect second half results for the gas distribution business to be
negatively impacted by increasing operating costs (a principal driver
for our filing for rate relief in April 2008), but we believe
full-year consolidated results for 2008 will be in line with our
previous guidance. Still, meeting our full-year projections continues
to depend on successfully managing costs in all of our businesses, and
managing margins in the face of less than expected volumes in our
shipping business."
Details regarding second quarter 2008 and six months ended June
30, 2008 financial results compared to 2007 follow:
-- Gas distribution operating income increased $6.9 million for
the second quarter 2008 compared to the prior-year period. The
quarter reflected:
- The positive impact of higher demand unrelated to weather
in 2008 (approximately $3 million); and the impact of
customer interest (approximately $3 million).
- Lower operating and maintenance costs ($2.4 million) due
primarily to recoveries of previously incurred costs and
lower company use gas and storage-related gas costs,
partially offset by higher bad debt expense and payroll and
benefit-related costs.
- Partially offsetting these positive factors was the
negative impact of higher depreciation expense ($1.4
million).
-- Gas distribution operating income decreased $1.7 million for
the six months ended June 30, 2008 compared to the prior-year
period. The six-month results reflected:
- The absence of mercury-related recoveries recorded last
year ($8.0 million).
- Higher operating and maintenance costs ($6.5 million) due
primarily to increased bad debt expense, partially offset
by lower company use gas and storage-related gas costs and
the aforementioned cost recoveries recorded in the second
quarter 2008; and higher depreciation expense ($2.7
million).
- Partially offsetting these negative factors was the
positive impact of increased natural gas deliveries due to
colder weather in 2008 (approximately $7 million); the
impact of customer interest (approximately $5 million); and
the positive impact of higher demand unrelated to weather
(approximately $4 million).
-- Shipping operating income decreased $2.6 million and $8.6
million for the second quarter 2008 and the six months ended
June 30, 2008, respectively, compared to the corresponding
prior-year periods. Declines in both periods were due to
higher operating costs, partially offset by higher revenues.
Increased operating costs for both 2008 periods, compared to
2007, were attributable to higher transportation-related
costs, due primarily to increased fuel costs. Increased
revenues for both 2008 periods, compared to 2007, were
attributable to higher average rates (due primarily to
surcharges for fuel), partially offset by lower volumes
shipped.
-- Other energy ventures operating income increased $3.0 million
for the second quarter 2008 compared to the prior-year period
due to improved operating results in the company's wholesale
natural gas marketing business; partially offset by lower
operating results in the company's retail energy-related
products and services businesses. Other energy-related
ventures operating income increased $6.7 million for the six
months ended June 30, 2008 compared to the prior-year period
due to higher operating results in the company's retail
energy-related products and services businesses; partially
offset by lower operating results in the company's wholesale
natural gas marketing business.
Higher second quarter 2008 operating results, as compared to 2007,
in the company's wholesale natural gas marketing business were due to
favorable costing of physical sales activity and improved 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; partially
offset by unfavorable changes in valuations of derivative instruments
used to hedge purchases and sales of natural gas inventory. Lower
operating results for the six months ended June 30, 2008, as compared
to 2007, in the company's wholesale natural gas marketing business
were due primarily to unfavorable changes in valuations of derivative
instruments used to hedge purchases and sales of natural gas
inventory, partially offset by favorable costing of physical sales
activity and improved 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.
The company uses derivative instruments to economically hedge
purchases and sales of natural gas inventory. Such derivative
instruments are used to mitigate commodity price risk in order to
substantially lock-in the profit margin that will ultimately be
realized from the withdrawal and sale of natural gas in storage.
Earnings at the wholesale natural gas marketing business can be
subject to volatility as the fair value of derivatives change, even
when the underlying expected profit margin is largely unchanged. The
volatility resulting from these adjustments can be significant from
period to period.
Lower second quarter 2008 operating results, as compared to 2007,
in the company's retail energy-related products and services
businesses were due to lower revenues; partially offset by lower
operating costs. Decreased revenues and operating costs were due
primarily to lower average utility-bill management contract volumes.
Improved operating results for the six months ended June 30, 2008, as
compared to 2007, in the company's retail energy-related products and
services businesses were due primarily to lower operating costs;
partially offset by lower revenues. Decreased operating costs were due
primarily to lower average utility-bill management contract volumes
and lower average costs associated with customer contracts. Decreased
revenues were due to lower average utility-bill management contract
volumes.
-- Corporate operating results increased $3.4 million for the
second quarter 2008 compared to the prior year period due
primarily to recoveries of previously incurred legal costs of
$3.1 million pretax. Corporate operating results increased
$0.9 million for the six months ended June 30, 2008 compared
to the prior year period reflecting the aforementioned legal
cost recoveries; offset by a negative weather-related impact
associated with certain of the company's retail utility-bill
management products of $4.0 million pretax, compared to a
negative weather impact in the 2007 six-month period of $0.1
million pretax. 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 second quarter 2008 and six months ended June 30, 2008
financial results were also favorably impacted by lower net
interest costs and higher pretax net equity investment income.
Net interest costs decreased $1.0 million for the second
quarter 2008 compared to the prior-year period due primarily
to lower estimated interest on tax-related matters. Net
interest costs decreased $4.2 million for the six months ended
June 30, 2008 compared to the prior-year period due to lower
estimated interest on tax-related matters, lower average
interest rates and lower average borrowing levels.
-- Net income for the second quarter 2008 and the six months
ended June 30, 2008 were also favorably impacted by changes in
its effective income tax rate compared to the same periods in
2007.
2008 Earnings Outlook
The company affirmed its estimate for 2008 diluted earnings per
common share in the range of $2.20 to $2.40, which remains unchanged
from earlier guidance for 2008 provided in the company's earnings
release on May 1, 2008 associated with first quarter 2008 results.
Consistent with prior guidance, the annual outlook excludes, among
other things, any future impacts associated with the Illinois Commerce
Commission'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 2008 earnings, they are not currently estimable. The
company's 2008 estimate assumes normal weather for the remainder of
the year.
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 second quarter 2008 financial results and 2008 outlook.
The conference call will be this morning, Monday, August 4, 2008 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, Monday, August 18, 2008. To access the recording, call (888)
286-8010, or (617) 801-6888 for callers outside the United States, and
enter reservation number 27181428. 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 Six months ended
June 30 June 30
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Operating revenues
Gas distribution $560.1 $431.4 $2,024.3 $1,639.8
Shipping 102.6 97.0 200.3 196.1
Other energy ventures 52.7 45.1 122.9 121.7
Corporate and eliminations (15.6) (16.6) (52.0) (66.0)
--------- --------- --------- ---------
$699.8 $556.9 $2,295.5 $1,891.6
--------- --------- --------- ---------
Operating expenses
Gas distribution
Cost of gas 396.2 281.6 1,582.9 1,230.0
Operating and
maintenance 59.7 62.1 148.3 141.8
Depreciation 42.9 41.5 85.7 83.0
Taxes, other than
income taxes 40.6 33.2 124.4 109.1
Mercury-related
recoveries, net - - - (8.0)
Property sale gains - (.8) - (.8)
Shipping 96.9 88.7 190.7 177.9
Other energy ventures 41.7 37.1 110.9 116.4
Other corporate expenses
and eliminations (18.8) (16.4) (51.2) (64.3)
--------- --------- --------- ---------
Total operating expenses 659.2 527.0 2,191.7 1,785.1
--------- --------- --------- ---------
Operating income (1) 40.6 29.9 103.8 106.5
Interest expense, net of
amounts capitalized 9.1 10.1 19.7 23.9
Equity investment income, net 2.8 1.2 4.3 2.0
Interest income 4.2 3.2 5.5 4.8
Other income, net .2 - .2 .2
--------- --------- --------- ---------
Income before income taxes 38.7 24.2 94.1 89.6
Income tax expense 9.8 6.2 23.8 24.4
--------- --------- --------- ---------
Net income $28.9 $18.0 $70.3 $65.2
========= ========= ========= =========
Average shares of common stock
outstanding
Basic 45.3 45.2 45.3 45.1
Diluted 45.3 45.3 45.3 45.2
Earnings per average share of
common stock
Basic $.64 $.40 $1.55 $1.45
Diluted $.64 $.40 $1.55 $1.44
----------------------------------------------------------------------
(1) Operating income (loss) by
business segment
Gas distribution $20.7 $13.8 $83.0 $84.7
Shipping 5.7 8.3 9.6 18.2
Other energy ventures 11.0 8.0 12.0 5.3
Corporate and eliminations 3.2 (.2) (.8) (1.7)
--------- --------- --------- ---------
$40.6 $29.9 $103.8 $106.5
========= ========= ========= =========
----------------------------------------------------------------------
Nicor Inc. Preliminary Operating Statistics
Gas Distribution
Unaudited
Three months ended Six months ended
June 30 June 30
------------------- ------------------
2008 2007 2008 2007
--------- --------- -------- ---------
Operating revenues (millions)
Sales - Residential $363.1 $282.4 $1,376.3 $1,120.2
Commercial 101.9 73.7 351.6 268.9
Industrial 11.1 7.7 42.1 31.5
--------- --------- -------- ---------
476.1 363.8 1,770.0 1,420.6
--------- --------- -------- ---------
Transportation - Residential 8.0 6.0 21.2 15.6
Commercial 11.8 12.2 43.0 41.1
Industrial 7.6 7.4 19.4 18.7
Other 5.5 1.3 22.7 9.3
--------- --------- -------- ---------
32.9 26.9 106.3 84.7
--------- --------- -------- ---------
Other revenues - Revenue taxes 36.7 28.9 117.0 101.2
Environmental
cost
recovery 1.1 1.6 6.1 7.1
Chicago Hub 2.5 2.2 5.9 9.7
Other 10.8 8.0 19.0 16.5
--------- --------- -------- ---------
51.1 40.7 148.0 134.5
--------- --------- -------- ---------
$560.1 $431.4 $2,024.3 $1,639.8
========= ========= ======== =========
Deliveries (Bcf)
Sales - Residential 26.1 24.9 130.3 124.7
Commercial 7.9 7.1 33.7 30.4
Industrial .9 .7 4.2 3.7
--------- --------- -------- ---------
34.9 32.7 168.2 158.8
--------- --------- -------- ---------
Transportation - Residential 3.1 2.4 14.8 11.7
Commercial 11.7 11.7 52.2 48.5
Industrial 23.1 23.6 55.4 56.4
--------- --------- -------- ---------
37.9 37.7 122.4 116.6
--------- --------- -------- ---------
72.8 70.4 290.6 275.4
========= ========= ======== =========
Degree days 690 636 3,962 3,654
Colder (warmer) than normal
Degree days 3 (51) 275 (33)
Percent (1) 0 (7) 7 (1)
Average gas cost per Mcf sold $11.29 $8.56 $9.37 $7.65
Customers at June 30
(thousands)
Sales - Residential 1,777 1,799
Commercial 128 125
Industrial 7 7
--------- ---------
1,912 1,931
--------- ---------
Transportation - Residential 205 169
Commercial 53 55
Industrial 5 6
--------- ---------
263 230
--------- ---------
2,175 2,161
========= =========
(1) Normal weather for Nicor Gas' service territory, for the purposes
of this report, is considered to be 5,830 degree days per year.
Nicor Inc. Preliminary Operating Statistics
Shipping
Unaudited Three months ended Six months ended
June 30 June 30
------------------ ----------------
2008 2007 2008 2007
--------- -------- ------- --------
Twenty-foot equivalent units (TEU)
shipped (thousands) 48.8 50.5 96.8 101.3
Revenue per TEU $2,098 $1,923 $2,068 $1,936
Ports served 25 27
Vessels operated 17 18
CONTACT: Nicor Inc.
Mark Knox, re: N-1001
630-388-2529
or
Media Contact: Richard Caragol
630-388-2686
SOURCE: Nicor Inc.
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