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Nicor Inc. has added a news release to its Investor Relations website. Title: Nicor Announces 2009 Preliminary Second Quarter Earnings and Affirms 2009 Annual Outlook
Date: 7/31/2009 7:00:00 AM
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NAPERVILLE, Ill.--(BUSINESS WIRE)--Jul. 31, 2009--
Nicor Inc. (NYSE: GAS) today reported second quarter 2009 preliminary
net income, operating income and diluted earnings per common share were
$22.9 million, $39.5 million and $.50, respectively. This compares to
net income, operating income and diluted earnings per common share for
the same period in 2008 of $28.9 million, $40.6 million and $.64,
respectively.
Earnings for the second quarter 2009, compared to the same period in
2008, reflect improved operating income in the company�s gas
distribution and other energy-related businesses, more than offset by
lower operating income in the company�s shipping business, as well as
lower corporate operating results. The second quarter comparisons also
reflect lower interest income and pretax equity investment income as
well as a higher effective income tax rate in 2009.
For the six months ended June 30, 2009, preliminary net income,
operating income and diluted earnings per common share were $66.7
million, $99.4 million and $1.47, respectively. This compares to net
income, operating income and diluted earnings per common share for the
same period in 2008 of $70.3 million, $103.8 million and $1.55,
respectively.
Earnings for the six months ended June 30, 2009, compared to 2008,
reflect lower operating income in the company�s gas distribution and
shipping businesses, and lower corporate operating results, partially
offset by higher operating income in the company�s other energy-related
businesses. The six-month-ended comparisons also reflect higher pretax
equity investment income, partially offset by a higher effective income
tax rate and lower interest income in 2009.
�Our consolidated year-to-date results are solid, particularly given the
challenging economic environment,� said Russ Strobel, Nicor�s Chairman,
President and Chief Executive Officer. �As expected, we�re now seeing
the positive impacts of rate relief begin to offset the increased
operating costs of our gas distribution business. Our shipping business
faced continued pressure on volumes due to the economic slowdown, but
still delivered year-to-date results that were approximately consistent
with 2008. Our other energy-related ventures produced results that were
near our expectations.�
Details regarding the second quarter 2009 and six months ended June 30,
2009 preliminary financial results compared to 2008 follow:
Gas distribution operating income increased $4.4 million for the
second quarter 2009 compared to the prior-year period. The three-month
results reflected:
Higher gas distribution margin due to the recent base rate
increase (approximately $20 million) partially offset by lower
demand unrelated to weather (approximately $2 million).
Higher operating and maintenance costs ($9.4 million) due in large
part to higher payroll and benefit-related costs (primarily
attributable to increased pension expense), and the absence of
prior year legal recoveries.
Higher depreciation expense ($1.7 million).
Gas distribution operating income decreased $4.1 million for the six
months ended June 30, 2009 compared to the prior-year period. The
six-month results reflected:
Higher gas distribution margin due to the base rate increase
(approximately $20 million) partially offset by lower demand
unrelated to weather (approximately $6 million) and lower natural
gas deliveries due to warmer weather in 2009 (approximately $2
million).
Higher operating and maintenance costs ($11.4 million) due
primarily to higher payroll and benefit-related costs (primarily
attributable to increased pension expense); the absence of the
aforementioned prior year legal recoveries recorded in the second
quarter of 2008; and higher company use and storage-related gas
costs. These increases were partially offset by lower franchise
gas costs and lower bad debt expense attributable principally to
lower natural gas prices.
Higher depreciation expense ($3.3 million).
Shipping operating income decreased $3.2 million and $0.5 million for
the second quarter 2009 and the six months ended June 30, 2009,
respectively, compared to the prior-year periods. Declines in both
periods were due to lower operating revenues partially offset by lower
operating costs. Decreased operating revenues for both 2009 periods,
compared to 2008, were attributable to lower volumes shipped and lower
average rates (resulting principally from lower surcharges for fuel).
Decreased operating costs for both 2009 periods, compared to 2008,
were primarily attributable to lower transportation-related costs, due
in large part to lower fuel prices and lower volumes shipped; and
lower charter costs.
Other energy ventures operating income increased $1.7 million for the
second quarter 2009 compared to the prior-year period due primarily to
higher operating income in the company�s retail energy-related
products and services businesses; and wholesale natural gas marketing
business. Other energy ventures operating income increased $3.3
million for the six months ended June 30, 2009, compared to the
prior-year period, due to higher operating income in the company�s
wholesale natural gas marketing business partially offset by lower
operating income in the company�s retail energy-related products and
services businesses.
Higher operating results for the second quarter 2009, as compared to
2008, in the company�s retail energy-related products and services
businesses were due to lower operating expenses, partially offset by
lower operating revenues. Lower operating expenses were due primarily to
lower average cost per utility-bill management contract partially offset
by higher average contract volumes. Lower operating revenues were due to
lower average revenue per utility-bill management contract attributable,
in part, to product mix, partially offset by higher average contract
volumes. Lower operating results for the six months ended June 30, 2009,
as compared to 2008, in the company�s retail energy-related products and
services businesses were due to higher operating expenses, partially
offset by higher operating revenues. Higher operating expenses were due
primarily to higher average contract volumes. Higher operating revenues
were due to higher average contract volumes partially offset by lower
average revenue per utility-bill management contract, attributable
primarily to product mix.
Higher operating income in the company�s wholesale natural gas marketing
business for the second quarter and six-months-ended June 30, 2009,
compared to the same periods in 2008, was due primarily to favorable
changes in valuations of derivative instruments used to hedge purchases
and sales of natural gas inventory; partially offset by unfavorable
costing of physical sales activity 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.
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
do not 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.
Corporate operating results decreased $4.0 million for the second
quarter 2009, compared to the prior year period, due primarily to the
absence of a prior year legal recovery of $3.1 million pretax. Corporate
operating results decreased $3.1 million for the six months ended June
30, 2009, compared to the prior year period, due to the absence of the
aforementioned legal recovery partially offset by a lower
weather-related cost. The company recorded a $2.9 million pretax
negative weather-related impact in the six months ended June 30, 2009,
compared to a $4.0 million pretax negative weather-related impact
recorded last year 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 second quarter 2009 and six-months-ended June 30, 2009 financial
results, compared to the same periods in 2008, reflect lower interest
income (due primarily to lower average investment balances, lower
interest income on income tax matters, and lower average rates); and a
higher effective income tax rate. The six-months-ended June 30, 2009
financial results, compared to the same period in 2008, also reflect
higher pretax equity investment income. Higher equity investment
income was due primarily to a gain of $10.1 million pretax, recorded
in the first quarter of 2009, related to the sale of the company�s
equity investment interest in EN Engineering.
Rate Case Status
On March 25, 2009, the company announced that its gas distribution
business, Nicor Gas, received approval from the Illinois Commerce
Commission (ICC) for a $69 million increase in base revenues. New rates
became effective on April 3, 2009. On April 24, 2009, the company filed
a request for rehearing with the ICC concerning the capital structure
and return on equity contained in the ICC�s rate order contending the
company�s return on rate base should be higher. The Attorney General�s
office, Citizen�s Utility Board and the Environmental Law and Policy
Center also filed requests for rehearing on items including the
management structure of the Energy Efficiency Plan and the rate design
for residential customers. These other parties do not raise issues about
the amount of the rate increase granted to Nicor Gas. On May 13, 2009,
the ICC agreed to conduct a rehearing concerning the capital structure
but denied the remainder of the company�s request. The ICC also denied
all the rehearing requests by other parties. The ICC has until October
13, 2009 to issue a ruling on rehearing. Any further changes in rates as
a result of rehearing would be effective prospectively. Nicor Gas has
also filed an appeal of the ICC�s rate order in state appellate court.
That appeal has been stayed until the ICC issues its ruling on rehearing.
2009 Earnings Outlook
The company affirmed that its estimate for 2009 diluted earnings per
common share is in the range of $2.54 to $2.74, unchanged from guidance
provided in the company�s first quarter earnings release on May 1, 2009.
As a reminder, this estimate includes approximately $.09 per share for
the positive impact of the first quarter 2009 sale of the company�s
equity interest in EN Engineering.
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 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 2009 financial results, and 2009 outlook. The
conference call will be this morning, Friday, July 31, 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 website 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, Friday, August 14, 2009. To access the recording, call (888)
286-8010, or (617) 801-6888 for callers outside the United States, and
enter reservation number 92141805. 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 website 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
2009
2008
2009
2008
Operating revenues
Gas distribution
$
326.3
$
560.1
$
1,310.3
$
2,024.3
Shipping
83.8
102.6
173.2
200.3
Other energy ventures
51.2
52.7
128.3
122.9
Corporate and eliminations
(13.7
)
(15.6
)
(53.4
)
(52.0
)
Total operating revenues
447.6
699.8
1,558.4
2,295.5
Operating expenses
Gas distribution
Cost of gas
156.6
396.2
873.0
1,582.9
Operating and maintenance
69.1
59.7
159.7
148.3
Depreciation
44.6
42.9
89.0
85.7
Taxes, other than income taxes
30.9
40.6
109.7
124.4
Shipping
81.3
96.9
164.1
190.7
Other energy ventures
38.5
41.7
113.0
110.9
Other corporate expenses and eliminations
(12.9
)
(18.8
)
(49.5
)
(51.2
)
Total operating expenses
408.1
659.2
1,459.0
2,191.7
Operating income (1)
39.5
40.6
99.4
103.8
Interest expense, net of amounts capitalized
8.8
9.1
18.1
19.7
Equity investment income, net
1.6
2.8
13.3
4.3
Interest income
.5
4.2
1.1
5.5
Other income, net
.3
.2
.5
.2
Income before income taxes
33.1
38.7
96.2
94.1
Income tax expense, net of benefits
10.2
9.8
29.5
23.8
Net income
$
22.9
$
28.9
$
66.7
$
70.3
Average shares of common stock outstanding
Basic
45.4
45.3
45.4
45.3
Diluted
45.5
45.3
45.5
45.3
Earnings per average share of common stock
Basic
$
.50
$
.64
$
1.47
$
1.55
Diluted
.50
.64
1.47
1.55
(1) Operating income (loss) by business segment
Gas distribution
$
25.1
$
20.7
$
78.9
$
83.0
Shipping
2.5
5.7
9.1
9.6
Other energy ventures
12.7
11.0
15.3
12.0
Corporate and eliminations
(.8
)
3.2
(3.9
)
(.8
)
$
39.5
$
40.6
$
99.4
$
103.8
Nicor Inc.
Gas Distribution Statistics
Three months ended
Six months ended
June 30
June 30
2009
2008
2009
2008
Operating revenues (millions)
Sales
Residential
$
195.5
$
363.1
$
843.6
$
1,376.3
Commercial
50.6
101.9
220.6
351.6
Industrial
5.9
11.1
25.3
42.1
252.0
476.1
1,089.5
1,770.0
Transportation
Residential
10.1
8.0
24.4
21.2
Commercial
14.3
11.8
39.4
43.0
Industrial
8.7
7.6
19.0
19.4
Other
.6
5.5
4.3
22.7
33.7
32.9
87.1
106.3
Other revenues
Revenue taxes
26.6
36.7
101.3
117.0
Environmental cost recovery
2.3
1.1
8.0
6.1
Chicago Hub
1.8
2.5
3.8
5.9
Other
9.9
10.8
20.6
19.0
40.6
51.1
133.7
148.0
$
326.3
$
560.1
$
1,310.3
$
2,024.3
Deliveries (Bcf)
Sales
Residential
25.8
26.1
122.2
130.3
Commercial
7.4
7.9
32.4
33.7
Industrial
1.0
.9
3.9
4.2
34.2
34.9
158.5
168.2
Transportation
Residential
3.3
3.1
15.5
14.8
Commercial
12.4
11.7
50.8
52.2
Industrial
23.2
23.1
53.6
55.4
38.9
37.9
119.9
122.4
73.1
72.8
278.4
290.6
Customers at end of period (thousands)
Sales
Residential
1,760
1,777
Commercial
131
128
Industrial
7
7
1,898
1,912
Transportation
Residential
221
205
Commercial
50
53
Industrial
5
5
276
263
2,174
2,175
Other statistics
Degree days
686
690
3,871
3,962
Colder than normal (1)
11
%
0
%
10
%
7
%
Average gas cost per Mcf sold
$
4.42
$
11.29
$
5.38
$
9.37
(1) Normal weather for Nicor Gas' service territory, for purposes
of this report, is considered to be 5,600 degree days per year for
2009 and 5,830 degree days per year for 2008.
Nicor Inc.
Shipping Statistics
Three months ended
Six months ended
June 30
June 30
2009
2008
2009
2008
Twenty-foot equivalent units (TEUs) shipped (thousands)
42.7
48.8
85.3
96.8
Revenue per TEU
$
1,960
$
2,098
$
2,030
$
2,068
At end of period
Ports served
25
25
Vessels operated
16
17
Source: Nicor Inc.
Nicor Inc.Kary Brunner, re: N-1016630 388-2529Media
Contact: Richard Caragol630 388-2686
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