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AGL Resources (NYSE:GAS)

April 30, 2013 10:00 am ET

Executives

John W. Somerhalder - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Finance & Risk Management Committee

Myra Coleman Bierria - Vice President, Securities Counsel and Corporate Secretary

Sandra N. Bane - Director, Member of Audit Committee and Member of Compensation & Management Development Committee

Operator

Good day, ladies and gentlemen, and welcome to the AGL Resources Inc. Annual Shareholder Meeting. My name is Rachel, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. And now I'd like to turn the call over to John Somerhalder. Please proceed.

John W. Somerhalder

I'm John Somerhalder. Welcome to the 2013 annual meeting of our shareholders. As Chairman, President and Chief Executive Officer of the company, I will preside at this meeting; and Myra Bierria, our Corporate Secretary, will serve as the Secretary for this meeting.

I now call this meeting to order. Our first order of business is to determine whether a quorum is present and recognize the inspector of the election.

Myra Coleman Bierria

A quorum exists when a majority of the shares entitled to vote are represented either in person or by proxy. As of the record date of February 21, 2013, the total number of outstanding shares of common stock of the company entitled to vote was 117,864,710. A total of 102,419,360 shares of common stock, constituting approximately 86.89% of the outstanding shares of common stock of the company entitled to vote, are represented at this meeting. Each holder of common stock is entitled to 1 vote for each share of common stock held on record as of February 21, 2013.

John W. Somerhalder

A quorum of the outstanding shares of common stock is present or represented by proxy, and I therefore declare the polls open for voting and the meeting open for business to be considered as set forth in the notice of the 2013 Annual Meeting of Shareholders and the proxy statement.

Ms. Belinda Massafra [ph], a representative of Broadridge Financial Services Inc., has been appointed as the inspector of election for this meeting to resolve any issues related to the shares to be voted or the proxy cards, to count the vote and to certify the vote on the proposals.

I'd now like to introduce our directors, officers and guests. I'll start out with our directors, and each one of their background information is included in the proxy. First of all, I'd like to introduce Sandra N. Bane. Sandra was not able to attend today because of unavoidable circumstances, but she is participating by telephone.

Sandra N. Bane

I'm present on the phone.

John W. Somerhalder

Okay, thank you, Sandy. We also have here in person, and I'd ask you to stand as I introduce you, Thomas D. Bell; Norman R. Bobins; Charlie R. Crisp; Brenda J. Gaines; Arthur E. Johnson; Wick A. Knox; Dennis M. Love; Charles H. Pete McTier; and Dean R. O'Hare; Armando J. Olivera; John E. Rau; James A Rubright; Bettina M. Whyte; Henry C. Hank Wolf. Thank you.

I am also pleased to introduce to you the officers of our company. And I'd ask you to stand also as we go through this. First, executive officers and heads of our major subsidiaries: Drew Evans, Executive Vice President and Chief Financial Officer; Hank Lingenfelter, Executive Vice President, Distribution Operations; Melanie M. Platt, Executive Vice President and Chief People Officer; Paul R. Shlanta, Executive Vice President, General Counsel and Chief Ethics and Compliance Officer; Pete Tumminello, Executive Vice President, Wholesale Services and President of Sequent Energy Management; Bryan Batson, Senior Vice President, Southern Operations, which includes Atlanta Gas Light, Chattanooga Gas and Florida City Gas; Robin Boren, President of our Retail Services; Mike Braswell, President of Retail Energy and President and CEO of SouthStar Energy Services; Jodi Gidley, is our -- I don't believe she's here, the Senior Vice President of Mid-Atlantic Operations, and she's President of Elizabethtown Gas, Elkton Gas and Virginia Natural Gas; and Beth Reese is our Senior Vice President and President of Nicor Gas. She's not in attendance today.

Also we have as our guest from PricewaterhouseCoopers, Mike Eberhardt [ph]. Mike [ph], I'd ask you to stand. PricewaterhouseCoopers audited our 2012 financial statements and has been selected by our Audit Committee to conduct the audit of the company for 2013. Mr. Eberhardt [ph], an accountant with PricewaterhouseCoopers, will be available to answer questions about the financial statements and the audit during the portion of the meeting set aside later for general discussion. Mr. Eberhardt [ph] also has -- also will have the opportunity to make a statement on behalf of PricewaterhouseCoopers, if he desires to do so.

Okay. Each of you should have registered at the desk in the lobby as you entered the meeting. If there are any of you who have not registered, would you please go to the desk and sign the register? As stated in the rules, each of you should have also an agenda for the meeting on your chair. On the reverse side of the agenda is a list of the rules of conduct for the meeting. We ask that each participant abide by these rules.

As stated in the rules of conduct, shareholders should not address the meeting until recognized. If you want to ask a question or speak during the meeting, please raise your hand. After being recognized, identify yourself and your status as a shareholder or a representative of a shareholder, and then ask your question or state your point. As stated in the rules of conduct, we ask that you restrict your remarks during the formal meeting to the item of the agenda that is before us and that you limit your remarks in all cases to 2 to 3 minutes. Thank you for your cooperation with those rules.

Ms. Bierria, the Corporate Secretary, has the following documents, which she will incorporate into the minutes of this meeting: Notice of the 2013 Annual Meeting of Shareholders, including the proxy statement and the forms of proxy cards mailed with the notice; certificate of Broadridge Financial Solutions Inc. certifying that notice of this annual meeting was timely mailed to all shareholders of record as of the close of business on February 21, 2013; and certified list of all registered holders of the common stock of record as of the close of business on February 21, 2013. I also request that the Corporate Secretary present the minutes of the annual meeting of the shareholders held on May 1, 2012.

We have 4 items of business to be voted on by the shareholders this year as described in the notice of the meeting and the proxy statement. First is the -- is to elect 16 directors to serve a one-year term until the 2014 Annual Meeting of the Shareholders; ratify the appointment of PricewaterhouseCoopers, LLP as our independent registered public accounting firm for 2013; approve a nonbinding resolution to approve the compensation of the named executive officers; and consider and act upon the shareholder proposal describing the proxy statement if properly presented at this annual meeting.

Before we proceed, is there anyone who would like to vote in person? If so, please raise your hand and we will provide you with a ballot on which you can mark your vote. If you've previously voted by proxy, you do not need to vote by ballot today unless you want to change your vote.

The first item of business is the election of the directors. I will now entertain a motion for the following resolution related to the election of directors and to be submitted to the shareholders and recommended for their approval.

And resolve that the following persons hereby are elected as directors of the company to serve for terms expiring at the 2014 Annual Meeting of the Shareholders and until their successors are duly elected and qualified or until their earlier resignation or removal. And that's Sandra N. Bane, Thomas D. Bell, Norman R. Bobins, Charles R. Crisp, Brenda J. Gaines, Arthur E. Johnson, Wyck A. Knox, Dennis M. Love, Charles H. Pete McTier, Dean R. O'Hare, Armando J. Olivera, John E. Rau, James A. Rubright, John W. Somerhalder, Bettina M. Whyte and Henry C. Wolf. Is there a motion to approve the resolution?

Unknown Attendee

So moved.

John W. Somerhalder

Is there a second?

Unknown Attendee

I second the motion.

John W. Somerhalder

Thank you. The second item of business is the ratification of the Audit Committee's appointment of PricewaterhouseCoopers, LLP as an independent registered public accounting firm for 2013 -- as our independent registered public accounting firm for 2013. I will now entertain a motion that the following resolution be submitted to the shareholders and recommended for their approval.

Resolve the shareholder hereby ratify and approve the appointment by the Audit Committee of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for 2013. Is there a motion to approve the resolution?

Unknown Attendee

So moved.

John W. Somerhalder

Is there a second?

Unknown Attendee

I second the motion.

John W. Somerhalder

Thank you. The third item of business is the adoption of a nonbinding resolution to approve the compensation of our named executive officers. I will now entertain a motion that the following resolution be submitted to the shareholders and recommended for their approval.

Resolve that the company shareholders hereby approve on an advisory basis the compensation of the named executive officers as disclosed in the company's proxy statement for the 2013 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including a compensation discussion and analysis, the accompanying compensation tables and the related narrative disclosed -- disclosure included in the proxy statement. Is there a motion to approve the resolution?

Unknown Attendee

I so move.

John W. Somerhalder

Is there a second?

Unknown Attendee

I second the motion.

John W. Somerhalder

Thank you. The fourth item of business is the consideration of the shareholder proposal regarding the gender identity nondiscriminatory -- nondiscrimination policy that was included in the proxy statement. The proponents of this proposal have authorized Mr. David Stewart [ph] to serve as their representative to present and comment on this proposal. I will now recognize the proponents of this proposal or their authorized representative, Mr. Stewart [ph], to present the proposal and make a brief supporting statement. David Stewart [ph]?

Unknown Attendee

Good morning. My name is David Stewart [ph]. I've been asked by the sponsor of this proposal, Eileen Blackwood, and Clean Yield Asset Management, to read the following statement on their behalf: "We have filed this proposal because we wish to see AGL Resources join the nation's leading companies in adopting best practices for nondiscrimination and non-harassment policies. In recent years, numerous employers, including the majority of the Fortune 500 and over 40% of the Fortune 500 -- the Fortune 100 and 40% of the Fortune 500 have updated their policies to explicitly prohibit discrimination or harassment on the basis of gender identity or expression. They do so in recognition that discrimination and harassment against those who do not conform to traditional gender roles is not good for business. And it is important to deter not only because it is bad for morale, retention and recruitment, it is also illegal in a growing numbers of jurisdictions. According to the nation's leading advocacy organization for lesbian, gay, bisexual and transgender people, 22 Fortune 1000 companies that are headquartered in Georgia have added gender identity to their EEO policies. Because state and local laws are inconsistent with respect to employment discrimination, AGL would benefit from a consistent corporate-wide policy to enhance efforts to prevent discrimination, resolve complaints internally and ensure a respectful and supportive atmosphere for all employees. If you have yet to cast your vote, we urge you to vote in favor of Item 4." Thank you.

John W. Somerhalder

Thank you, Mr. Stewart [ph]. And for the record, before you hand back the microphone, will you state your name and the number of shares you represent for us?

Unknown Attendee

My name is David Stewart [ph]. I'm representing Eileen Blackwood of Clean Yield Asset Management. I'm not completely [indiscernible].

John W. Somerhalder

That's fine. Thank you very much.

Okay, the shareholder proposal regarding a gender identity nondiscrimination policy is now before the meeting. As described in the proxy statement, the Board of Directors recommends that you vote against this proposal for the reasons stated in the proxy statement.

No further business is scheduled to come before the shareholders, so this completes the formal presentation of the proposals, and I hereby declare the polls closed.

We are -- we will now proceed to the vote totals. Ms. Bierria, do you have the proxy totals?

Myra Coleman Bierria

Yes. I have received the vote total from the inspector of election. As proxy, Mr. Shlanta cast votes representing 71,822,913 shares of common stock for the resolution to elect the 16 directors. This represents the minimum number of shares voted for any one of the nominees, and each nominee has received a majority of the votes cast.

Mr. Shlanta also casts votes representing 101,344,578 shares of common stock for the ratification of the appointment of PricewaterhouseCoopers LLP as the company's independent registered public accounting firm for 2013, which exceeds the number of votes cast against the proposal.

Mr. Shlanta also cast votes representing 78,075,056 shares of common stock for the nonbinding resolution to approve the compensation of our named executive officers, which exceeds the number of votes cast against the proposal.

Mr. Shlanta also cast votes representing 38,786,000 shares of common stock against the shareholder proposal presented at this meeting regarding a gender identity nondiscrimination policy, which exceeds the number of votes cast for the proposal.

John W. Somerhalder

Thank you. I hereby declare that the 16 persons nominated have been elected as directors, the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2013 has been ratified and approved, the nonbinding resolution to approve the compensation of our named executive officers has been approved, and the shareholder proposal presented at this meeting regarding the gender identity nondiscrimination policy has not been approved.

That concludes the formal items on the agenda for today's meeting. I have some concluding remarks and then we'll have a question-and-answer period. But first, I will entertain a motion that we adjourn the formal portion of the annual meeting.

Unknown Attendee

I so move.

John W. Somerhalder

Do we have a second?

Unknown Attendee

I second the motion.

John W. Somerhalder

All in favor, say aye?

[Voting]

John W. Somerhalder

All opposed, no.

[Voting]

John W. Somerhalder

Great, we stand adjourned. And we'll now turn to the informal part of the meeting, and I'll start by making a few brief remarks about the company, our financial and operating results for 2012 and the first quarter of 2013, as well as provide an outlook for the remainder of 2013.

Let me first point out that a number of statements I will make today are forward-looking statements based on our current expectations. A number of factors can change those expectations over time, and the various factors that could impact our businesses are detailed in our filings with the Securities and Exchange Commission, including the Risk Factors section of our most recent 10-K filing and the 10-Q we filed this morning.

Forward-looking statements are only as of the date they are made, and we do not undertake to update these statements to reflect subsequent changes. I will also be discussing some non-GAAP measures in talking about the company's performance. We have provided a reconciliation of those non-financial -- non-GAAP financial measures to -- on our website at www.aglresources.com.

Since we are already 4 months into 2013, I won't spend a lot of time talking about 2012. But a quick review. Last year, we performed well operationally against our objectives of prudent capital investment, safety and reliability. However, due primarily to record warm weather across much of the country and continued low natural gas price volatility, the company's financial performance did not meet our expectations. Temperatures were 14% warmer in Illinois and 26% warmer in Georgia compared to normal. And as a result, our earnings were more than $30 million lower than our expectations across our distribution and our retail businesses. We also continued to experience impacts of ongoing low natural gas price volatility, which created challenges for some of our noncore -- or nonutility businesses. These factors, and their impact on our stock price, resulted in a 1% loss in total shareholder return for the year.

Our overall business strategy for 2013 is consistent with the direction we have taken as a company over the past decade. We will remain focused on efficient operations across all of our businesses, including offsetting natural inflationary pressures by spreading costs across a broader customer base and sizing our operations to properly reflect the market challenges I talked about a minute ago, which have persisted in many of our unregulated businesses.

Our distribution businesses contributed about 80% of our earnings before interest and tax, or EBIT, last year, and we expect a similar contribution in 2013. Our priorities for this business segment are to invest necessary capital to enhance and maintain safety and reliability, remain a low-cost leader within the industry, opportunistically expand our pipeline system and capitalize on potential customer growth and conversions.

Our retail businesses contributed over 15% of our EBIT last year. And again, we expect a similar contribution for 2013. This business had 2 primary components. One is natural gas commodity sales to customers in Georgia, Illinois, Ohio and several other states. The order is a services business that provides warranty and repair services. We entered this later business through the -- our acquisition of Nicor and just expanded through an acquisition of the NiSource retail business earlier this year. Our priorities for this business are to maintain margins in Georgia and Illinois while continuing to expand into other profitable retail markets, integrate our new retail services business and expand our overall market reach.

We expect our other business units, wholesale services, midstream operations and cargo shipping, to contribute on a combined basis, approximately 5% of our EBIT in 2013. Market fundamentals for these businesses have created a challenging operating environment, but we have taken steps at each of these units to ensure that we are capable of weathering this downturn.

I am pleased to report that due to our continued focus on each of our businesses and expense discipline, with more normal weather in the first quarter of 2013, we reported a very solid result this morning. For the first quarter, diluted earnings per share were $1.31, and we remain on track for full year EPS in the range of $2.50 to $2.70 per share. We will hold our earnings conference call later today, and will discuss our results in greater detail at that time.

For those of you know me or have heard me speak at these meetings over the past few years, you know that prepared remarks are not my favorite thing to do, so what we thought we'd do today is focus on something that is a very valuable to me and is very compelling, over and above our financial results. And that is that one of our core values, and we don't talk about that as much but we do internally, one of those core values is generosity of spirit. Our employees have their feet on the ground every day in our service territories, so it is important that we understand the needs of our communities and find ways to give back.

We support a large of number of organizations and charitable causes, from United Way to Red Cross to the American Heart Association to the March of Dimes. One cause that has been a part of our generosity of spirit for decades is Habitat for Humanity, which is also headquartered here in Georgia. About 6 years ago, we donated land to Habitat. And just last year, we had a groundbreaking for an entire neighborhood of Habitat homes. And I'd like to conclude my prepared remarks today with a brief video, it's about 4 minutes, highlighting our Habitat for Humanity build as well as several other activities that we participate in across our entire footprint. So I'd ask that we play that 4-minute video at this time.

[Presentation]

John W. Somerhalder

I could not be prouder of our employees for the foundation they have established for this company. And as you can see, it's not only inside the company. And there was a lot of hard work last year in a very challenging environment, but now under more normal weather conditions so far, 2013 is showing very solid results. But that foundation that we established in the communities where we live and where we work is remarkably important, too. Also, thank you to that group of employees and thank you to all of our shareholders for your interest in the company and for attending the meeting with us today.

With that, I'm going to open it up for the question-and-answer session of the meeting.

Question-and-Answer Session

John W. Somerhalder

Yes?

Unknown Shareholder

My name is Bernie Goldstein [ph], and I'm a long time shareholder. And I wrote it in my comments when I sent back my proxy, but I never heard anything. I'd like to know why we need 16 directors and why we -- because it costs us over $3 million a year. I know that they're all competent, and I know that they all do a good job. But could we not consider in the future reducing the number down to 10 or -- where we could save some money? And I'm sure if we could get 10 competent directors, they could probably do the same work that the 16 do.

John W. Somerhalder

Thank you, Mr. Goldstein [ph]. And I share your view that we have 16 very competent and valuable directors. In fact, we talked about this issue this morning in the board meeting. And what led us to where we are today was bringing together 2 very large distribution companies and making sure that across that entire footprint, we had good representation for people for -- and in fact, it wasn't just this last combination. It was over time making sure we had good representation all the way from New Jersey and Virginia through Illinois, through Georgia. So that's what's led us to this place. And we do have a very good diversity of skills and background with our board that does function very well. Your other comment is something we'll continue to look at as we move forward to see what the right number is, and that is something we'll seriously evaluate as we move forward. So I appreciate your comment.

If there are no further questions, again thank you very much from -- for your attendance today, and that concludes the meeting.

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Source: AGL Resources Inc. - Shareholder/Analyst Call
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