Notes to Consolidated Financial Statements

Note 9 Segment Information

We generate nearly all our operating revenues through the sale, distribution, transportation and storage of natural gas. Our operating segments comprise revenue-generating components of our company for which we produce separate financial information internally that we regularly use to make operating decisions and assess performance. Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. We manage our businesses through four operating segments — distribution operations, retail energy operations, wholesale services and energy investments and a nonoperating corporate segment.

Our distribution operations segment is the largest component of our business and includes natural gas local distribution utilities in six states — Florida, Georgia, Maryland, New Jersey, Tennessee and Virginia. These utilities construct, manage, and maintain intrastate natural gas pipelines and distribution facilities. Although the operations of our distribution operations segment are geographically dispersed, the operating subsidiaries within the distribution operations segment are regulated utilities, with rates determined by individual state regulatory commissions. These natural gas distribution utilities have similar economic and risk characteristics.

We are also involved in several related and complementary businesses. Our retail energy operations segment includes retail natural gasmarketing to end-use customers primarily in Georgia. Our wholesale services segment includes natural gas assetmanagement and related logistics activities for each of our utilities as well as for nonaffiliated companies, natural gas storage arbitrage and related activities. Our energy investments segment includes a number of aggregated businesses that are related and complementary to our primary business. The most significant is the development and operation of high-deliverability natural gas storage assets. Our corporate segment includes intercompany eliminations and aggregated subsidiaries that are not significant enough on a standalone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments.

We evaluate segment performance based primarily on the non- GAAP measure of EBIT, which includes the effects of corporate expense allocations. EBIT is a non-GAAP measure that includes operating income and other income and expenses. Items we do not include in EBIT are financing costs, including interest and debt expense and income taxes, each of which we evaluate on a consolidated level. We believe EBIT is a useful measurement of our performance because it provides information that can be used to evaluate the effectiveness of our businesses from an operational perspective, exclusive of the costs to finance those activities and exclusive of income taxes, neither of which is directly relevant to the efficiency of those operations.

You should not consider EBIT an alternative to, or a more meaningful indicator of, our operating performance than operating income or net income as determined in accordance with GAAP. In addition, our EBIT may not be comparable to a similarly titled measure of another company. The reconciliations of EBIT to operating income, earnings before income taxes and net income for 2009, 2008 and 2007 are presented below.

In millions
2009
2008
2007
Operating income
$476
$478
$489
Other income
9
6
4
EBIT
485
484
493
Interest expense
101
115
125
Earnings before income taxes
384
369
368
Income taxes
135
132
127
Net income
$249
$237
$241



Summarized income statement, statements of financial position and capital expenditure information by segment as of and for the years ended December 31, 2009, 2008 and 2007 is shown in the following tables.

In millions
Distribution operations
Retail energy operations
Wholesale services
Energy investments
Corporate and intercompany eliminations
Consolidated AGL Resources
2009            
Operating revenues from external parties
$1,344
$801
$ 121
$ 47
$ 4
$2,317
Intercompany revenues(1)
138
(138)
Total operating revenues
1,482
801
121
47
(134)
2,317
Operating expenses
Cost of gas
646
620
10
1
(135)
1,142
Operation and maintenance
351
71
59
25
(9)
497
Depreciation and amortization
134
4
3
6
11
158
Taxes other than income taxes
34
1
2
2
5
44
Total operating expenses
1,165
696
74
34
(128)
1,841
Operating income (loss)
317
105
47
13
(6)
476
Other income (expense)
9
(1)
1
9
EBIT
$ 326
$105
$ 47
$ 12
$ (5)
$ 485
Identifiable and total assets
$5,230
$261
$1,168
$454
$ (39)
$7,074
Goodwill
$ 404
$ —
$ —
$ 14
$ —
$ 418
Capital expenditures
$ 354
$ 2
$ 1
$110
$ 9
$ 476


In millions
Distribution operations
Retail energy operations
Wholesale services
Energy investments
Corporate and intercompany eliminations
Consolidated AGL Resources
2008            
Operating revenues from external parties
$1,581
$987
$170
$ 55
$ 7
$2,800
Intercompany revenues(1)
187
(187)
Total operating revenues
1,768
987
170
55
(180)
2,800
Operating expenses
Cost of gas
950
838
48
5
(187)
1,654
Operation and maintenance
330
67
55
24
(4)
472
Depreciation and amortization
128
4
5
6
9
152
Taxes other than income taxes
35
2
2
1
4
44
Total operating expenses
1,443
911
110
36
(178)
2,322
Operating income (loss)
325
76
60
19
(2)
478
Other income
4
1
1
6
EBIT
$ 329
$ 77
$ 60
$ 19
$ (1)
$ 484
Identifiable and total assets
$5,138
$315
$970
$353
$ (66)
$6,710
Goodwill
$ 404
$ —
$ —
$ 14
$ —
$ 418
Capital expenditures
$ 278
$ 6
$ 1
$ 75
$ 12
$ 372


In millions
Distribution operations
Retail energy operations
Wholesale services
Energy investments
Corporate and intercompany eliminations
Consolidated AGL Resources
2007            
Operating revenues from external parties
$1,477
$892
$ 83
$ 42
$ —
$2,494
Intercompany revenues(1)
188
(188)
Total operating revenues
1,665
892
83
42
(188)
2,494
Operating expenses
Cost of gas
845
704
6
2
(188)
1,369
Operation and maintenance
330
69
38
19
(5)
451
Depreciation and amortization
122
5
4
5
8
144
Taxes other than income taxes
33
1
1
1
5
41
Total operating expenses
1,330
779
49
27
(180)
2,005
Operating income (loss)
335
113
34
15
(8)
489
Other income
3
1
4
EBIT
$ 338
$113
$ 34
$ 15
$ (7)
$ 493
Identifiable and total assets
$4,847
$282
$890
$287
$ (48)
$6,258
Goodwill
$ 406
$ —
$ —
$ 14
$ —
$ 420
Capital expenditures
$ 201
$ 2
$ 2
$ 26
$ 28
$ 259

(1) Intercompany revenues – Wholesale services records its energy marketing and risk management revenues on a net basis and its total operating revenues include intercompany revenues of $425 million in 2009, $982 million in 2008 and $638 million in 2007.