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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 18, 1999
AGL RESOURCES INC.
(Exact Name of Registrant as Specified in Charter)
Georgia 1-14174 58-2210952
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
817 West Peachtree Street, NW, 10th Floor, Atlanta, Georgia 30308
(Address of Principal Executive Offices) (Zip Code)
(404) 584-9470
(Registrant's telephone number, including area code)
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Item 5. Other Events
See Exhibit 99.1 attached hereto regarding the Registrant's Year 2000
Readiness Disclosure.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(c) Exhibits.
Exhibit
Number Description
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99.1 Year 2000 Readiness Disclosure.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AGL RESOURCES INC.
(Registrant)
/s/ Donald P. Weinstein
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Donald P. Weinstein
Senior Vice President and
Chief Financial Officer
Date: November 18, 1999
3
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Year 2000 Readiness Disclosure
4
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Exhibit 99.1
Year 2000 Readiness Disclosure
The widespread use by governments and businesses, including AGL Resources Inc.,
of computer software that relies on two digits, rather than four digits, to
define the applicable year may cause computers, computer-controlled systems, and
equipment with embedded software to malfunction or incorrectly process data as
AGL Resources approaches and enters the year 2000. AGL Resources Inc. and its
subsidiaries are collectively referred to as "AGL Resources."
AGL Resources' Year 2000 Readiness Initiative
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In view of the potential adverse impact of the "Year 2000" issue on its
business, operations, and financial condition, AGL Resources has established a
cross-functional team to coordinate, and to report to management on a regular
basis about, the assessment, remediation planning, and plan implementation
processes directed to the Year 2000 issue. AGL Resources has also engaged
independent consultants to assist in the assessment, remediation planning, and
implementation phases of our Year 2000 initiative. AGL Resources' Year 2000
initiative is proceeding on a schedule that management believes will achieve
Year 2000 readiness in a timely manner.
The mission of AGL Resources' Year 2000 initiative is to define and provide a
continuing process for assessment, remediation planning, and plan implementation
to achieve a level of readiness that will meet the challenges presented by the
Year 2000 in a timely manner. Achieving Year 2000 readiness does not mean
correcting every Year 2000 limitation. Achieving Year 2000 readiness does mean
that critical systems, critical electronic assets, and relationships with key
business partners have been evaluated and are expected to be suitable for
continued use into and beyond the year 2000, and that contingency plans are in
place.
AGL Resources' Year 2000 readiness initiative involves a three-phase process.
The initiative is a continuing process with all phases of the initiative
progressing concurrently with respect to information technology (IT)
applications, infrastructure and non-information technology (non-IT)
applications, as each of those terms is defined below, and key business
relationships. The three phases of AGL Resources' Year 2000 initiative are as
follows:
1. Assessment - Assessment involves identifying and inventorying business
assets and processes. It also involves determining the Year 2000
readiness status of AGL Resources' assets and of key business partners.
Key business partners are those customers, suppliers and manufacturers
who management believes may be material to AGL Resources' business,
results of operations, or financial condition. In appropriate
circumstances, pre-remediation testing is conducted as a part of the
assessment phase. The assessment phase of AGL Resources' Year 2000
initiative includes assessment for Year 2000 readiness of the
following:
. Information technology ("IT") applications - Computer software
maintained by AGL Resources' Information Systems (IS) Department;
. Infrastructure and non-information technology ("non-IT")
applications - Computer hardware, such as AGL Resources' mainframe
and PC's, microprocessors embedded
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in equipment, and software maintained by business units other than
AGL Resources' IS Department; and
. Key business partners (customers, suppliers, and manufacturers).
2. Preparation of Remediation Plans - The purpose of this phase is to
develop plans which, when implemented, will enable assets and business
relationships to be Year 2000 ready. This phase involves implementation
planning and prioritizing the implementation of remediation plans.
3. Implementation - This step involves the implementation of remediation
plans, including post-remediation testing and contingency planning.
State of Readiness
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AGL Resources continues to assess the impact of the Year 2000 issue throughout
its businesses and operations, including its customer and supplier base. The
scope of the Year 2000 initiative includes AGL Resources and its subsidiaries.
Set forth below is a description of the progress of AGL Resources' Year 2000
initiative in all business units that are within the scope of AGL Resources'
Year 2000 initiative, with the exception of SouthStar Energy Services LLC
("SouthStar") and of Utilipro, Inc. ("Utilipro"). With respect to SouthStar, the
assessment, remediation planning, and plan implementation phases have been
completed. All of SouthStar's critical assets are Year 2000 ready. An
assessment of the readiness of SouthStar's two joint venture partners is
underway. Information or responses from all of SouthStar's key suppliers and
customers has been obtained. The assessment of SouthStar's key suppliers
reveals that all are Year 2000 ready, with the exception of one supplier whom
SouthStar expects will achieve Year 2000 readiness prior to December 31, 1999.
The preparation and review of contingency plans for SouthStar have been
completed. With respect to Utilipro, the Year 2000 initiative commenced in
January of 1999. The project plan and assessment phase, as well as the
remediation planning phase, for the Utilipro Year 2000 initiative have been
completed. Utilipro has engaged independent consultants to assist with its Year
2000 initiative. The mission and processes of the Year 2000 initiative for
Utilipro are essentially identical to those of the AGL Resources' Year 2000
initiative. The majority of the remediation and testing for Utilipro is
complete. Management expects Utilipro's business and operations to achieve Year
2000 readiness.
IT Applications
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Assessment of, and remediation planning for, IT applications is complete and
implementation is underway. During the assessment phase, an assessment of AGL
Resources' 81 IT applications was completed. Of the 81 applications, 14 are
deemed to be critical applications. The results of AGL Resources' Year 2000
initiative with respect to IT applications indicate that, to date:
. 55 applications now are ready for Year 2000, including all critical
applications;
. Nine applications have been eliminated;
. Sixteen applications have been replaced; and
. One application is scheduled for elimination by December 15, 1999.
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Infrastructure and Non-IT Applications
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Assessment, remediation, and testing of infrastructure and non-IT applications
are complete. These processes involved:
. Identifying business processes;
. Identifying the assets that comprise the infrastructure and non-IT
applications category, and defining the business process or processes to
which such assets relate;
. Identifying the mission criticality of each such asset and business
process;
. Documenting in a tracking database the existence, and the mission-
criticality, of each such asset and business process;
. Fixing, upgrading, replacing, eliminating, or developing alternate
processes for those assets that were deemed not to be Year 2000 ready; and
. Testing the mission-critical assets where possible. In those cases where
testing of those assets was not possible or was cost-prohibitive, the process
involved evaluating and accepting, where appropriate, the readiness
statements provided by the manufacturers of such assets.
Key Business Partners
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AGL Resources has contacted key business partners, including suppliers,
manufacturers and customers to evaluate their Year 2000 readiness plans and
status of readiness. AGL Resources has contacted over 2,000 suppliers and
manufacturers by letter. This group includes suppliers and manufacturers that
AGL Resources considers key business partners as well as other selected
suppliers and manufacturers. AGL Resources has received responses from the
majority of suppliers and manufacturers who were contacted. To date, AGL
Resources has completed follow-up with 100% of those suppliers that are
considered critical suppliers. AGL Resources plans to continue to update its
assessment of the readiness of critical suppliers and manufacturers during the
remainder of calendar year 1999.
AGL Resources also initiated contact with more than 2,500 commercial and
industrial customers by personal or telephone interview or by fax survey. That
group of customers includes customers that AGL Resources considers key business
partners as well as other selected customers. AGL Resources expects to continue
to follow-up as needed throughout the remainder of calendar year 1999. In light
of deregulation, the expected focus of AGL Resources' follow-up effort will be
on Atlanta Gas Light Company's certificated marketers who are also customers.
AGL Resources is assessing the state of readiness of key business partners who
have responded to requests for information and will continue to do so as
additional responses are received. As a general matter, AGL Resources, like
other businesses, is vulnerable to key business partners' inability to achieve
Year 2000 readiness. AGL Resources cannot predict the outcome of business
partners' readiness efforts. However, AGL Resources has developed contingency
plans to mitigate risks associated with the Year 2000 readiness of certain
business partners, including certain key business partners. AGL Resources'
review of key business partners' responses gives management no reason to believe
the Year 2000 readiness of key business partners is likely to have a material
impact on AGL Resources' business, results of operations, or financial
condition. AGL Resources will continue to assess key business partners
throughout the remainder of calendar year 1999.
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Costs to Address Year 2000 Issues
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AGL Resources intends to devote the resources necessary to achieve a level of
readiness that will meet its Year 2000 challenges in a timely manner. Through
September 30, 1999, cumulative expenses in connection with AGL Resources' Year
2000 assessment, remediation planning, and plan implementation processes were
approximately $6.7 million. Of this total, $2.7 million was spent in fiscal
years 1997 and 1998. Through September 30, 1999, an additional $8.6 million has
been spent for the replacement of AGL Resources' financial and human resources
information systems. The primary reason for replacing those systems was to
achieve increased efficiency and functionality. An added benefit of replacing
those systems was the avoidance of the costs of remediating Year 2000 problems
associated with AGL Resources' previous financial and human resources
information systems. The costs of the new financial and human resources
information systems have been capitalized, in accordance with AGL Resources'
accounting policies and with generally accepted accounting principles.
AGL Resources expects to spend $2.1 million for the Year 2000 initiative in
fiscal year 2000. These estimates include costs associated with the use of
outside consultants as well as hardware and software costs. They also include
direct costs associated with employees of AGL Resources' IS Department who work
on the Year 2000 initiative. It does not include costs associated with employees
of other departments such as Legal and Internal Audit, and of other business
units, that are involved, on a limited basis, in the Year 2000 initiative.
On June 30, 1998, the Georgia Public Service Commission ("GPSC") issued a rate
case order in response to a filing by Atlanta Gas Light Company ("AGLC"). The
GPSC provided for the deferral, amortization, and recovery of some Year 2000
costs over a five-year period beginning July 1, 1998. The portion of those costs
that will be deferred in this way includes costs which would normally be
expensed in accordance with generally accepted accounting principles and that
are attributable to AGLC. Going forward, AGL Resources' estimates that
approximately 83% of Year 2000 costs will be attributable to AGLC. At September
30, 1999, AGLC had deferred total costs of approximately $4.4 million, which are
being amortized and recovered over a five year period.
At present, the cost estimates associated with achieving Year 2000 readiness are
not expected to materially impact AGL Resources' consolidated financial
statements. AGL Resources will account for costs related to achieving Year 2000
readiness in accordance with its internal accounting policies, with regulatory
treatment, and with generally accepted accounting principles.
Risks of Year 2000 Issues
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AGL Resources' has finalized its estimate of the Year 2000 most reasonably
likely worst case scenarios. These scenarios contemplate intermittent
disruptions of important goods and services that AGL Resources obtains from
third parties at some locations. AGL Resources does not expect these disruptions
to be long-term nor does AGL Resources expect the disruptions to materially
impact its operations as a whole. However, the extent of such disruptions is
uncertain, and if the extent or longevity of the disruptions exceed AGL
Resources' assumptions, they could have a material adverse impact on AGL
Resources' business, results of operations, or financial condition.
Although AGL Resources has finalized its estimate of Year 2000 most reasonably
likely worst case scenarios, the process of refining AGL Resources' most
reasonably likely worst case scenarios will be an ongoing process. AGL Resources
expects to continue to develop and modify its most reasonably likely
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worst case scenarios as AGL Resources obtains additional information regarding
(a) internal systems and equipment during the implementation phase of its Year
2000 initiative as well as during independent validation and verification of the
Year 2000 readiness of such systems and equipment, and (b) the status, and the
impact on AGL Resources, of the Year 2000 readiness of others.
Business Continuity and Contingency Planning
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AGL Resources has completed its Year 2000 contingency plans. Those plans, which
are intended to enable AGL Resources to deliver an acceptable level of service
despite Year 2000 failures, include performing certain processes manually,
changing suppliers, and reducing or suspending certain noncritical aspects of
AGL Resources' operations. AGL Resources' contingency planning effort focused on
the potential internal risks as well as potential risks associated with AGL
Resources' suppliers and customers. AGL Resources' most reasonably likely worst
case scenarios as described above define the boundaries of AGL Resources'
contingency planning effort. The contingency planning process also includes, but
is not limited to the following:
. Identifying the nature of Year 2000 risks to understand the business
impact of those risks;
. Identifying minimal acceptable service levels;
. Identifying alternative providers of goods and services;
. Identifying necessary investments in additional back-up equipment such as
generators and communications equipment; and
. Developing manual methods of performing critical functions currently
performed by electronic systems and equipment.
AGL Resources has completed initial testing of its contingency plans. During the
remainder of calendar year 1999, AGL Resources plans to update, refine, and
further test its contingency plans as needed, to reflect system and business
changes as they evolve.
Clean Management
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Clean management describes the process of:
. Identifying AGL Resources' means of acquiring assets and of developing or
modifying systems;
. Verifying the Year 2000 readiness of assets prior to purchase; and
. Assuring that system modifications and new systems are Year 2000 ready at
the time of development or acquisition.
AGL Resources is using the clean management process on an on-going basis. Clean
management applies to IT applications, to infrastructure and non-IT
applications, and to key business partner relationships. AGL Resources expects
to obtain additional or updated information about the Year 2000 readiness of
assets and key business partners through the clean management process. AGL
Resources will address any additional Year 2000 issues discovered as a result of
the clean management process.
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Validation and Verification
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AGL Resources' Year 2000 initiative includes validation and verification of
assets by AGL Resources, by third parties, or by both. AGL Resources expects
validation and verification efforts, whether internal or independent, to result
in the discovery of additional Year 2000 issues and AGL Resources will address
those issues as they arise. AGL Resources expects the validation and
verification process to continue throughout calendar year 1999 and into calendar
year 2000.
Presently, AGL Resources believes that its assessment, remediation planning,
plan implementation and contingency planning processes will be effective to
achieve Year 2000 readiness in a timely manner.
Forward-Looking Statements
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The preceding "Year 2000 Readiness Disclosure" discussion contains various
forward-looking statements that represent AGL Resources' beliefs or expectations
regarding future events. When used in the "Year 2000 Readiness Disclosure"
discussion, the words "believes", "intends", "expects", "estimates", "plans",
"goals" and similar expressions are intended to identify forward-looking
statements. Forward-looking statements include, without limitation, AGL
Resources' expectations as to when AGL Resources will complete the assessment,
remediation planning, and implementation phases of its Year 2000 initiative as
well as its Year 2000 contingency planning; AGL Resources' estimated cost of
achieving Year 2000 readiness; and AGL Resources' belief that its internal
systems and equipment will be Year 2000 ready in a timely and appropriate
manner. All forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results. Factors that may cause those differences include availability
of information technology resources; customer demand for AGL Resources' products
and services; continued availability of materials, services, and data from AGL
Resources' suppliers; the ability to identify and remediate all date-sensitive
lines of computer code and to replace embedded computer chips in affected
systems and equipment; the failure of others to timely achieve appropriate Year
2000 readiness; and the actions or inaction of governmental agencies and others
with respect to Year 2000 problems.
