The following tables set forth a reconciliation of various non-GAAP measures to the most comparable GAAP measure for the indicated periods.
Download GAAP Reconciliation
Reconciliations of operating margin, adjusted net income and adjusted earnings per share are available in our quarterly reports (Form 10-Q) and annual reports (Form 10-K) filed with the Securities and Exchange Commission.
Our management evaluates segment financial performance based on operating margin and earnings before interest and taxes (EBIT), which include the effects of corporate expense allocations. We believe that 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.
Further, management calculates “economic earnings” in relation to EBIT reported on a GAAP basis for the wholesale services segment in order to assess and evaluate earnings generated during the year. The company believes economic earnings is a useful measurement of the wholesale services’ segment as it provides information excluding the volatility effects resulting from mark-to-market, LOCOM accounting adjustments and gains or losses from dispositions recorded during the current period, as well as the offset of mark-to-market gains or losses reported in prior periods.
Operating margin is a non-GAAP measure calculated as operating revenues minus cost of goods sold and revenue taxes, excluding operation and maintenance expense, depreciation and amortization, certain taxes other than income taxes, Nicor merger expenses and gains or losses on the sale of assets, if any. These items are included in the company's calculation of operating income. We believe operating margin is a better indicator than operating revenues of the contribution resulting from customer growth, since cost of gas and revenue taxes are generally passed directly through to customers.
AGL Resources presents a non-GAAP measure of adjusted earnings per share (EPS) that excludes expenses incurred with respect to the Nicor merger, an additional accrual for the Nicor Gas PBR issue and the impact of our wholesale services segment. As we do not routinely engage in transactions of the magnitude of the Nicor merger, and consequently do not regularly incur transaction and integration-related expenses of correlative size, we believe that presenting EPS excluding Nicor merger-related expenses provides investors with an additional measure of our core operating performance. Examples of such expenses related to the merger and integration are: employee severance, relocation, consulting services, temporary labor and certain travel costs that is not expected to be recurring. In addition, we believe that presenting EPS excluding wholesale services provides investors with additional measures of core operating performance excluding the volatility effects resulting from mark-to-market and LOCOM accounting adjustments in the wholesale services segment. Details related to these adjustments are included in the management discussion and analysis section of the Annual Report on Form 10-K.
Operating margin and adjusted EPS should not be considered as alternatives to, or more meaningful indicators of, our operating performance than net income attributable to AGL Resources Inc., operating income or EPS, as determined in accordance with GAAP. In addition, our operating margin and adjusted EPS may not be comparable to similarly titled measures of another company.