Atmos Energy Corporation Reports Earnings for the Fiscal 2013 Second Quarter and Six Months; Raises Fiscal 2013 Guidance

Wed May 1, 2013 5:01pm EDT

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Atmos Energy Corporation Reports Earnings for the Fiscal 2013 Second Quarter and Six Months; Raises Fiscal 2013 Guidance

Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its fiscal 2013 second quarter and six months ended March 31, 2013.

  • Fiscal 2013 second quarter consolidated net income, excluding net unrealized margins, was $114.8 million, or $1.25 per diluted share, compared with net income, excluding net unrealized margins of $116.8 million, or $1.28 per diluted share in the prior-year quarter.
  • After including noncash, unrealized net gains of $1.6 million, or $0.02 per diluted share, fiscal 2013 second quarter net income was $116.4 million, or $1.27 per diluted share. Net income was $109.1 million, or $1.20 per diluted share in the prior-year quarter, after including unrealized net losses of $7.7 million or ($0.08) per diluted share.
  • As anticipated, net income for the quarter decreased due to rate design changes recently implemented in the Texas service areas, which shifts margins from the first and second fiscal quarters into the third and fourth fiscal quarters.
  • Fiscal 2013 earnings guidance was increased to $2.45 to $2.55 per diluted share from $2.40 and $2.50 per diluted share, excluding unrealized margins and the gain on the sale of the company’s Georgia operations.

For the six months ended March 31, 2013, consolidated net income was $196.9 million, or $2.15 per diluted share, compared with net income of $177.6 million, or $1.94 per diluted share for the same period last year. Results from nonregulated operations include noncash, unrealized net gains of $15.0 million, or $0.16 per diluted share for the six months ended March 31, 2013, compared with net gains of $5.3 million, or $0.06 per diluted share for the prior-year period. For the current six-month period, regulated operations contributed $179.1 million of net income, or $1.95 per diluted share, and nonregulated operations contributed net income of $17.8 million, or $0.20 per diluted share. For the current six-month period, net income from regulated operations includes $7.2 million, or $0.08 per diluted share from discontinued operations, compared with $13.2 million, or $0.14 per diluted share for the same period last year.

“Regulated operations have continued to deliver stable and predictable earnings, driven by revenue growth from increased capital investment and well executed regulatory strategy,” said Kim Cocklin, president and chief executive officer of Atmos Energy Corporation. “We will continue investing in our infrastructure to provide safe and reliable energy service to our customers while delivering an attractive shareholder return to our investors.”

“With half of our fiscal year now complete and earlier than expected revenue growth from our rate base investment, we are raising our earnings guidance to $2.45 to $2.55 per diluted share,” Cocklin concluded.

Results for the 2013 Second Quarter Ended March 31, 2013

Natural gas distribution gross profit, excluding discontinued operations, decreased $25.3 million to $347.0 million for the fiscal 2013 second quarter, compared with $372.3 million in the prior-year quarter. As expected, this decrease primarily reflects a decrease in margins due to the rate design changes implemented in the recent Mid-Tex and West Texas Divisions’ rate cases, which resulted in an increase to the customer’s base charge and decrease to the consumption charge. These rate design changes result in a shift in margins from the first and second fiscal quarters to the third and fourth fiscal quarters.

Regulated transmission and storage gross profit increased $3.8 million to $61.8 million for the quarter ended March 31, 2013, compared with $58.0 million for the same quarter last year. This increase is primarily the result of increased revenue from the Gas Reliability Infrastructure Program (GRIP) filing that became effective in April 2012.

Nonregulated gross profit increased $28.5 million to $24.3 million for the fiscal 2013 second quarter, compared with ($4.2) million for the prior-year quarter. Asset optimization margins increased $12.1 million from the prior-year quarter, primarily due to gains realized on the settlement of financial positions compared with losses incurred in the prior-year quarter, coupled with lower storage demand fees. Realized margins for gas delivery, storage and transportation services and other services increased $0.9 million quarter-over-quarter, primarily due to a $0.01/Mcf increase in per-unit margins, partially offset by a two percent decrease in consolidated sales volumes.

Interest charges for the second quarter of fiscal 2013 were $33.3 million, compared with $36.6 million for the prior-year quarter. The $3.3 million quarter-over-quarter decrease resulted primarily from interest deferrals related to Texas infrastructure spending in the current quarter.

Results for the Six Months Ended March 31, 2013

Natural gas distribution gross profit, excluding discontinued operations, decreased $29.3 million to $626.6 million for the six months ended March 31, 2013, compared with $655.9 million in the prior-year period. This decrease primarily reflects the aforementioned rate design changes implemented in the Texas service areas. Additionally, revenue-related taxes decreased $2.6 million, primarily due to the reduced revenues in both the Mid-Tex and West Texas Divisions.

Regulated transmission and storage gross profit increased $7.7 million to $122.5 million for the six months ended March 31, 2013, compared with $114.8 million last year. This increase is primarily the result of increased revenue from the GRIP filing that became effective in April 2012.

Nonregulated gross profit increased $35.6 million to $46.8 million for the six months ended March 31, 2013, compared with $11.2 million for the prior-year period. Asset optimization margins increased $18.5 million period-over-period, primarily due to smaller losses incurred from asset optimization activities. Significantly larger losses were experienced in the prior-year period as Atmos Energy Holdings realized losses in a falling price market when it rolled positions to capture incremental physical to forward spread values that were subsequently realized during the fiscal third and fourth quarters of fiscal 2012. Additionally, realized asset optimization margins for the prior-year period included a $1.7 million charge to write down to market certain natural gas inventory that no longer qualified for fair value hedge accounting. Realized margins for gas delivery, storage and transportation services and other services remained essentially flat period over period, despite a four percent decrease in consolidated sales volumes.

Consolidated operation and maintenance expense, excluding discontinued operations, for the six months ended March 31, 2013, was $217.6 million, compared with $223.9 million for the prior-year period. The $6.3 million decrease resulted primarily from lower legal and other administrative costs, partially offset by an increase in contract labor.

Interest charges for the six months ended March 31, 2013 were $63.9 million, compared with $72.4 million for the same period last year. The $8.5 million period-over-period decrease resulted primarily from interest deferrals related to Texas infrastructure spending in the current period and lower long-term interest expense resulting from refinancing activities that occurred during the fourth quarter of fiscal 2012.

The debt capitalization ratio at March 31, 2013 was 51.4 percent, compared with 51.7 percent at September 30, 2012 and 50.2 percent at March 31, 2012. At March 31, 2013, there was $233.0 million of short-term debt outstanding, compared with $570.9 million at September 30, 2012 and $174.0 million at March 31, 2012.

For the six months ended March 31, 2013, the company generated operating cash flow of $376.3 million, a $15.6 million increase compared with the six months ended March 31, 2012. The increase primarily reflects a $17.5 million period-over-period decrease in pension and postretirement contributions, combined with the timing of customer collections and vendor payments, as well as the effect of a decrease in the amount of cash used to inject gas into storage, primarily in the company’s nonregulated segment.

Capital expenditures increased to $389.1 million for the six months ended March 31, 2013, compared with $311.1 million in the prior-year period. The $78.0 million increase primarily reflects infrastructure spending in the Mid-Tex Division of the natural gas distribution segment and for the Line W and Line WX pipeline expansion projects in the regulated transmission and storage segment.

Outlook

The leadership of Atmos Energy remains focused on enhancing shareholder value by delivering consistent earnings growth. Atmos Energy now expects fiscal 2013 earnings to increase to a new range of $2.45 to $2.55 per diluted share, excluding unrealized margins and the gain on the sale of the company’s Georgia operations. The increase is based on continued strong earnings through the second fiscal quarter of 2013 from constructive rate outcomes in several jurisdictions, offset in part by the acceleration of the closing of the sale of the company’s Georgia assets. Net income from regulated operations is now expected to be in the range of $215 million to $223 million, while net income from nonregulated operations remains in the range of $9 million to $11 million. Total capital expenditures for fiscal 2013 are still expected to range between $770 million and $790 million.

Conference Call to be Webcast May 2, 2013

Atmos Energy will host a conference call with financial analysts to discuss the financial results for the fiscal 2013 second quarter and first six months on Thursday, May 2, 2013, at 9 a.m. Eastern Time. The telephone number is 877-485-3107, and the international telephone number is 201-689-8427. The conference call will be webcast live on the Atmos Energy website at www.atmosenergy.com. A playback of the call will be available on the website later that day. Kim Cocklin, president and chief executive officer, and Bret Eckert, senior vice president and chief financial officer, will participate in the conference call.

Highlights and Recent Developments

Robert W. Best Retires as Executive Chairman

On April 2, 2013, Atmos Energy announced that Robert W. Best had retired from the company, effective April 1, 2013. Subsequent to his retirement, the board appointed Mr. Best as chairman of the board.

Atmos Energy Completes Sale of Georgia Distribution Assets

On April 1, 2013, Atmos Energy completed the sale of substantially all of its natural gas distribution assets and related nonregulated assets located in Georgia to Liberty Energy (Georgia) Corp., an affiliate of Algonquin Power & Utilities Corp. Net cash proceeds for rate base and related working capital were approximately $155 million, subject to final purchase price adjustments. The company expects to record a net of tax gain on the sale of approximately $6 million, or $0.07 per diluted share in the third quarter of fiscal 2013.

This news release should be read in conjunction with the attached unaudited financial information.

Forward-Looking Statements

The matters discussed in this news release may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this news release are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this news release or in any of the company’s other documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “objective,” “plan,” “projection,” “seek,” “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this news release, including the risks and uncertainties relating to regulatory trends and decisions, the company’s ability to continue to access the capital markets and the other factors discussed in the company’s reports filed with the Securities and Exchange Commission. These factors include the risks and uncertainties discussed in the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012 and in the company’s Quarterly Report on Form 10-Q for the three months ended December 31, 2012. Although the company believes these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. The company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

About Atmos Energy

Atmos Energy Corporation, headquartered in Dallas, is one of the country's largest natural-gas-only distributors, serving over three million natural gas distribution customers in over 1,400 communities in eight states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy also manages company-owned natural gas pipeline and storage assets, including one of the largest intrastate natural gas pipeline systems in Texas and provides natural gas marketing and procurement services to industrial, commercial and municipal customers primarily in the Midwest and Southeast. For more information, visit www.atmosenergy.com.

 
 
Atmos Energy Corporation

Financial Highlights (Unaudited)

 
    Three Months Ended    

Consolidated Statements of Income

March 31 Percentage
(000s except per share)   2013         2012       Change
   
Gross Profit:
Natural gas distribution segment $ 347,006 $ 372,328 (7 )%
Regulated transmission and storage segment 61,848 58,037 7 %
Nonregulated segment 24,307 (4,229 ) 675 %
Intersegment eliminations   (410 )   (349 ) (17 )%
Gross profit 432,751 425,787 2 %
 
Operation and maintenance expense 111,086 109,300 2 %
Depreciation and amortization 57,180 59,420 (4 )%
Taxes, other than income   54,307     54,635   (1 )%
Total operating expenses 222,573 223,355 %
 
Operating income 210,178 202,432 4 %
 
Miscellaneous income 1,712 506 238 %
Interest charges   33,331     36,643   (9 )%
 
Income from continuing operations
before income taxes 178,559 166,295 7 %
Income tax expense   66,219     64,211   3 %
Income from continuing operations 112,340 102,084 10 %
 
Income from discontinued operations, net of tax   4,085     7,027   (42 )%
Net income $ 116,425   $ 109,111   7 %
 
Basic earnings per share
Income per share from continuing operations $ 1.24 $ 1.12
Income per share from discontinued operations   0.04     0.08  
Net income per share – basic $ 1.28   $ 1.20  
 
Diluted earnings per share
Income per share from continuing operations $ 1.23 $ 1.12
Income per share from discontinued operations   0.04     0.08  
Net income per share – diluted $ 1.27   $ 1.20  
 
Cash dividends per share $ 0.350 $ 0.345
 
Weighted average shares outstanding:
Basic 90,530 90,020
Diluted 91,492 90,322
 
 
Three Months Ended
March 31 Percentage

Summary Net Income (Loss) by Segment (000s)

  2013         2012       Change
 
Natural gas distribution – continuing operations $ 86,190 $ 94,475 (9 )%
Natural gas distribution – discontinued operations 4,085 7,027 (42 )%
Regulated transmission and storage 16,530 14,620 13 %
Nonregulated 7,997 730 995 %
Unrealized margins, net of tax   1,623     (7,741 ) 121 %
Consolidated net income $ 116,425   $ 109,111   7 %
 
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 
    Six Months Ended    

Consolidated Statements of Income

March 31 Percentage
(000s except per share)   2013         2012       Change
   
Gross Profit:
Natural gas distribution segment $ 626,637 $ 655,923 (4 )%
Regulated transmission and storage segment 122,529 114,796 7 %
Nonregulated segment 46,766 11,176 318 %
Intersegment eliminations   (819 )   (716 ) (14 )%
Gross profit 795,113 781,179 2 %
 
Operation and maintenance expense 217,613 223,944 (3 )%
Depreciation and amortization 116,759 117,786 (1 )%
Taxes, other than income   95,641     97,546   (2 )%
Total operating expenses 430,013 439,276 (2 )%
 
Operating income 365,100 341,903 7 %
 
Miscellaneous income (expense) 2,410 (1,510 ) 260 %
Interest charges   63,853     72,369   (12 )%
 
Income from continuing operations before
income taxes 303,657 268,024 13 %
Income tax expense   113,969     103,556   10 %
Income from continuing operations 189,688 164,468 15 %
 
Income from discontinued operations, net of tax   7,202     13,150   (45 )%
Net income $ 196,890   $ 177,618   11 %
 
Basic earnings per share
Income per share from continuing operations $ 2.09 $ 1.81
Income per share from discontinued operations   0.08     0.14  
Net income per share – basic $ 2.17   $ 1.95  
 
Diluted earnings per share
Income per share from continuing operations $ 2.07 $ 1.80
Income per share from discontinued operations   0.08     0.14  
Net income per share – diluted $ 2.15   $ 1.94  
 
Cash dividends per share $ 0.70 $ 0.69
 
Weighted average shares outstanding:
Basic 90,445 90,137
Diluted 91,406 90,440
 
 
Six Months Ended
March 31 Percentage

Summary Net Income (Loss) by Segment (000s)

  2013         2012       Change
 
Natural gas distribution – continuing operations $ 139,283 $ 138,976 %
Natural gas distribution – discontinued operations 7,202 13,150 (45 )%
Regulated transmission and storage 32,635 28,034 16 %
Nonregulated 2,766 (7,835 ) 135 %
Unrealized margins, net of tax   15,004     5,293   183 %
Consolidated net income $ 196,890   $ 177,618   11 %
 
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Discontinued Operations

    Three Months Ended     Six Months Ended
(000s) March 31 March 31
2013     2012     2013     2012
       
Operating revenues $ 21,678 $ 44,315 $ 37,962 $ 84,945
Purchased gas cost   12,497   26,493   21,464   51,133
Gross profit 9,181 17,822 16,498 33,812
 
Operating expenses   3,038   6,819   5,858   13,547
Operating income 6,143 11,003 10,640 20,265
Other nonoperating income   200   55   548   432
Income from discontinued operations
before income taxes 6,343 11,058 11,188 20,697
Income tax expense   2,258   4,031   3,986   7,547
 
Net income from discontinued operations $ 4,085 $ 7,027 $ 7,202 $ 13,150
 
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Consolidated Balance Sheets

    March 31,     September 30,
(000s) 2013     2012
 
Net property, plant and equipment $ 5,710,273 $ 5,475,604
 
Cash and cash equivalents 65,547 64,239
Accounts receivable, net 485,601 234,526
Gas stored underground 197,356 256,415
Other current assets   253,916   272,782
 
Total current assets 1,002,420 827,962
 
Goodwill and intangible assets 740,825 740,847
Deferred charges and other assets   500,212   451,262
 
$ 7,953,730 $ 7,495,675
 
 
Shareholders’ equity $ 2,543,470 $ 2,359,243
Long-term debt   2,455,514   1,956,305
 
Total capitalization 4,998,984 4,315,548
 
Accounts payable and accrued liabilities 316,411 215,229
Other current liabilities 377,357 489,665
Short-term debt 232,998 570,929
Current maturities of long-term debt     131
 
Total current liabilities 926,766 1,275,954
 
Deferred income taxes 1,168,140 1,015,083
Deferred credits and other liabilities   859,840   889,090
 
$ 7,953,730 $ 7,495,675
 
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 
    Six Months Ended

Condensed Consolidated Statements of Cash Flows

March 31
(000s)   2013         2012  
   
Cash flows from operating activities
 
Net income $ 196,890 $ 177,618
Depreciation and amortization 118,873 122,735
Deferred income taxes 106,891 102,052
Other 5,519 9,874
Changes in assets and liabilities   (51,832 )   (51,556 )
Net cash provided by operating activities 376,341 360,723
 
Cash flows from investing activities
 
Capital expenditures (389,117 ) (311,123 )
Other, net   (3,700 )   (3,878 )
Net cash used in investing activities (392,817 ) (315,001 )
 
Cash flows from financing activities
 
Net decrease in short-term debt (342,141 ) (48,945 )
Net proceeds from issuance of long-term debt 493,793
Settlement of Treasury lock agreements (66,626 )
Repayment of long-term debt (131 ) (2,369 )
Cash dividends paid (64,008 ) (62,907 )
Repurchase of common stock (12,535 )
Repurchase of equity awards (3,124 ) (3,509 )
Issuance of common stock   21     164  
Net cash provided by (used in) financing activities   17,784     (130,101 )
 
Net increase (decrease) in cash and cash equivalents 1,308 (84,379 )
Cash and cash equivalents at beginning of period   64,239     131,419  
Cash and cash equivalents at end of period $ 65,547   $ 47,040  
       
Three Months Ended Six Months Ended
March 31 March 31

Statistics, including discontinued operations

2013     2012     2013     2012

Consolidated natural gas distribution throughput (MMcf as metered)

159,337

   

144,894

273,036

   

266,642

Consolidated regulated transmission and storage transportation volumes (MMcf)

105,099

109,626

213,842

214,663

Consolidated nonregulated delivered gas sales volumes (MMcf)

97,732

99,844

182,450

190,714

Natural gas distribution meters in service 3,150,173 3,220,045 3,150,173 3,220,045

Natural gas distribution average cost of gas

$4.67 $4.94 $4.77 $4.87
Nonregulated net physical position (Bcf) 20.8 38.0 20.8 38.0

Atmos Energy Corporation
Susan Giles, 972-855-3729