Atmos Energy Corporation Reports Earnings for Fiscal 2017 Second Quarter and Six Months; Reaffirms Fiscal 2017 Guidance

DALLAS--()--Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its fiscal 2017 second quarter and six months ended March 31, 2017.

  • Fiscal 2017 second quarter consolidated net income was $164.7 million, or $1.55 per diluted share, compared with consolidated net income of $141.8 million, or $1.38 per diluted share in the prior-year quarter.
  • Fiscal 2017 second quarter net income from continuing operations was $162.0 million, or $1.52 per diluted share. In the prior-year quarter, net income from continuing operations was $143.0 million, or $1.39 per diluted share, and the net loss from discontinued operations was $1.2 million, or $0.01 per diluted share.
  • The company recognized a net gain on the sale of discontinued operations of $2.7 million, or $0.03 per diluted share in the current-year quarter, upon completion of the sale of Atmos Energy Marketing, LLC in January 2017.
  • The company's Board of Directors has declared a quarterly dividend of $0.45 per common share. The indicated annual dividend for fiscal 2017 is $1.80, which represents a 7.1 percent increase over fiscal 2016.

For the six months ended March 31, 2017, net income from continuing operations was $276.1 million or $2.61 per diluted share, compared with net income from continuing operations of $244.5 million, or $2.38 per diluted share for the same period last year. Net income from discontinued operations for the six months ended March 31, 2017, was $13.7 million, or $0.13 per diluted share, including the gain on sale, compared with net income from discontinued operations of $0.1 million in the prior-year period.

“Our solid financial performance in the second quarter reflects the continued execution of our growth strategy, coupled with weather mechanisms which effectively insulated us during a period of warmer than normal weather,” said Kim Cocklin, chief executive officer of Atmos Energy Corporation. “Our results reflect the significant capital investments we have made in our infrastructure to safely and reliably deliver natural gas to our 3.2 million customers. For fiscal 2017, we remain on track to meet earnings from continuing operations of between $3.45 and $3.65 per diluted share,” Cocklin concluded.

Results for the Three Months Ended March 31, 2017

Distribution gross profit, which is defined as operating revenues less purchased gas cost, increased $37.9 million to $449.4 million for the three months ended March 31, 2017, compared with $411.5 million in the prior-year quarter. Gross profit reflects a net $29.5 million increase in rates, primarily in the Mid-Tex, Mississippi and Louisiana Divisions. In addition, customer growth primarily in the Mid-Tex and Tennessee service areas contributed an incremental $2.5 million in gross profit. These increases were partially offset by a net $0.6 million decline in consumption primarily due to weather that was 23 percent warmer than the prior-year quarter, before adjusting for weather normalization mechanisms.

Pipeline and storage gross profit, which is defined as operating revenues less purchased gas cost, increased $10.0 million to $111.2 million for the three months ended March 31, 2017, compared with $101.2 million in the prior-year quarter. This increase is primarily the result of a $10.8 million increase in revenues from the Gas Reliability Infrastructure Program (GRIP) filing approved in 2016.

Continuing operation and maintenance expense for the three months ended March 31, 2017, was $132.2 million, compared with $127.9 million for the prior-year quarter. The $4.3 million quarter-over-quarter increase was primarily driven by higher employee-related costs.

Results for the Six Months Ended March 31, 2017

Distribution gross profit increased $61.9 million to $808.8 million for the six months ended March 31, 2017, compared with $746.9 million in the prior-year period. Gross profit reflects a net $46.6 million increase in rates, primarily in the Mid-Tex, Louisiana and Mississippi Divisions. Customer growth primarily in the Mid-Tex Division contributed an incremental $4.2 million in gross profit. Revenue-related taxes primarily in the Mid-Tex and West Texas Divisions increased gross profit by $3.8 million. Transportation gross profit primarily in the Kentucky/Mid-States and West Texas Divisions increased $2.7 million, period over period. These increases were partially offset by a net $1.0 million decline in consumption primarily due to weather that was 12 percent warmer than the prior-year period, before adjusting for weather normalization mechanisms.

Pipeline and storage gross profit increased $20.6 million to $220.8 million for the six months ended March 31, 2017, compared with $200.2 million in the prior-year period. This increase primarily is attributable to a $21.5 million increase in revenue from the GRIP filings approved in fiscal 2016.

Continuing operation and maintenance expense for the six months ended March 31, 2017, was $257.2 million, compared with $247.7 million for the prior-year period. This $9.5 million increase was primarily driven by higher employee-related costs and increased pipeline maintenance spending.

In January 2017, the company completed the sale of its natural gas marketing business. Net income from discontinued operations was $13.7 million for the six months ended March 31, 2017, compared with $0.1 million in the prior–year period. The increase largely reflects the recognition of a net $6.6 million noncash gain in the first quarter of fiscal 2017 from unwinding hedge accounting for certain of the natural gas marketing business's financial positions as a result of the sale and the $2.7 million gain recognized on the sale.

Capital expenditures increased $23.4 million to $559.4 million for the six months ended March 31, 2017, compared with $536.0 million in the prior-year period, driven by a planned increase in spending for infrastructure replacements and enhancements.

For the six months ended March 31, 2017, the company generated operating cash flow of $552.0 million, a $99.0 million increase compared with the six months ended March 31, 2016. The year-over-year increase primarily reflects the positive cash effect of successful rate case outcomes achieved in fiscal 2016 and changes in working capital.

The debt capitalization ratio at March 31, 2017 was 45.8 percent, compared with 48.5 percent at September 30, 2016 and 47.8 percent at March 31, 2016. At March 31, 2017, there was $670.6 million of short-term debt outstanding, compared with $829.8 million at September 30, 2016 and $626.9 million at March 31, 2016. Short-term debt balances fluctuate due to the seasonal nature of the natural gas business and the timing of spending year over year.

Outlook

The leadership of Atmos Energy remains focused on enhancing system safety and reliability through infrastructure investment while delivering shareholder value and consistent earnings growth. Atmos Energy continues to expect fiscal 2017 earnings from continuing operations to be in the range of $3.45 to $3.65 per diluted share. Net income from continuing operations is still expected to be in the range of $365 million to $390 million. Capital expenditures for fiscal 2017 are still expected to range between $1.1 billion and $1.25 billion.

Conference Call to be Webcast May 4, 2017

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2017 second quarter financial results on Thursday, May 4, 2017, at 10:00 a.m. Eastern Time. The domestic telephone number is 877-485-3107 and the international telephone number is 201-689-8427. Kim Cocklin, Chief Executive Officer, Mike Haefner, President and Chief Operating Officer and Chris Forsythe, Senior Vice President and Chief Financial Officer will participate in the conference call. 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.

Highlights and Recent Developments

Board Retirement

On February 9, 2017, Atmos Energy announced the retirement of Dr. Thomas C. Meredith from the company's Board of Directors, effective February 8, 2017.

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, 2016, and in the company's Quarterly Report on Form 10-Q for the three months ended December 31, 2016. 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 the country's largest natural-gas-only distributor, 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. For more information, visit www.atmosenergy.com.

   
Atmos Energy Corporation

Financial Highlights (Unaudited)

 
 

Statements of Income

Three Months Ended
March 31
(000s except per share)   2017   2016  
Gross Profit:
Distribution segment $ 449,445 $ 411,456
Pipeline and storage segment 111,247 101,228
Intersegment eliminations      
Gross profit 560,692 512,684
Operation and maintenance expense 132,239 127,857
Depreciation and amortization 77,667 71,391
Taxes, other than income   65,614   61,780  
Total operating expenses 275,520 261,028
Operating income 285,172 251,656
Miscellaneous income (expense) 833 (329 )
Interest charges   26,944   27,559  
Income from continuing operations before income taxes 259,061 223,768
Income tax expense   97,049   80,765  
Income from continuing operations 162,012 143,003
Loss from discontinued operations, net of tax (1,193 )
Gain on sale of discontinued operations, net of tax   2,716    
Net Income $ 164,728 $ 141,810  
Basic and diluted net income per share
Income per share from continuing operations $ 1.52 $ 1.39
Income (loss) per share from discontinued operations   0.03   (0.01 )
Net income per share - basic and diluted $ 1.55 $ 1.38  
Cash dividends per share $ 0.45 $ 0.42  
Basic and diluted weighted average shares outstanding   105,935   102,946  
 
 
Three Months Ended
March 31

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

  2017   2016  
Distribution $ 131,145 $ 115,080
Pipeline and storage   30,867   27,923  
Net income from continuing operations 162,012 143,003
Net income from discontinued operations   2,716   (1,193 )
Net Income $ 164,728 $ 141,810  
   
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 
 

Statements of Income

Six Months Ended
March 31

(000s except per share)

  2017     2016  
Gross Profit:
Distribution $ 808,755 $ 746,908
Pipeline and Storage 220,844 200,203
Intersegment eliminations   (44 )    
Gross profit 1,029,555 947,111
Operation and maintenance expense 257,177 247,685
Depreciation and amortization 154,625 142,047
Taxes, other than income   122,663     112,994  
Total operating expenses 534,465 502,726
Operating income 495,090 444,385
Miscellaneous expense (161 ) (1,208 )
Interest charges   57,974     57,096  
Income from continuing operations before income taxes 436,955 386,081
Income tax expense   160,905     141,532  
Income from continuing operations 276,050 244,549
Income from discontinued operations, net of tax 10,994 122
Gain on sale of discontinued operations, net of tax   2,716      
Net Income $ 289,760   $ 244,671  
Basic and diluted earnings per share
Income per share from continuing operations $ 2.61 $ 2.38
Income per share from discontinued operations   0.13      
Net income per share - basic and diluted $ 2.74   $ 2.38  
Cash dividends per share $ 0.90   $ 0.84  
Basic and diluted weighted average shares outstanding   105,610     102,837  
 
 
Six Months Ended
March 31

Summary Net Income by Segment (000s)

  2017     2016  
Distribution $ 216,509 $ 189,016
Pipeline and Storage   59,541     55,533  
Net income from continuing operations 276,050 244,549
Net income from discontinued operations   13,710     122  
Net income $ 289,760   $ 244,671  
   
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Balance Sheets

March 31, September 30,
(000s)   2017   2016
Net property, plant and equipment $ 8,738,487 $ 8,268,606
Cash and cash equivalents 45,403 47,534
Accounts receivable, net 336,637 215,880
Gas stored underground 120,026 179,070
Current assets of disposal group classified as held for sale 151,117
Other current assets   61,018   88,085
Total current assets 563,084 681,686
Goodwill 729,673 726,962
Noncurrent assets of disposal group classified as held for sale 28,616
Deferred charges and other assets   330,222   305,019
$ 10,361,466 $ 10,010,889
 
Shareholders' equity $ 3,834,864 $ 3,463,059
Long-term debt   2,314,620   2,188,779
Total capitalization 6,149,484 5,651,838
Accounts payable and accrued liabilities 185,212 196,485
Current liabilities of disposal group classified as held for sale 72,900
Other current liabilities 390,253 439,085
Short-term debt 670,607 829,811
Current maturities of long-term debt   250,000   250,000
Total current liabilities 1,496,072 1,788,281
Deferred income taxes 1,810,160 1,603,056
Noncurrent liabilities of disposal group classified as held for sale 316
Deferred credits and other liabilities   905,750   967,398
$ 10,361,466 $ 10,010,889
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Statements of Cash Flows

Six Months Ended
March 31
(000s)   2017       2016  
Cash flows from operating activities
Net income $ 289,760 $ 244,671
Depreciation and amortization 154,810 143,211
Deferred income taxes 148,657 132,456
Gain on sale of discontinued operations (12,931 )
Discontinued cash flow hedging for natural gas marketing commodity contracts (10,579 )
Other 10,391 8,771
Changes in assets and liabilities   (28,105 )   (76,154 )
Net cash provided by operating activities 552,003 452,955
Cash flows from investing activities
Capital expenditures (559,385 ) (536,004 )
Acquisition (85,714 )
Proceeds from the sale of discontinued operations 133,560
Available-for-sale securities activities, net (8,918 ) (2,117 )
Other, net   3,787     4,597  
Net cash used in investing activities (516,670 ) (533,524 )
Cash flows from financing activities
Net increase (decrease) in short-term debt (159,204 ) 169,002
Proceeds from issuance of long-term debt, net of discount 125,000
Net proceeds from equity offering 49,400
Issuance of common stock through stock purchase and employee retirement plans 16,984 17,641
Interest rate agreements cash collateral 25,670
Cash dividends paid   (95,314 )   (86,809 )
Net cash provided by (used in) financing activities   (37,464 )   99,834  
Net increase (decrease) in cash and cash equivalents (2,131 ) 19,265
Cash and cash equivalents at beginning of period   47,534     28,653  
Cash and cash equivalents at end of period $ 45,403   $ 47,918  
   
Three Months Ended
March 31
Six Months Ended
March 31

Statistics

  2017     2016     2017     2016
Consolidated distribution throughput (MMcf as metered) 137,669 157,047 248,274 261,512
Consolidated pipeline and storage transportation volumes (MMcf) 131,151 115,040 266,127 244,199
Distribution meters in service 3,208,532 3,176,716 3,208,532 3,176,716
Distribution average cost of gas $ 5.25 $ 3.87 $ 5.28 $ 4.05

Contacts

Atmos Energy Corporation
Susan Giles, 972-855-3729

Contacts

Atmos Energy Corporation
Susan Giles, 972-855-3729