ATO
$83.90
Atmos Energy
($.33)
(.39%)
Earnings Details
1st Quarter December 2017
Tuesday, February 06, 2018 5:02:00 PM
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Summary

Atmos Energy Raises Guidance

Atmos Energy (ATO) reported 1st Quarter December 2017 earnings of $1.40 per share on revenue of $0.0 million. The consensus earnings estimate was $1.14 per share on revenue of $904.5 million.

The company said it expects fiscal 2018 earnings of $3.85 to $4.05 per share. The company's previous guidance was earnings of $3.75 to $3.95 per share and the current consensus earnings estimate is $3.82 per share for the year ending September 30, 2018.

Atmos Energy Corp is engaged in the regulated natural gas distribution, transmission & storage businesses & other nonregulated natural gas businesses. It distributes natural gas to residential, commercial, public authority & industrial customer.

Results
Reported Earnings
$1.40
Earnings Whisper
-
Consensus Estimate
$1.14
Reported Revenue
Revenue Estimate
$904.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Atmos Energy Corporation Reports Earnings for Fiscal 2018 First Quarter; Raises Fiscal 2018 Guidance

Atmos Energy Corporation (ATO) today reported consolidated results for its first quarter ended December 31, 2017.

Fiscal 2018 first quarter consolidated net income was $314.1 million, or $2.89 per diluted share, compared with consolidated net income of $125.0 million, or $1.19 per diluted share in the prior-year quarter.

Adjusted net income from continuing operations was $152.2 million, or $1.40 per diluted share after excluding a one-time income tax benefit of $161.9 million, or $1.49 per diluted share, related to the Tax Cuts and Jobs Act of 2017 (the TCJA) due to the revaluation of the Company’s net deferred tax liabilities. Net income from continuing operations was $114.0 million, or $1.08 per diluted share for the same period last year.

Fiscal 2018 earnings guidance was increased to $3.85 to $4.05 per diluted share from $3.75 to $3.95 per diluted share. Capital expenditures are expected to remain in the previously announced range of $1.3 billion to $1.4 billion in fiscal 2018.

The company’s Board of Directors has declared a quarterly dividend of $0.485 per common share. The indicated annual dividend for fiscal 2018 is $1.94, which represents a 7.8 percent increase over fiscal 2017.

"Executing on our strategy of infrastructure investment continues to deliver solid results," said Mike Haefner, President and Chief Executive Officer of Atmos Energy Corporation. "Additionally, we believe that the impact of tax reform will be good for our customers and the lower tax rate will result in over $100 million of annual savings to customer bills. We are working with regulators in each of our jurisdictions to return this benefit. Our strategy remains unchanged and looking forward, we remain well positioned to continue delivering annual earnings growth in the 6 percent to 8 percent range," Haefner concluded.

Results for the Three Months Ended December 31, 2017

Distribution gross profit increased $37.7 million to $397.0 million for the three months ended December 31, 2017, compared with $359.3 million in the prior-year period. Gross profit reflects a net $25.6 million increase in rates, primarily in our Texas, Mississippi and Kentucky/Mid-States Divisions. In addition, net consumption increased $5.7 million, primarily due to weather that was 20 percent colder than the prior-year quarter.

Pipeline and storage gross profit increased $16.0 million to $125.6 million for the three months ended December 31, 2017, compared with $109.6 million in the prior-year quarter. This increase is primarily attributable to a $13.9 million increase in revenue from the Atmos Pipeline-Texas rate case and the Gas Reliability Infrastructure Program (GRIP) filing approved in December 2017.

Consolidated operation and maintenance expense for the three months ended December 31, 2017, was $129.6 million, compared with $124.9 million in the prior-year quarter. This increase was primarily driven by higher maintenance activities in the company’s distribution segment and higher employee-related costs in the current year.

Excluding the one-time income tax benefit, the effective tax rate for the three months ended December 31, 2017 decreased to 26.8%, compared to 35.9% in the prior-year quarter. The decrease primarily reflects the lower statutory federal income tax rate due to enactment of the TCJA. The lower effective tax rate reduced tax expense by approximately $16 million.

Capital expenditures increased $85.2 million to $383.2 million for the three months ended December 31, 2017, compared with $298.0 million in the prior-year quarter, due to a planned increase in spending for infrastructure replacements and enhancements.

For the three months ended December 31, 2017, the company generated operating cash flow of $173.2 million, a $56.3 million increase compared with the three months ended December 31, 2016. The quarter-over-quarter increase primarily reflects the positive cash effect of successful rate case outcomes achieved in fiscal 2017, as well as higher recoveries of deferred gas cost due to higher distribution sales volumes in the current quarter compared to the prior-year quarter.

The equity capitalization ratio at December 31, 2017 was 57.3%, compared with 52.6% at September 30, 2017. On November 28, 2017, Atmos Energy completed the public offering of 4,558,404 shares of common stock for gross proceeds of approximately $400 million. Atmos Energy used the net proceeds of $395.1 million from this offering to repay short-term debt under its commercial paper program, to fund capital spending primarily to enhance the safety and reliability of its system and for general corporate purposes.

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 now expects fiscal 2018 earnings to be in the range of $3.85 to $4.05 per diluted share, excluding the one-time, non-cash income tax benefit recognized during the first quarter. The increase primarily reflects the accounting effects from implementing the TCJA. Capital expenditures for fiscal 2018 are expected to remain in the previously announced range of $1.3 billion to $1.4 billion.

Conference Call to be Webcast February 7, 2018

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2018 first quarter financial results on Wednesday, February 7, 2018, at 8:00 a.m. Eastern Time. The domestic telephone number is 877-485-3107 and the international telephone number is 201-689-8427. Mike Haefner, President and Chief Executive 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.

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 credit and 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, 2017. 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.

Non-GAAP Financial Measures

The historical financial information in this news release utilizes certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). Specifically, the company uses gross profit, defined as operating revenues less purchased gas cost, to discuss and analyze its financial performance. Its operations are affected by the cost of natural gas, which is passed through to its customers without markup and includes commodity price, transportation, storage, injection and withdrawal fees, along with hedging settlements. These costs are reflected in the income statement as purchased gas cost. Therefore, increases in the cost of gas are offset by a corresponding increase in revenues. Accordingly, the company believes gross profit is a more useful and relevant measure to analyze its financial performance than operating revenues.

In addition, the enactment of the TCJA required the company to remeasure its deferred tax assets and liabilities at its new federal statutory income tax rate as of December 31, 2017, which resulted in the recognition of a one-time, non-cash income tax benefit of $161.9 million during the three months ended December 31, 2017. Due to the non-recurring nature of this benefit, the company believes that income from continuing operations and diluted earnings per share from continuing operations before the one-time, non-cash income tax benefit, provides a more useful and relevant measure to analyze its financial performance than income from continuing operations and consolidated diluted earnings per share from continuing operations. Accordingly, the discussion and analysis of the company’s financial performance will reference adjusted income from continuing operations and diluted earnings per share, which is calculated as follows:

Three Months Ended December 31
2017
2016
Change
(In thousands, except per share data)
Income from continuing operations
$ 314,132
$
114,038
$
200,094
One-time, non-cash income tax benefit
161,884
--
161,884
Adjusted income from continuing operations
$ 152,248
$
114,038
$
38,210
Consolidated diluted EPS from continuing operations
$
2.89
$
1.08
$
1.81
Diluted EPS from one-time, non-cash income tax benefit
1.49
--
1.49
Adjusted diluted EPS from continuing operations
$
1.40
$
1.08
$
0.32

About Atmos Energy

Atmos Energy Corporation, headquartered in Dallas, is the country’s largest fully-regulated, 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)
Three Months Ended
Statements of Income
December 31
(000s except per share)
2017
2016
Gross Profit:
Distribution segment
$
397,034
$ 359,310
Pipeline and storage segment
125,551
109,597
Intersegment eliminations
(310 )
(44 )
Gross profit
522,275
468,863
Operation and maintenance expense
129,567
124,938
Depreciation and amortization
88,374
76,958
Taxes, other than income
62,773
57,049
Total operating expenses
280,714
258,945
Operating income
241,561
209,918
Miscellaneous expense
(2,035 )
(994 )
Interest charges
31,509
31,030
Income from continuing operations before income taxes
208,017
177,894
Income tax expense (benefit)
(106,115 )
63,856
Income from continuing operations
314,132
114,038
Income from discontinued operations, net of tax
--
10,994
Net Income
$
314,132
$ 125,032
Basic and diluted net income per share
Income per share from continuing operations
$
2.89
$
1.08
Income per share from discontinued operations
--
0.11
Net income per share - basic and diluted
$
2.89
$
1.19
Cash dividends per share
$
0.485
$
0.450
Basic and diluted weighted average shares outstanding
108,564
105,284
Three Months Ended
December 31
Summary Net Income by Segment (000s)
2017
2016
Distribution
$
249,099
$
85,364
Pipeline and storage
65,033
28,674
Net income from continuing operations
314,132
114,038
Net income from discontinued operations
--
10,994
Net Income
$
314,132
$ 125,032
Atmos Energy Corporation
Financial Highlights, continued (Unaudited)
Condensed Balance Sheets
December 31,
September 30,
(000s)
2017
2017
Net property, plant and equipment
$
9,518,792
$
9,259,182
Cash and cash equivalents
54,750
26,409
Accounts receivable, net
489,217
222,263
Gas stored underground
163,959
184,653
Other current assets
70,984
106,321
Total current assets
778,910
539,646
Goodwill
730,132
730,132
Deferred charges and other assets
236,886
220,636
$ 11,264,720
$
10,749,596
Shareholders’ equity
$
4,563,620
$
3,898,666
Long-term debt
3,067,469
3,067,045
Total capitalization
7,631,089
6,965,711
Accounts payable and accrued liabilities
285,675
233,050
Other current liabilities
336,919
332,648
Short-term debt
336,816
447,745
Total current liabilities
959,410
1,013,443
Deferred income taxes
1,033,206
1,878,699
Regulatory excess deferred taxes
746,246
--
Deferred credits and other liabilities
894,769
891,743
$ 11,264,720
$
10,749,596
Atmos Energy Corporation
Financial Highlights, continued (Unaudited)
Three Months Ended
Condensed Statements of Cash Flows
December 31
(000s)
2017
2016
Cash flows from operating activities
Net income
$
314,132
$
125,032
Depreciation and amortization
88,374
77,143
Deferred income taxes
53,149
67,241
One-time income tax benefit
(161,884 )
--
Discontinued cash flow hedging for natural gas marketing commodity
--
(10,579 )
contracts
Other
6,915
4,842
Changes in assets and liabilities
(127,448 )
(146,716 )
Net cash provided by operating activities
173,238
116,963
Cash flows from investing activities
Capital expenditures
(383,238 )
(297,962 )
Acquisition
--
(85,714 )
Available-for-sale securities activities, net
(135 )
(10,263 )
Other, net
2,001
1,802
Net cash used in investing activities
(381,372 )
(392,137 )
Cash flows from financing activities
Net increase (decrease) in short-term debt
(110,929 )
110,936
Proceeds from issuance of long-term debt, net of premium/discount
--
125,000
Net proceeds from equity offering
395,099
49,400
Issuance of common stock through stock purchase and employee
5,660
8,998
retirement plans
Interest rate agreements cash collateral
--
25,670
Cash dividends paid
(51,837 )
(47,740 )
Other
(1,518 )
--
Net cash provided by financing activities
236,475
272,264
Net increase (decrease) in cash and cash equivalents
28,341
(2,910 )
Cash and cash equivalents at beginning of period
26,409
47,534
Cash and cash equivalents at end of period
$
54,750
$
44,624
Three Months Ended
December 31
Statistics
2017
2016
Consolidated distribution throughput (MMcf as metered)
124,357
110,605
Consolidated pipeline and storage transportation volumes (MMcf)
155,105
134,976
Distribution meters in service
3,236,524
3,202,106
Distribution average cost of gas
$
5.37
$
5.31

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SOURCE: Atmos Energy Corporation

Atmos Energy Corporation
Jennifer Hills, 972-855-3729