ATO
$83.89
Atmos Energy
($.66)
(.78%)
Earnings Details
3rd Quarter June 2017
Wednesday, August 2, 2017 5:02:00 PM
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Summary

Atmos Energy Narrows Guidance

Atmos Energy (ATO) reported 3rd Quarter June 2017 earnings of $0.67 per share on revenue of $526.5 million. The consensus earnings estimate was $0.66 per share on revenue of $596.5 million.

The company said it expects fiscal 2017 earnings of $3.55 to $3.63 per share. The company's previous guidance was earnings of $3.45 to $3.65 per share and the current consensus earnings estimate is $3.59 per share for the year ending September 30, 2017.

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
$0.67
Earnings Whisper
-
Consensus Estimate
$0.66
Reported Revenue
$526.5 Mil
Revenue Estimate
$596.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Atmos Energy Corporation Reports Earnings for Fiscal 2017 Third Quarter and Nine Months; Tightens Fiscal 2017 Guidance

Atmos Energy Corporation (ATO) today reported consolidated results for its fiscal 2017 third quarter and nine months ended June 30, 2017.

Fiscal 2017 third quarter consolidated net income was $70.8 million, or $0.67 per diluted share, compared with consolidated net income of $71.2 million, or $0.69 per diluted share in the prior-year quarter.

Fiscal 2017 third quarter net income from continuing operations was $70.8 million, or $0.67 per diluted share. In the prior-year quarter, net income from continuing operations was $66.1 million, or $0.64 per diluted share.

The company now expects fiscal 2017 earnings from continuing operations to be in the middle of the tightened range of $3.55 to $3.63 per diluted share.

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 nine months ended June 30, 2017, net income from continuing operations was $346.9 million or $3.27 per diluted share, compared with net income from continuing operations of $310.7 million, or $3.01 per diluted share for the same period last year.

"Our regulatory framework is paramount to our success in becoming the nation’s safest utility," said Kim Cocklin, chief executive officer of Atmos Energy Corporation. "Timely recovery of our infrastructure investments provides for the efficient conversion of rate base growth to earnings growth. Now that our most significant rate activities have been concluded, we expect fiscal 2017 earnings from continuing operations to be in the middle of our tightened range of $3.55 to $3.63 per diluted share," Cocklin concluded.

Results for the Three Months Ended June 30, 2017

Distribution gross profit increased $19.0 million to $296.3 million for the three months ended June 30, 2017, compared with $277.3 million in the prior-year quarter. Gross profit reflects a net $13.7 million increase in rates, primarily in the Mid-Tex, West Texas, Louisiana and Mississippi Divisions. In addition, consumption increased a net $1.8 million, despite weather that was 19 percent warmer than the prior-year quarter and customer growth, primarily in the Mid-Tex Division, contributed an incremental $1.1 million in gross profit.

Pipeline and storage gross profit increased $1.7 million to $116.0 million for the three months ended June 30, 2017, compared with $114.3 million in the prior-year quarter. This increase is primarily the result of higher through system revenue of $1.3 million, largely related to incremental throughput on the Enlink Pipeline, which was acquired in the first quarter of fiscal 2017, and higher basis spreads due to increased production in the Permian Basin.

Continuing operation and maintenance expense for the three months ended June 30, 2017, was $128.7 million, compared with $131.4 million for the prior-year quarter. The $2.7 million quarter-over-quarter decrease was primarily driven by lower legal expenses.

Results for the Nine Months Ended June 30, 2017

Distribution gross profit increased $80.8 million to $1,105.0 million for the nine months ended June 30, 2017, compared with $1,024.2 million in the prior-year period. Gross profit reflects a net $59.0 million increase in rates, primarily in the Mid-Tex, Louisiana and Mississippi Divisions. Customer growth, primarily in the Mid-Tex Division, contributed an incremental $5.4 million in gross profit. Transportation gross profit, primarily in the Kentucky/Mid-States, Mid-Tex and West Texas Divisions, increased $4.2 million, period over period. Revenue-related taxes, primarily in the Mid-Tex and West Texas Divisions, increased gross profit by $3.8 million. In addition, net consumption increased $2.1 million, despite weather that was 12 percent warmer than the prior-year period.

Pipeline and storage gross profit increased $22.4 million to $336.9 million for the nine months ended June 30, 2017, compared with $314.5 million in the prior-year period. This increase primarily is attributable to a $22.1 million increase in revenue from the GRIP filings approved in fiscal 2016.

Continuing operation and maintenance expense for the nine months ended June 30, 2017, was $385.9 million, compared with $379.1 million for the prior-year period. This $6.8 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 nine months ended June 30, 2017, compared with $5.2 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 a $2.7 million gain recognized on the sale in the second fiscal quarter.

Capital expenditures increased $22.4 million to $812.1 million for the nine months ended June 30, 2017, compared with $789.7 million in the prior-year period, driven by a planned increase in spending for infrastructure replacements and enhancements.

For the nine months ended June 30, 2017, the company generated operating cash flow of $745.6 million, a $115.6 million increase compared with the nine months ended June 30, 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, primarily the recovery of deferred purchased gas cost.

The debt capitalization ratio at June 30, 2017 was 46.0 percent, compared with 48.5 percent at September 30, 2016 and 47.3 percent at June 30, 2016. At June 30, 2017, there was $258.6 million of short-term debt outstanding, compared with $829.8 million at September 30, 2016 and $670.5 million at June 30, 2016. On June 8, 2017, the company completed a public offering of $500 million of 3.00% senior unsecured notes due 2027 and $250 million of 4.125% senior unsecured notes due 2044. The net proceeds of approximately $753 million were used to repay $250 million 6.35% senior unsecured notes at maturity on June 15, 2017 and for general corporate purposes, including the repayment of commercial paper.

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 2017 earnings from continuing operations to be in the tightened range of $3.55 to $3.63 per diluted share. Net income from continuing operations is now expected to be in the range of $375 million to $385 million. Capital expenditures for fiscal 2017 are still expected to range between $1.1 billion and $1.25 billion.

Conference Call to be Webcast August 3, 2017

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2017 third quarter financial results on Thursday, August 3, 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.

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, 2016, and in the company’s Quarterly Report on Form 10-Q for the three and six months ended March 31, 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 Measure

The historical financial information in this news release utilizes a certain financial measure that is 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, a non-GAAP financial measure defined as operating revenues less purchased gas cost, is a better indicator of its financial performance than operating revenues as it provides a useful and more relevant measure to analyze its financial performance.

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)
Statements of Income
Three Months Ended
June 30
(000s except per share)
2017
2016
Gross Profit:
Distribution segment
$
296,293
$
277,336
Pipeline and storage segment
116,032
114,293
Intersegment eliminations
--
--
Gross profit
412,325
391,629
Operation and maintenance expense
128,690
131,388
Depreciation and amortization
80,023
72,880
Taxes, other than income
62,948
58,965
Total operating expenses
271,661
263,233
Operating income
140,664
128,396
Miscellaneous income (expense)
(289 )
1,118
Interest charges
28,498
27,679
Income from continuing operations before income taxes
111,877
101,835
Income tax expense
41,069
35,692
Income from continuing operations
70,808
66,143
Income from discontinued operations, net of tax
--
5,050
Net Income
$
70,808
$
71,193
Basic and diluted net income per share
Income per share from continuing operations
$
0.67
$
0.64
Income per share from discontinued operations
--
0.05
Net income per share - basic and diluted
$
0.67
$
0.69
Cash dividends per share
$
0.45
$
0.42
Basic and diluted weighted average shares outstanding
106,364
103,750
Three Months Ended
June 30
Summary Net Income by Segment (000s)
2017
2016
Distribution
$
36,514
$
30,361
Pipeline and storage
34,294
35,782
Net income from continuing operations
70,808
66,143
Net income from discontinued operations
--
5,050
Net Income
$
70,808
$
71,193
Atmos Energy Corporation
Financial Highlights, continued (Unaudited)
Statements of Income
Nine Months Ended
June 30
(000s except per share)
2017
2016
Gross Profit:
Distribution
$ 1,105,048
$
1,024,244
Pipeline and Storage
336,876
314,496
Intersegment eliminations
(44 )
--
Gross profit
1,441,880
1,338,740
Operation and maintenance expense
385,867
379,073
Depreciation and amortization
234,648
214,927
Taxes, other than income
185,611
171,959
Total operating expenses
806,126
765,959
Operating income
635,754
572,781
Miscellaneous expense
(450 )
(90 )
Interest charges
86,472
84,775
Income from continuing operations before income taxes
548,832
487,916
Income tax expense
201,974
177,224
Income from continuing operations
346,858
310,692
Income from discontinued operations, net of tax
10,994
5,172
Gain on sale of discontinued operations, net of tax
2,716
--
Net Income
$
360,568
$
315,864
Basic and diluted earnings per share
Income per share from continuing operations
$
3.27
$
3.01
Income per share from discontinued operations
0.13
0.05
Net income per share - basic and diluted
$
3.40
$
3.06
Cash dividends per share
$
1.35
$
1.26
Basic and diluted weighted average shares outstanding
105,862
103,137
Nine Months Ended
June 30
Summary Net Income by Segment (000s)
2017
2016
Distribution
$
253,023
$
219,377
Pipeline and Storage
93,835
91,315
Net income from continuing operations
346,858
310,692
Net income from discontinued operations
13,710
5,172
Net income
$
360,568
$
315,864
Atmos Energy Corporation
Financial Highlights, continued (Unaudited)
Condensed Balance Sheets
June 30,
September 30,
(000s)
2017
2016
Net property, plant and equipment
$
8,924,381
$
8,268,606
Cash and cash equivalents
69,777
47,534
Accounts receivable, net
250,224
215,880
Gas stored underground
151,656
179,070
Current assets of disposal group classified as held for sale
--
151,117
Other current assets
62,725
88,085
Total current assets
534,382
681,686
Goodwill
729,673
726,962
Noncurrent assets of disposal group classified as held for sale
--
28,616
Deferred charges and other assets
310,339
305,019
$
10,498,775
$ 10,010,889
Shareholders’ equity
$
3,901,710
$
3,463,059
Long-term debt
3,066,734
2,188,779
Total capitalization
6,968,444
5,651,838
Accounts payable and accrued liabilities
164,365
196,485
Current liabilities of disposal group classified as held for sale
--
72,900
Other current liabilities
322,721
439,085
Short-term debt
258,573
829,811
Current maturities of long-term debt
--
250,000
Total current liabilities
745,659
1,788,281
Deferred income taxes
1,853,564
1,603,056
Noncurrent liabilities of disposal group classified as held for sale
--
316
Deferred credits and other liabilities
931,108
967,398
$
10,498,775
$ 10,010,889
Atmos Energy Corporation
Financial Highlights, continued (Unaudited)
Condensed Statements of Cash Flows
Nine Months Ended
June 30
(000s)
2017
2016
Cash flows from operating activities
Net income
$
360,568
$
315,864
Depreciation and amortization
234,833
216,670
Deferred income taxes
188,256
171,042
Gain on sale of discontinued operations
(12,931 )
--
Discontinued cash flow hedging for natural gas marketing commodity
(10,579 )
--
contracts
Other
14,892
14,430
Changes in assets and liabilities
(29,478 )
(88,060 )
Net cash provided by operating activities
745,561
629,946
Cash flows from investing activities
Capital expenditures
(812,148 )
(789,688 )
Acquisition
(86,128 )
--
Proceeds from the sale of discontinued operations
140,253
--
Available-for-sale securities activities, net
(14,329 )
558
Use tax refund
18,562
--
Other, net
6,435
5,731
Net cash used in investing activities
(747,355 )
(783,399 )
Cash flows from financing activities
Net increase (decrease) in short-term debt
(571,238 )
212,539
Proceeds from issuance of long-term debt, net of premium/discount
884,911
--
Net proceeds from equity offering
98,755
98,660
Issuance of common stock through stock purchase and employee
22,673
26,500
retirement plans
Settlement of interest rate agreements
(36,996 )
--
Interest rate agreements cash collateral
25,670
(16,330 )
Repayment of long-term debt
(250,000 )
--
Cash dividends paid
(143,075 )
(130,363 )
Debt issuance costs
(6,663 )
--
Net cash provided by financing activities
24,037
191,006
Net increase in cash and cash equivalents
22,243
37,553
Cash and cash equivalents at beginning of period
47,534
28,653
Cash and cash equivalents at end of period
$
69,777
$
66,206
Three Months Ended
Nine Months Ended
June 30
June 30
Statistics
2017
2016
2017
2016
Consolidated distribution throughput (MMcf as metered)
76,281
69,456
324,555
330,968
Consolidated pipeline and storage transportation volumes (MMcf)
159,023
128,881
425,150
373,080
Distribution meters in service
3,213,853
3,179,726
3,213,853
3,179,726
Distribution average cost of gas
$
4.60
$
3.78
$
5.14
$
4.01

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SOURCE: Atmos Energy Corporation

Atmos Energy Corporation
Susan Giles, 972-855-3729