November 8, 2017 - 5:02 PM EST
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Atmos Energy Corporation Reports Earnings for Fiscal 2017 and Initiates Fiscal 2018 Guidance; Raises Dividend 7.8 Percent

DALLAS

Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its 2017 fiscal year and fourth quarter ended September 30, 2017.

  • Fiscal 2017 consolidated net income was $396.4 million, or $3.73 per diluted share, compared with consolidated net income of $350.1 million, or $3.38 per diluted share in the prior year.
  • Fiscal 2017 net income from continuing operations was $382.7 million or $3.60 per diluted share, compared with net income from continuing operations of $345.5 million, or $3.33 per diluted share for the same period last year.
  • Fiscal 2017 net income from discontinued operations was $13.7 million, or $0.13 per diluted share, compared with net income from discontinued operations of $4.6 million, or $0.05 per diluted share in the prior year.
  • Capital expenditures were $1.14 billion for the year ended September 30, 2017, with approximately 80 percent of that spending related to system safety and reliability investments.
  • Atmos Energy expects fiscal 2018 earnings to be in the range of $3.75 to $3.95 per diluted share. Capital expenditures are expected to be in the 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.

For the quarter ended September 30, 2017, net income from continuing operations was $35.9 million, or $0.34 per diluted share, compared with net income from continuing operations of $34.9 million, or $0.33 per diluted share for the same quarter last year.

“Our business strategy continues to deliver solid results,” said Mike Haefner, president and chief executive officer of Atmos Energy Corporation. “Once again our employees have gone above and beyond to deliver value to our customers, communities, and investors. The financial strength of the company and quality of our team sustain our ongoing investments in system safety, reliability, growth, and expansion while providing an attractive return to shareholders. We are well-positioned to continue delivering annual earnings per share growth in the six to eight percent range,” Haefner concluded.

Results for the Fiscal Year Ended September 30, 2017

Distribution gross profit increased $98.5 million to $1,379.7 million for the year ended September 30, 2017, compared with $1,281.2 million in the prior year. Gross profit reflects a net $72.4 million increase in rates, primarily in the Mid-Tex, Louisiana, Mississippi and Kentucky/Mid-States Divisions. Customer growth, primarily in the Mid-Tex Division, contributed an incremental $5.8 million in gross profit. Transportation gross profit, primarily in the Kentucky/Mid-States and Mid-Tex Divisions, increased $5.8 million year over year. In addition, net consumption increased $2.9 million, despite weather that was 12 percent warmer than the prior year.

Pipeline and storage gross profit increased $27.2 million to $454.5 million for the year ended September 30, 2017, compared with $427.3 million in the prior year. This increase is primarily attributable to a $24.6 million increase in rates from the approved 2016 GRIP filings and the rate case finalized in August 2017.

Continuing operation and maintenance expense for the year ended September 30, 2017, was $546.8 million, compared with $538.6 million in the prior year. This $8.2 million increase was primarily driven by higher employee-related costs.

Interest charges for the year ended September 30, 2017 were $120.2 million, compared with $114.8 million in the prior year. The $5.4 million increase was primarily driven by an increase in long-term debt compared to the prior year.

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 year ended September 30, 2017, compared with $4.6 million in the prior year. 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 $50.1 million to $1,137.1 million for the year ended September 30, 2017, compared with $1,087.0 million in the prior year, driven by a planned increase in spending for infrastructure replacements and enhancements.

For the year ended September 30, 2017, the company generated operating cash flow of $867.1 million, a $72.1 million increase compared with the year ended September 30, 2016. The year-over-year increase primarily reflects the positive cash effect of successful rate case outcomes achieved in fiscal 2016.

The equity capitalization ratio at September 30, 2017 was 52.6%, compared with 51.5% at September 30, 2016. At September 30, 2017, there was $447.7 million of short-term debt outstanding, compared with $829.8 million at September 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 of 6.35% senior unsecured notes at maturity on June 15, 2017 and for general corporate purposes, including the repayment of commercial paper.

Results for the Quarter Ended September 30, 2017

Distribution gross profit increased $17.7 million to $274.7 million for the three months ended September 30, 2017, compared with $257.0 million in the prior-year quarter. Gross profit reflects a net $13.3 million increase in rates, primarily in the Mid-Tex, Louisiana, West Texas, Mississippi and Kentucky/Mid-States Divisions. Transportation gross profit, primarily in the Kentucky/Mid-States and Mid-Tex Divisions, increased $1.7 million.

Pipeline and storage gross profit increased $4.8 million to $117.6 million for the three months ended September 30, 2017, compared with $112.8 million in the prior-year quarter. This increase is primarily the result of higher through system revenue, 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.

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 expects fiscal 2018 earnings to be in the range of $3.75 to $3.95 per diluted share. Capital expenditures for fiscal 2018 are expected to range between $1.3 billion and $1.4 billion.

Conference Call to be Webcast November 9, 2017

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2017 financial results on Thursday, November 9, 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. 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.

Highlights and Recent Developments

On October 11, 2017, Atmos Energy announced that Susan Giles would retire and Jennifer Hills would succeed her as Vice President, Investor Relations, effective November 1, 2017.

On August 7, 2017, Atmos Energy announced that Karen E. Hartsfield, Senior Attorney had been appointed by the Board of Directors as Senior Vice President, General Counsel and Corporate Secretary, and would serve on the company’s Management Committee.

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 nine months ended June 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 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

Year Ended
September 30
(000s except per share) 2017 2016
Gross Profit:
Distribution $ 1,379,719 $ 1,281,202
Pipeline and storage 454,524 427,254
Intersegment eliminations   (44 )    
Gross profit 1,834,199 1,708,456
Operation and maintenance expense 546,798 538,592
Depreciation and amortization 319,448 290,791
Taxes, other than income   240,407     221,843  
Total operating expenses 1,106,653 1,051,226
Operating income 727,546 657,230
Miscellaneous expense (3,270 ) (234 )
Interest charges   120,182     114,812  
Income from continuing operations before income taxes 604,094 542,184
Income tax expense   221,383     196,642  
Income from continuing operations 382,711 345,542
Income from discontinued operations, net of tax 10,994 4,562
Gain on sale of discontinued operations, net of tax   2,716      
Net Income $ 396,421   $ 350,104  
Basic and diluted earnings per share
Income per share from continuing operations $ 3.60 $ 3.33
Income per share from discontinued operations   0.13     0.05  
Net income per share - basic and diluted $ 3.73   $ 3.38  
Cash dividends per share $ 1.80   $ 1.68  
Basic and diluted weighted average shares outstanding   106,100     103,524  
 
 

Year Ended
September 30

Summary Net Income by Segment (000s)

2017 2016
Distribution $ 268,369 $ 233,830
Pipeline and storage   114,342     111,712  
Net income from continuing operations 382,711 345,542
Net income from discontinued operations   13,710     4,562  
Net income $ 396,421   $ 350,104  
       
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Statements of Income

Three Months Ended
September 30

(000s except per share) 2017 2016
Gross Profit:
Distribution segment $ 274,671 $ 256,958
Pipeline and storage segment 117,648 112,758
Intersegment eliminations        
Gross profit 392,319 369,716
Operation and maintenance expense 160,931 159,519
Depreciation and amortization 84,800 75,864
Taxes, other than income   54,796     49,884  
Total operating expenses 300,527 285,267
Operating income 91,792 84,449
Miscellaneous expense (2,820 ) (144 )
Interest charges   33,710     30,037  
Income from continuing operations before income taxes 55,262 54,268
Income tax expense   19,409     19,418  
Income from continuing operations 35,853 34,850
Loss from discontinued operations, net of tax       (610 )
Net Income $ 35,853   $ 34,240  
Basic and diluted net income per share
Income per share from continuing operations $ 0.34 $ 0.33
Income per share from discontinued operations        
Net income per share - basic and diluted $ 0.34   $ 0.33  
Cash dividends per share $ 0.45   $ 0.42  
Basic and diluted weighted average shares outstanding   106,814     104,687  
 
 
Three Months Ended
September 30

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

2017 2016
Distribution $ 15,346 $ 14,453
Pipeline and storage   20,507     20,397  
Net income from continuing operations 35,853 34,850
Net loss from discontinued operations       (610 )
Net Income $ 35,853   $ 34,240  
       
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Balance Sheets

September 30, September 30,
(000s) 2017 2016
Net property, plant and equipment $ 9,259,182 $ 8,268,606
Cash and cash equivalents 26,409 47,534
Accounts receivable, net 222,263 215,880
Gas stored underground 184,653 179,070
Current assets of disposal group classified as held for sale 151,117
Other current assets   106,321   88,085
Total current assets 539,646 681,686
Goodwill 730,132 726,962
Noncurrent assets of disposal group classified as held for sale 28,616
Deferred charges and other assets   220,636   305,019
$ 10,749,596 $ 10,010,889
 
Shareholders' equity $ 3,898,666 $ 3,463,059
Long-term debt   3,067,045   2,188,779
Total capitalization 6,965,711 5,651,838
Accounts payable and accrued liabilities 233,050 196,485
Current liabilities of disposal group classified as held for sale 72,900
Other current liabilities 332,648 439,085
Short-term debt 447,745 829,811
Current maturities of long-term debt     250,000
Total current liabilities 1,013,443 1,788,281
Deferred income taxes 1,878,699 1,603,056
Noncurrent liabilities of disposal group classified as held for sale 316
Deferred credits and other liabilities   891,743   967,398
$ 10,749,596 $ 10,010,889
   
 
Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Statements of Cash Flows

Year Ended
September 30
(000s) 2017     2016
Cash flows from operating activities
Net income $ 396,421 $ 350,104
Depreciation and amortization 319,633 293,096
Deferred income taxes 227,183 193,556
Gain on sale of discontinued operations (12,931 )
Discontinued cash flow hedging for natural gas marketing commodity contracts (10,579 )
Other 20,630 21,446
Changes in assets and liabilities   (73,267 )   (63,212 )
Net cash provided by operating activities 867,090 794,990
Cash flows from investing activities
Capital expenditures (1,137,089 ) (1,086,950 )
Acquisition (86,128 )
Proceeds from the sale of discontinued operations 140,253
Available-for-sale securities activities, net (12,473 ) 758
Use tax refund 29,790
Other, net   9,341     6,460  
Net cash used in investing activities (1,056,306 ) (1,079,732 )
Cash flows from financing activities
Net increase (decrease) in short-term debt (382,066 ) 371,884
Proceeds from issuance of long-term debt, net of premium/discount 884,911
Net proceeds from equity offering 98,755 98,574
Issuance of common stock through stock purchase and employee retirement plans 26,523 34,278
Settlement of interest rate agreements (36,996 )
Interest rate agreements cash collateral 25,670 (25,670 )
Repayment of long-term debt (250,000 )
Cash dividends paid (191,931 ) (175,126 )
Debt issuance costs   (6,775 )   (317 )
Net cash provided by financing activities   168,091     303,623  
Net increase (decrease) in cash and cash equivalents (21,125 ) 18,881
Cash and cash equivalents at beginning of period   47,534     28,653  
Cash and cash equivalents at end of period $ 26,409   $ 47,534  
       
Three Months Ended
September 30
Year Ended
September 30

Statistics

2017     2016   2017     2016
Consolidated distribution throughput (MMcf as metered) 63,810 61,060 388,365 392,028
Consolidated pipeline and storage transportation volumes (MMcf) 171,029 132,223 596,179 505,303
Distribution meters in service 3,221,405 3,185,865 3,221,405 3,185,865
Distribution average cost of gas $ 5.16 $ 4.72 $ 5.14 $ 4.09

Atmos Energy Corporation
Jennifer Hills, 972-855-3729


Source: Business Wire (November 8, 2017 - 5:02 PM EST)

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