01—Abstract
Summary
Summary of the 10-K filed November 22, 2011. Cited figures are marked; the original filing is the authoritative source.
Atmos Energy Corporation (ATO) is a major natural gas distributor, serving over three million customers across 12 states, primarily in the South.
The company's strategy focuses on delivering superior shareholder value and consistent earnings growth through operational excellence and a strong culture. In fiscal year 2011, Atmos Energy reported net income of $207.6 milliona, or $2.27 per diluted share. The company is undergoing a strategic streamlining, including the announced sale of its distribution operations in Missouri, Illinois, and Iowa.
Atmos Energy's business is primarily regulated, with a significant portion of its gross margin insulated from weather and commodity price volatility through various rate mechanisms such as purchased gas cost adjustments and weather normalization adjustments. The regulated transmission and storage segment, primarily Atmos Pipeline — Texas, supports the distribution business and serves third parties. The nonregulated segment provides gas management and marketing services, with its financial performance significantly impacted by natural gas price volatility and basis differentials.
Looking ahead, Atmos Energy is focused on strengthening its regulatory relationships, optimizing its operations, and managing its capital structure effectively. The company's long-term debt is rated investment grade, and it has access to significant liquidity through its committed credit facilities.
02—Key points
Key Highlights
- Atmos Energy reported a net income of $207.6 million ($2.27 per diluted share) for fiscal year 2011, a slight increase from the prior year.
- The company is strategically divesting its natural gas distribution operations in Missouri, Illinois, and Iowa, representing approximately 84,000 customers.
- Approximately 84% of Atmos Energy's gross margin is protected from volatile margins through rate structures with accelerated recovery mechanisms and weather normalization adjustments.
- The regulated transmission and storage segment (Atmos Pipeline — Texas) saw a significant increase in authorized rate base in fiscal 2011 due to a new rate case filing.
- The nonregulated segment experienced a loss in fiscal year 2011 due to weak natural gas market fundamentals affecting asset optimization margins, a contrast to its profitability in the prior year.
- Atmos Energy's credit ratings were upgraded by Moody's and Fitch in fiscal 2011, reflecting a stable outlook and strategic focus on lower-risk regulated activities.
- The company is committed to its capital expenditure program, including a significant steel service line replacement program in its Mid-Tex Division, and has sufficient liquidity to fund its operations.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed November 22, 2011Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Gross Profit | $1.30B$1.31B | −1.0% |
| Operating Expenses | $874.83M$850.30M | +2.9% |
| Operating Income | $425.99M$463.83M | −8.2% |
| Interest Expense | $150.76M$154.19M | −2.2% |
| Net Income | $207.60M$205.84M | +0.9% |
| EPS (Basic) | $2.28$2.22 | +2.7% |
| EPS (Diluted) | $2.27$2.20 | +3.2% |
| Shares Outstanding (Basic) | 90.20M91.85M | −1.8% |
| Shares Outstanding (Diluted) | 90.65M92.42M | −1.9% |
05—Questions
Frequently Asked Questions
What is Atmos Energy's core business and geographic focus?
Atmos Energy's core business is the regulated distribution of natural gas, serving over three million residential, commercial, public authority, and industrial customers. Its operations are primarily concentrated in 12 states, with a significant presence in the Southern United States, particularly Texas.
How does Atmos Energy manage the volatility of natural gas prices and weather?
Atmos Energy utilizes several mechanisms to manage volatility. Purchased gas cost adjustment mechanisms allow for dollar-for-dollar recovery of natural gas costs. Weather normalization adjustments (WNA) in approximately 94% of its service areas minimize the impact of weather fluctuations on margins. The company also employs physical storage and financial instruments for risk management, particularly in its nonregulated segment.
What is the financial performance of Atmos Energy's segments?
In fiscal year 2011, the natural gas distribution segment was the primary contributor to net income. The regulated transmission and storage segment also showed positive results. The nonregulated segment, however, reported a net loss in fiscal year 2011, impacted by unfavorable market conditions in its asset optimization activities, a decline from its profitable performance in the prior year.
What significant strategic changes is Atmos Energy undertaking?
Atmos Energy has announced the sale of its natural gas distribution operations in Missouri, Illinois, and Iowa, signaling a move to streamline its operations and focus on core, lower-risk regulated markets. The company is also actively managing its credit facilities and debt profile.
06—Continue