10-KPeriod: FY2015

ATMOS ENERGY CORP Annual Report, Year Ended Sep 30, 2015

Filed November 6, 2015For Securities:ATO

Summary

Atmos Energy Corporation's (ATO) 2015 10-K filing highlights a financially stable year, marked by a 9% increase in net income to $315.1 million, or $3.09 per diluted share. This growth was driven by positive rate outcomes across its regulated distribution and pipeline segments, which together contributed approximately 95% of consolidated net income. The company continues to focus on safety and infrastructure reliability, investing significantly in its distribution and transmission systems, with a substantial portion of capital expenditures expected to be recovered through regulatory mechanisms that reduce lag. The company's strategy to reduce regulatory lag and ensure timely recovery of investments through formula rate mechanisms and infrastructure programs is proving effective. Despite a warmer-than-average weather year impacting some segments, particularly non-regulated operations, the overall financial performance remained strong. Atmos Energy also saw credit rating upgrades and affirmations, reflecting its consistent financial performance and prudent capital management. The company anticipates continued investment in infrastructure and growth, supported by its operating cash flows and access to capital markets.

Financial Highlights

45 data points
Beta

Net Income

$315.07M

EPS (Diluted)

$3.09

Total Assets

$9.08B

Cash & Equivalents

$28.65M

Free Cash Flow

$811.91M

Financial Statements
Beta
Gross Profit$1.68B
Operating Expenses$1.05B
Operating Income$612.23M
Interest Expense$116.24M
Net Income$315.07M
EPS (Basic)$3.09
EPS (Diluted)$3.09
Shares Outstanding (Basic)101.89M
Shares Outstanding (Diluted)101.89M

Key Highlights

  • 1Net income increased 9% to $315.1 million ($3.09 per diluted share) in fiscal year 2015, driven by positive rate outcomes.
  • 2Regulated operations (distribution and pipeline) accounted for approximately 95% of consolidated net income.
  • 3Capital expenditures totaled $975.1 million, with about 80% invested in safety and reliability improvements for distribution and transmission systems.
  • 4The company secured favorable credit rating actions, with Fitch upgrading its senior unsecured debt rating and S&P affirming its rating with a positive outlook.
  • 5Atmos Energy successfully implemented various rate mechanisms that accelerate the recovery of capital expenditures.
  • 6The company maintained a strong focus on safety and infrastructure reliability, a core element of its business strategy.

Frequently Asked Questions

Atmos Energy's primary business is the regulated distribution and pipeline of natural gas. It serves over three million customers across eight states, primarily in the South, and also operates non-regulated natural gas management, marketing, transportation, and storage services.

Regulatory actions were a key driver of financial performance. The company completed 16 regulatory proceedings in its regulated distribution segment, expected to increase annual operating income by $77.3 million, and had 17 regulatory filings completed in fiscal 2015 that should increase annual operating income by $114.5 million. The implementation of rate mechanisms designed to reduce regulatory lag and ensure timely recovery of investments was a significant positive factor.

Atmos Energy invests heavily in improving the safety and reliability of its distribution and transmission infrastructure, with approximately 80% of its $975.1 million capital expenditure in fiscal 2015 directed towards these areas. The company's strategy involves utilizing regulatory mechanisms that allow for the timely recovery of these capital expenditures, often within six months of being placed in service, through rate adjustments and infrastructure programs.

In its regulated operations, Atmos Energy largely mitigates commodity price risk through purchased gas cost adjustment mechanisms, which allow for the direct pass-through of gas costs to customers. In its non-regulated segment, it uses a combination of physical storage and financial instruments (futures, options, swaps) to manage exposure and lock in margins. The company also uses financial instruments to manage interest rate risk.