01—Abstract
Summary
Summary of the 10-K filed November 14, 2016. Cited figures are marked; the original filing is the authoritative source.
Atmos Energy Corporation's (ATO) 10-K filing for the fiscal year ended September 30, 2016, highlights a company focused on regulated natural gas distribution and pipeline operations, serving over three million customers across eight states, primarily in the South.
The company's strategy emphasizes safety, operational excellence, infrastructure investment, and employee development, aiming to deliver strong shareholder value. Significant capital expenditures were made to upgrade distribution and transmission systems, with recovery mechanisms in place to minimize regulatory lag. The company's financial performance in fiscal year 2016 showed net income growth to $350.1 milliona ($3.38 per diluted share), up from $315.1 million ($3.09 per diluted share) in the prior year.
This growth was driven by positive rate outcomes and infrastructure investments, which more than offset warmer weather patterns and increased maintenance spending. Atmos Energy also announced plans to exit its nonregulated gas marketing business with the proposed sale of Atmos Energy Marketing, LLC (AEM) to CenterPoint Energy Services, Inc. The company's financial health remains robust, supported by an improved credit rating from Standard & Poor's and a strong liquidity position with an increased credit facility. The focus on regulated operations, which contributed 95%b of consolidated net income in fiscal 2016, provides a stable and predictable earnings stream.
02—Key points
Key Highlights
- Atmos Energy reported a net income of $350.1 million ($3.38 per diluted share) for fiscal year 2016, an increase from $315.1 million ($3.09 per diluted share) in fiscal year 2015, driven by rate increases and infrastructure investments.
- The company is divesting its nonregulated gas marketing business (AEM) through a proposed sale to CenterPoint Energy Services, Inc., intending to redeploy proceeds to fund regulated business infrastructure.
- Capital expenditures totaled $1.09 billion in fiscal year 2016, with over 80% allocated to enhancing the safety and reliability of distribution and transmission systems.
- Atmos Energy's regulated operations accounted for 95% of its consolidated net income in fiscal year 2016, underscoring the stability and importance of its core business.
- The company secured an improved senior unsecured debt rating from A- to A from Standard & Poor's, reflecting strong financial performance and timely capital investment recovery.
- Multiple regulatory filings resulted in a significant increase in annual operating income ($122.5 million) for fiscal year 2016, primarily through formula rate mechanisms and infrastructure programs designed to reduce regulatory lag.
- The company amended and increased its credit facility to $1.5 billion, enhancing its liquidity and financial flexibility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Atmos Energy Corp kept $0.14.
- Revenue$2.45B100.0%
- Cost of revenue−$709.8M28.9%
- Gross profit$1.74B71.1%
- Operating costs−$1.09B44.3%
- Operating income$657.2M26.8%
- Interest, other & tax−$307.1M12.5%
- Net income$350.1M14.3%
Where FY2016 revenue went
$2.45B- Operating costs: $1.09B, 44% of revenue
- Cost of revenue: $709.8M, 29% of revenue
- Net income: $350.1M, 14% of revenue
- Interest, other & tax: $307.1M, 13% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed November 14, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $2.45B— | — |
| Gross Profit | $1.74B$1.68B | +3.9% |
| Operating Expenses | $1.08B$1.05B | +2.7% |
| Operating Income | $657.23M$612.23M | +7.3% |
| Interest Expense | $114.81M$116.24M | −1.2% |
| Net Income | $350.10M$315.07M | +11.1% |
| EPS (Basic) | $3.38$3.09 | +9.4% |
| EPS (Diluted) | $3.38$3.09 | +9.4% |
| Shares Outstanding (Basic) | 103.52M101.89M | +1.6% |
| Shares Outstanding (Diluted) | 103.52M101.89M | +1.6% |
05—Questions
Frequently Asked Questions
What is Atmos Energy's primary business focus and geographic operational area?
Atmos Energy's primary business is regulated natural gas distribution and pipeline operations. It serves over three million customers across eight states, with a strong concentration in the South, particularly in Texas, which is its most significant market.
How did Atmos Energy perform financially in fiscal year 2016 compared to the previous year?
In fiscal year 2016, Atmos Energy saw an increase in net income to $350.1 million, or $3.38 per diluted share, up from $315.1 million, or $3.09 per diluted share, in fiscal year 2015. This growth was attributed to successful rate adjustments and capital investments in infrastructure, which helped mitigate the impact of warmer weather and increased operational expenses.
What is the significance of the company's infrastructure investment strategy?
Atmos Energy invested heavily in its infrastructure to improve safety and reliability, with over 80% of its $1.09 billion capital expenditure in fiscal year 2016 dedicated to its distribution and transmission systems. The company benefits from regulatory mechanisms that allow for timely recovery of these investments, minimizing 'regulatory lag' and supporting stable earnings.
What impact did regulatory ratemaking activity have on the company's results?
Ratemaking activity, including formula rate mechanisms and infrastructure programs, was a key driver of financial performance, contributing to a $122.5 million increase in annual operating income for fiscal year 2016. These mechanisms are designed to reduce regulatory lag and ensure the company can recover its capital investments and earn a reasonable rate of return.
06—Continue