10-QPeriod: Q1 FY2008

ATMOS ENERGY CORP Quarterly Report for Q1 Ended Dec 31, 2007

Filed February 6, 2008For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported its financial results for the three months ended December 31, 2007. The company saw a decrease in net income to $73.8 million ($0.82 diluted EPS) from $81.3 million ($0.97 diluted EPS) in the prior year period. This decline was primarily driven by a significant drop in the performance of its nonregulated natural gas marketing segment, which experienced lower margins. The regulated natural gas distribution segment, however, showed improvement due to rate increases in several service areas. Despite the overall dip in net income, the company maintained a solid financial position with a total capitalization of $4.36 billion, a debt-to-capitalization ratio of 53.4%, and ample liquidity from its credit facilities. Capital expenditures for the quarter were $94.2 million, with a focus on an automated metering initiative. Investors should note the ongoing rate case proceedings in the Mid-Tex and Kansas divisions, which could impact future earnings.

Key Highlights

  • 1Net income decreased to $73.8 million for the quarter ended December 31, 2007, down from $81.3 million in the prior year period.
  • 2Diluted EPS fell to $0.82 from $0.97 year-over-year.
  • 3The nonregulated natural gas marketing segment's net income decreased significantly by $14.3 million, primarily due to lower margins.
  • 4The regulated natural gas distribution segment's net income increased by $8.3 million, driven by rate increases in various service areas.
  • 5The company maintained a healthy debt-to-capitalization ratio of 53.4% at December 31, 2007.
  • 6Capital expenditures for the quarter were $94.2 million, with a focus on the automated metering initiative.
  • 7Atmos Energy is actively engaged in rate case proceedings in its Mid-Tex and Kansas divisions.

Frequently Asked Questions

The decrease in net income was primarily due to a significant decline in the performance of the nonregulated natural gas marketing segment, which experienced lower unrealized and delivered gas margins. While the regulated natural gas distribution segment saw improvement, it was not enough to offset the decline in the marketing segment.

Atmos Energy maintained a debt-to-capitalization ratio of 53.4% as of December 31, 2007. The company aims to keep this ratio within a target range of 50-55% through internally generated cash flow, equity issuances under its stock purchase and retirement plans, and access to capital markets. They were in compliance with all debt covenants as of the reporting date.

The company is involved in ongoing rate case proceedings in its Mid-Tex and Kansas service areas. A tentative settlement was reached with the Atmos Cities Steering Committee for the Mid-Tex Division, which includes a rate review mechanism. The company is also negotiating with other cities in the Mid-Tex area and providing information to the Kansas regulatory commission.

For fiscal year 2008, capital expenditures are projected to be between $450 million and $465 million. The company incurred $94.2 million in capital expenditures during the three months ended December 31, 2007, with a notable portion allocated to its new automated metering initiative aimed at improving operational efficiency.