10-QPeriod: Q1 FY2010

ATMOS ENERGY CORP Quarterly Report for Q1 Ended Dec 31, 2009

Filed February 3, 2010For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid performance for the three months ended December 31, 2009, with net income increasing to $93.3 million ($1.00 per diluted share) from $75.9 million ($0.83 per diluted share) in the prior year period. This increase was largely driven by the natural gas marketing segment, which benefited from favorable unrealized margins resulting from asset optimization activities and a narrowing of spreads between current and forward natural gas prices. Despite challenging economic conditions leading to decreased demand in some areas, colder weather in others and improved rate designs in the natural gas distribution segment provided some offset. The company also demonstrated strong liquidity, successfully accessing capital markets through renewed credit facilities. The balance sheet remains solid with total debt to total capitalization at 51.0% as of December 31, 2009. Management expressed confidence in its ability to fund operations and capital expenditures through a combination of internally generated funds and existing credit facilities.

Financial Highlights

24 data points
Beta

Net Income

$93.33M

EPS (Diluted)

$1.00

Cash & Equivalents

$175K

Free Cash Flow

$95K

Financial Statements
Beta
Cost of Revenue$882K
Gross Profit$403.00M
Operating Expenses$220K
Operating Income$186.60M
Interest Expense$39K
Net Income$93.33M
EPS (Basic)$1.00
EPS (Diluted)$1.00
Shares Outstanding (Basic)92K
Shares Outstanding (Diluted)93K

Key Highlights

  • 1Net income increased by 23% to $93.3 million for the quarter ended December 31, 2009, compared to $75.9 million in the prior year.
  • 2Diluted earnings per share rose to $1.00 from $0.83 year-over-year, indicating improved profitability.
  • 3The natural gas marketing segment was a key driver of profit growth, primarily due to increased unrealized margins from asset optimization activities.
  • 4Operating revenues saw a decrease of 25% to $1.29 billion from $1.72 billion, largely due to lower natural gas commodity prices impacting the natural gas marketing segment.
  • 5Capital expenditures for the quarter totaled $115.4 million, consistent with investments in infrastructure and growth projects.
  • 6The company maintained strong liquidity with $174.8 million in cash and cash equivalents and sufficient access to credit facilities.
  • 7Total debt as a percentage of total capitalization remained manageable at 51.0% as of December 31, 2009.

Frequently Asked Questions

The primary driver for the 23% increase in net income was the natural gas marketing segment, which experienced a significant increase in unrealized margins. This was due to favorable asset optimization activities and a narrowing of spreads between current cash and forward natural gas prices. Additionally, colder weather in some service areas and improvements in rate designs for the natural gas distribution segment helped offset some of the decline in demand due to economic conditions.

Atmos Energy maintained strong liquidity with $174.8 million in cash and cash equivalents at the end of the period. The company also successfully accessed capital markets by renewing its credit facilities in October and December 2009, providing approximately $1.2 billion in working capital funding. Management expressed confidence in their ability to fund working capital and capital expenditures through existing resources.

Challenging economic conditions did impact the company, leading to declines in demand for natural gas. This was reflected in a decrease in consolidated throughput for the regulated transmission and storage segment and a decrease in sales volumes for the natural gas marketing segment. However, factors like colder weather and improved rate designs in the natural gas distribution segment partially offset these negative impacts.

Atmos Energy utilizes a combination of financial instruments, physical storage, and forward contracts to manage commodity price risk. For its natural gas distribution segment, these instruments are used to mitigate the impact of price volatility on customers and are largely passed through via purchased gas adjustment mechanisms. The natural gas marketing segment uses financial instruments to hedge against price changes and capture arbitrage opportunities in its asset optimization activities.