10-QPeriod: Q1 FY2011

ATMOS ENERGY CORP Quarterly Report for Q1 Ended Dec 31, 2010

Filed February 9, 2011For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported its financial results for the three months ended December 31, 2010. The company experienced a decrease in net income compared to the prior year quarter, largely driven by a significant decline in the non-regulated segment's performance. While the regulated natural gas distribution and transmission segments showed improved operating income, this was insufficient to offset the substantial decrease in earnings from the non-regulated segment. Despite the overall decline in net income, the company highlighted an increase in diluted earnings per share from regulated operations, suggesting resilience in its core regulated business. Management focused on strategic actions to streamline credit facilities and reduce financing costs, aiming to improve financial flexibility and efficiency. Investors should note the continued investment in capital expenditures, particularly for infrastructure improvements, which is characteristic of the utility sector.

Financial Highlights

43 data points
Beta

Net Income

$74.00M

EPS (Diluted)

$0.81

Total Assets

$7.22M

Cash & Equivalents

$129.89M

Free Cash Flow

$45.82M

Financial Statements
Beta
Cost of Revenue$783K
Gross Profit$357.58M
Operating Expenses$209.44M
Operating Income$150.77M
Interest Expense$38.90M
Net Income$74.00M
EPS (Basic)$0.81
EPS (Diluted)$0.81
Shares Outstanding (Basic)90.08M
Shares Outstanding (Diluted)90.41M

Key Highlights

  • 1Net income decreased by approximately 20.5% to $74.0 million for the three months ended December 31, 2010, compared to $93.3 million in the prior year period.
  • 2Diluted earnings per share decreased to $0.81 from $1.00 in the prior year quarter, primarily due to the performance of the non-regulated segment.
  • 3Regulated operations demonstrated strength, with operating income increasing and contributing 91% of the company's net income.
  • 4Capital expenditures remained robust, totaling $123.2 million for the quarter, primarily focused on infrastructure improvements and the steel service line replacement program.
  • 5The company actively managed its liquidity, refinancing certain credit facilities to reduce financing costs and extend maturities.
  • 6A significant lawsuit in Kentucky resulted in a jury verdict of $31.3 million against Atmos Energy and two subsidiaries, although the company believes the verdict will be overturned on appeal and has accrued an adequate amount for potential resolution.

Frequently Asked Questions

The decrease in net income was primarily driven by a significant decline in the non-regulated segment's performance, which reported a net income of $6.6 million compared to $33.4 million in the prior year. While regulated operations showed improved operating income, this was not enough to offset the drop in the non-regulated segment.

Atmos Energy is actively managing its liquidity by consolidating and refinancing credit facilities to reduce financing costs and extend maturities. They also plan to refinance upcoming senior note maturities in June and November 2011.

A jury awarded $31.3 million in compensatory and punitive damages against Atmos Energy and two subsidiaries in a lawsuit in Kentucky. The company strongly believes the trial court erred and that the verdict will be overturned on appeal. While an adequate amount has been accrued for potential resolution, the amount accrued does not reflect the verdict itself. Management believes the final outcome will not have a material adverse effect on the company's financial condition, results of operations, or cash flows.

Atmos Energy continues to invest in its infrastructure through capital expenditures, which totaled $123.2 million for the quarter. Key investments include ongoing construction programs for system integrity, expansion into new markets, and specific initiatives like the accelerated steel service line replacement program in the Mid-Tex Division.