10-QPeriod: Q3 FY2012

ATMOS ENERGY CORP Quarterly Report for Q3 Ended Jun 30, 2012

Filed August 9, 2012For Securities:ATO

Summary

Atmos Energy Corporation's (ATO) third quarter fiscal year 2012 report (filed August 9, 2012) shows a significant rebound in profitability compared to the same period last year. The company reported net income of $31.1 million, or $0.34 per diluted share, a stark contrast to a net loss of $0.6 million ($0.01 per diluted share) in the prior year's quarter. This improvement was driven by stronger performance across its segments, particularly the regulated transmission and storage segment and the nonregulated segment, which benefited from increased asset optimization. The company also reported solid results for the nine-month period ended June 30, 2012, with net income of $208.8 million ($2.28 per diluted share), a slight increase from $205.6 million ($2.25 per diluted share) in the comparable period last year. While the natural gas distribution segment experienced lower throughput due to warmer weather and abundant supply, this was largely offset by improved rate designs and capital investments in regulated operations. Furthermore, Atmos Energy is actively managing its business portfolio, having completed the divestiture of its Missouri, Illinois, and Iowa natural gas distribution operations and announced an agreement to sell its Georgia operations. These strategic moves are indicative of a focus on optimizing its operational footprint and potentially streamlining its business for enhanced efficiency and profitability.

Financial Highlights

45 data points
Beta

Net Income

$31.13M

EPS (Diluted)

$0.34

Total Assets

$7.35B

Cash & Equivalents

$27.71M

Free Cash Flow

$158.08M

Financial Statements
Beta
Cost of Revenue$19.53M
Gross Profit$293.17M
Operating Expenses$211.63M
Operating Income$81.55M
Interest Expense$34.91M
Net Income$31.13M
EPS (Basic)$0.34
EPS (Diluted)$0.34
Shares Outstanding (Basic)90.12M
Shares Outstanding (Diluted)90.99M

Key Highlights

  • 1Net income for the three months ended June 30, 2012, was $31.1 million ($0.34/share), a significant improvement from a net loss of $0.6 million ($0.01/share) in the prior year's quarter.
  • 2For the nine months ended June 30, 2012, net income was $208.8 million ($2.28/share), up from $205.6 million ($2.25/share) in the prior year's period.
  • 3The company completed the sale of its natural gas distribution operations in Missouri, Illinois, and Iowa on August 1, 2012, for approximately $129 million.
  • 4An agreement was announced on August 8, 2012, to sell its natural gas distribution operations in Georgia for approximately $141 million.
  • 5Operating income in the regulated transmission and storage segment saw a substantial increase due to approved GRIP filings.
  • 6The nonregulated segment's performance improved due to increased asset optimization, although overall results were impacted by lower natural gas prices and compressed spreads.
  • 7Capital expenditures for the nine months ended June 30, 2012, increased to $497.4 million, up from $390.3 million in the prior year, reflecting investments in infrastructure replacement and system upgrades.

Frequently Asked Questions

The improved financial performance was driven by a combination of factors across segments. Key drivers included stronger operating income in the regulated transmission and storage segment due to approved Gas Reliability Infrastructure Program (GRIP) filings and increased asset optimization activities in the nonregulated segment. These positive contributions more than offset a decrease in natural gas distribution margins, which were impacted by warmer weather but partially mitigated by favorable rate designs.

The divestitures of the Missouri, Illinois, and Iowa operations have been completed, and an agreement is in place for the Georgia operations. These strategic decisions indicate a focus on optimizing the company's business portfolio, potentially streamlining operations, and reallocating resources to core areas or growth opportunities. While specific financial impacts will depend on final sale prices and future investment strategies, these actions suggest a move towards a more focused and potentially more efficient business structure.

The report indicates that the nonregulated segment's performance continues to be influenced by unfavorable natural gas market conditions, including historically high storage levels and low prices due to strong domestic production. The company anticipates compressed spot-to-forward spreads and basis differentials to continue, leading to lower per-unit margins from delivered gas and asset optimization activities in the near future. Despite these challenges, Atmos Energy expects to continue generating profit on a fiscal-year basis from its nonregulated activities.

Atmos Energy is significantly investing in its infrastructure. Capital expenditures for the nine months ended June 30, 2012, were $497.4 million, an increase from the prior year, driven by spending on steel service line replacements, other infrastructure upgrades, new customer billing systems, and capacity expansion on its Atmos Pipeline – Texas system. The company prioritizes capital spending in jurisdictions that allow for timely recovery of investments through approved rates.