10-QPeriod: Q3 FY2013

ATMOS ENERGY CORP Quarterly Report for Q3 Ended Jun 30, 2013

Filed August 7, 2013For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid financial results for the nine months ended June 30, 2013, demonstrating growth in both its regulated and non-regulated segments. The company experienced a notable increase in operating revenues and gross profit, driven by rate increases in its natural gas distribution divisions and improved asset optimization in its non-regulated segment. The divestiture of Georgia operations was completed, contributing a gain to discontinued operations. The company maintained a strong balance sheet, with a debt-to-capitalization ratio of 50.1% as of June 30, 2013, and a significant increase in liquidity, highlighted by amendments to its credit facilities and the issuance of long-term senior notes. Capital expenditures remained robust, focusing on growth projects and system improvements in regulated operations. Despite some challenges in the non-regulated segment due to market conditions, overall profitability showed a positive trend, supported by effective management of financial instruments and operational efficiencies.

Financial Statements
Beta
Cost of Revenue-$558K
Gross Profit$316.50M
Operating Expenses$230.10M
Operating Income$86.40M
Interest Expense$32.74M
Net Income$38.77M
EPS (Basic)$0.43
EPS (Diluted)$0.42
Shares Outstanding (Basic)90.60M
Shares Outstanding (Diluted)91.55M

Key Highlights

  • 1Net income increased by $26.9 million to $235.7 million for the nine months ended June 30, 2013, compared to the prior year, with diluted EPS rising to $2.57.
  • 2Operating revenues grew to $3.2 billion for the nine months ended June 30, 2013, up from $2.9 billion in the prior year, indicating strong top-line performance.
  • 3The company successfully completed the sale of its Georgia natural gas distribution operations on April 1, 2013, recognizing a net gain of $5.3 million.
  • 4Capital expenditures for the nine months ended June 30, 2013, were $582.5 million, a slight increase from the prior year, reflecting continued investment in infrastructure.
  • 5Long-term debt increased to $2.46 billion as of June 30, 2013, driven by the issuance of $500 million in new senior notes, while maintaining a healthy debt-to-capitalization ratio.
  • 6The regulated transmission and storage segment showed strong performance, with a $7.55 million increase in net income for the nine-month period.
  • 7The non-regulated segment experienced a decrease in operating income, impacted by lower asset optimization margins and increased litigation expenses, but remained a contributor to overall results.

Frequently Asked Questions

Revenue growth was primarily driven by rate increases and approved rate design changes in the natural gas distribution segment, particularly in Texas. Additionally, improvements in asset optimization margins within the non-regulated segment contributed to the overall revenue increase.

The sale of the Georgia natural gas distribution operations, completed on April 1, 2013, resulted in a net gain of $5.3 million, which was recognized within discontinued operations for the nine months ended June 30, 2013. The operating results of these divested operations are also reported separately under discontinued operations for comparative periods.

Atmos Energy maintained a strong liquidity position, supported by over $1 billion in working capital funding from its committed revolving credit facilities. The company also issued $500 million in long-term senior notes and has a $1.75 billion shelf registration statement available, indicating a solid outlook for meeting its financial obligations and capital expenditure plans.

The company utilizes a combination of physical storage and financial instruments, including futures, options, and swap contracts, to manage commodity price risk in its non-regulated segment. While this strategy provides opportunities for profit, it also introduces variability in reported earnings due to unrealized gains and losses on these financial instruments.