10-QPeriod: Q3 FY2015

ATMOS ENERGY CORP Quarterly Report for Q3 Ended Jun 30, 2015

Filed August 5, 2015For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported a 9.8% increase in net income to $56.3 million for the three months ended June 30, 2015, compared to $45.7 million in the prior year period. For the nine-month period ended June 30, 2015, net income grew 9.5% to $291.6 million from $266.1 million in the same period last year. This growth was primarily driven by strong performance in the regulated distribution and pipeline segments, supported by positive rate outcomes and colder weather in certain periods. The company's regulated operations continue to be the primary contributor to overall profitability, accounting for 91% and 94% of net income for the three and nine-month periods, respectively. Capital expenditures for the nine months totaled $667.5 million, with a significant portion allocated to enhancing the safety and reliability of the company's infrastructure. Despite a decrease in operating revenues primarily due to lower natural gas commodity prices impacting the nonregulated segment, the company's focus on regulated rate increases and operational efficiencies has bolstered profitability. Atmos Energy maintained a strong financial position, with a debt-to-capitalization ratio of 47% and a positive outlook from credit rating agencies.

Financial Highlights

45 data points
Beta

Net Income

$56.28M

EPS (Diluted)

$0.55

Total Assets

$8.88B

Cash & Equivalents

$43.15M

Free Cash Flow

$176.73M

Financial Statements
Beta
Gross Profit$381.67M
Operating Expenses$264.07M
Operating Income$117.61M
Interest Expense$27.95M
Net Income$56.28M
EPS (Basic)$0.55
EPS (Diluted)$0.55
Shares Outstanding (Basic)102.00M
Shares Outstanding (Diluted)102.00M

Key Highlights

  • 1Net income increased by 9.8% to $56.3 million for the three months ended June 30, 2015, and by 9.5% to $291.6 million for the nine months ended June 30, 2015.
  • 2Regulated operations remain the core driver of profitability, contributing 91% and 94% of net income for the respective periods.
  • 3The regulated distribution segment saw a 21% increase in net income for the quarter, driven by rate adjustments and lower gas costs.
  • 4Capital expenditures were $667.5 million for the nine-month period, with 80% dedicated to improving system safety and reliability.
  • 5The nonregulated segment's gross profit decreased by $14.2 million for the nine-month period, largely due to reduced natural gas price volatility and a shift in strategy to fewer low-margin deliveries.
  • 6The company successfully completed 15 regulatory proceedings during the nine months, resulting in a $75.9 million increase in annual operating income.
  • 7Atmos Energy maintained a healthy balance sheet with a debt-to-capitalization ratio of 47% as of June 30, 2015.

Frequently Asked Questions

Earnings growth was primarily driven by positive rate outcomes in the regulated distribution and pipeline segments, coupled with favorable weather conditions in certain periods that boosted throughput. Successful completion of regulatory proceedings and strategic improvements in rate design also contributed significantly.

The nonregulated segment experienced a decrease in gross profit and net income for the nine-month period, largely due to lower natural gas price volatility which reduced realized margins. The company also shifted away from lower-margin deliveries, impacting sales volumes but improving per-unit margins. In contrast, the regulated segments showed robust growth.

Atmos Energy invested $667.5 million in capital expenditures during the nine months ended June 30, 2015, with approximately 80% allocated to improving the safety and reliability of its distribution and transportation systems. The company plans to continue significant capital investments and is funding these primarily through operating cash flows and net short-term borrowings, while also maintaining access to a $1.25 billion commercial paper program and other credit facilities.

The company's credit ratings are investment grade, and as of July 1, 2015, Fitch Ratings upgraded its senior unsecured debt rating to 'A' from 'A-'. This reflects expectations of continued strong financial performance driven by organic growth in regulated segments. Atmos Energy maintains a debt-to-capitalization ratio of 47%, well within its target range, and has over $1 billion in available borrowing capacity, indicating strong financial flexibility.