10-QPeriod: Q1 FY2016

ATMOS ENERGY CORP Quarterly Report for Q1 Ended Dec 31, 2015

Filed February 2, 2016For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported a solid third quarter for fiscal year 2016, with net income increasing by 5% to $102.9 million, or $1.00 per diluted share, compared to $97.6 million, or $0.96 per diluted share, in the prior year's comparable period. This growth was primarily driven by the regulated operations, which contributed 96% of the consolidated net income, benefiting from positive rate outcomes and investments in infrastructure. The company successfully managed warmer weather conditions compared to the previous year through weather normalization adjustments, which largely offset the impact on earnings. Capital expenditures remained robust, with $291.7 million invested during the quarter, predominantly focused on enhancing the safety and reliability of its distribution and transportation systems. The company reaffirmed its full-year fiscal 2016 capital expenditure guidance of $1 billion to $1.1 billion. Additionally, Atmos Energy announced a 7.7% increase in its quarterly dividend for fiscal year 2016, reflecting confidence in its stable earnings and cash flows from regulated businesses. The company also maintained compliance with all debt covenants, with a debt-to-capitalization ratio of 51% at the end of the quarter.

Financial Highlights

43 data points
Beta

Net Income

$102.86M

EPS (Diluted)

$1.00

Total Assets

$9.55B

Cash & Equivalents

$47.92M

Free Cash Flow

$70.14M

Financial Statements
Beta
Gross Profit$434.43M
Operating Expenses$241.70M
Operating Income$192.73M
Interest Expense$29.54M
Net Income$102.86M
EPS (Basic)$1.00
EPS (Diluted)$1.00
Shares Outstanding (Basic)102.71M

Key Highlights

  • 1Net income increased by 5% to $102.9 million ($1.00/share) in Q3 FY16, up from $97.6 million ($0.96/share) in Q3 FY15.
  • 2Regulated operations contributed 96% of consolidated net income, demonstrating their stability and importance.
  • 3Capital expenditures were $291.7 million, with 83% allocated to improving safety and reliability of distribution and transportation systems.
  • 4Quarterly dividend increased by 7.7% for fiscal year 2016.
  • 5The company maintained compliance with all debt covenants, with a total debt to total capitalization ratio of 51%.
  • 6Warmer weather compared to the prior year was largely offset by weather normalization adjustments in regulated operations.
  • 7The nonregulated segment experienced a decrease in realized margins, partly due to losses on financial positions in a period of falling gas prices, though unrealized margins increased.

Frequently Asked Questions

The primary driver of Atmos Energy's earnings growth was its regulated operations, which accounted for 96% of consolidated net income. Positive rate outcomes from completed regulatory proceedings and ongoing investments in infrastructure improvements contributed significantly to this growth.

Atmos Energy utilized weather normalization adjustments (WNA), approved by state regulatory commissions, which cover approximately 97% of its residential and commercial meters in several states. These mechanisms help to offset the financial impact of weather deviations from normal, thereby stabilizing earnings.

Atmos Energy plans to continue investing significantly in its infrastructure. For the full fiscal year 2016, the company anticipates capital expenditures to range between $1 billion and $1.1 billion, with a strong focus on improving the safety and reliability of its distribution and transportation systems.

Atmos Energy maintained compliance with all its debt covenants during the quarter, with a debt-to-capitalization ratio of 51%. The company utilizes a combination of a commercial paper program and revolving credit facilities for liquidity, and actively manages commodity price and interest rate risks through financial instruments, primarily in its nonregulated segment.