10-QPeriod: Q2 FY2016

ATMOS ENERGY CORP Quarterly Report for Q2 Ended Mar 31, 2016

Filed May 4, 2016For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid financial results for the six months ended March 31, 2016, with net income increasing by 4% to $244.7 million, or $2.38 per diluted share, compared to the same period last year. This growth was primarily driven by performance in the regulated distribution segment, which benefited from rate increases and improved operational efficiencies, offsetting warmer weather patterns. The company continues to prioritize investment in its infrastructure, with capital expenditures of $538.2 million for the period, largely focused on enhancing the safety and reliability of its distribution and transportation systems. These investments are supported by regulatory mechanisms designed to reduce recovery lag. Atmos Energy also demonstrated its commitment to shareholder returns by increasing its quarterly dividend.

Financial Highlights

43 data points
Beta

Net Income

$141.81M

EPS (Diluted)

$1.38

Total Assets

$9.54B

Cash & Equivalents

$47.92M

Free Cash Flow

$382.81M

Financial Statements
Beta
Gross Profit$517.81M
Operating Expenses$267.80M
Operating Income$251.66M
Interest Expense$27.56M
Net Income$141.81M
EPS (Basic)$1.38
EPS (Diluted)$1.38
Shares Outstanding (Basic)102.95M

Key Highlights

  • 1Net income for the six months ended March 31, 2016, increased 4% to $244.7 million, or $2.38 per diluted share, compared to $235.3 million, or $2.31 per diluted share, in the prior year period.
  • 2Regulated operations contributed significantly to overall profitability, with net income from this segment increasing by approximately 7% for the six-month period.
  • 3Capital expenditures totaled $538.2 million for the first six months of fiscal 2016, with 83% allocated to improving the safety and reliability of distribution and transportation systems.
  • 4The company successfully completed nine regulatory proceedings, resulting in a $22.1 million increase in annual operating income.
  • 5A $200 million At-the-Market (ATM) equity distribution agreement was established to repay short-term debt, fund capital expenditures, and for general corporate purposes.
  • 6The quarterly dividend was increased by 7.7% for fiscal 2016, reflecting the stability and contribution of regulated earnings.
  • 7Short-term debt increased to $626.9 million from $457.9 million, primarily to fund working capital needs and increased capital expenditures.

Frequently Asked Questions

The primary driver of the net income increase was the strong performance of the regulated distribution segment, which benefited from regulatory rate adjustments totaling $30.6 million and a decrease in operating expenses. These positive factors helped to offset the impact of warmer weather and a decline in the nonregulated segment's results.

Atmos Energy is funding its capital expenditure program primarily through internally generated funds from operations ($455.8 million) and net short-term borrowings. Additionally, the company has established a $200 million At-the-Market (ATM) equity distribution agreement, the proceeds of which are intended to repay short-term debt and fund capital spending.

Atmos Energy expects capital expenditures to range between $1 billion and $1.1 billion for the full fiscal year 2016, with a significant portion dedicated to infrastructure improvements. The company also increased its quarterly dividend by 7.7% for fiscal 2016, reflecting confidence in its financial stability and the consistent contributions from its regulated operations.

The nonregulated segment experienced a decline in performance, with net income decreasing from $12.3 million to $6.3 million for the six-month period. This was primarily due to larger losses on the settlement of financial positions resulting from falling natural gas prices and a decrease in sales volumes due to warmer weather.