10-QPeriod: Q3 FY2017

ATMOS ENERGY CORP Quarterly Report for Q3 Ended Jun 30, 2017

Filed August 2, 2017For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid financial results for the nine months ended June 30, 2017, driven by strong performance in its regulated distribution and pipeline and storage segments. The company successfully navigated a warmer-than-normal weather period and achieved positive rate outcomes, leading to a 12% increase in net income from continuing operations compared to the prior year. Strategic divestitures, including the sale of its non-regulated natural gas marketing business, contributed to a streamlined, fully regulated operational profile and provided proceeds that were reinvested in infrastructure. Capital expenditures remained robust, focused on safety and reliability improvements across its network. The company maintained a strong balance sheet and access to capital markets, with significant long-term debt issuances and equity offerings to support its growth and refinance existing debt. Atmos Energy's commitment to regulatory mechanisms that reduce lag and ensure timely recovery of investments positions it well for continued operational and financial performance.

Financial Highlights

41 data points
Beta

Revenue

$526.50M

Net Income

$70.81M

13.4% Net Margin

EPS (Diluted)

$0.67

Total Assets

$10.50B

Cash & Equivalents

$69.78M

Free Cash Flow

$193.56M

Financial Statements
Beta
Revenue$526.50M
Operating Income$140.66M
Interest Expense$28.50M
Net Income$70.81M
EPS (Basic)$0.67
Shares Outstanding (Basic)106.36M

Key Highlights

  • 1Net income from continuing operations increased by 12% to $346.9 million for the nine months ended June 30, 2017, compared to the same period in 2016.
  • 2The company successfully completed the sale of its non-regulated natural gas marketing business (AEM) in January 2017, reporting a net gain and streamlining its operations to be fully regulated.
  • 3Capital expenditures were $812.1 million for the first nine months of fiscal 2017, with approximately 82% dedicated to enhancing the safety and reliability of its distribution and transportation systems.
  • 4Distribution segment income increased by 15% for the nine months ended June 30, 2017, driven by rate adjustments and customer growth.
  • 5Pipeline and storage segment income increased by 3% for the nine months ended June 30, 2017, supported by rate increases and higher transportation volumes.
  • 6Atmos Energy's balance sheet remains strong, with a total debt-to-total-capitalization ratio of 47% as of June 30, 2017, well within its target range.
  • 7The company proactively managed its liquidity through a combination of operating cash flows, long-term debt issuance, and equity offerings, repaying maturing debt and reducing short-term borrowings.

Frequently Asked Questions

The sale of the non-regulated natural gas marketing business (AEM) was completed in January 2017. This strategic move resulted in Atmos Energy becoming a fully regulated entity. The sale generated cash proceeds which were used for infrastructure investments, and the results of the divested business are now reported as discontinued operations, contributing a gain on sale in the current period.

Despite facing warmer-than-normal weather for the three months ended June 30, 2017, Atmos Energy's distribution segment income still increased. This resilience is attributed to the effectiveness of weather normalization adjustments (WNA) in approximately 97% of its residential and commercial meters and positive rate outcomes achieved through regulatory proceedings.

Atmos Energy is heavily investing in its infrastructure, with capital expenditures totaling $812.1 million for the nine months ended June 30, 2017. The focus is on improving the safety and reliability of its distribution and transportation systems, with a significant portion of these investments being recovered through regulatory mechanisms that reduce rate lag.

Atmos Energy maintains a balanced capital structure, targeting a debt-to-capitalization ratio between 45% and 55%. As of June 30, 2017, this ratio was 47%. The company has access to substantial liquidity through its commercial paper program and revolving credit facilities, and it has actively managed its debt by issuing new long-term debt and using the proceeds to repay existing debt and fund operations.