Atmos Energy Corporation ( ATO) F1Q12 Earnings Call February 8, 2012 8:00 a.m. ET Executives Susan Giles - VP, IR Kim Cocklin - President and CEO Fred Meisenheimer - SVP and CFO Analysts Theodore Durbin – Goldman Sachs Faisel Khan – Citigroup John Hansen (Peter Arch – ZLP) Presentation Operator
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As we review these financial results and discuss future expectations; please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Any forward-looking statements are intended to fall within the Safe Harbor rules of the Private Securities Litigation Reform Act of 1995.And now, I would like to turn the call over to Kim Cocklin. Kim. Kim Cocklin Thank you, Susan. Good morning, everybody, and we certainly appreciate you joining us, and your interest in Atmos Energy. Before we begin, I’d like to extend my congratulations to all the Giants fans on the phone, and condolences to the Patriots and the Cowboy fans. Yesterday, we did report first quarter consolidated net income of $69 million or $0.75 per diluted share compared to $74 million or $0.81 per share one year ago. When you exclude the unrealized gains in both periods, net income was $56 million or $0.61 per share this quarter compared to 74 million or $0.81 last year. Regulated operations contributed 93% of our net income and non-regulated operations contributed the remaining 7%. Regulated earnings were in line with our first quarter expectations of fiscal ’12. Abundant natural gas supply across the nation has created a low gas price environment, which is extremely good for utility customers. However, our non-regulated operations are adversely impacted by such a low price and low volatility and did not contribute as expected. Our liquidity and financial position remain very strong. Our debt capitalization ratio is 53.4% at December 31, compared with 51.4% one year ago. Short-term debt this quarter increased to $390 million compared to $248 million in last year’s quarter, primarily to fund natural gas purchases in our non-regulated segment and increase capital spending. During the quarter we purchased about 388,000 shares under our current share repurchase program at an average price of $32.31 per share.
Also during the quarter, we resolved the FERC investigation that arose in 2007 in our non-regulated segment. Under the terms of that agreement, we paid about $12 million plus accrued interest. We cooperated with the FERC throughout the process, and had adequate reserves for the resolution.Yesterday, our Board of Directors declared the 113th consecutive quarterly cash dividend. The indicated annual dividend rate for fiscal ’12 is $1.38. Our CFO, Fred Meisenheimer, will review our financial results in greater details now, and I’ll return for closing comments and we’ll open up the call for questions. Fred? Fred Meisenheimer Thanks, Kim, good morning, everyone. As a reminder, because of the agreement to sell our distribution assets in Missouri, Illinois and Iowa, we combine and report financial results for those assets on the income statement as discontinued operations. Therefore, the corresponding detail by line item will be excluded from my prepared discussions. Rate relief remains the primary driver of our success in the regulated operations. Rate increases for distribution Atmos’ pipeline Texas combined, generated almost $13 million of incremental margin quarter-over-quarter with about $5 million for distribution, and $8 million for APT. Specifically, distribution margins were negatively impacted by utilizing required updated weather data to calculate the weather normalization adjustment in the Mid-Tex division, which we expect to substantially flip around by the end of the heating season. Regulated Transmission and Storage, we refer to as APT, benefited from the rate case that became effective last May. Also, during the current quarter, APT’s consolidated throughput rose 5% due to increase through system demand and the execution of new delivery contracts with local producers. Turning now to our non-regulated operations, and you may want to turn to slide number 7. The on-going and on-favorable market cash conditions continue to pressure this segment. We anticipate natural gas storage levels will remain high for an extended period of time, and for unseasonably warm weather to continue during the second quarter of fiscal 2012. Read the rest of this transcript for free on seekingalpha.com