Atmos Energy's CEO Discusses F3Q2012 (Qtr End 6/30/12) Results - Earnings Call Transcript

Atmos Energy Corp. (ATO)

F3Q2012 Earnings Call

August 9, 2011 10:00 am ET


Susan Giles - VP, IR

Kim Cocklin - President and CEO

Fred Meisenheimer - SVP and CFO


Ted Durbin - Goldman Sachs

Andrew Bischof - Morningstar

Amit Marwaha - Citigroup

Jeff Healy - AIG



Welcome to the Atmos Energy's Fiscal 2012 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Susan Giles, VP, Investor Relations for Atmos Energy Corporation. Thank you. You may begin.

Susan Giles

Thank you, [Danielle]. Good morning, everyone and thank you all for joining us. This call is open to the general public and media, but designed for financial analysts. It is being webcast live over the Internet. We have placed slides on our website that summarize our financial results. We will refer to just a few of the slides during this live call, but we will be happy to take questions on any of them at the end of our prepared remarks. If you would like to access the webcast and slides, please visit our website at and click on the conference call link. Additionally, we plan to file the company's Form 10-Q later this morning.

Our speakers today are Kim Cocklin, President and CEO; and Fred Meisenheimer, Senior Vice President and CFO. There are other members of our leadership team here to assist with questions as needed.

As we review these financial results and discuss future expectation, 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. Please see slide two for more information regarding the assumptions and factors that we consider in making these forward-looking statements and where to go to get more information on our risk factors.

Now, I'd like to turn the call over to Kim Cocklin. Kim?

Kim Cocklin

Thank you, Susan, and good morning everyone. We certainly appreciate you joining us and your interest in Atmos Energy.

Yesterday, we reported third quarter consolidated net income of $31 million or $0.34 per diluted share compared to a net loss of about $1 million or a negative $0.01 per share one year ago.

Our Non-Regulated Operations executed on their strategy and delivered positive results this quarter. I'll remind you that in the first half of our fiscal year our Non-Regulated Group took advantage of falling gas prices by buying and injecting gas into storage. As a result, there were no realized storage withdrawal gains to offset realized losses taken when we settled the financial instruments used to hedge the natural gas purchases. However, that strategy paid off in the fiscal third quarter.

Realized asset optimization margin increased $18 million as the financial position settled as anticipated from the trading approach employed earlier this year. For the current nine months, reported net income was $209 million or $2.28 per diluted share, compared to $206 million or $2.26 for the nine months last year.

Last week, we also announced the closing of the sale of our distribution asset in Missouri, Illinois, and Iowa to Liberty Energy for approximately $129 million. About 84,000 distribution meters were transferred. We expect to record a net of tax gain on the sale in the fourth quarter of fiscal '12 of approximately $6 million or $0.06 per diluted share subject to final purchase price adjustments.

The net proceeds of $129 million have been used to pay down commercial paper.

We also announced, yesterday, an agreement to sell our Georgia utility assets to Liberty for approximately $141 million. Included in that transaction are about 64,000 distribution meters and a rate base estimate of some $96 million. We are estimating a $6 million after-tax gain on the sale and expect that transaction to close in fiscal '13.

Net proceeds will be redeployed to help finance rate-based investment in our remaining jurisdiction.

Our liquidity and financial position remained strong and we benefit from solid investment grade credit ratings. Our debt-capital ratio is 50.7% at June 30, compared with 48.6% one year ago.

On July 27, we issued a notice of full redemption of our $250 million, 5-1/8% senior notes which are due January 2013. That redemption will occur on August 28, 2012. We will initially utilize commercial paper to redeem the notes and shortly thereafter enter into a short-term financing facility to repay the commercial paper. We will then issue new unsecured long-term notes probably in January 13 and use those proceeds to repay the borrowings on the short-term facility.

Yesterday, our board of directors declared the 115th consecutive quarterly cash dividend. The indicated annual dividend rate for fiscal '12 is $1.38.

Fred Meisenheimer, our CFO, will review our financial results in greater detail and we'll come back for some closing comments and open the call up for questions. Fred?

Fred Meisenheimer

Thanks Kim and good morning everyone. I'll review the more significant items in the quarter and nine months and discuss the outlook for the remainder of our fiscal year.

As Kim mentioned, reported consolidated net income was $31 million or $0.34 per diluted share for the quarter, and $209 million or $2.28 per diluted share for the current nine months.

If you'll turn to slide three, it compares quarters. And when you exclude the unrealized gains, net income was $29 million or $0.32 this quarter, compared to a loss of about $1 million or $0.01 per share last year. Last year's quarter has a one-time charge of $6 million or $0.06 per share.

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