Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its fiscal 2017 first quarter ended December 31, 2016.
  • Fiscal 2017 first quarter consolidated net income was $125.0 million, or $1.19 per diluted share, compared with consolidated net income of $102.9 million, or $1.00 per diluted share in the prior-year quarter.
  • Fiscal 2017 first quarter net income from continuing operations was $114.0 million, or $1.08 per diluted share, and income from discontinued operations was $11.0 million, or $0.11 per diluted share. In the prior-year quarter, net income from continuing operations was $101.5 million, or $0.99 per diluted share, and income from discontinued operations was $1.3 million, or $0.01 per diluted share.
  • The company's Board of Directors has declared a quarterly dividend of $0.45 per common share. The indicated annual dividend for fiscal 2017 is $1.80, which represents a 7.1 percent increase over fiscal 2016.

"Our first quarter results reflect the positive execution of our growth strategy," said Kim Cocklin, Chief Executive Officer of Atmos Energy Corporation. "Ongoing capital investments made to our infrastructure have enhanced the safe and reliable delivery of natural gas to our customers and provided a steady return to shareholders. In addition, we are pleased that Atmos Energy has become a fully regulated, pure-play natural gas utility after closing on the sale of our nonregulated natural gas marketing business in January. Fiscal 2017 earnings from continuing operations are still expected to range from between $3.45 and $3.65 per diluted share," Cocklin concluded.

Results for the Three Months Ended December 31, 2016

Distribution gross profit increased $23.8 million to $359.3 million for the three months ended December 31, 2016, compared with $335.5 million in the prior-year period. Gross profit reflects a net $15.9 million increase in rates, primarily in the Mid-Tex, Louisiana and West Texas Divisions. In addition, transportation gross profit primarily in the Kentucky/Mid-States and West Texas Divisions increased $2.0 million. Finally, customer growth primarily in the Mid-Tex Division contributed an incremental $1.7 million in gross profit.

Pipeline and storage gross profit increased $10.6 million to $109.6 million for the three months ended December 31, 2016, compared with $99.0 million in the prior-year period. This increase primarily is attributable to a $10.8 million increase in revenue from the Gas Reliability Infrastructure Program (GRIP) filings approved in fiscal 2016.

Continuing operation and maintenance expense for the three months ended December 31, 2016, was $124.9 million, compared with $119.8 million for the prior-year period. This increase was primarily driven by increased pipeline maintenance spending.

In January 2017, the company completed the sale of its natural gas marketing business. Accordingly, the results of operations for the divested business have been presented as discontinued operations. Net income from discontinued operations increased $9.7 million to $11.0 million for the three months ended December 31, 2016, compared with $1.3 million in the prior-year period. The increase largely reflects the recognition of a net $6.6 million noncash gain from unwinding hedge accounting for certain of the natural gas marketing business's financial positions as a result of the sale.

Capital expenditures increased to $298.0 million for the three months ended December 31, 2016, compared with $290.4 million in the prior-year quarter driven by a planned increase in spending for infrastructure replacements and enhancements.

For the three months ended December 31, 2016, the company generated operating cash flow of $117.0 million, a $46.8 million increase compared with the three months ended December 31, 2015. The year-over-year increase primarily reflects favorable deferred gas cost recoveries attributable to higher sales volumes than in the prior-year quarter.

The debt capitalization ratio at December 31, 2016 was 48.7 percent, compared with 48.5 percent at September 30, 2016 and 49.5 percent at December 31, 2015. At December 31, 2016, there was $940.7 million of short-term debt outstanding, compared with $829.8 million at September 30, 2016 and $763.2 million at December 31, 2015. Short-term debt balances fluctuate due to the seasonal nature of the natural gas business and the timing of spending year over year.

Outlook

The leadership of Atmos Energy remains focused on enhancing system safety and reliability through infrastructure investment while delivering shareholder value and consistent earnings growth. Atmos Energy continues to expect fiscal 2017 earnings from continuing operations to be in the range of $3.45 to $3.65 per diluted share. Net income from continuing operations is expected to be in the range of $365 million to $390 million. Capital expenditures for fiscal 2017 are expected to range between $1.1 billion and $1.25 billion.

Conference Call to be Webcast February 8, 2017

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2017 first quarter financial results on Wednesday, February 8, 2017, at 8:00 a.m. Eastern Time. The domestic telephone number is 877-485-3107 and the international telephone number is 201-689-8427. Kim Cocklin, Chief Executive Officer, Mike Haefner, President and Chief Operating Officer and Chris Forsythe, Senior Vice President and Chief Financial Officer will participate in the conference call. The conference call will be webcast live on the Atmos Energy website at www.atmosenergy.com. A playback of the call will be available on the website later that day.

Highlights and Recent Developments

Senior Management Changes

On January 19, 2017, Atmos Energy announced the departure of Bret J. Eckert, Senior Vice President and Chief Financial Officer, effective February 1, 2017 and the appointment of Christopher T. Forsythe, Vice President and Controller, to succeed him, also effective February 1, 2017.

On January 19, 2017, Atmos Energy also announced the retirement of Louis P. Gregory, Senior Vice President, General Counsel and Corporate Secretary, effective February 1, 2017. Gregory's successor will be named at a later date.

On November 30, 2016, Atmos Energy announced two promotions to its senior management team, effective January 1, 2017. Kevin Akers, President of the Kentucky/Mid-States Division was promoted to Senior Vice President, Safety and Enterprise Services and Matt Robbins was promoted from Vice President, Human Resources to Senior Vice President, Human Resources.

This news release should be read in conjunction with the attached unaudited financial information.

Forward-Looking Statements

The matters discussed in this news release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this news release are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this news release or in any of the company's other documents or oral presentations, the words "anticipate," "believe," "estimate," "expect," "forecast," "goal," "intend," "objective," "plan," "projection," "seek," "strategy" or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this news release, including the risks and uncertainties relating to regulatory trends and decisions, the company's ability to continue to access the capital markets and the other factors discussed in the company's reports filed with the Securities and Exchange Commission. These factors include the risks and uncertainties discussed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016. Although the company believes these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. The company undertakes no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

About Atmos Energy

Atmos Energy Corporation, headquartered in Dallas, is the country's largest natural-gas-only distributor, serving over three million natural gas distribution customers in over 1,400 communities in eight states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy also manages company-owned natural gas pipeline and storage assets, including one of the largest intrastate natural gas pipeline systems in Texas. For more information, visit www.atmosenergy.com.
       
 

Atmos Energy Corporation Financial Highlights (Unaudited)
 

Statements of Income
Three Months EndedDecember 31
(000s except per share) 2016 2015
Gross Profit:
Distribution segment $ 359,310 $ 335,452
Pipeline and storage segment 109,597 98,975
Intersegment eliminations   (44 )    
Gross profit 468,863 434,427
Operation and maintenance expense 124,938 119,828
Depreciation and amortization 76,958 70,656
Taxes, other than income   57,049     51,214  
Total operating expenses 258,945 241,698
Operating income 209,918 192,729
Miscellaneous expense (994 ) (879 )
Interest charges   31,030     29,537  
Income from continuing operations before income taxes 177,894 162,313
Income tax expense   63,856     60,767  
Income from continuing operations 114,038 101,546
Income from discontinued operations, net of tax   10,994     1,315  
Net Income $ 125,032   $ 102,861  
Basic and diluted net income per share
Income per share from continuing operations $ 1.08 $ 0.99
Income per share from discontinued operations   0.11     0.01  
Net income per share - basic and diluted $ 1.19   $ 1.00  
Cash dividends per share $ 0.45   $ 0.42  
Basic and diluted weighted average shares outstanding   105,284     102,713  
 
 
Three Months EndedDecember 31

Summary Net Income by Segment (000s)
2016 2015
Distribution $ 85,364 $ 73,936
Pipeline and storage   28,674     27,610  
Income from continuing operations 114,038 101,546
Income from discontinued operations, net of tax   10,994     1,315  
Consolidated net income $ 125,032   $ 102,861  
 
       

Atmos Energy Corporation Financial Highlights, continued (Unaudited)
 

Condensed Balance Sheets
December 31, September 30,
(000s) 2016 2016
Net property, plant and equipment $ 8,552,962 $ 8,268,606
Cash and cash equivalents 44,624 47,534
Accounts receivable, net 458,813 215,880
Gas stored underground 163,763 179,070
Current assets of disposal group classified as held for sale 235,482 151,117
Other current assets   76,750   88,085
Total current assets 979,432 681,686
Goodwill 729,673 726,962
Noncurrent assets of disposal group classified as held for sale 28,616
Deferred charges and other assets   317,088   305,019
$ 10,579,155 $ 10,010,889
 
Shareholders' equity $ 3,698,975 $ 3,463,059
Long-term debt   2,314,199   2,188,779
Total capitalization 6,013,174 5,651,838
Accounts payable and accrued liabilities 268,647 196,485
Current liabilities of disposal group classified as held for sale 109,298 72,900
Other current liabilities 381,123 439,085
Short-term debt 940,747 829,811
Current maturities of long-term debt   250,000   250,000
Total current liabilities 1,949,815 1,788,281
Deferred income taxes 1,725,433 1,603,056
Noncurrent liabilities of disposal group classified as held for sale 316
Deferred credits and other liabilities   890,733   967,398
$ 10,579,155 $ 10,010,889
 
   

Atmos Energy Corporation Financial Highlights, continued (Unaudited)
 

Condensed Statements of Cash Flows
Three Months EndedDecember 31
(000s) 2016     2015
Cash flows from operating activities
Net income $ 125,032 $ 102,861
Depreciation and amortization 77,143 71,239
Deferred income taxes 67,241 59,299
Discontinued cash flow hedging for natural gas marketing commodity contracts (10,579 )
Other 4,842 3,471
Changes in assets and liabilities   (146,716 )   (166,729 )
Net cash provided by operating activities 116,963 70,141
Cash flows from investing activities
Capital expenditures (297,962 ) (290,412 )
Acquisition (85,714 )
Available-for-sale securities activities, net (10,263 ) (2,263 )
Other, net   1,802     2,382  
Net cash used in investing activities (392,137 ) (290,293 )
Cash flows from financing activities
Net increase in short-term debt 110,936 305,309
Proceeds from issuance of long-term debt, net of discount 125,000
Net proceeds from equity offering 49,400
Issuance of common stock through stock purchase and employee retirement plans 8,998 8,729
Interest rate agreements cash collateral 25,670
Cash dividends paid   (47,740 )   (43,636 )
Net cash provided by financing activities   272,264     270,402  
Net increase (decrease) in cash and cash equivalents (2,910 ) 50,250
Cash and cash equivalents at beginning of period   47,534     28,653  
Cash and cash equivalents at end of period $ 44,624   $ 78,903  
 
 
Three Months EndedDecember 31

Statistics
2016 2015
Consolidated distribution throughput (MMcf as metered) 110,605 104,465
Consolidated pipeline and storage transportation volumes (MMcf) 134,976 129,159
Distribution meters in service 3,202,106 3,167,702
Distribution average cost of gas $ 5.31 $ 4.35

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