Atmos Energy Corporation Reports Earnings for Fiscal 2017 and Initiates Fiscal 2018 Guidance; Raises Dividend 7.8 Percent | Atmos Energy

Atmos Energy Corporation Reports Earnings for Fiscal 2017 and Initiates Fiscal 2018 Guidance; Raises Dividend 7.8 Percent

Financial
November 8, 2017

Analysts and Media Contact:
Jennifer Hills
(972) 855-3729

DALLAS, Texas - (November 8, 2017) -- Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its 2017 fiscal year and fourth quarter ended September 30, 2017.

  • Fiscal 2017 consolidated net income was $396.4 million, or $3.73 per diluted share, compared with consolidated net income of $350.1 million, or $3.38 per diluted share in the prior year. 
  • Fiscal 2017 net income from continuing operations was $382.7 million or $3.60 per diluted share, compared with net income from continuing operations of $345.5 million, or $3.33 per diluted share for the same period last year.
  • Fiscal 2017 net income from discontinued operations was $13.7 million, or $0.13 per diluted share, compared with net income from discontinued operations of $4.6 million, or $0.05 per diluted share in the prior year.
  • Capital expenditures were $1.14 billion for the year ended September 30, 2017, with approximately 80 percent of that spending related to system safety and reliability investments.     
  • Atmos Energy expects fiscal 2018 earnings to be in the range of $3.75 to $3.95 per diluted share. Capital expenditures are expected to be in the range of $1.3 billion to $1.4 billion in fiscal 2018.
  • The company's Board of Directors has declared a quarterly dividend of $0.485 per common share. The indicated annual dividend for fiscal 2018 is $1.94, which represents a 7.8 percent increase over fiscal 2017.

 

For the quarter ended September 30, 2017, net income from continuing operations was $35.9 million, or $0.34 per diluted share, compared with net income from continuing operations of $34.9 million, or $0.33 per diluted share for the same quarter last year.

“Our business strategy continues to deliver solid results,” said Mike Haefner, president and chief executive officer of Atmos Energy Corporation. “Once again our employees have gone above and beyond to deliver value to our customers, communities, and investors. The financial strength of the company and quality of our team sustain our ongoing investments in system safety, reliability, growth, and expansion while providing an attractive return to shareholders. We are well-positioned to continue delivering annual earnings per share growth in the six to eight percent range,” Haefner concluded.

Results for the Fiscal Year Ended September 30, 2017

Distribution gross profit increased $98.5 million to $1,379.7 million for the year ended September 30, 2017, compared with $1,281.2 million in the prior year. Gross profit reflects a net $72.4 million increase in rates, primarily in the Mid-Tex, Louisiana, Mississippi and Kentucky/Mid-States Divisions. Customer growth, primarily in the Mid-Tex Division, contributed an incremental $5.8 million in gross profit.  Transportation gross profit, primarily in the Kentucky/Mid-States and Mid-Tex Divisions, increased $5.8 million year over year. In addition, net consumption increased $2.9 million, despite weather that was 12 percent warmer than the prior year.

Pipeline and storage gross profit increased $27.2 million to $454.5 million for the year ended September 30, 2017, compared with $427.3 million in the prior year. This increase is primarily attributable to a $24.6 million increase in rates from the approved 2016 GRIP filings and the rate case finalized in August 2017.

Continuing operation and maintenance expense for the year ended September 30, 2017, was $546.8 million, compared with $538.6 million in the prior year. This $8.2 million increase was primarily driven by higher employee-related costs.

Interest charges for the year ended September 30, 2017 were $120.2 million, compared with $114.8 million in the prior year. The $5.4 million increase was primarily driven by an increase in long-term debt compared to the prior year.

In January 2017, the company completed the sale of its natural gas marketing business. Net income from discontinued operations was $13.7 million for the year ended September 30, 2017, compared with $4.6 million in the prior year. The increase largely reflects the recognition of a net $6.6 million noncash gain in the first quarter of fiscal 2017 from unwinding hedge accounting for certain of the natural gas marketing business's financial positions as a result of the sale and a $2.7 million gain recognized on the sale in the second fiscal quarter.

Capital expenditures increased $50.1 million to $1,137.1 million for the year ended September 30, 2017, compared with $1,087.0 million in the prior year, driven by a planned increase in spending for infrastructure replacements and enhancements.  

For the year ended September 30, 2017, the company generated operating cash flow of $867.1 million, a $72.1 million increase compared with the year ended September 30, 2016. The year-over-year increase primarily reflects the positive cash effect of successful rate case outcomes achieved in fiscal 2016.

The equity capitalization ratio at September 30, 2017 was 52.6%, compared with 51.5% at September 30, 2016. At September 30, 2017, there was $447.7 million of short-term debt outstanding, compared with $829.8 million at September 30, 2016. On June 8, 2017, the company completed a public offering of $500 million of 3.00% senior unsecured notes due 2027 and $250 million of 4.125% senior unsecured notes due 2044.  The net proceeds of approximately $753 million were used to repay $250 million of 6.35% senior unsecured notes at maturity on June 15, 2017 and for general corporate purposes, including the repayment of commercial paper.

Results for the Quarter Ended September 30, 2017

Distribution gross profit increased $17.7 million to $274.7 million for the three months ended September 30, 2017, compared with $257.0 million in the prior-year quarter. Gross profit reflects a net $13.3 million increase in rates, primarily in the Mid-Tex, Louisiana, West Texas, Mississippi and Kentucky/Mid-States Divisions. Transportation gross profit, primarily in the Kentucky/Mid-States and Mid-Tex Divisions, increased $1.7 million.

Pipeline and storage gross profit increased $4.8 million to $117.6 million for the three months ended September 30, 2017, compared with $112.8 million in the prior-year quarter. This increase is primarily the result of higher through system revenue, largely related to incremental throughput on the Enlink Pipeline, which was acquired in the first quarter of fiscal 2017, and higher basis spreads due to increased production in the Permian Basin.

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 expects fiscal 2018 earnings to be in the range of $3.75 to $3.95 per diluted share. Capital expenditures for fiscal 2018 are expected to range between $1.3 billion and $1.4 billion.

Conference Call to be Webcast November 9, 2017

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2017 financial results on Thursday, November 9, 2017, at 10:00 a.m. Eastern Time. The domestic telephone number is 877-485-3107 and the international telephone number is 201-689-8427. Mike Haefner, President and Chief Executive 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

On October 11, 2017, Atmos Energy announced that Susan Giles would retire and Jennifer Hills would succeed her as Vice President, Investor Relations, effective November 1, 2017.

On August 7, 2017, Atmos Energy announced that Karen E. Hartsfield, Senior Attorney had been appointed by the Board of Directors as Senior Vice President, General Counsel and Corporate Secretary, and would serve on the company’s Management Committee.

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 credit and 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, and in the company's Quarterly Report on Form 10-Q for the three and nine months ended June 30, 2017. 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.

Non-GAAP Financial Measure

The historical financial information in this news release utilizes a certain financial measure that is not presented in accordance with generally accepted accounting principles (GAAP). Specifically, the company uses gross profit, defined as operating revenues less purchased gas cost, to discuss and analyze its financial performance. Its operations are affected by the cost of natural gas, which is passed through to its customers without markup and includes commodity price, transportation, storage, injection and withdrawal fees, along with hedging settlements. These costs are reflected in the income statement as purchased gas cost. Therefore, increases in the cost of gas are offset by a corresponding increase in revenues. Accordingly, the company believes gross profit, a non-GAAP financial measure defined as operating revenues less purchased gas cost, is a better indicator of its financial performance than operating revenues as it provides a useful and more relevant measure to analyze its financial performance.

About Atmos Energy

Atmos Energy Corporation, headquartered in Dallas, is the country's largest fully-regulated, 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

 

Year Ended
 September 30

(000s except per share)

 

2017

 

2016

Gross Profit:

 

 

 

 

Distribution

 

$

1,379,719

 

 

$

1,281,202

 

Pipeline and storage

 

454,524

 

 

427,254

 

Intersegment eliminations

 

(44

)

 

 

Gross profit

 

1,834,199

 

 

1,708,456

 

Operation and maintenance expense

 

546,798

 

 

538,592

 

Depreciation and amortization

 

319,448

 

 

290,791

 

Taxes, other than income

 

240,407

 

 

221,843

 

Total operating expenses

 

1,106,653

 

 

1,051,226

 

Operating income

 

727,546

 

 

657,230

 

Miscellaneous expense

 

(3,270

)

 

(234

)

Interest charges

 

120,182

 

 

114,812

 

Income from continuing operations before income taxes

 

604,094

 

 

542,184

 

Income tax expense

 

221,383

 

 

196,642

 

Income from continuing operations

 

382,711

 

 

345,542

 

Income from discontinued operations, net of tax

 

10,994

 

 

4,562

 

Gain on sale of discontinued operations, net of tax

 

2,716

 

 

 

Net Income

 

$

396,421

 

 

$

350,104

 

Basic and diluted earnings per share

 

 

 

 

Income per share from continuing operations

 

$

3.60

 

 

$

3.33

 

Income per share from discontinued operations

 

0.13

 

 

0.05

 

Net income per share - basic and diluted

 

$

3.73

 

 

$

3.38

 

Cash dividends per share

 

$

1.80

 

 

$

1.68

 

Basic and diluted weighted average shares outstanding

 

106,100

 

 

103,524

 

 

 

 

 

 

 

 

Year Ended
 September 30

Summary Net Income by Segment (000s)

 

2017

 

2016

Distribution

 

$

268,369

 

 

$

233,830

 

Pipeline and storage

 

114,342

 

 

111,712

 

Net income from continuing operations

 

382,711

 

 

345,542

 

Net income from discontinued operations

 

13,710

 

 

4,562

 

Net income

 

$

396,421

 

 

$

350,104

 

 

Atmos Energy Corporation
Financial Highlights, continued (Unaudited)

 

 

 

 

 

 

Statements of Income

 

Three Months Ended
 September 30

(000s except per share)

 

2017

 

2016

Gross Profit:

 

 

 

 

Distribution segment

 

$

274,671

 

 

$

256,958

 

Pipeline and storage segment

 

117,648

 

 

112,758

 

Intersegment eliminations

 

 

 

 

Gross profit

 

392,319

 

 

369,716

 

Operation and maintenance expense

 

160,931

 

 

159,519

 

Depreciation and amortization

 

84,800

 

 

75,864

 

Taxes, other than income

 

54,796

 

 

49,884

 

Total operating expenses

 

300,527

 

 

285,267

 

Operating income

 

91,792

 

 

84,449

 

Miscellaneous expense

 

(2,820

)

 

(144

)

Interest charges

 

33,710

 

 

30,037

 

Income from continuing operations before income taxes

 

55,262

 

 

54,268

 

Income tax expense

 

19,409

 

 

19,418

 

Income from continuing operations

 

35,853

 

 

34,850

 

Loss from discontinued operations, net of tax

 

 

 

(610

)

Net Income

 

$

35,853

 

 

$

34,240

 

Basic and diluted net income per share

 

 

 

 

Income per share from continuing operations

 

$

0.34

 

 

$

0.33

 

Income per share from discontinued operations

 

 

 

 

Net income per share - basic and diluted

 

$

0.34

 

 

$

0.33

 

Cash dividends per share

 

$

0.45

 

 

$

0.42

 

Basic and diluted weighted average shares outstanding

 

106,814

 

 

104,687

 

 

 

 

 

 

 

 

Three Months Ended
 September 30

Summary Net Income (Loss) by Segment (000s)

 

2017

 

2016

Distribution

 

$

15,346

 

 

$

14,453

 

Pipeline and storage

 

20,507

 

 

20,397

 

Net income from continuing operations

 

35,853

 

 

34,850

 

Net loss from discontinued operations

 

 

 

(610

)

Net Income

 

$

35,853

 

 

$

34,240

 

Atmos Energy Corporation
Financial Highlights, continued (Unaudited)

Condensed Balance Sheets

 

September 30,

 

September 30,

(000s)

 

2017

 

2016

Net property, plant and equipment

 

$

9,259,182

 

 

$

8,268,606

 

Cash and cash equivalents

 

26,409

 

 

47,534

 

Accounts receivable, net

 

222,263

 

 

215,880

 

Gas stored underground

 

184,653

 

 

179,070

 

Current assets of disposal group classified as held for sale

 

 

 

151,117

 

Other current assets

 

106,321

 

 

88,085

 

Total current assets

 

539,646

 

 

681,686

 

Goodwill

 

730,132

 

 

726,962

 

Noncurrent assets of disposal group classified as held for sale

 

 

 

28,616

 

Deferred charges and other assets

 

220,636

 

 

305,019

 

 

 

$

10,749,596

 

 

$

10,010,889

 

 

 

 

 

 

Shareholders' equity

 

$

3,898,666

 

 

$

3,463,059

 

Long-term debt

 

3,067,045

 

 

2,188,779

 

Total capitalization

 

6,965,711

 

 

5,651,838

 

Accounts payable and accrued liabilities

 

233,050

 

 

196,485

 

Current liabilities of disposal group classified as held for sale

 

 

 

72,900

 

Other current liabilities

 

332,648

 

 

439,085

 

Short-term debt

 

447,745

 

 

829,811

 

Current maturities of long-term debt

 

 

 

250,000

 

Total current liabilities

 

1,013,443

 

 

1,788,281

 

Deferred income taxes

 

1,878,699

 

 

1,603,056

 

Noncurrent liabilities of disposal group classified as held for sale

 

 

 

316

 

Deferred credits and other liabilities

 

891,743

 

 

967,398

 

 

 

$

10,749,596

 

 

$

10,010,889

 

Atmos Energy Corporation
Financial Highlights, continued (Unaudited)

Condensed Statements of Cash Flows

 

Year Ended
 September 30

(000s)

 

2017

 

2016

Cash flows from operating activities

 

 

 

 

Net income

 

$

396,421

 

 

$

350,104

 

Depreciation and amortization

 

319,633

 

 

293,096

 

Deferred income taxes

 

227,183

 

 

193,556

 

Gain on sale of discontinued operations

 

(12,931

)

 

 

Discontinued cash flow hedging for natural gas marketing commodity contracts

 

(10,579

)

 

 

Other

 

20,630

 

 

21,446

 

Changes in assets and liabilities

 

(73,267

)

 

(63,212

)

Net cash provided by operating activities

 

867,090

 

 

794,990

 

Cash flows from investing activities

 

 

 

 

Capital expenditures

 

(1,137,089

)

 

(1,086,950

)

Acquisition

 

(86,128

)

 

 

Proceeds from the sale of discontinued operations

 

140,253

 

 

 

Available-for-sale securities activities, net

 

(12,473

)

 

758

 

Use tax refund

 

29,790

 

 

 

Other, net

 

9,341

 

 

6,460

 

Net cash used in investing activities

 

(1,056,306

)

 

(1,079,732

)

Cash flows from financing activities

 

 

 

 

Net increase (decrease) in short-term debt

 

(382,066

)

 

371,884

 

Proceeds from issuance of long-term debt, net of premium/discount

 

884,911

 

 

 

Net proceeds from equity offering

 

98,755

 

 

98,574

 

Issuance of common stock through stock purchase and employee retirement plans

 

26,523

 

 

34,278

 

Settlement of interest rate agreements

 

(36,996

)

 

 

Interest rate agreements cash collateral

 

25,670

 

 

(25,670

)

Repayment of long-term debt

 

(250,000

)

 

 

Cash dividends paid

 

(191,931

)

 

(175,126

)

Debt issuance costs

 

(6,775

)

 

(317

)

Net cash provided by financing activities

 

168,091

 

 

303,623

 

Net increase (decrease) in cash and cash equivalents

 

(21,125

)

 

18,881

 

Cash and cash equivalents at beginning of period

 

47,534

 

 

28,653

 

Cash and cash equivalents at end of period

 

$

26,409

 

 

$

47,534

 

 

 

Three Months Ended
 September 30

 

Year Ended
 September 30

Statistics

 

2017

 

2016

 

2017

 

2016

Consolidated distribution throughput (MMcf as metered)

 

63,810

 

 

61,060

 

 

388,365

 

 

392,028

 

Consolidated pipeline and storage transportation volumes (MMcf)

 

171,029

 

 

132,223

 

 

596,179

 

 

505,303

 

Distribution meters in service

 

3,221,405

 

 

3,185,865

 

 

3,221,405

 

 

3,185,865

 

Distribution average cost of gas

 

$

5.16

 

 

$

4.72

 

 

$

5.14

 

 

$

4.09

 

###