Atmos Energy Corporation Reports Earnings for Fiscal 2020 Second Quarter; Reaffirms Fiscal 2020 Guidance

DALLAS–(BUSINESS WIRE)–Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its second fiscal quarter ended March 31, 2020.

Highlights

  • Earnings per diluted share of $3.42 for the six months ended March 31, 2020; $1.95 per diluted share for the second fiscal quarter
  • Consolidated net income of $418.3 million for the six months ended March 31, 2020; $239.6 million for the second fiscal quarter
  • Capital expenditures were $994.7 million for the six months ended March 31, 2020, an increase of 28 percent
  • Approximately 87 percent of capital spending related to system safety and reliability investments

Outlook

  • Although the impacts of the pandemic remain uncertain, at this time Atmos Energy is not changing guidance for fiscal 2020 earnings per diluted share of $4.58 to $4.73.
  • Capital expenditures are expected to be in the range of $1.85 billion to $1.95 billion in fiscal 2020.
  • The company’s Board of Directors has declared a quarterly dividend of $0.575 per common share. The indicated annual dividend for fiscal 2020 is $2.30, which represents a 9.5% increase over fiscal 2019.

“Our second quarter and six months ended March 31, 2020, results reflect the ongoing dedication and commitment of our 4,800 employees to provide our customers safe and reliable natural gas service,” said Kevin Akers, President and Chief Executive Officer of Atmos Energy Corporation. “As we move into the remainder of our fiscal year, we are positioned to focus on the health and safety of our employees, customers and communities as we execute our proven strategy of safely operating and modernizing our natural gas distribution and transmission system.”

Results for the Three Months Ended March 31, 2020

Consolidated operating income increased $33.7 million to $331.4 million for the three months ended March 31, 2020, from $297.7 million in the prior-year quarter. Positive rate case outcomes in both segments and customer growth in our distribution segment were partially offset by increased depreciation expense.

Distribution operating income increased $24.5 million to $253.5 million for the three months ended March 31, 2020, compared with $229.0 million in the prior-year quarter. The increase primarily reflects a $28.6 million increase in rates and a $4.5 million increase from customer growth, mostly in the Mid-Tex and Kentucky/Mid-States divisions, partially offset by a $2.5 million increase in employee costs and a $6.4 million increase in depreciation expense due to increased capital investments.

Pipeline and storage operating income increased $9.2 million to $77.9 million for the three months ended March 31, 2020, compared with $68.7 million in the prior-year quarter. This increase is attributable to a $12.9 million increase in rates, due to the GRIP filings approved in fiscal 2019, partially offset by a $2.8 million increase in depreciation expense due to increased capital investments.

Results for the Six Months Ended March 31, 2020

Consolidated operating income increased $50.1 million to $584.2 million for the six months ended March 31, 2020, compared to $534.1 million in the prior year, which primarily reflects positive rate outcomes and customer growth in our distribution business, partially offset by higher operation and maintenance, depreciation and property tax expenses.

Distribution operating income increased $35.4 million to $433.8 million for the six months ended March 31, 2020, compared with $398.4 million in the prior year. The increase reflects a net $56.0 million increase in rates. In addition, customer growth increased $8.5 million, mainly in our Mid-Tex division. These increases were partially offset by a decrease in consumption of $1.5 million, primarily in our Louisiana division, a $6.8 million increase in operation and maintenance expense due primarily to higher employee and information technology costs and pipeline and maintenance activities, as well as a $15.6 million increase in depreciation and property tax expenses associated with increased capital investments.

Pipeline and storage operating income increased $14.7 million to $150.4 million for the six months ended March 31, 2020, compared with $135.7 million in the prior year. This increase is primarily attributable to a $26.6 million increase in revenue from our GRIP filing approved in fiscal 2019, partially offset by a $5.3 million increase in operation and maintenance expense primarily due to well integrity costs and a $5.4 million increase in depreciation expense due to increased capital investments.

Capital expenditures increased $217.1 million to $994.7 million for the six months ended March 31, 2020, compared with $777.6 million in the prior year, due to continued spending for infrastructure replacements and enhancements.

For the six months ended March 31, 2020, the company generated operating cash flow of $633.8 million, a $72.9 million increase compared with the six months ended March 31, 2019. The year-over-year increase reflects the positive cash effects of successful rate case outcomes achieved in fiscal 2019 and working capital changes, primarily as a result of the timing of gas cost recoveries under our purchase gas cost mechanisms.

Our equity capitalization ratio at March 31, 2020 was 58.2%, compared with 59.0% at September 30, 2019. The decrease primarily reflects the effects of higher short-term debt balances as of March 31, 2020 and long-term debt issuances in October 2019.

Conference Call to be Webcast May 7, 2020

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2020 second quarter financial results on Thursday, May 7, 2020, at 10:00 a.m. Eastern Time. The domestic telephone number is 877-407-3088 and the international telephone number is 201-389-0927. Kevin Akers, 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.

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 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 presentation, including the risks 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 following: the outbreak of COVID-19 and its impact on business and economic conditions; federal, state and local regulatory and political trends and decisions, including the impact of rate proceedings before various state regulatory commissions; increased federal regulatory oversight and potential penalties; possible increased federal, state and local regulation of the safety of our operations; possible significant costs and liabilities resulting from pipeline integrity and other similar programs and related repairs; the inherent hazards and risks involved in distributing, transporting and storing natural gas; the capital-intensive nature of our business; our ability to continue to access the credit and capital markets to execute our business strategy; market risks beyond our control affecting our risk management activities, including commodity price volatility, counterparty performance or creditworthiness and interest rate risk; the concentration of our operations in Texas; the impact of adverse economic conditions on our customers; changes in the availability and price of natural gas; the availability and accessibility of contracted gas supplies, interstate pipeline and/or storage services; increased competition from energy suppliers and alternative forms of energy; adverse weather conditions; increased costs of providing health care benefits, along with pension and postretirement health care benefits and increased funding requirements; the inability to continue to hire, train and retain operational, technical and managerial personnel; the impact of climate change; the impact of greenhouse gas emissions or other legislation or regulations intended to address climate change; increased dependence on technology that may hinder the Company’s business if such technologies fail; the threat of cyber-attacks or acts of cyber-terrorism that could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive customer, employee or Company information; and natural disasters, terrorist activities or other significant events, all of which are difficult to predict and many of which are beyond our control.

Accordingly, while we believe 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. Further, the company undertakes no obligation to update or revise any of our forward-looking statements whether as a result of new information, future events or otherwise.

About Atmos Energy

Atmos Energy Corporation is the nation’s largest fully regulated, natural gas-only distributor of safe, clean, efficient and affordable energy. As part of our vision to be the safest provider of natural gas services, we are modernizing our business and our infrastructure while continuing to invest in safety, innovation, environmental sustainability and our communities. An S&P 500 company headquartered in Dallas, Atmos Energy serves more than 3 million distribution customers in over 1,400 communities across eight states and manages proprietary pipeline and storage assets, including one of the largest intrastate natural gas pipeline systems in Texas. Find us online at http://www.atmosenergy.com, Facebook, Twitter, Instagram and YouTube.

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

 

Atmos Energy Corporation

Financial Highlights (Unaudited)

 

 

 

 

 

 

Statements of Income

 

Three Months Ended March 31

(000s except per share)

 

2020

 

2019

 

Operating revenues

 

 

 

 

 

Distribution segment

 

$

933,005

 

 

$

1,057,889

 

 

Pipeline and storage segment

 

146,237

 

 

135,650

 

 

Intersegment eliminations

 

(101,577

)

 

(98,894

)

 

 

 

977,665

 

 

1,094,645

 

 

Purchased gas cost

 

 

 

 

 

Distribution segment

 

418,935

 

 

570,348

 

 

Pipeline and storage segment

 

202

 

 

(90

)

 

Intersegment eliminations

 

(101,254

)

 

(98,582

)

 

 

 

317,883

 

 

471,676

 

 

Operation and maintenance expense

 

147,824

 

 

149,427

 

 

Depreciation and amortization

 

105,916

 

 

96,772

 

 

Taxes, other than income

 

74,604

 

 

79,093

 

 

Operating income

 

331,438

 

 

297,677

 

 

Other non-operating income (expense)

 

(2,989

)

 

4,232

 

 

Interest charges

 

22,171

 

 

26,949

 

 

Income before income taxes

 

306,278

 

 

274,960

 

 

Income tax expense

 

66,632

 

 

60,072

 

 

Net income

 

$

239,646

 

 

$

214,888

 

 

 

 

 

 

 

 

Basic net income per share

 

$

1.95

 

 

$

1.83

 

 

Diluted net income per share

 

$

1.95

 

 

$

1.82

 

 

Cash dividends per share

 

$

0.575

 

 

$

0.525

 

 

Basic weighted average shares outstanding

 

122,916

 

 

117,581

 

 

Diluted weighted average shares outstanding

 

122,997

 

 

117,756

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31

 

Summary Net Income by Segment (000s)

 

2020

 

2019

 

Distribution

 

$

187,064

 

 

$

172,193

 

 

Pipeline and storage

 

52,582

 

 

42,695

 

 

Net income

 

$

239,646

 

 

$

214,888

 

 

 

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

 

 

 

 

Statements of Income

 

Six Months Ended March 31

(000s except per share)

 

2020

 

2019

Operating revenues

 

 

 

 

Distribution segment

 

$

1,761,509

 

 

$

1,896,724

 

Pipeline and storage segment

 

294,413

 

 

270,120

 

Intersegment eliminations

 

(202,694

)

 

(194,417

)

 

 

1,853,228

 

 

1,972,427

 

Purchased gas cost

 

 

 

 

Distribution segment

 

816,493

 

 

1,008,080

 

Pipeline and storage segment

 

301

 

 

(448

)

Intersegment eliminations

 

(202,043

)

 

(193,791

)

 

 

614,751

 

 

813,841

 

Operation and maintenance expense

 

300,069

 

 

288,027

 

Depreciation and amortization

 

210,978

 

 

192,837

 

Taxes, other than income

 

143,211

 

 

143,581

 

Operating income

 

584,219

 

 

534,141

 

Other non-operating income (expense)

 

1,898

 

 

(3,491

)

Interest charges

 

49,400

 

 

54,798

 

Income before income taxes

 

536,717

 

 

475,852

 

Income tax expense

 

118,398

 

 

103,318

 

Net income

 

$

418,319

 

 

$

372,534

 

 

 

 

 

 

Basic net income per share

 

$

3.43

 

 

$

3.22

 

Diluted net income per share

 

$

3.42

 

 

$

3.21

 

Cash dividends per share

 

$

1.15

 

 

$

1.05

 

Basic weighted average shares outstanding

 

122,015

 

 

115,690

 

Diluted weighted average shares outstanding

 

122,179

 

 

115,794

 

 

 

 

 

 

 

 

 

Six Months Ended March 31

 

Summary Net Income by Segment (000s)

 

2020

 

2019

 

Distribution

 

$

316,821

 

 

$

286,578

 

 

Pipeline and storage

 

101,498

 

 

85,956

 

 

Net income

 

$

418,319

 

 

$

372,534

 

 

 

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Balance Sheets

 

March 31,

 

September 30,

(000s)

 

2020

 

2019

Net property, plant and equipment

 

$

12,548,240

 

 

$

11,787,669

 

Cash and cash equivalents

 

320,099

 

 

24,550

 

Accounts receivable, net

 

377,817

 

 

230,571

 

Gas stored underground

 

68,061

 

 

130,138

 

Other current assets

 

63,584

 

 

72,772

 

Total current assets

 

829,561

 

 

458,031

 

Goodwill

 

730,706

 

 

730,706

 

Deferred charges and other assets

 

607,891

 

 

391,213

 

 

 

$

14,716,398

 

 

$

13,367,619

 

 

 

 

 

 

Shareholders’ equity

 

$

6,304,415

 

 

$

5,750,223

 

Long-term debt

 

4,328,866

 

 

3,529,452

 

Total capitalization

 

10,633,281

 

 

9,279,675

 

Accounts payable and accrued liabilities

 

190,088

 

 

265,024

 

Other current liabilities

 

543,248

 

 

479,501

 

Short-term debt

 

199,923

 

 

464,915

 

Current maturities of long-term debt

 

131

 

 

 

Total current liabilities

 

933,390

 

 

1,209,440

 

Deferred income taxes

 

1,421,779

 

 

1,300,015

 

Regulatory excess deferred taxes

 

694,433

 

 

705,101

 

Deferred credits and other liabilities

 

1,033,515

 

 

873,388

 

 

 

$

14,716,398

 

 

$

13,367,619

 

 

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Statements of Cash Flows

 

Six Months Ended March 31

(000s)

 

2020

 

2019

Cash flows from operating activities

 

 

 

 

Net income

 

$

418,319

 

 

$

372,534

 

Depreciation and amortization

 

210,978

 

 

192,837

 

Deferred income taxes

 

110,664

 

 

96,885

 

Other

 

7,144

 

 

5,334

 

Changes in assets and liabilities

 

(113,330

)

 

(106,761

)

Net cash provided by operating activities

 

633,775

 

 

560,829

 

Cash flows from investing activities

 

 

 

 

Capital expenditures

 

(994,737

)

 

(777,586

)

Proceeds from the sale of discontinued operations

 

 

 

4,000

 

Debt and equity securities activities, net

 

(1,131

)

 

777

 

Other, net

 

4,631

 

 

4,388

 

Net cash used in investing activities

 

(991,237

)

 

(768,421

)

Cash flows from financing activities

 

 

 

 

Net decrease in short-term debt

 

(264,992

)

 

(575,780

)

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

 

799,450

 

 

1,045,221

 

Net proceeds from equity offering

 

258,047

 

 

494,085

 

Issuance of common stock through stock purchase and employee retirement plans

 

8,321

 

 

10,344

 

Settlement of interest rate swaps

 

 

 

(90,141

)

Repayment of long-term debt

 

 

 

(450,000

)

Cash dividends paid

 

(140,077

)

 

(120,328

)

Debt issuance costs

 

(7,738

)

 

(11,227

)

Net cash provided by financing activities

 

653,011

 

 

302,174

 

Net increase in cash and cash equivalents

 

295,549

 

 

94,582

 

Cash and cash equivalents at beginning of period

 

24,550

 

 

13,771

 

Cash and cash equivalents at end of period

 

$

320,099

 

 

$

108,353

 

 

 

Three Months Ended March 31

 

Six Months Ended March 31

Statistics

 

2020

 

2019

 

2020

 

2019

Consolidated distribution throughput (MMcf as metered)

 

163,870

 

 

185,432

 

 

303,428

 

 

328,178

 

Consolidated pipeline and storage transportation volumes (MMcf)

 

143,465

 

 

165,369

 

 

299,994

 

 

335,896

 

Distribution meters in service

 

3,312,616

 

 

3,279,005

 

 

3,312,616

 

 

3,279,005

 

Distribution average cost of gas

 

$

3.51

 

 

$

4.10

 

 

$

3.74

 

 

$

4.18

 

 

Contacts

Analysts and Media Contact:
Dan Meziere (972) 855-3729

 

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