Atmos Energy Corporation (NYSE: ATO) today reported consolidated
results for its fiscal 2009 third quarter and nine months ended
June 30, 2009.
- Fiscal 2009 third quarter net
income was $2.0 million, or $0.02 per diluted share, compared with
a net loss of $6.6 million, or $0.07 per diluted share in the
prior-year quarter.
- Consolidated results include
noncash, unrealized mark-to-market net gains of $7.0 million, or
$0.08 per diluted share for the third quarter of fiscal 2009,
compared with net gains of $14.3 million, or $0.16 per diluted
share for the prior-year quarter.
- Atmos Energy reaffirms its
fiscal 2009 earnings guidance to be in the previously announced
range of $2.05 to $2.15 per diluted share.
For the nine months ended June 30, 2009, net income was $206.9
million, or $2.26 per diluted share, compared with net income of
$178.7 million, or $1.99 per diluted share for the same period last
year. Net income for the current nine months includes the positive
impact of net one-time adjustments of $17.3 million, or $0.19 per
diluted share. For the current nine-month period, regulated
operations contributed $176.8 million of net income, or $1.93 per
diluted share, and nonregulated operations contributed $30.1
million of net income, or $0.33 per diluted share. Nonregulated
operations include noncash, unrealized mark-to-market net losses of
$9.9 million, or $0.11 per diluted share for the nine months ended
June 30, 2009, compared with net gains of $8.7 million, or $0.10
per diluted share for the prior-year period.
“The seasonality of our distribution business typically results
in a loss in our fiscal third and fourth quarters,” said Robert W.
Best, chairman and chief executive officer of Atmos Energy
Corporation. “However, we experienced solid improvement in both our
regulated transmission and storage and nonregulated natural gas
marketing segments this quarter, while continuing to control our
operating expenses. These results position us well for the
remainder of our fiscal year,” Best concluded.
Results for the 2009 Third Quarter
Ended June 30, 2009
Natural gas distribution gross profit decreased $8.2 million to
$191.7 million for the fiscal 2009 third quarter, compared with
$199.9 million in the prior-year quarter, before intersegment
eliminations. This decrease reflects a $5.4 million net reduction
in margins in the Mid-Tex Division primarily from rate design
changes implemented earlier in the fiscal year that decreased the
base customer charge and increased the volumetric charge.
Additionally, a five percent decrease in consolidated consumption
reduced gross profit by $3.5 million. These decreases were
partially offset by a $3.3 million increase in rates principally in
the Louisiana, Kansas and Georgia service areas.
Regulated transmission and storage gross profit increased $3.0
million to $49.3 million for the three months ended June 30, 2009,
compared with $46.3 million for the same period last year, before
intersegment eliminations. This increase is due primarily to a $3.5
million increase in demand-based charges and a $1.1 million
increase in revenues resulting from filings under the Texas Gas
Reliability Infrastructure Program (GRIP). These increases were
partially offset by a $0.7 million decrease due to a seven percent
decrease in consolidated throughput, due principally to a decline
in Barnett Shale activity, industrial demand and electric
generation demand.
Natural gas marketing gross profit increased $17.6 million to
$15.0 million for the fiscal 2009 third quarter, compared with a
$2.6 million loss for the fiscal 2008 third quarter, before
intersegment eliminations. This increase is due principally to a
$23.0 million quarter-over-quarter increase in Atmos Energy
Marketing’s (AEM) realized storage and trading margins. In both
quarters, AEM elected to defer physical storage withdrawals into
future periods to increase the potential gross profit associated
with these positions. This election resulted in the planned
recognition of asset optimization losses which were lower in the
current quarter than the prior-year quarter. Realized delivered gas
margins increased $5.4 million, primarily due to basis gains which
increased per-unit margins, coupled with a two percent increase in
consolidated sales volumes compared to the same period one year
ago. These increases were partially offset by a $10.7 million
decrease in unrealized margins due to lower volatility between
current cash prices and forward natural gas prices experienced on
AEM’s net physical position during the current quarter.
Consolidated operation and maintenance expense for the third
quarter of fiscal 2009 was $110.9 million, compared with $117.8
million for the third quarter last year. Excluding the provision
for doubtful accounts, operation and maintenance expense for the
current quarter decreased $5.6 million, compared with the
prior-year quarter. The decrease is due primarily to lower pipeline
maintenance, fuel and legal costs, partially offset by increased
employee wages and benefits.
The provision for doubtful accounts was $1.6 million for the
three months ended June 30, 2009, compared with $2.9 million for
the same period last year. The $1.3 million decrease primarily
reflects the impact of recent rate design changes in certain
jurisdictions, which allow for the recovery of the gas cost portion
of uncollectible accounts and a 58 percent quarter-over-quarter
decline in the average cost of gas.
Results for the third quarter included a $3.3 million noncash
charge to impair certain available-for-sale investments based on
the company’s belief that the decline in the fair value of these
investments would not recover within a reasonable period of
time.
Interest charges for the three months ended June 30, 2009, were
$41.5 million, compared with $33.5 million for the same period last
year. The $8.0 million quarter-over-quarter increase is due
primarily to the effect of the company’s March 2009 issuance of
$450 million 8.50% senior notes to redeem $400 million 4.00% senior
notes in April 2009.
Results for the Nine Months Ended
June 30, 2009
Natural gas distribution gross profit increased $26.4 million to
$857.1 million for the nine months ended June 30, 2009, compared
with $830.7 million in the prior-year period, before intersegment
eliminations. This increase is due largely to a net $35.1 million
increase in rates, primarily in the company’s Mid-Tex, Louisiana
and West Texas service areas, the reversal of a $7.0 million
accrual for estimated uncollectible gas costs recorded in a prior
year and a $7.8 million increase due to a non-recurring update to
the estimate for gas delivered to customers but not yet billed,
resulting from base rate changes in several jurisdictions. These
increases in gross profit were partially offset by an $18.8 million
decrease as a result of a four percent reduction in consolidated
distribution throughput primarily associated with lower
residential, commercial and industrial consumption and warmer
weather in the Colorado service area, which does not have
weather-normalized rates.
Regulated transmission and storage gross profit increased $20.5
million to $163.3 million for the nine months ended June 30, 2009,
compared with $142.8 million for the same period last year, before
intersegment eliminations. This increase is due primarily to an
$11.0 million increase in demand-based charges, higher per-unit
margins earned on through-system deliveries of $7.5 million, a $2.9
million gain associated with the routine sale of excess inventory
and a $3.8 million increase in revenues resulting from filings
under GRIP. These increases were partially offset by a $4.2 million
decrease due to a reduction in transportation volumes to the
company’s Mid-Tex Division, as a result of warmer weather and a
seven percent decrease in consolidated throughput, due principally
to a decline in Barnett Shale activity, industrial demand and
electric generation demand.
Natural gas marketing gross profit increased $8.9 million to
$68.6 million for the fiscal 2009 nine-month period, compared with
$59.7 million for the prior-year period, before intersegment
eliminations. This increase primarily reflects a $30.6 million
period-over-period increase from AEM’s storage and trading
activities primarily from the recognition in the first quarter of
fiscal 2009 of storage withdrawal gains that AEM had captured
during fiscal 2008, as a result of deferring storage withdrawals
and rolling the associated financial instruments to forward months
during the third quarter of fiscal 2008. Additionally, delivered
gas margins increased $2.7 million primarily as a result of basis
gains, which increased per-unit margins and more than offset a five
percent period-over-period decrease in consolidated sales volumes.
These increases were partially offset by a $24.4 million decrease
in unrealized margins due to the impact of widening spreads between
current cash prices and forward natural gas prices experienced on
AEM’s net physical position.
Pipeline, storage and other gross profit increased $8.3 million
to $27.2 million for the nine months ended June 30, 2009, compared
with $18.9 million for the same period last year, before
intersegment eliminations. The increase was due principally to
larger realized gains from the settlement of financial positions
associated with storage and trading activities, basis gains earned
from utilizing leased pipeline capacity and higher margins earned
under asset management plans during the current-year period
compared with the prior-year period. These increases were partially
offset by increased unrealized losses, due primarily to the
widening of the spreads between current cash prices and forward
natural gas prices.
Consolidated operation and maintenance expense for the nine
months ended June 30, 2009, was $365.3 million, compared with
$359.1 million for the prior-year period. Excluding the provision
for doubtful accounts, operation and maintenance expense for the
current nine-month period was $358.4 million, compared with $349.8
million for the prior-year period. The $8.6 million increase
resulted from higher pipeline maintenance costs and an increase in
employee wages and benefits costs, partially offset by lower fuel
costs.
The provision for doubtful accounts was $6.9 million for the
nine months ended June 30, 2009, compared with $9.3 million for the
same period last year. The $2.4 million decrease primarily reflects
the impact of recent rate design changes in certain jurisdictions,
which allow for the recovery of the gas cost portion of
uncollectible accounts and an 18 percent decline in the average
cost of gas.
Results for the nine months ended June 30, 2009, included a $5.4
million noncash charge to impair certain available-for-sale
investments based on the company’s belief that the decline in the
fair value of these investments would not recover within a
reasonable period of time.
Interest charges for the nine months ended June 30, 2009, were
$116.0 million, compared with $103.8 million for the nine months
ended June 30, 2008. The $12.2 million period-over-period increase
primarily reflects the effect of the company’s issuance of senior
notes in March 2009. The increase also reflects higher commercial
paper rates, increased line of credit commitment fees and higher
average short-term debt balances experienced primarily during the
first quarter of fiscal 2009.
Results for the nine months ended June 30, 2009, were favorably
impacted by a one-time tax benefit of $11.3 million. The benefit
arose in the second quarter after the company updated the tax rates
used to record its deferred taxes.
The debt capitalization ratio at June 30, 2009, was 49.7
percent, compared with 54.6 percent at September 30, 2008, and 51.5
percent at June 30, 2008. No short-term debt was outstanding at
June 30, 2009, compared with $350.5 million at September 30, 2008,
and $113.3 million at June 30, 2008.
For the nine months ended June 30, 2009, the company generated
operating cash flow of $824.6 million, compared with $417.4 million
for the nine months ended June 30, 2008. Period over period, the
$407.2 million increase in operating cash flow is primarily due to
the decline in natural gas prices in the current year as compared
to one year ago, which increased operating cash flow by $251.1
million. The increase in operating cash flow was also positively
impacted by $99.9 million due to lower cash margin requirements
related to the company’s natural gas marketing financial
instruments and by $49.0 million due to the favorable timing in the
recovery of gas costs during the current year.
Capital expenditures increased to $342.3 million for the nine
months ended June 30, 2009, compared with $312.9 million for the
same period last year. The $29.4 million increase primarily
reflects spending for the construction of a pipeline extension in
the company’s regulated operations.
Outlook
The leadership of Atmos Energy remains focused on enhancing
shareholder value by delivering consistent earnings growth. Atmos
Energy continues to expect fiscal 2009 earnings to be in the range
of $2.05 to $2.15 per diluted share, excluding any material
mark-to-market impact. Major assumptions underlying the earnings
projection remain materially unchanged. Capital expenditures for
fiscal 2009 remain unchanged and are expected to range from $500
million to $515 million.
However, the mark-to-market impact on the nonregulated marketing
company’s physical storage inventory at September 30, 2009, and
changes in events or other circumstances that the company cannot
currently anticipate or predict, including adverse credit market
conditions, could result in earnings for fiscal 2009 that are
significantly above or below this outlook. Factors that could cause
such changes are described below in Forward-Looking Statements and
in other company documents on file with the Securities and Exchange
Commission.
Conference Call to be Webcast
August 5, 2009
Atmos Energy will host a conference call with financial analysts
to discuss the financial results for the fiscal 2009 third quarter
and first nine months on Wednesday August 5, 2009, at 8 a.m. EDT.
The telephone number is 877-485-3107. The conference call will be
webcast live on the Atmos Energy Web site at www.atmosenergy.com. A
playback of the call will be available on the Web site later that
day. Atmos Energy senior leadership who will participate in the
conference call include: Bob Best, chairman and chief executive
officer; Kim Cocklin, president and chief operating officer; Fred
Meisenheimer, senior vice president and chief financial officer;
and Mark Johnson, senior vice president, nonregulated
operations.
Highlights and Recent
Developments
Credit Ratings Upgraded
On May 18, 2009, Moody’s Investors Service raised its corporate
credit rating on Atmos Energy Corporation’s senior long-term debt
from Baa3 to Baa2 and its commercial paper from P-3 to P-2, and
changed its outlook from “positive” to “stable”.
Atmos Energy Redeems Senior Notes
On April 30, 2009, Atmos Energy Corporation redeemed its $400
million 4.00% senior notes. The senior notes were redeemed using
most of the net proceeds received from its March 26, 2009 public
offering of $450 million 8.50% senior notes.
Appointment of Vice President and Controller
On May 5, 2009, Christopher T. Forsythe was promoted to vice
president and controller from director of financial reporting. Mr.
Forsythe reports to Fred Meisenheimer, senior vice president and
chief financial officer of Atmos Energy Corporation.
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 filings 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, 2008 and in the company’s Quarterly Report on Form
10-Q for the three and six months ended March 31, 2009. 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 about 3.2
million natural gas distribution customers in more than 1,600
communities in 12 states from the Blue Ridge Mountains in the East
to the Rocky Mountains in the West. Atmos Energy also provides
natural gas marketing and procurement services to industrial,
commercial and municipal customers primarily in the Midwest and
Southeast and manages company-owned natural gas pipeline and
storage assets, including one of the largest intrastate natural gas
pipeline systems in Texas. Atmos Energy is a Fortune 500 company.
For more information, visit www.atmosenergy.com.
Atmos Energy
Corporation
Financial Highlights
(Unaudited)
Statements of Income
Three Months EndedJune 30
Percentage (000s except per share) 2009
2008 Change Gross Profit: Natural gas distribution
segment $ 191,682 $ 199,928 (4 )% Regulated transmission and
storage segment 49,345 46,286 7 % Natural gas marketing segment
15,022 (2,631 ) 671 % Pipeline, storage and other segment 4,014
3,174 26 % Intersegment eliminations
(423 )
(535 ) 21 % Gross profit 259,640 246,222 5 %
Operation and maintenance expense 110,895 117,822 (6 )%
Depreciation and amortization 54,181 50,356 8 % Taxes, other than
income 47,577 57,335 (17 )% Asset impairment
3,304 — 100 % Total
operating expenses 215,957 225,513 (4 )% Operating income
43,683 20,709 111 % Miscellaneous income 1,219 1,600 (24 )%
Interest charges
41,511
33,470 24 % Income (loss) before income
taxes 3,391 (11,161 ) 130 % Income tax expense (benefit)
1,427 (4,573 ) 131 % Net
income (loss)
$ 1,964
$ (6,588 ) 130 % Basic net income
(loss) per share $ 0.02 $ (0.07 ) Diluted net income (loss) per
share $ 0.02 $ (0.07 ) Cash dividends per share $ .330 $
.325 Weighted average shares outstanding: Basic 91,338
89,648 Diluted 92,002 89,648 Three Months EndedJune 30
Percentage
Summary Net Income (Loss) by Segment
(000s)
2009 2008 Change Natural
gas distribution $ (14,941 ) $ (12,378 ) (21 )% Regulated
transmission and storage 12,954 10,265 26 % Natural gas marketing
2,099 (6,314 ) 133 % Pipeline, storage and other
1,852 1,839 1 %
Consolidated net income (loss)
$ 1,964
$ (6,588 ) 130 %
Atmos Energy
Corporation
Financial Highlights,
continued (Unaudited)
Statements of Income
Nine Months EndedJune 30 Percentage (000s except per share)
2009 2008 Change Gross Profit:
Natural gas distribution segment $ 857,146 $ 830,652 3 % Regulated
transmission and storage segment 163,261 142,772 14 % Natural gas
marketing segment 68,589 59,664 15 % Pipeline, storage and other
segment 27,175 18,856 44 % Intersegment eliminations
(1,268 )
(1,690 ) 25 % Gross
profit 1,114,903 1,050,254 6 % Operation and maintenance
expense 365,312 359,064 2 % Depreciation and amortization 160,757
147,659 9 % Taxes, other than income 150,028 153,170 (2 )% Asset
impairments
5,382 —
100 % Total operating expenses 681,479 659,893 3 %
Operating income 433,424 390,361 11 % Miscellaneous income
(expense) (647 ) 2,974 (122 )% Interest charges
116,035 103,803 12 %
Income before income taxes 316,742 289,532 9 % Income tax
expense
109,812
110,783 (1 )% Net income
$
206,930 $ 178,749
16 % Basic net income per share $ 2.28 $ 2.00 Diluted
net income per share $ 2.26 $ 1.99 Cash dividends per share
$ .990 $ .975 Weighted average shares outstanding: Basic
90,940 89,281 Diluted 91,590 89,937 Nine Months EndedJune 30
Percentage
Summary Net Income by Segment (000s)
2009 2008 Change Natural gas distribution $ 136,768 $
113,442 21 % Regulated transmission and storage 40,080 35,336 13 %
Natural gas marketing 16,022 19,565 (18 )% Pipeline, storage and
other
14,060 10,406 35 %
Consolidated net income
$ 206,930
$ 178,749 16 %
Atmos Energy
Corporation
Financial Highlights,
continued (Unaudited)
Condensed Balance Sheets
June 30, September 30, (000s) 2009 2008 Net property, plant
and equipment $ 4,339,364 $ 4,136,859 Cash and cash
equivalents 125,735 46,717 Accounts receivable, net 241,582 477,151
Gas stored underground 317,275 576,617 Other current assets
111,420 184,619 Total
current assets 796,012 1,285,104 Goodwill and intangible
assets 738,615 739,086 Deferred charges and other assets
222,039 225,650
$ 6,096,030 $
6,386,699 Shareholders’ equity $
2,191,520 $ 2,052,492 Long-term debt
2,169,395
2,119,792 Total capitalization 4,360,915
4,172,284 Accounts payable and accrued liabilities 221,968
395,388 Other current liabilities 422,200 460,372 Short-term debt —
350,542 Current maturities of long-term debt
131 785 Total current
liabilities 644,299 1,207,087 Deferred income taxes 510,901
441,302 Deferred credits and other liabilities
579,915 566,026
$ 6,096,030 $
6,386,699
Atmos Energy
Corporation
Financial Highlights,
continued (Unaudited)
Condensed Statements of Cash Flows
Nine Months EndedJune 30 (000s) 2009
2008
Cash flows from operating activities
Net income $ 206,930 $ 178,749 Depreciation and amortization
160,817 147,765 Deferred income taxes 62,658 77,864 Changes in
assets and liabilities 371,180 236 Other
23,009
12,767 Net cash provided by
operating activities 824,594 417,381
Cash flows from
investing activities Capital expenditures (342,326 )
(312,878 ) Other, net
(6,094 )
(4,303 ) Net cash used in investing activities
(348,420 ) (317,181 )
Cash flows from financing
activities Net decrease in short-term debt (366,449 )
(35,721 ) Net proceeds from issuance of long-term debt 445,623 —
Settlement of Treasury lock agreement 1,938 — Repayment of
long-term debt (407,287 ) (9,945 ) Cash dividends paid (90,909 )
(87,821 ) Issuance of common stock
19,928
19,063 Net cash used in financing
activities
(397,156 )
(114,424 ) Net increase (decrease) in cash and
cash equivalents 79,018 (14,224 ) Cash and cash equivalents at
beginning of period
46,717
60,725 Cash and cash equivalents at end of
period
$ 125,735 $
46,501
Three Months EndedJune 30
Nine Months EndedJune 30
Statistics
2009 2008 2009 2008
Consolidated natural gas
distribution throughput (MMcf as metered)
69,678
73,483
352,081
367,297
Consolidated regulated
transmission and storage transportation volumes (MMcf)
141,556
152,450
400,699
429,758
Consolidated natural gas marketing
sales volumes (MMcf)
84,162
82,122
282,443
298,351
Natural gas distribution meters in
service
3,210,325
3,205,456
3,210,325
3,205,456
Natural gas distribution average
cost of gas
$4.87
$11.53
$7.18
$8.77
Natural gas marketing net physical
position (Bcf)
20.0
17.5
20.0
17.5
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