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Exhibit 99.1 |
News Release
Analysts and Media Contact:
Susan Kappes (972) 855-3729
Atmos Energy Corporation’s Nonutility Performance
Drives Fiscal 2006 First Quarter Results
DALLAS (February 7, 2006)—Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its first quarter of fiscal 2006 ending December 31, 2005.
| • | For the fiscal 2006 first quarter net income was $71.0 million, or $0.88 per diluted share, up approximately 19 percent from net income of $59.6 million, or $0.79 per diluted share in the prior-year quarter, despite a 5 million increase in weighted average shares outstanding year over year. |
| • | Nonutility businesses contributed $22.6 million, or $0.28 per diluted share in the fiscal 2006 first quarter, largely due to capturing favorable arbitrage spreads during a period of unprecedented market volatility. |
| • | Gross profit for the fiscal 2006 first quarter was negatively affected by $8.0 million from weather that was 7 percent warmer than normal, as adjusted for jurisdictions with weather-normalized rates. Warmer-than-normal-weather in the Mid-Tex Division accounted for $4.5 million of the reduction in gross profit. Atmos Energy’s budgeted earnings for the full 2006 fiscal year reflect 30-year normal weather. |
| • | First quarter results reflect the adverse impact of the effects of Hurricane Katrina on operations in the Louisiana Division, which reduced gross profit by about $2.5 million. As previously disclosed, the company expects a negative impact on gross profit of between $10 million and $12 million for the full 2006 fiscal year. |
“In the first quarter, we were able to offset much of the effect on our earnings of unseasonably warm weather with a continued strong performance in our nonutility businesses, especially our natural gas marketing operations, and our continued control of operations and maintenance expenses,” said Robert W. Best, chairman, president and chief executive officer of Atmos Energy Corporation. “Weather in our Mid-Tex Division, which makes up almost 50 percent of our customer base and does not have weather-normalized rates, was 17 percent warmer than normal. We remain focused on seeking rate design that will mitigate the effects of weather, conservation and regulatory lag on our utility margins.”
Consolidated gross profit for the three months ended December 31, 2005 was $346.6 million, compared with $322.1 million in the prior-year quarter. Utility gross profit increased $22.9 million to $280.2 million for the three months ended December 31, 2005, compared with $257.3 million in the prior-year quarter, before intersegment eliminations. Consolidated utility throughput increased to 125.8 billion cubic feet (Bcf) for the three months ended December 31, 2005, compared with 118.9 Bcf for the prior-year quarter. The increases in utility gross profit and throughput primarily reflect weather, as adjusted for jurisdictions with weather-normalized rates that was 7 percent colder than the prior-year quarter. Additionally, the Mississippi Division benefited from an increase in its WNA coverage during the three months ended December 31, 2005, and colder than normal weather prior to the beginning of its WNA period. Offsetting these increases was a reduction in gross profit in the Louisiana Division due to the impact of Hurricane Katrina.
Natural gas marketing gross profit decreased $0.5 million to $26.3 million for the three months ended December 31, 2005, compared with $26.8 million for the three months ended December 31, 2004, before intersegment eliminations. For the fiscal 2006 first quarter, the storage and marketing margin of $26.3 million included a negative $29.5 million mark-to-market impact, which resulted from the change in value of the physical/financial portfolio from September 30, 2005. For the first quarter of fiscal 2005, the storage and marketing margin of $26.8 million included a positive $10.7 million of mark-to-market impact, which resulted from the change in value of the physical/financial portfolio from September 30, 2004. As of December 31, 2005, the physical storage position was 12.8 Bcf with equal and offsetting financial hedges, compared to physical/financial positions of 6.4 Bcf at December 31, 2004. Consolidated natural gas marketing sales volumes were 71.5 Bcf for the three months ended December 31, 2005, compared with 60.3 Bcf in the prior-year quarter.
Pipeline and storage gross profit increased $2.2 million to $39.7 million for the three months ended December 31, 2005, compared with $37.5 million in the prior-year quarter. The increase in pipeline and storage gross profit was primarily attributable to increased throughput on the Atmos Pipeline–Texas system coupled with higher transportation and related services margins.
Consolidated operation and maintenance expense for the three months ended December 31, 2005, was $108.2 million, compared with $110.8 million for the three months ended December 31, 2004. Excluding the provision for doubtful accounts, operation and maintenance expense for the three months ended December 31, 2005, decreased $3.8 million compared with the prior-year quarter. The decrease was primarily attributable to a reduction in third-party costs for outsourced administrative and meter reading functions in the first quarter of fiscal 2005 that were subsequently in-sourced during the first quarter of fiscal 2006, partially offset by a $2.0 million charge for Hurricane Katrina-related losses, increased employee headcount and higher benefit costs. The provision for doubtful accounts increased from $7.5 million for the three months ended December 31, 2004 to $8.7 million for the three months ended December 31, 2005. The $1.2 million increase was primarily attributable to increases in the utility segment provision due to potential increased collection risk associated with higher natural gas prices. In the utility segment, the average cost of natural gas for the three months ended December 31, 2005, was $11.82 per thousand cubic feet (Mcf), compared with $7.22 per Mcf for the prior-year quarter.
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Taxes, other than income taxes, for the three months ended December 31, 2005, were $45.4 million, compared with $38.7 million for the prior-year quarter. The $6.7 million increase was primarily related to franchise fees and state gross receipts taxes, both of which are calculated as a percentage of revenue and are paid by utility customers as a component of their monthly bills. Although these amounts are included as a component of revenue in accordance with the company’s tariffs, timing differences between when these amounts are billed to customers and when the company recognizes the associated expense may favorably or unfavorably affect net income on a temporary basis. However, there is no permanent effect on net income.
Interest charges for the three months ended December 31, 2005, were $36.2 million, compared with $32.5 million for the prior-year quarter. The $3.7 million increase was primarily due to higher average outstanding short-term debt balances used to fund natural gas purchases at significantly higher prices, coupled with an increase in the three-month LIBOR rate. These increases were partially offset by $1.2 million in interest savings arising from the early payoff of $72.5 million of the company’s First Mortgage Bonds in June 2005.
For the three months ended December 31, 2005, cash flow generated from operating activities reflected a $195.4 million cash outflow, compared with a $67.9 million cash inflow from operations for the three months ended December 31, 2004. Overall, operating cash flow was adversely impacted by significantly higher natural gas prices, which increased the levels of accounts receivable, natural gas inventories and under-collected deferred gas costs. These increases were partially offset by working capital management efforts which favorably affected the timing of payments for accounts payable and other accrued liabilities.
Capital expenditures increased to $102.5 million for the three months ended December 31, 2005, from $67.2 million for the three months ended December 31, 2004. The $35.3 million increase in capital expenditures primarily reflects increased spending associated with the company’s North Side Loop project in the Dallas/Fort Worth Metroplex and other pipeline expansion projects in the Atmos Pipeline–Texas Division as well as various capital projects in the Mid-Tex Division.
Outlook
Atmos Energy’s leadership remains focused on enhancing shareholder value by delivering consistent earnings growth and providing a sound and attractive dividend. As a result of additional short-term borrowings to fund natural gas purchases and meet working capital requirements during the winter heating season, the debt to capitalization ratio typically reaches its peak at the end of the fiscal first quarter. At December 31, 2005, debt to total capitalization was 61.9 percent. However, Atmos Energy remains committed to reducing the debt to capitalization ratio to a targeted range of 50 to 55 percent within two to four years.
The company believes that despite the continued unseasonably warm weather that is negatively impacting its utility results, natural gas price volatility creates the potential for the complementary nonutility businesses to deliver stronger results, thereby partially offsetting the impact of warmer weather at the utility. As a result, Atmos Energy still anticipates earnings per diluted share in the full 2006 fiscal year to be between $1.80 and $1.90, as previously announced. However, changes in these events or other circumstances that the
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company cannot currently anticipate could materially impact earnings, and could result in earnings for fiscal 2006 significantly above or below this outlook.
Conference Call to be Webcast February 8, 2006
Atmos Energy Corporation will host a conference call with financial analysts to discuss the financial results for the first quarter of fiscal 2006 on Wednesday, February 8, 2006, at 8 a.m. EST. The phone number is 800-218-0204. The conference call will be webcast live on the Atmos Energy Web site at www.atmosenergy.com. A slide presentation also will be available on the company’s Web site, and a playback of the call will be available on the Web site later that day. Atmos Energy officers who will participate in the conference call include: Bob Best, chairman, president and chief executive officer; Pat Reddy, senior vice president and chief financial officer; Earl Fischer, senior vice president, utility operations; JD Woodward, senior vice president, nonutility operations; Fred Meisenheimer, vice president and controller; Laurie Sherwood, vice president, corporate development, and treasurer; and Susan Kappes, vice president, investor relations.
Highlights and Recent Developments
New Credit Facilities
During the first quarter of fiscal 2006, Atmos Energy renewed and amended its credit facilities to increase its total availability under its committed and uncommitted credit facilities from $893 million to approximately $1.5 billion.
On October 18, 2005, Atmos Energy entered into a $600 million 3-year committed revolving credit facility to replace its $600 million 364-day working capital facility. The credit facility will expire on October 18, 2008. This facility serves as a backup liquidity facility for the company’s commercial paper program. Additionally, on November 10, 2005, Atmos Energy entered into a new $300 million 364-day committed revolving credit facility to supplement amounts available under its existing $18 million committed credit facility and $25 million uncommitted credit facility. The new $600 million and $300 million committed credit facilities contain essentially the same terms as those of the previous $600 million committed credit facility.
On November 28, 2005, Atmos Energy Marketing amended its $250 million uncommitted demand working capital credit facility, primarily to increase the amount of credit available from $250 million to a maximum of $580 million. The credit facility will expire on March 31, 2006. The new credit facility contains essentially the same terms as those of the previous credit facility.
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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,” “believes,” “estimate,” “expects,” “forecast,” “goal,” “intends,” “objective,” “plans,” “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 relating to the acquisition of the operations of TXU Gas, the company’s ability to continue to access the capital markets and the other factors discussed in the company’s SEC filings. These factors include the risks and uncertainties discussed in the company’s Form 10-K for the fiscal year ended September 30, 2005. 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 gas utility customers. Atmos Energy’s utility operations serve more than 1,500 communities in 12 states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy’s nonutility operations, organized under Atmos Energy Holdings, Inc., operate in 22 states. They provide natural gas marketing and procurement services to industrial, commercial and municipal customers and manage 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.
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Atmos Energy Corporation
Financial Highlights
(Unaudited)
Statements of Income
(000s
except per share)
Percentage
Change
Operating revenues:
Utility segment
Natural gas marketing segment
Pipeline and storage segment
Other nonutility segment
Intersegment eliminations
Purchased gas cost:
Utility segment
Natural gas marketing segment
Pipeline and storage segment
Other nonutility segment
Intersegment eliminations
Gross profit
Operation and maintenance expense
Depreciation and amortization
Taxes, other than income
Total operating expenses
Operating income
Miscellaneous income, net
Interest charges
Income before income taxes
Income tax expense
Net income
Basic net income per share
Diluted net income per share
Cash dividends per share
Weighted average shares outstanding:
Basic
Diluted
Percentage
Change
Summary Net Income (Loss) by Segment (000s)
Utility
Natural gas marketing
Pipeline and storage
Other nonutility
Consolidated net income
Three Months Ended
December 31
2005
2004
$
1,405,010
$
913,681
1,101,845
493,801
39,712
43,690
1,492
1,359
(264,239
)
(83,907
)
2,283,820
1,368,624
1,124,829
656,370
1,075,526
466,957
—
6,221
—
—
(263,125
)
(83,027
)
1,937,230
1,046,521
346,590
322,103
8
%
108,217
110,777
(2
)%
43,260
43,997
(2
)%
45,416
38,655
17
%
196,893
193,429
2
%
149,697
128,674
16
%
448
385
16
%
36,189
32,542
11
%
113,956
96,517
18
%
42,929
36,918
16
%
$
71,027
$
59,599
19
%
$
0.88
$
0.79
$
0.88
$
0.79
$
.315
$
.310
80,259
75,306
80,722
75,725
Three Months Ended
December 31
2005
2004
$
48,413
$
37,023
31
%
11,452
13,262
(14
)%
11,167
9,084
23
%
(5
)
230
(102
)%
$
71,027
$
59,599
19
%
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Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)
Condensed Balance Sheets
(000s)
December 31,
2005
September 30,
2005
Net property, plant and equipment
Cash and cash equivalents
Cash held on deposit in margin account
Accounts receivable, net
Gas stored underground
Other current assets
Total current assets
Goodwill and intangible assets
Deferred charges and other assets
Shareholders’ equity
Long-term debt
Total capitalization
Accounts payable and accrued liabilities
Other current liabilities
Short-term debt
Current maturities of long-term debt
Total current liabilities
Deferred income taxes
Deferred credits and other liabilities
$
3,439,934
$
3,374,367
49,451
40,116
74,076
80,956
1,229,190
454,313
583,572
450,807
239,992
238,238
2,176,281
1,264,430
737,641
737,787
265,146
276,943
$
6,619,002
$
5,653,527
$
1,637,617
$
1,602,422
2,181,497
2,183,104
3,819,114
3,785,526
1,170,402
461,314
401,948
503,368
474,059
144,809
3,286
3,264
2,049,695
1,112,755
284,196
292,207
465,997
463,039
$
6,619,002
$
5,653,527
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Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)
Condensed Statements of Cash Flows
(000s)
Cash flows from operating activities
Net income
Depreciation and amortization
Deferred income taxes
Changes in assets and liabilities
Other
Net cash (used in) provided by operating activities
Cash flows from investing activities
Capital expenditures
Acquisitions
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase in short-term debt
Net proceeds from issuance of long-term debt
Repayment of long-term debt
Settlement of Treasury lock agreements
Cash dividends paid
Net proceeds from equity offering
Issuance of common stock
Three Months Ended
December 31
2005
2004
$
71,027
$
59,599
43,407
44,251
20,448
8,308
(333,931
)
(45,231
)
3,680
977
(195,369
)
67,904
(102,465
)
(67,201
)
—
(1,912,532
)
(1,121
)
(1,051
)
(103,586
)
(1,980,784
)
329,250
28,797
—
1,385,847
(1,695
)
(3,373
)
—
(43,770
)
(25,429
)
(24,521
)
—
382,014
6,164