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2010 Financial News
 

Atmos Energy Corporation Reports Earnings for Fiscal 2010;
Initiates Fiscal 2011 Guidance

Analyst and Media Contact:
Susan Giles
(972) 855-3729                           

DALLAS (November 3, 2010) — Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its 2010 fiscal year and fourth quarter ended September 30, 2010.

  • Fiscal 2010 consolidated results, excluding net unrealized margins were $210.1 million, or $2.25 per diluted share, compared with $212.6 million, or $2.30 per diluted share in the prior year.
  • After including noncash, unrealized net losses of $4.3 million, or ($0.05) per diluted share, fiscal 2010 net income was $205.8 million, or $2.20 per diluted share. Net income was $191.0 million, or $2.07 per diluted share in the prior year, after including unrealized net losses of $21.6 million, or ($0.23) per diluted share.
  • Included in current year net income is the positive impact of a state sales tax refund of $4.6 million, or $0.05 per diluted share. Net income for the prior year included the positive impact of net one-time adjustments of $17.1 million, or $0.19 per diluted share.
  • Atmos Energy expects fiscal 2011 earnings to be in the range of $2.25 to $2.35 per diluted share, excluding unrealized gains and losses.

For the quarter ended September 30, 2010, consolidated net income was $1.5 million, or $0.02 per diluted share, compared with a net loss of $16.0 million, or ($0.17) per diluted share for the same quarter last year. Results include noncash, unrealized net gains of $1.6 million, or $0.02 per diluted share for the current quarter, compared with unrealized net losses of $12.2 million, or ($0.13) per diluted share for the prior-year quarter. For the current quarter, regulated operations incurred a net loss of $4.8 million, or ($0.05) per diluted share, and nonregulated operations contributed $6.3 million of net income, or $0.07 per diluted share.

“Fiscal 2010 was an exceptional year and we are gratified to again deliver on our stated earnings objectives, especially during these challenging economic times,” said Robert W. Best, executive chairman of Atmos Energy Corporation. “The predictable and stable contribution from our regulated operations remains the cornerstone of our earnings framework, while the nonregulated assets continue to complement these base earnings. Looking forward to fiscal 2011, we believe that we are positioned to continue delivering average annual earnings growth in the 4 percent to 6 percent range,” Best concluded.

Results for the Year Ended September 30, 2010

Natural gas distribution gross profit increased $24.8 million to $1,049.4 million for the year ended September 30, 2010, compared with $1,024.6 million in the prior year. This increase is due largely to a net $33.7 million increase in rates, primarily in the company’s Texas, Louisiana and Mississippi service areas and an $11.2 million increase associated with an 11 percent rise in consolidated distribution throughput. Partially offsetting these increases in gross profit was a decrease resulting from the absence in the current period of a non-recurring $7.6 million adjustment to the revenue estimate for gas delivered to customers but not yet billed, which was recorded in the prior-year period. Additionally, gross profit decreased $7.0 million as a result of the prior-year reversal of an accrual for estimated unrecoverable gas costs that did not recur in the current year.

Regulated transmission and storage gross profit decreased $6.7 million to $203.0 million for the year ended September 30, 2010, compared with $209.7 million for the same period last year. This period-over-period decrease is due primarily to a $13.3 million decrease attributable to lower per-unit transportation margins largely due to narrower basis spreads, and a $2.6 million decrease due to a 19 percent decline in consolidated throughput. Partially offsetting these decreases was a $9.3 million increase in revenues resulting from filings under the Texas Gas Reliability Infrastructure Program (GRIP).

Natural gas marketing gross profit increased $1.4 million to $86.0 million for the 2010 fiscal year, compared with $84.6 million for the prior year. Atmos Energy Marketing’s (AEM) delivered gas margins decreased $15.8 million year over year due to reduced per-unit margins and a five percent decrease in consolidated sales volumes. Additionally, storage and trading margins decreased $0.5 million due primarily to higher storage demand fees paid, partially offset by an increase in realized storage and trading gains experienced in the current fiscal year. Offsetting these decreases was a $17.6 million year-over-year increase in unrealized margins.

Pipeline, storage and other gross profit decreased $1.4 million to $28.1 million for the year ended September 30, 2010, compared with $29.5 million last year. The decrease was due principally to lower margins earned from storage optimization activities of $4.9 million, a $3.9 million decrease arising from lower physical basis spreads and lower margins earned under asset management plans of $2.4 million. Partially offsetting these decreases was a $10.5 million increase in unrealized margins.

Consolidated operation and maintenance expense for the year ended September 30, 2010, was $468.0 million, compared with $494.0 million for the prior year. Excluding the provision for doubtful accounts, operation and maintenance expense for the current year was $460.3 million, compared with $486.2 million for the prior year. The $25.9 million decrease resulted primarily from lower pipeline maintenance costs in the company’s Atmos Pipeline-Texas Division of $14.3 million, a one-time $7.4 million state sales tax refund and a $4.6 million reduction in legal and other administrative costs.

Prior-year results include the favorable impact of a one-time tax benefit of $11.3 million. This benefit arose in the second quarter of fiscal 2009 after the company updated the tax rates used to record its deferred taxes. Additionally, fiscal 2009 includes a $5.4 million noncash charge to impair certain available-for-sale investments. These items did not recur in the current year.

The debt capitalization ratio at September 30, 2010, was 51.3 percent, compared with 50.7 percent at September 30, 2009. At September 30, 2010, there was $126.1 million of short-term debt outstanding, compared with $72.6 million at September 30, 2009.

For the year ended September 30, 2010, the company generated operating cash flow of $726.5 million, a $192.8 million reduction compared with fiscal 2009. Operating cash flow for fiscal 2010 reflects the recovery of lower gas costs through purchased gas recovery mechanisms. This is in contrast to fiscal 2009, when operating cash flow was favorably influenced by the recovery of high gas costs during a period of falling prices.

Capital expenditures increased to $542.6 million for fiscal 2010, compared with $509.5 million last year. The $33.1 million increase primarily reflects spending for the relocation of the company’s information technology data center, the construction of two service centers and the steel service line replacement program in the Mid-Tex Division.  

Results for the Fiscal 2010 Fourth Quarter

Natural gas distribution gross profit increased $5.0 million to $172.5 million for the fiscal 2010 fourth quarter, compared with $167.5 million in the prior-year quarter. This increase reflects a net $5.8 million increase in rates principally in the company’s Kentucky, Texas and Louisiana service areas.

Regulated transmission and storage gross profit increased $9.6 million to $56.0 million for the quarter ended September 30, 2010, compared with $46.4 million for the prior-year quarter. This increase is due primarily to a $4.8 million increase from the sale of excess gas, a $3.1 million increase in revenues resulting from filings under GRIP and a $3.0 million increase resulting from higher levels of compression activity. These increases were partially offset by a $1.3 million quarter-over-quarter decrease in per-unit transportation margins on through-system deliveries, largely due to narrower basis spreads.

Natural gas marketing gross profit decreased $2.6 million to $13.4 million for the fiscal 2010 fourth quarter, compared with $16.0 million for the fiscal 2009 fourth quarter. Realized storage and trading margins decreased by $19.8 million quarter over quarter. AEM experienced a decrease in realized trading gains during the current quarter due to unfavorable natural gas market fundamentals. This contrasts to the prior-year quarter, where AEM settled its financial positions and cycled gas during a period of wider spot to forward spread values. Additionally, delivered gas margins decreased $3.2 million due to decreased per-unit margins, combined with about a 2 percent quarter-over-quarter decrease in consolidated sales volumes. Partially offsetting these decreases was a $20.4 million quarter-over-quarter increase in unrealized margins.

Pipeline, storage and other gross profit increased $2.7 million to $5.0 million for the quarter ended September 30, 2010, compared with $2.3 million for the same period last year. The increase is due primarily to higher margins earned from storage optimization activities of $0.6 million and an increase in storage demand fees of $0.5 million. Additionally, unrealized margins increased $1.4 million quarter over quarter.

Consolidated operation and maintenance expense for the quarter ended September 30, 2010 was $113.7 million, compared with $128.7 million for the prior-year quarter. Excluding the provision for doubtful accounts, operation and maintenance expense for the current quarter decreased $14.5 million, compared with the same period last year. The decrease is due primarily to an $8.3 million decrease in employee wages and benefit costs and a $7.3 million decrease in contract labor costs primarily in the company’s Atmos Pipeline-Texas Division.  

Outlook

The leadership of Atmos Energy remains focused on enhancing shareholder value by delivering consistent earnings growth. Atmos Energy projects fiscal 2011 earnings to be in the range of $2.25 to $2.35 per diluted share, excluding unrealized gains and losses. Net income from regulated operations is expected to be in the range of $161 million to $168 million, and net income from nonregulated operations is expected to be in the range of $45 million to $47 million. Capital expenditures for fiscal 2011 are expected to range from $580 million to $595 million.

However, the valuation on September 30, 2011, of the company’s nonregulated physical storage inventory and associated financial instruments (“mark-to-market”), as well as changes in events or other circumstances that the company cannot currently anticipate or predict, could result in earnings for fiscal 2011 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 reports filed with the Securities and Exchange Commission. 

Conference Call to be Webcast November 4, 2010

Atmos Energy will host a conference call with financial analysts to discuss fiscal 2010 financial results on Thursday November 4, 2010, at 10 a.m. Eastern Time. The telephone number is 877-485-3107. 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. Atmos Energy senior leadership who will participate in the conference call include: Bob Best, executive chairman; Kim Cocklin, president and chief executive officer; and Fred Meisenheimer, senior vice president, chief financial officer and treasurer.

Highlights and Recent Developments

Leadership Changes
Effective October 1, 2010, Kim R. Cocklin became president and chief executive officer of Atmos Energy Corporation. Mr. Cocklin served as president and chief operating officer since October 2008. In addition, Robert W. Best became executive chairman of Atmos Energy after having served as chairman and chief executive officer since 1997.

$200 Million Revolving Credit Facility
On October 15, 2010, Atmos Energy Corporation entered into a $200 million, 180-day committed revolving credit facility. The credit facility will expire on April 13, 2011. This credit facility replaces the company’s $200 million, 364-day revolving credit facility on essentially the same terms, except for the duration of the facility.

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, 2009 and in the company’s Quarterly Report on Form 10-Q for the three and nine months ended June 30, 2010. 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 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

 

 

Year Ended
September 30

Percentage

(000s except per share)

2010

2009

Change

 

 

 

 

Gross Profit:

 

 

 

    Natural gas distribution segment

$  1,049,447

$  1,024,628

2%

    Regulated transmission and storage segment

203,013

209,658

(3)%

    Natural gas marketing segment

85,951

84,612

2%

    Pipeline, storage and other segment

28,140

29,496

(5)%

    Intersegment eliminations

           (1,610)

           (1,692)

5%

      Gross profit

1,364,941

1,346,702

1%

 

 

 

 

Operation and maintenance expense

468,038

494,010

(5)%

Depreciation and amortization

216,960

217,208

—%

Taxes, other than income

        190,507

        182,700

4%

Asset impairments

                  —

            5,382

(100)%

    Total operating expenses

875,505

899,300

(3)%

 

 

 

 

Operating income

489,436

447,402

9%

 

 

 

 

Miscellaneous expense

(339)

(3,303)

(90)%

Interest charges

        154,471

        152,830

1%

 

 

 

 

Income before income taxes

334,626

291,269

15%

Income tax expense

        128,787

        100,291

 28%

Net income

$     205,839

$     190,978

8%

 

 

 

 

Basic net income per share

$            2.22

$            2.08

 

Diluted net income per share

$            2.20

$            2.07

 

 

 

 

 

Cash dividends per share

$            1.34

$            1.32

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

    Basic

91,852

91,117

 

    Diluted

92,422

91,620

 


 

 

 

Year Ended
September 30

Percentage

Summary Net Income by Segment (000s)

2010

2009

Change

 

 

 

 

Natural gas distribution

$     125,949

$     116,807

8%

Regulated transmission and storage

41,486

41,056

1%

Natural gas marketing

34,059

37,334

(9)%

Pipeline, storage and other

            8,672

          17,353

(50)%

Unrealized margins, net of tax

           (4,327)

         (21,572)

80%

    Consolidated net income

$     205,839

$     190,978

8%

Atmos Energy Corporation
Financial Highlights, continued (Unaudited)

Statements of Income

 

 

Three Months Ended
September 30

Percentage

(000s except per share)

2010

2009

Change

 

 

 

 

Gross Profit:

 

 

 

    Natural gas distribution segment

$     172,542

$     167,482

3%

    Regulated transmission and storage segment

56,015

46,397

21%

    Natural gas marketing segment

13,381

16,023

(16)%

    Pipeline, storage and other segment

5,003

2,321

116%

    Intersegment eliminations

              (398)

              (424)

6%

      Gross profit

246,543

231,799

6%

 

 

 

 

Operation and maintenance expense

113,740

128,698

(12)%

Depreciation and amortization

56,753

56,451

1%

Taxes, other than income

          35,859

          32,672

10%

    Total operating expenses

206,352

217,821

(5)%

 

 

 

 

Operating income

40,191

13,978

188%

 

 

 

 

Miscellaneous income (expense)

731

(2,656)

128%

Interest charges

          38,891

          36,795

6%

 

 

 

 

Income (loss) before income taxes

2,031

(25,473)

108%

Income tax expense (benefit)

                494

           (9,521)

105%

Net income (loss)

$          1,537

$      (15,952)

110%

 

 

 

 

Basic net income (loss) per share

$            0.02

$           (0.17)

 

Diluted net income (loss) per share

$            0.02

$           (0.17)

 

 

 

 

 

Cash dividends per share

$            .335

$            .330

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

    Basic

89,890

91,617

 

    Diluted

90,454

91,617

 


 

 

 

Three Months Ended
September 30


Percentage

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

2010

2009

Change

 

 

 

 

Natural gas distribution

$      (17,328)

$      (19,961)

13%

Regulated transmission and storage

12,497

976

1,180%

Natural gas marketing

2,204

15,858

(86)%

Pipeline, storage and other

            2,561

              (609)

520%

Unrealized margins, net of tax

            1,603

         (12,216)

113%

    Consolidated net income (loss)

$          1,537

$      (15,952)

110%

Atmos Energy CorporationFinancial Highlights,
continued (Unaudited)

 

 

 

Condensed Balance Sheets

September 30,

September 30,

(000s)

2010

2009

 

 

 

Net property, plant and equipment

$     4,793,075

$     4,439,103

 

 

 

Cash and cash equivalents

131,952

111,203

Accounts receivable, net

273,207

232,806

Gas stored underground

319,038

352,728

Other current assets

           150,995

           132,203

 

 

 

    Total current assets

875,192

828,940

 

 

 

Goodwill and intangible assets

           740,148

           740,064

Deferred charges and other assets

           355,376

           358,976

 

 

 

 

$     6,763,791

$     6,367,083

 

 

 

 

 

 

Shareholders’ equity

$     2,178,348

$     2,176,761

Long-term debt

       1,809,551

       2,169,400

 

 

 

    Total capitalization

3,987,899

4,346,161

 

 

 

Accounts payable and accrued liabilities

266,208

207,421

Other current liabilities

413,640

457,319

Short-term debt

           126,100

72,550

Current maturities of long-term debt

           360,131

                   131

 

 

 

    Total current liabilities

1,166,079

737,421

 

 

 

Deferred income taxes

829,128

570,940

Deferred credits and other liabilities

           780,685

           712,561

 

 

 

 

$     6,763,791

$     6,367,083

Atmos Energy Corporation
Financial Highlights, continued (Unaudited)

 


Condensed Statements of Cash Flows
Year Ended
September 30
(000s)
2010
2009

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net income

$        205,839

$        190,978

Asset impairments

5,382

Depreciation and amortization

217,133

217,302

Deferred income taxes

196,731

129,759

Changes in assets and liabilities

83,455

352,131

Other

             23,318

             23,681

    Net cash provided by operating activities

726,476

919,233

 

 

 

Cash flows from investing activities

 

 

 

 

 

Capital expenditures

(542,636)

(509,494)

Other, net

                (66)

           (7,707)

    Net cash used in investing activities

(542,702)

(517,201)

 

 

 

Cash flows from financing activities

 

 

 

 

 

Net increase (decrease) in short-term debt

54,268

(283,981)

Net proceeds from issuance of long-term debt

445,623

Settlement of Treasury lock agreement

1,938

Repayment of long-term debt

(131)

(407,353)

Cash dividends paid

(124,287)

(121,460)

Repurchase of common stock

(100,450)

Repurchase of equity awards

(1,191)

Issuance of common stock

               8,766

             27,687

    Net cash used in financing activities

        (163,025)

        (337,546)

 

 

 

Net increase in cash and cash equivalents

20,749

64,486

Cash and cash equivalents at beginning of period

           111,203

             46,717

Cash and cash equivalents at end of period

$        131,952

$        111,203

Three Months Ended
September 30
Year Ended
September 30
Statistics
2010
2009
2010
2009

Consolidated natural gas distribution
    throughput (MMcf as metered)


55,902 


56,804 


454,175 


408,885 

Consolidated regulated transmission and storage
    transportation volumes (MMcf)


133,473 


127,990 


428,599 


528,689 

Consolidated natural gas marketing sales
    volumes (MMcf)


86,717 


88,126 


353,853 


370,569 

Natural gas distribution meters in service

3,186,040 

3,178,844 

3,186,040 

3,178,844 

Natural gas distribution average cost of gas

$5.83 

$4.96 

$5.77 

$6.95 

Natural gas marketing net physical position (Bcf)

13.7 

13.8

13.7 

13.8

###

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