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Atmos Energy Corporation Reports Earnings for Fiscal 2019; Initiates Fiscal 2020 through Fiscal 2024 Guidance; Raises Dividend 9.5 Percent

November 6, 2019

DALLAS--(BUSINESS WIRE)--Nov 6, 2019--

Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its fourth quarter ended September 30, 2019.

Fiscal 2019 fourth quarter net income was $58.4 million or $0.49 per diluted share, compared with adjusted net income of $45.5 million, or $0.41 per diluted share for the same period last year, after excluding the effects of the TCJA in the prior-year quarter.

“Our investment strategy continues to improve the safety and reliability of our system, provide value to our customers and drive our financial performance,” said Kevin Akers, president and chief executive officer of Atmos Energy Corporation. “As we continue to modernize our natural gas distribution, transmission and storage systems, we remain well positioned to continue delivering annual earnings per share growth in the six to eight percent range,” Akers concluded.

Results for the Fiscal Year Ended September 30, 2019

Operating income increased $18.2 million to $746.1 million for the year ended September 30, 2019, compared to $727.9 million in the prior year, which primarily reflects positive rate outcomes, customer growth in the distribution business and higher volumes and margins in our pipeline and storage segment, partially offset by higher operation and maintenance, depreciation and property tax expenses in the current year.

Distribution Contribution Margin increased $33.7 million to $1,476.9 million for the year ended September 30, 2019, compared with $1,443.2 million in the prior year. Contribution Margin reflects a net $33.0 million increase in rates, primarily in the Mid-Tex, Mississippi, West Texas and Louisiana divisions. In addition, customer growth increased $12.8 million, primarily in our Mid-Tex division. These increases were partially offset by decreases of $9.6 million in pass-thru taxes and consumption of $2.3 million, primarily in our Mid-Tex division.

Pipeline and storage Contribution Margin increased $61.7 million to $567.4 million for the year ended September 30, 2019, compared with $505.7 million in the prior year. This increase is primarily attributable to a net $46.5 million increase in revenue from GRIP filings approved in fiscal 2018 and 2019. In addition, transportation revenues increased Contribution Margin by a net $12.2 million due to wider spreads and positive supply and demand dynamics impacting the Permian Basin.

Operation and maintenance expense for the year ended September 30, 2019 was $630.3 million, compared with $594.8 million for the prior year. The $35.5 million increase primarily reflects increased pipeline maintenance and related spending as well as employee, training and software license expenses in the current year, partially offset by the absence of expenses incurred for the Northwest Dallas outage in the prior year.

Capital expenditures increased $225.9 million to $1,693.5 million for the year ended September 30, 2019, compared with $1,467.6 million in the prior year, due to continued spending for infrastructure replacements and enhancements.

For the year ended September 30, 2019, the company generated operating cash flow of $968.8 million, a $155.9 million decrease compared with the year ended September 30, 2018. The year-over-year decrease is primarily attributable to working capital changes, particularly in our distribution segment resulting from the timing of payments for natural gas purchases and deferred gas cost recoveries.

Our equity capitalization ratio at September 30, 2019 was 59.0%, compared with 56.7% at September 30, 2018. The increase primarily reflects the effects of our fiscal 2019 financing activities and lower short-term debt at September 30, 2019.

Results for the Three Months Ended September 30, 2019

Operating income decreased $0.9 million to $89.7 million for the three months ended September 30, 2019 compared to the prior-year quarter primarily due to higher operating expenses. Increased Contribution Margins in both our distribution and pipeline and storage segments were more than offset by higher operation and maintenance and depreciation expenses in the current-year quarter.

Distribution Contribution Margin increased $13.5 million to $282.8 million for the three months ended September 30, 2019, compared with $269.3 million in the prior-year quarter. Contribution Margin reflects a net $9.3 million increase in rates, primarily in our Mid-Tex, Louisiana and West Texas divisions, a $2.4 million increase in consumption and a $2.2 million increase from customer growth, primarily in our Mid-Tex division.

Pipeline and storage Contribution Margin increased $14.9 million to $147.5 million for the three months ended September 30, 2019, compared with $132.6 million in the prior-year quarter. This increase is attributable to a net $13.1 million increase in rates, due to the GRIP filings approved in fiscal 2018 and 2019, and a net increase of $2.0 million due to wider spreads and positive supply and demand dynamics in the Permian Basin.

Operation and maintenance expense for the three months ended September 30, 2019, was $177.7 million, compared with $162.8 million for the prior-year quarter. This $14.9 million increase was primarily driven by increased pipeline maintenance and related activities and higher employee and training costs in the current-year quarter.

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 2020 earnings to be in the range of $4.58 to $4.73 per diluted share. Capital expenditures for fiscal 2020 are expected to range between $1.85 billion and $1.95 billion.

Conference Call to be Webcast November 7, 2019

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2019 financial results on Thursday, November 7, 2019, 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 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 Item 1A of the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018 and in subsequent filings with the Securities and Exchange Commission.

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 Measures

The historical financial information in this news release utilizes certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP). Specifically, the company uses Contribution Margin, 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 Contribution Margin is a more useful and relevant measure to analyze its financial performance than operating revenues. The term Contribution Margin is not intended to represent operating income, the most comparable GAAP financial measure, as an indicator of operating performance, and is not necessarily comparable to similarly titled measures reported by other companies.

In addition, the enactment of the TCJA required the company to remeasure its deferred tax assets and liabilities at its new federal statutory income tax rate as of December 22, 2017, which resulted in the recognition of a non-cash income tax benefit during the year ended September 30, 2018. Due to the non-recurring nature of this benefit, the company believes that net income and diluted earnings per share before the one-time, non-cash income tax benefit, provides a more useful and relevant measure to analyze its financial performance than net income and diluted earnings per share in order to allow investors to better analyze the company’s core results and allow the information to be presented on a comparative basis to the prior year. Accordingly, the discussion and analysis of the company’s financial performance will reference adjusted net income and adjusted diluted earnings per share, which is calculated as follows:

 

 

 

 

 

 

 

Three Months Ended September 30

 

2019

 

2018

 

Change

 

(In thousands, except per share data)

Net income

$

58,406

 

 

$

38,747

 

 

$

19,659

 

TCJA non-cash income tax expense

 

 

6,740

 

 

(6,740

)

Adjusted net income

$

58,406

 

 

$

45,487

 

 

$

12,919

 

 

 

 

 

 

 

Diluted net income per share

$

0.49

 

 

$

0.35

 

 

$

0.14

 

Diluted EPS from TCJA non-cash income tax expense

 

 

0.06

 

 

(0.06

)

Adjusted diluted net income per share

$

0.49

 

 

$

0.41

 

 

$

0.08

 

 

Year Ended September 30

 

2019

 

2018

 

Change

 

(In thousands, except per share data)

Net income

$

511,406

 

 

$

603,064

 

 

$

(91,658

)

TCJA non-cash income tax benefit

 

 

(158,782

)

 

158,782

 

Adjusted net income

$

511,406

 

 

$

444,282

 

 

$

67,124

 

 

 

 

 

 

 

Diluted net income per share

$

4.35

 

 

$

5.43

 

 

$

(1.08

)

Diluted EPS from TCJA non-cash income tax benefit

 

 

(1.43

)

 

1.43

 

Adjusted diluted net income per share

$

4.35

 

 

$

4.00

 

 

$

0.35

 

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

 

Year Ended September 30

(000s except per share)

 

2019

 

2018

Operating revenues

 

 

 

 

Distribution segment

 

$

 

2,745,461

 

 

$

 

3,003,047

 

Pipeline and storage segment

 

 

567,024

 

 

 

507,713

 

Intersegment eliminations

 

 

(410,637

)

 

 

(395,214

)

 

 

 

2,901,848

 

 

 

3,115,546

 

Purchased gas cost

 

 

 

 

Distribution segment

 

 

1,268,591

 

 

 

1,559,836

 

Pipeline and storage segment

 

 

(360

)

 

 

1,978

 

Intersegment eliminations

 

 

(409,394

)

 

 

(393,966

)

 

 

 

858,837

 

 

 

1,167,848

 

Contribution Margin

 

 

2,043,011

 

 

 

1,947,698

 

Operation and maintenance expense

 

 

630,308

 

 

 

594,795

 

Depreciation and amortization

 

 

391,456

 

 

 

361,083

 

Taxes, other than income

 

 

275,189

 

 

 

263,886

 

Total operating expenses

 

 

1,296,953

 

 

 

1,219,764

 

Operating income

 

 

746,058

 

 

 

727,934

 

Other non-operating income (expense)

 

 

7,404

 

 

 

(10,144

)

Interest charges

 

 

103,153

 

 

 

106,646

 

Income before income taxes

 

 

650,309

 

 

 

611,144

 

Income tax expense

 

 

138,903

 

 

 

8,080

 

Net income

 

$

 

511,406

 

 

$

 

603,064

 

 

 

 

 

 

Basic net income per share

 

$

 

4.36

 

 

$

 

5.43

 

Diluted net income per share

 

$

 

4.35

 

 

$

 

5.43

 

Cash dividends per share

 

$

 

2.10

 

 

$

 

1.94

 

Basic weighted average shares outstanding

 

 

117,200

 

 

 

111,012

 

Diluted weighted average shares outstanding

 

 

117,461

 

 

 

111,012

 

 

 

 

 

 

 

 

Year Ended September 30

Summary Net Income by Segment (000s)

 

2019

 

2018

Distribution

 

$

 

328,814

 

 

$

 

442,966

 

Pipeline and storage

 

 

182,592

 

 

 

160,098

 

Net income

 

$

 

511,406

 

 

$

 

603,064

 

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

 

 

 

 

Statements of Income

 

Three Months Ended September 30

(000s except per share)

 

2019

 

2018

Operating revenues

 

 

 

 

Distribution segment

 

$

 

403,793

 

 

$

 

407,476

 

Pipeline and storage segment

 

 

147,706

 

 

 

132,662

 

Intersegment eliminations

 

 

(107,816

)

 

 

(95,438

)

 

 

 

443,683

 

 

 

444,700

 

Purchased gas cost

 

 

 

 

Distribution segment

 

 

120,993

 

 

 

138,138

 

Pipeline and storage segment

 

 

184

 

 

 

72

 

Intersegment eliminations

 

 

(107,507

)

 

 

(95,125

)

 

 

 

13,670

 

 

 

43,085

 

Contribution Margin

 

 

430,013

 

 

 

401,615

 

Operation and maintenance expense

 

 

177,736

 

 

 

162,843

 

Depreciation and amortization

 

 

100,919

 

 

 

92,657

 

Taxes, other than income

 

 

61,643

 

 

 

55,486

 

Total operating expenses

 

 

340,298

 

 

 

310,986

 

Operating income

 

 

89,715

 

 

 

90,629

 

Other non-operating income (expense)

 

 

9,250

 

 

 

(2,090

)

Interest charges

 

 

28,763

 

 

 

24,484

 

Income before income taxes

 

 

70,202

 

 

 

64,055

 

Income tax expense

 

 

11,796

 

 

 

25,308

 

Net income

 

$

 

58,406

 

 

$

 

38,747

 

 

 

 

 

 

Basic net income per share

 

$

 

0.49

 

 

$

 

0.35

 

Diluted net income per share

 

$

 

0.49

 

 

$

 

0.35

 

Cash dividends per share

 

$

 

0.525

 

 

$

 

0.485

 

Basic weighted average shares outstanding

 

 

119,345

 

 

 

111,926

 

Diluted weighted average shares outstanding

 

 

119,824

 

 

 

111,926

 

 

 

 

 

 

 

 

Three Months Ended September 30

Summary Net Income by Segment (000s)

 

2019

 

2018

Distribution

 

$

 

9,838

 

 

$

 

13,280

 

Pipeline and storage

 

 

48,568

 

 

 

25,467

 

Net income

 

$

 

58,406

 

 

$

 

38,747

 

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Balance Sheets

 

September 30,

 

September 30,

(000s)

 

2019

 

2018

Net property, plant and equipment

 

$

 

11,787,669

 

 

$

 

10,371,147

 

Cash and cash equivalents

 

 

24,550

 

 

 

13,771

 

Accounts receivable, net

 

 

230,571

 

 

 

253,295

 

Gas stored underground

 

 

130,138

 

 

 

165,732

 

Other current assets

 

 

72,772

 

 

 

46,055

 

Total current assets

 

 

458,031

 

 

 

478,853

 

Goodwill

 

 

730,706

 

 

 

730,419

 

Deferred charges and other assets

 

 

391,213

 

 

 

294,018

 

 

 

$

 

13,367,619

 

 

$

 

11,874,437

 

 

 

 

 

 

Shareholders' equity

 

$

 

5,750,223

 

 

$

 

4,769,951

 

Long-term debt

 

 

3,529,452

 

 

 

2,493,665

 

Total capitalization

 

 

9,279,675

 

 

 

7,263,616

 

Accounts payable and accrued liabilities

 

 

265,024

 

 

 

217,283

 

Other current liabilities

 

 

474,697

 

 

 

547,068

 

Short-term debt

 

 

464,915

 

 

 

575,780

 

Current maturities of long-term debt

 

 

 

 

575,000

 

Total current liabilities

 

 

1,204,636

 

 

 

1,915,131

 

Deferred income taxes

 

 

1,300,015

 

 

 

1,154,067

 

Regulatory excess deferred taxes

 

 

705,101

 

 

 

739,670

 

Deferred credits and other liabilities

 

 

878,192

 

 

 

801,953

 

 

 

$

 

13,367,619

 

 

$

 

11,874,437

 

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Statements of Cash Flows

 

Year Ended September 30

(000s)

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net income

 

$

 

 

511,406

 

 

$

 

 

603,064

 

Depreciation and amortization

 

 

391,456

 

 

 

361,083

 

Deferred income taxes

 

 

132,004

 

 

 

158,271

 

One-time income tax benefit

 

 

 

 

(158,782

)

Other

 

 

10,589

 

 

 

26,165

 

Changes in assets and liabilities

 

 

(76,686

)

 

 

134,861

 

Net cash provided by operating activities

 

 

968,769

 

 

 

1,124,662

 

Cash flows from investing activities

 

 

 

 

Capital expenditures

 

 

(1,693,477

)

 

 

(1,467,591

)

Proceeds from the sale of discontinued operations

 

 

4,000

 

 

 

3,000

 

Debt and equity securities activities, net

 

 

(2,784

)

 

 

(8,325

)

Use tax refund

 

 

 

 

790

 

Other, net

 

 

8,601

 

 

 

8,560

 

Net cash used in investing activities

 

 

(1,683,660

)

 

 

(1,463,566

)

Cash flows from financing activities

 

 

 

 

Net increase (decrease) in short-term debt

 

 

(110,865

)

 

 

128,035

 

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

 

 

1,045,221

 

 

 

Net proceeds from equity offering

 

 

694,103

 

 

 

395,092

 

Issuance of common stock through stock purchase and employee retirement plans

 

 

19,323

 

 

 

19,563

 

Settlement of interest rate swaps

 

 

(90,141

)

 

 

Repayment of long-term debt

 

 

(575,000

)

 

 

Cash dividends paid

 

 

(245,717

)

 

 

(214,906

)

Debt issuance costs

 

 

(11,254

)

 

 

Other

 

 

 

 

(1,518

)

Net cash provided by financing activities

 

 

725,670

 

 

 

326,266

 

Net increase (decrease) in cash and cash equivalents

 

 

10,779

 

 

 

(12,638

)

Cash and cash equivalents at beginning of period

 

 

13,771

 

 

 

26,409

 

Cash and cash equivalents at end of period

 

$

 

 

24,550

 

 

$

 

 

13,771

 

 

 

Three Months Ended September 30

 

Year Ended September 30

Statistics

 

2019

 

2018

 

2019

 

2018

Consolidated distribution throughput (MMcf as metered)

 

66,184

 

 

64,600

 

 

470,554

 

 

451,383

 

Consolidated pipeline and storage transportation volumes (MMcf)

 

204,810

 

 

179,444

 

 

721,998

 

 

663,900

 

Distribution meters in service

 

3,291,835

 

 

3,256,336

 

 

3,291,835

 

 

3,256,336

 

Distribution average cost of gas

 

$

3.68

 

 

$

4.44

 

 

$

4.02

 

 

$

5.19

 

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191106005800/en/

CONTACT: Analysts and Media Contact:

Jennifer Hills (972) 855-3729

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: ENERGY UTILITIES OIL/GAS

SOURCE: Atmos Energy Corporation

Copyright Business Wire 2019.

PUB: 11/06/2019 04:16 PM/DISC: 11/06/2019 04:16 PM

http://www.businesswire.com/news/home/20191106005800/en