Business Wire | May 5, 2021 04:36PM EDT

Atmos Energy Corporation Reports Earnings for Fiscal 2021 Second Quarter; Affirms Fiscal 2021 Guidance

May 05, 2021

DALLAS--(BUSINESS WIRE)--May 05, 2021--Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its second fiscal quarter ended March 31, 2021.

Highlights

* Earnings per diluted share was $4.01 for the six months ended March 31, 2021; $2.30 per diluted share for the second fiscal quarter. * Consolidated net income was $514.4 million for the six months ended March 31, 2021; $296.8 million for the second fiscal quarter. * Capital expenditures totaled $845.7 million for the six months ended March 31, 2021, with approximately 87 percent of capital spending related to system safety and reliability investments.

Outlook

* Earnings per diluted share for fiscal 2021 is expected to be in the previously announced range of $4.90 to $5.10. * Capital expenditures are expected to be in the range of $2.0 billion to $2.2 billion in fiscal 2021. * The company's Board of Directors has declared a quarterly dividend of $0.625 per common share. The indicated annual dividend for fiscal 2021 is $2.50, which represents an 8.7% increase over fiscal 2020.

"Our operating and financial performance for the first six months of the fiscal year reflects our employees' continued ability to execute at the highest levels on all facets of our business," said Kevin Akers, President and Chief Executive Officer of Atmos Energy. "Their dedication and resilience leaves us well positioned for a successful fiscal 2021," Akers concluded.

Results for the Three Months Ended March 31, 2021

Consolidated operating income increased $50.4 million to $381.8 million for the three months ended March 31, 2021, from $331.4 million in the prior-year quarter. Rate case outcomes in both segments and customer growth in our distribution segment were partially offset by lower through system revenue in our pipeline and storage segment, decreased service order revenue and higher bad debt expense in our distribution segment and higher depreciation and property tax expenses.

Distribution operating income increased $49.8 million to $303.3 million for the three months ended March 31, 2021, compared with $253.5 million in the prior-year quarter. The increase primarily reflects a net $65.8 million increase in rates and a $4.9 million increase due to net customer growth, partially offset by a $12.3 million increase in depreciation and property tax expenses associated with increased capital investments, a $6.5 million increase in bad debt expense, and a $3.9 million decrease in service order revenues.

Pipeline and storage operating income increased $0.7 million to $78.5 million for the three months ended March 31, 2021, compared with $77.9 million in the prior-year quarter. This increase is primarily attributable to a $14.0 million increase in rates, due to the GRIP filing approved in fiscal 2020, partially offset by a $6.8 million increase in depreciation and property tax expenses due to increased capital investments, a $6.4 million decrease due to the refund of excess deferred income taxes to customers and a $3.4 million decrease in through system revenues.

Results for the Six Months Ended March 31, 2021

Consolidated operating income increased $96.4 million to $680.6 million for the six months ended March 31, 2021, compared to $584.2 million in the prior year, which primarily reflects rate outcomes in both segments, customer growth in our distribution segment and lower operating and maintenance expenses, partially offset by higher bad debt expense and lower service order revenue in our distribution segment, lower through system revenue in our pipeline and storage segment and increased depreciation and property tax expenses.

Distribution operating income increased $79.0 million to $512.8 million for the six months ended March 31, 2021, compared with $433.8 million in the prior year. The increase reflects a net $102.7 million increase in rates, customer growth of $10.7 million and a $6.2 million savings in operations and maintenance expense excluding bad debt expense, partially offset by a $22.1 million increase in depreciation and property tax expenses associated with increased capital investments, increased bad debt expense of $8.8 million, an $8.1 million decrease in weather and consumption and an $8.4 million decrease in service order revenues.

Pipeline and storage operating income increased $17.4 million to $167.8 million for the six months ended March 31, 2021, compared with $150.4 million in the prior year. This increase is primarily attributable to a $27.3 million increase from our GRIP filings approved in fiscal 2020 and a $7.7 million decrease in operating and maintenance expense due primarily to nonrecurring well integrity costs in the prior-year period. These increases were partially offset by an $11.4 million increase in depreciation and property tax expenses due to increased capital investments, a $6.4 million decrease due to the refund of excess deferred income taxes to customers and a $4.9 million decrease in through system revenues.

Additionally, our year-to-date results reflect a reduction in our annual effective tax rate related to the refund of excess deferred taxes, primarily to APT customers, which has been or will be offset by a corresponding decrease in revenues over the remainder of the fiscal year. As a result, our consolidated effective tax rate declined from 22.1% in the prior-year period to 19.8% for the six months ended March 31, 2021.

Capital expenditures decreased $149.0 million to $845.7 million for the six months ended March 31, 2021, compared with $994.7 million in the prior year, primarily as a result of timing of spending in our distribution segment.

For the six months ended March 31, 2021, the company generated negative operating cash flow of $1,402.2 million, a $2,036.0 million decrease compared with the six months ended March 31, 2020. The year-over-year decrease is primarily the result of gas costs incurred during Winter Storm Uri.

Our equity capitalization ratio at March 31, 2021 was 51.7%, compared with 60.0% at September 30, 2020, due to the issuance of $600 million of 1.50% senior notes in October 2020 and a $2.2 billion debt issuance in March 2021 in order to finance gas costs incurred during Winter Storm Uri. Excluding the $2.2 billion of incremental financing, our equity capitalization ratio would have been 60.4% at March 31, 2021.

Conference Call to be Webcast May 6, 2021

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2021 second quarter financial results on Thursday, May 6, 2021, 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 risks and uncertainties include the following: 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; the impact of greenhouse gas emissions or other legislation or regulations intended to address climate change; 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 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; the impact of climate change; the inability to continue to hire, train and retain operational, technical and managerial personnel; 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; natural disasters, terrorist activities or other events and other risks and uncertainties discussed herein, all of which are difficult to predict and many of which are beyond our control; 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; increased costs of providing health care benefits, along with pension and postretirement health care benefits and increased funding requirements; and the outbreak of COVID-19 and its impact on business and economic conditions.

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, an S&P 500 company headquartered in Dallas, is the country's largest natural gas-only distributor. We safely deliver reliable, affordable, efficient and abundant natural gas to more than 3 million distribution customers in over 1,400 communities across eight states located primarily in the South. As part of our vision to be the safest provider of natural gas services, we are modernizing our business and infrastructure while continuing to invest in safety, innovation, environmental sustainability and our communities. Atmos Energy 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) 2021 2020

Operating revenues

Distribution segment $ 1,282,674 $ 933,005

Pipeline and storage segment 154,168 146,237

Intersegment eliminations (117,769 ) (101,577 )

1,319,073 977,665

Purchased gas cost

Distribution segment 691,147 418,935

Pipeline and storage segment 113 202

Intersegment eliminations (117,451 ) (101,254 )

573,809 317,883

Operation and maintenance expense 156,375 147,824

Depreciation and amortization 118,636 105,916

Taxes, other than income 88,449 74,604

Operating income 381,804 331,438

Other non-operating income (expense) 2,834 (2,989 )

Interest charges 26,096 22,171

Income before income taxes 358,542 306,278

Income tax expense 61,788 66,632

Net income $ 296,754 $ 239,646



Basic net income per share $ 2.30 $ 1.95

Diluted net income per share $ 2.30 $ 1.95

Cash dividends per share $ 0.625 $ 0.575

Basic weighted average shares outstanding 129,161 122,916

Diluted weighted average shares outstanding 129,164 122,997

Three Months Ended March 31

Summary Net Income by Segment (000s)

2021

2020

Distribution

$

232,336

$

187,064

Pipeline and storage

64,418

52,582

Net income

$

296,754

$

239,646

Three Months Ended March 31

Summary Net Income by Segment (000s) 2021 2020

Distribution $ 232,336 $ 187,064

Pipeline and storage 64,418 52,582

Net income $ 296,754 $ 239,646

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)



Statements of Income Six Months Ended March 31

(000s except per share) 2021 2020

Operating revenues

Distribution segment $ 2,159,324 $ 1,761,509

Pipeline and storage segment 313,881 294,413

Intersegment eliminations (239,652 ) (202,694 )

2,233,553 1,853,228

Purchased gas cost

Distribution segment 1,102,219 816,493

Pipeline and storage segment (1,131 ) 301

Intersegment eliminations (239,019 ) (202,043 )

862,069 614,751

Operation and maintenance expense 295,018 300,069

Depreciation and amortization 233,921 210,978

Taxes, other than income 161,901 143,211

Operating income 680,644 584,219

Other non-operating income 8,906 1,898

Interest charges 48,106 49,400

Income before income taxes 641,444 536,717

Income tax expense 127,012 118,398

Net income $ 514,432 $ 418,319



Basic net income per share $ 4.01 $ 3.43

Diluted net income per share $ 4.01 $ 3.42

Cash dividends per share $ 1.25 $ 1.15

Basic weighted average shares outstanding 128,098 122,015

Diluted weighted average shares outstanding 128,100 122,179

Six Months Ended March 31

Summary Net Income by Segment (000s)

2021

2020

Distribution

$

386,028

$

316,821

Pipeline and storage

128,404

101,498

Net income

$

514,432

$

418,319



Six Months Ended March 31

Summary Net Income by Segment (000s) 2021 2020

Distribution $ 386,028 $ 316,821

Pipeline and storage 128,404 101,498

Net income $ 514,432 $ 418,319

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

Condensed Balance Sheets March 31, September 30,

(000s) 2021 2020

Net property, plant and equipment $ 14,039,588 $ 13,355,347

Cash and cash equivalents 865,311 20,808

Accounts receivable, net 469,595 230,595

Gas stored underground 50,043 111,950

Other current assets 235,485 107,905

Total current assets 1,620,434 471,258

Goodwill 731,257 731,257

Deferred charges and other assets 3,017,531 801,170

$ 19,408,810 $ 15,359,032



Shareholders' equity $ 7,820,925 $ 6,791,203

Long-term debt 7,316,404 4,531,779

Total capitalization 15,137,329 11,322,982

Accounts payable and accrued liabilities 263,597 235,775

Other current liabilities 607,525 546,461

Current maturities of long-term debt 177 165

Total current liabilities 871,299 782,401

Deferred income taxes 1,658,000 1,456,569

Regulatory excess deferred taxes 639,496 697,764

Deferred credits and other liabilities 1,102,686 1,099,316

$ 19,408,810 $ 15,359,032

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

Condensed Statements of Cash Flows Six Months Ended March 31

(000s) 2021 2020

Cash flows from operating activities

Net income $ 514,432 $ 418,319

Depreciation and amortization 233,921 210,978

Deferred income taxes 128,725 110,664

Other (938 ) 7,144

Changes in Winter Storm Uri regulatory asset (2,093,534 ) -

Changes in other assets and liabilities (184,852 ) (113,330 )

Net cash provided by (used in) operating (1,402,246 ) 633,775 activities

Cash flows from investing activities

Capital expenditures (845,728 ) (994,737 )

Debt and equity securities activities, net (5,506 ) (1,131 )

Other, net 5,171 4,631

Net cash used in investing activities (846,063 ) (991,237 )

Cash flows from financing activities

Net decrease in short-term debt - (264,992 )

Proceeds from issuance of long-term debt, net of 2,797,346 799,450 premium/discount

Net proceeds from equity offering 460,678 258,047

Issuance of common stock through stock purchase 8,291 8,321 and employee retirement plans

Cash dividends paid (159,348 ) (140,077 )

Debt issuance costs (14,155 ) (7,738 )

Net cash provided by financing activities 3,092,812 653,011

Net increase in cash and cash equivalents 844,503 295,549

Cash and cash equivalents at beginning of period 20,808 24,550

Cash and cash equivalents at end of period $ 865,311 $ 320,099

Three Months Ended March 31

Six Months Ended March 31

Statistics

2021

2020

2021

2020

Consolidated distribution throughput (MMcf as metered)

191,243

163,870

319,713

303,428

Consolidated pipeline and storage transportation volumes (MMcf)

130,578

143,465

275,165

299,994

Distribution meters in service

3,380,153

3,312,616

3,380,153

3,312,616

Distribution average cost of gas

$

4.75

$

3.51

$

4.70

$

3.74

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