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

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

Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its third fiscal quarter ended June 30, 2021.

Highlights

  • Earnings per diluted share was $4.77 for the nine months ended June 30, 2021; $0.78 per diluted share for the third fiscal quarter.
  • Consolidated net income was $616.8 million for the nine months ended June 30, 2021; $102.4 million for the third fiscal quarter.
  • Capital expenditures totaled $1,358.0 million for the nine months ended June 30, 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 higher end of 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.

“With strong visibility into the remainder of the year, we continue to believe fiscal 2021 earnings will be at the higher end of our earnings guidance range of $4.90 to $5.10 per diluted share,” said Kevin Akers, President and Chief Executive Officer of Atmos Energy, “and our capital expenditures are expected to be in the range of $2.0 billion to $2.2 billion for this fiscal year.”

Results for the Three Months Ended June 30, 2021

Consolidated operating income decreased $5.6 million to $133.4 million for the three months ended June 30, 2021, from $139.0 million in the prior-year quarter. Rate case outcomes in both segments were more than offset by increased depreciation and property tax expenses, timing of system maintenance, the refund of excess deferred income taxes to customers and increased bad debt expense in our distribution segment.

Distribution operating income increased $5.6 million to $68.1 million for the three months ended June 30, 2021, compared with $62.5 million in the prior-year quarter. The increase primarily reflects a net $25.4 million increase in rates, an $8.9 million increase in weather and consumption, partially offset by a $12.7 million increase in bad debt expense, a $9.3 million increase in depreciation and property tax expenses associated with increased capital investments, a $3.2 million increase in pipeline maintenance and other activities and a $2.6 million increase in employee related costs.

Pipeline and storage operating income decreased $11.3 million to $65.3 million for the three months ended June 30, 2021, compared with $76.5 million in the prior-year quarter. This decrease is primarily attributable to a $14.4 million increase in rates that was more than offset by a $10.0 million decrease due to the refund of excess deferred income taxes to customers, an $8.4 million increase in system maintenance expenses primarily due to timing, a $3.4 million increase in depreciation and property tax expenses due to increased capital investments, and a $1.7 million decrease in through system revenues.

Results for the Nine Months Ended June 30, 2021

Consolidated operating income increased $90.7 million to $814.0 million for the nine months ended June 30, 2021, compared to $723.3 million in the prior year, which primarily reflects rate outcomes in both segments and customer growth in our distribution segment, 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 $84.6 million to $580.9 million for the nine months ended June 30, 2021, compared with $496.3 million in the prior year. The increase reflects a net $128.1 million increase in rates and customer growth of $15.0 million, partially offset by a $31.3 million increase in depreciation and property tax expenses associated with increased capital investments, increased bad debt expense of $21.5 million and an $8.6 million decrease in service order revenues.

Pipeline and storage operating income increased $6.2 million to $233.1 million for the nine months ended June 30, 2021, compared with $226.9 million in the prior year. This increase is primarily attributable to a $41.9 million increase from our GRIP filings approved in fiscal 2020 and 2021, partially offset by a $14.9 million increase in depreciation and property tax expenses due to increased capital investments, a $16.6 million decrease due to the refund of excess deferred income taxes to customers and a $6.5 million decrease in through system revenues.

Capital expenditures decreased $47.7 million to $1,358.0 million for the nine months ended June 30, 2021, compared with $1,405.7 million in the prior year, primarily as a result of timing of spending.

For the nine months ended June 30, 2021, the company generated negative operating cash flow of $1,158.5 million, a $2,054.0 million decrease compared with the nine months ended June 30, 2020. The year-over-year decrease is primarily the result of gas costs incurred during Winter Storm Uri.

Our equity capitalization ratio at June 30, 2021 was 51.5%, 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 60.2% at June 30, 2021.

Conference Call to be Webcast August 5, 2021

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2021 third quarter financial results on Thursday, August 5, 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.

Non-GAAP Financial Measures

Due to the passage of Kansas House Bill 2585 on June 1, 2020, we remeasured our deferred tax liability and updated our state deferred tax rate in the third quarter of fiscal 2020. As a result, we recorded a non-cash income tax benefit of $21.0 million for the three and nine months ended June 30, 2020. Due to the non-recurring nature of this benefit, we believe that net income and diluted net income per share before the non-cash income tax benefit provide a more relevant measure to analyze our financial performance than net income and diluted net income per share in order to allow investors to better analyze our core results and allow the information to be presented on a comparative basis to the prior year. Accordingly, the discussion and analysis of our financial performance herein will reference adjusted net income and adjusted diluted net income per share, non-GAAP measures, which are calculated as follows:

 

Three Months Ended June 30

 

2021

 

2020

 

Change

 

(In thousands, except per share data)

Net income

$

102,411

 

$

117,791

 

 

$

(15,380

)

Non-cash income tax benefit

 

 

 

(20,962

)

 

 

20,962

 

Adjusted net income

$

102,411

 

$

96,829

 

 

$

5,582

 

 

 

 

 

 

 

Diluted net income per share

$

0.78

 

$

0.96

 

 

$

(0.18

)

Diluted EPS from non-cash income tax benefit

 

 

 

(0.17

)

 

 

0.17

 

Adjusted diluted net income per share

$

0.78

 

$

0.79

 

 

$

(0.01

)

 

Nine Months Ended June 30

 

2021

 

2020

 

Change

 

(In thousands, except per share data)

Net income

$

616,843

 

$

536,110

 

 

$

80,733

Non-cash income tax benefit

 

 

 

(20,962

)

 

 

20,962

Adjusted net income

$

616,843

 

$

515,148

 

 

$

101,695

 

 

 

 

 

 

Diluted net income per share

$

4.77

 

$

4.37

 

 

$

0.40

Diluted EPS from non-cash income tax benefit

 

 

 

(0.17

)

 

 

0.17

Adjusted diluted net income per share

$

4.77

 

$

4.20

 

 

$

0.57

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 June 30

(000s except per share)

 

2021

 

2020

Operating revenues

 

 

 

 

Distribution segment

 

$

558,750

 

 

$

435,308

 

Pipeline and storage segment

 

 

162,987

 

 

 

158,008

 

Intersegment eliminations

 

 

(116,184

)

 

 

(100,321

)

 

 

 

605,553

 

 

 

492,995

 

Purchased gas cost

 

 

 

 

Distribution segment

 

 

202,050

 

 

 

126,093

 

Pipeline and storage segment

 

 

691

 

 

 

(11

)

Intersegment eliminations

 

 

(115,871

)

 

 

(100,010

)

 

 

 

86,870

 

 

 

26,072

 

Operation and maintenance expense

 

 

184,470

 

 

 

149,460

 

Depreciation and amortization

 

 

119,348

 

 

 

107,104

 

Taxes, other than income

 

 

81,475

 

 

 

71,324

 

Operating income

 

 

133,390

 

 

 

139,035

 

Other non-operating income

 

 

5,887

 

 

 

7,235

 

Interest charges

 

 

20,962

 

 

 

19,580

 

Income before income taxes

 

 

118,315

 

 

 

126,690

 

Income tax expense

 

 

15,904

 

 

 

8,899

 

Net income

 

$

102,411

 

 

$

117,791

 

 

 

 

 

 

Basic net income per share

 

$

0.78

 

 

$

0.96

 

Diluted net income per share

 

$

0.78

 

 

$

0.96

 

Cash dividends per share

 

$

0.625

 

 

$

0.575

 

Basic weighted average shares outstanding

 

 

131,358

 

 

 

123,026

 

Diluted weighted average shares outstanding

 

 

131,486

 

 

 

123,032

 

 

 

Three Months Ended June 30

Summary Net Income by Segment (000s)

 

2021

 

2020

Distribution

 

$

53,289

 

$

58,899

Pipeline and storage

 

 

49,122

 

 

58,892

Net income

 

$

102,411

 

$

117,791

Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)

Statements of Income

 

Nine Months Ended June 30

(000s except per share)

 

2021

 

2020

Operating revenues

 

 

 

 

Distribution segment

 

$

2,718,074

 

 

$

2,196,817

 

Pipeline and storage segment

 

 

476,868

 

 

 

452,421

 

Intersegment eliminations

 

 

(355,836

)

 

 

(303,015

)

 

 

 

2,839,106

 

 

 

2,346,223

 

Purchased gas cost

 

 

 

 

Distribution segment

 

 

1,304,269

 

 

 

942,586

 

Pipeline and storage segment

 

 

(440

)

 

 

290

 

Intersegment eliminations

 

 

(354,890

)

 

 

(302,053

)

 

 

 

948,939

 

 

 

640,823

 

Operation and maintenance expense

 

 

479,488

 

 

 

449,529

 

Depreciation and amortization

 

 

353,269

 

 

 

318,082

 

Taxes, other than income

 

 

243,376

 

 

 

214,535

 

Operating income

 

 

814,034

 

 

 

723,254

 

Other non-operating income

 

 

14,793

 

 

 

9,133

 

Interest charges

 

 

69,068

 

 

 

68,980

 

Income before income taxes

 

 

759,759

 

 

 

663,407

 

Income tax expense

 

 

142,916

 

 

 

127,297

 

Net income

 

$

616,843

 

 

$

536,110

 

 

 

 

 

 

Basic net income per share

 

$

4.77

 

 

$

4.38

 

Diluted net income per share

 

$

4.77

 

 

$

4.37

 

Cash dividends per share

 

$

1.875

 

 

$

1.725

 

Basic weighted average shares outstanding

 

 

129,185

 

 

 

122,352

 

Diluted weighted average shares outstanding

 

 

129,229

 

 

 

122,463

 

 

 

Nine Months Ended June 30

Summary Net Income by Segment (000s)

 

2021

 

2020

Distribution

 

$

439,317

 

$

375,720

Pipeline and storage

 

 

177,526

 

 

160,390

Net income

 

$

616,843

 

$

536,110

Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)

Condensed Balance Sheets

 

June 30,

 

September 30,

(000s)

 

2021

 

2020

Net property, plant and equipment

 

$

14,477,749

 

$

13,355,347

Cash and cash equivalents

 

 

524,621

 

 

20,808

Accounts receivable, net

 

 

291,122

 

 

230,595

Gas stored underground

 

 

99,469

 

 

111,950

Other current assets

 

 

200,154

 

 

107,905

Total current assets

 

 

1,115,366

 

 

471,258

Goodwill

 

 

731,257

 

 

731,257

Deferred charges and other assets

 

 

2,991,063

 

 

801,170

 

 

$

19,315,435

 

$

15,359,032

 

 

 

 

 

Shareholders' equity

 

$

7,773,758

 

$

6,791,203

Long-term debt

 

 

7,128,505

 

 

4,531,779

Total capitalization

 

 

14,902,263

 

 

11,322,982

Accounts payable and accrued liabilities

 

 

280,352

 

 

235,775

Other current liabilities

 

 

581,722

 

 

546,461

Current maturities of long-term debt

 

 

200,442

 

 

165

Total current liabilities

 

 

1,062,516

 

 

782,401

Deferred income taxes

 

 

1,667,784

 

 

1,456,569

Regulatory excess deferred taxes

 

 

587,680

 

 

697,764

Deferred credits and other liabilities

 

 

1,095,192

 

 

1,099,316

 

 

$

19,315,435

 

$

15,359,032

Atmos Energy Corporation
Financial Highlights, continued
(Unaudited)

Condensed Statements of Cash Flows

 

Nine Months Ended June 30

(000s)

 

2021

 

2020

Cash flows from operating activities

 

 

 

 

Net income

 

$

616,843

 

 

$

536,110

 

Depreciation and amortization

 

 

353,269

 

 

 

318,082

 

Deferred income taxes

 

 

144,195

 

 

 

137,996

 

One-time income tax benefit

 

 

 

 

 

(20,962

)

Other

 

 

378

 

 

 

5,935

 

Changes in Winter Storm Uri regulatory asset

 

 

(2,088,536

)

 

 

 

Changes in other assets and liabilities

 

 

(184,616

)

 

 

(81,675

)

Net cash provided by (used in) operating activities

 

 

(1,158,467

)

 

 

895,486

 

Cash flows from investing activities

 

 

 

 

Capital expenditures

 

 

(1,357,960

)

 

 

(1,405,673

)

Debt and equity securities activities, net

 

 

(2,363

)

 

 

(692

)

Other, net

 

 

8,006

 

 

 

6,098

 

Net cash used in investing activities

 

 

(1,352,317

)

 

 

(1,400,267

)

Cash flows from financing activities

 

 

 

 

Net decrease in short-term debt

 

 

 

 

 

(464,915

)

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

 

 

2,797,346

 

 

 

999,450

 

Net proceeds from equity offering

 

 

460,678

 

 

 

358,047

 

Issuance of common stock through stock purchase and employee retirement plans

 

 

12,121

 

 

 

14,125

 

Cash dividends paid

 

 

(241,260

)

 

 

(210,674

)

Debt issuance costs

 

 

(14,288

)

 

 

(7,738

)

Net cash provided by financing activities

 

 

3,014,597

 

 

 

688,295

 

Net increase in cash and cash equivalents

 

 

503,813

 

 

 

183,514

 

Cash and cash equivalents at beginning of period

 

 

20,808

 

 

 

24,550

 

Cash and cash equivalents at end of period

 

$

524,621

 

 

$

208,064

 

 

 

Three Months Ended June 30

 

Nine Months Ended June 30

Statistics

 

2021

 

2020

 

2021

 

2020

Consolidated distribution throughput (MMcf as metered)

 

 

76,128

 

 

69,162

 

 

395,841

 

 

372,590

Consolidated pipeline and storage transportation volumes (MMcf)

 

 

153,166

 

 

153,652

 

 

428,331

 

 

453,646

Distribution meters in service

 

 

3,387,451

 

 

3,322,332

 

 

3,387,451

 

 

3,322,332

Distribution average cost of gas

 

$

4.89

 

$

3.24

 

$

4.73

 

$

3.66

 

Dan Meziere, (972) 855-3729

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