Atmos Energy Corporation Reports Earnings for Fiscal 2021 Second Quarter;
Affirms Fiscal 2021 Guidance
DALLAS (May 5, 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
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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,
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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
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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.
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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
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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
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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
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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 activities
(1,402,246)
633,775
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 premium/discount
2,797,346
799,450
Net proceeds from equity offering
460,678
258,047
Issuance of common stock through stock purchase and employee retirement plans
8,291
8,321
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)
