Atmos Energy Corporation Reports Earnings for Fiscal 2009; Initiates Fiscal 2010 Guidance

November 10, 2009 5:01 PM EST

DALLAS--(BUSINESS WIRE)-- Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its 2009 fiscal year and fourth quarter ended September 30, 2009.

    --  Fiscal 2009 net income was $191.0 million, or $2.08 per diluted share,
        compared with net income of $180.3 million, or $2.00 per diluted share,
        the prior year.
    --  Consolidated results include noncash, unrealized net losses of $21.6
        million, or ($0.23) per diluted share for fiscal 2009, compared with net
        gains of $18.4 million, or $0.20 per diluted share for the prior year.
    --  Net income for the current year also includes the positive impact of net
        one-time adjustments of $17.1 million, or $0.19 per diluted share.
    --  Atmos Energy expects fiscal 2010 earnings to be in the range of $2.15 to
        $2.25 per diluted share.

For the three months ended September 30, 2009, net loss was $16.0 million, or ($0.17) per diluted share, compared with net income of $1.6 million, or $0.02 per diluted share for the same quarter last year. For the current quarter, regulated operations experienced a net loss of $19.0 million, or ($0.21) per diluted share and nonregulated operations contributed $3.0 million of net income, or $0.04 per diluted share. Nonregulated operations include noncash, unrealized net losses of $12.2 million, or ($0.13) per diluted share for the quarter ended September 30, 2009, compared with net gains of $9.9 million, or $0.11 per diluted share for the prior-year quarter.

"We are pleased to have overcome the challenges of the struggling economic environment to deliver on our stated earnings guidance for fiscal 2009," said Robert W. Best, chairman and chief executive officer of Atmos Energy Corporation. "Our business strategy continues to yield solid results. Our regulated operations, which contributed 83 percent of our consolidated net income, were boosted by rate increases and enhanced rate design across our service territory. Our nonregulated operations continue to generate solid baseline earnings, despite the temporary unrealized losses recorded this year."

"Looking forward to fiscal 2010 and beyond, we remain focused on enhancing the stability and predictability of our regulated earnings, while optimizing our nonregulated assets to deliver average annual earnings per share growth in the 4 to 6 percent range," Best concluded.

Results for the Year Ended September 30, 2009

Natural gas distribution gross profit increased $18.5 million to $1,024.6 million for the year ended September 30, 2009, compared with $1,006.1 million in the prior year, before intersegment eliminations. This increase is due largely to a net $29.6 million increase in rates, primarily in the company's Mid-Tex, Louisiana and West Texas service areas, the reversal of a $7.0 million accrual for estimated uncollectible gas costs recorded in a prior year and a $7.6 million increase due to a non-recurring update to the estimate for gas delivered to customers but not yet billed, resulting from base rate changes in several jurisdictions. These increases in gross profit were partially offset by a $17.9 million decrease as a result of a five percent reduction in consolidated distribution throughput primarily associated with lower residential, commercial and industrial consumption and warmer weather in the Colorado service area, which does not have weather-normalized rates. Additionally, gross profit decreased year over year by $10.8 million from lower franchise fees and state gross receipts taxes included in revenue as a result of lower natural gas prices, which are recovered from customers and have no permanent effect on net income.

Regulated transmission and storage gross profit increased $13.8 million to $209.7 million for the year ended September 30, 2009, compared with $195.9 million for the same period last year, before intersegment eliminations. This increase is due primarily to a $13.0 million increase in demand-based charges, higher per-unit margins earned on through-system deliveries of $5.6 million and a $5.4 million increase in revenues resulting from filings under the Texas Gas Reliability Infrastructure Program (GRIP). These increases were partially offset by an $8.4 million decrease due to a reduction in transportation volumes to the company's Mid-Tex Division, as a result of warmer weather and an 11 percent decrease in consolidated throughput, due principally to a decline in Barnett Shale activity, industrial demand and electric generation demand.

Natural gas marketing gross profit decreased $8.4 million to $84.6 million for the year ended September 30, 2009, compared with $93.0 million for the prior year, before intersegment eliminations. The decrease primarily reflects a $53.9 million reduction in unrealized margins due to the impact of widening spreads between current cash prices and forward natural gas prices experienced on Atmos Energy Marketing's (AEM) net physical position. This decrease was partially offset by a $43.8 million year-over-year increase from AEM's storage and trading activities primarily from the recognition in the first quarter of fiscal 2009 of storage withdrawal gains that AEM had captured during fiscal 2008, as a result of deferring storage withdrawals and rolling the associated financial instruments to forward months during the third quarter of fiscal 2008. Additionally, delivered gas margins increased $1.7 million primarily as a result of basis gains, which increased per-unit margins and more than offset a five percent year-over-year decrease in consolidated sales volumes.

Pipeline, storage and other gross profit increased $1.2 million to $29.5 million for the year ended September 30, 2009, compared with $28.3 million for the same period last year, before intersegment eliminations. The increase was due principally to larger realized gains from the settlement of financial positions associated with storage and trading activities, basis gains earned from utilizing leased pipeline capacity and higher margins earned under asset management plans during the current year compared with the prior year. These increases were partially offset by increased unrealized losses, due primarily to the widening of the spreads between current cash prices and forward natural gas prices.

Consolidated operation and maintenance expense for the year ended September 30, 2009, was $494.0 million, compared with $500.2 million for the prior year. Excluding the provision for doubtful accounts, operation and maintenance expense for the current year was virtually flat at $486.2 million, compared with $484.5 million for the prior year.

The provision for doubtful accounts was $7.8 million for the year ended September 30, 2009, compared with $15.7 million for the same period last year. The $7.9 million decrease primarily reflects the impact of recent rate design changes in certain jurisdictions, which allow for the recovery of the gas cost portion of uncollectible accounts and a 23 percent year-over-year decline in the average cost of gas.

Results for the year ended September 30, 2009, included a $5.4 million noncash charge to impair certain available-for-sale investments based on the company's belief that the decline in the fair value of these investments would not recover within a reasonable period of time.

Interest charges for the year ended September 30, 2009, were $152.8 million, compared with $137.9 million for the year ended September 30, 2008. The $14.9 million year-over-year increase primarily reflects the effect of the company's March 2009 issuance of $450 million 8.50% senior notes to redeem $400 million 4.00% senior notes in April 2009. The increase also reflects higher commercial paper rates, increased line of credit commitment fees and higher average short-term debt balances experienced primarily during the first quarter of fiscal 2009.

Results for the year ended September 30, 2009, were favorably impacted by a one-time tax benefit of $11.3 million. The benefit arose in the second quarter after the company updated the tax rates used to record its deferred taxes.

The debt capitalization ratio at September 30, 2009, was 50.7 percent, compared with 54.6 percent at September 30, 2008. At September 30, 2009, there was $72.6 million short-term debt outstanding, compared with $350.5 million at September 30, 2008.

For the year ended September 30, 2009, the company generated operating cash flow of $919.2 million, compared with $370.9 million for the year ended September 30, 2008. Year over year, the $548.3 million increase in operating cash flow is primarily due to the decline in natural gas prices in the current year as compared to one year ago, which increased operating cash flow by $368.9 million. The increase in operating cash flow was also positively impacted by $56.8 million due to lower cash margin requirements related to the company's natural gas marketing financial instruments.

Capital expenditures increased to $509.5 million for the year ended September 30, 2009, compared with $472.3 million for the same period last year. The $37.2 million increase primarily reflects spending for the construction of a pipeline extension in the company's regulated operations.

Results for the 2009 Fourth Quarter Ended September 30, 2009

Natural gas distribution gross profit decreased $7.9 million to $167.5 million for the fiscal 2009 fourth quarter, compared with $175.4 million in the prior-year quarter, before intersegment eliminations. This decrease reflects an $8.7 million net reduction in margins in the Mid-Tex Division primarily from rate design changes implemented earlier in the fiscal year that decreased the base customer charge and increased the volumetric charge. This decrease was partially offset by a $2.0 million increase in rates in the Louisiana, Georgia and Tennessee service areas.

Regulated transmission and storage gross profit decreased $6.7 million to $46.4 million for the three months ended September 30, 2009, compared with $53.1 million for the same period last year, before intersegment eliminations. This decrease is due primarily to a $4.5 million decrease as a result of a 23 percent decrease in consolidated throughput, due principally to a decline in Barnett Shale activity, industrial demand and electric generation demand. The decrease in gross profit also includes a $3.4 million reduction arising from the sale of excess gas in the prior-year quarter and a $1.6 million reduction in transportation fees compared to the prior-year quarter. These decreases were partially offset by a $1.8 million increase in demand-based charges and a $1.6 million increase in revenue resulting from filings under GRIP.

Natural gas marketing gross profit decreased $17.4 million to $16.0 million for the fiscal 2009 fourth quarter, compared with $33.4 million for the fiscal 2008 fourth quarter, before intersegment eliminations. This decrease is due principally to a $29.5 million decrease in unrealized margins due to the impact of widening spreads between current cash prices and forward natural gas prices experienced on AEM's net physical position during the current quarter, coupled with a 5.8 Bcf increase in AEM's net physical position. Realized delivered gas margins decreased $1.0 million, due primarily to a three percent decrease in consolidated sales volumes compared to the same period one year ago. These decreases were partially offset by a $13.2 million quarter-over-quarter increase in AEM's realized storage and trading margins. Due to relatively low natural gas prices experienced during the current quarter, AEM elected to defer planned storage withdrawals and reset the related financial positions to future periods to maximize economic value. As a result, AEM realized gains on the settlement of the associated financial instruments, which were larger than the gains realized in the prior-year quarter from planned storage withdrawals.

Consolidated operation and maintenance expense for the fourth quarter of fiscal 2009 was $128.7 million, compared with $141.2 million for the fourth quarter last year. Excluding the provision for doubtful accounts, operation and maintenance expense for the current quarter decreased $7.0 million, compared with the prior-year quarter. The decrease is due primarily to reduced legal and miscellaneous administrative costs.

The provision for doubtful accounts was $0.9 million for the three months ended September 30, 2009, compared with $6.4 million for the same period last year. The $5.5 million decrease primarily reflects the impact of a 56 percent quarter-over-quarter decline in the average cost of gas.

Interest charges for the three months ended September 30, 2009, were $36.8 million, compared with $34.1 million for the same period last year. The $2.7 million quarter-over-quarter increase is due primarily to the effect of the company's issuance of senior notes in March 2009.

Outlook

The leadership of Atmos Energy seeks to enhance shareholder value through consistent earnings growth. Atmos Energy projects fiscal 2010 earnings to be in the range of $2.15 to $2.25 per diluted share, excluding unrealized gains and losses. Net income from regulated operations is expected to be in the range of $153 million to $159 million, and net income from nonregulated operations is expected to be in the range of $48 million to $52 million. Capital expenditures for fiscal 2010 are expected to range from $520 million to $535 million.

However, the valuation on September 30, 2010, of the company's nonregulated physical storage inventory and associated financial instruments, as well as changes in events or other circumstances that the company cannot currently anticipate or predict, could result in earnings for fiscal 2010 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 documents on file with the Securities and Exchange Commission.

Conference Call to be Webcast November 11, 2009

Atmos Energy will host a conference call with financial analysts to discuss the financial results for the 2009 fiscal year on Wednesday, November 11, 2009, at 8 a.m. EST. The telephone number is 877-485-3107. The conference call will be webcast live on the Atmos Energy Web site at www.atmosenergy.com. A playback of the call will be available on the Web site later that day. Atmos Energy senior leadership who will participate in the conference call include: Bob Best, chairman and chief executive officer; Kim Cocklin, president and chief operating officer; and Fred Meisenheimer, senior vice president and chief financial officer.

Highlights and Recent Developments

Nonregulated Leadership Change

On October 12, 2009, Atmos Energy announced that Mark H. Johnson, senior vice president, nonregulated operations, and president, Atmos Energy Holdings, Inc., would be leaving the company effective October 31, 2009. The company also announced that Mark S. Bergeron, Atmos Energy vice president, gas supply and services, had been appointed as president of Atmos Energy Holdings, Inc., effective October 15, 2009, with responsibility for Atmos Energy's nonregulated operations.

$200 Million Revolving Credit Facility

On October 22, 2009, Atmos Energy Corporation entered into a $200 million, 364-day committed revolving credit facility. The credit facility will expire on October 20, 2010 and replaces the company's $212.5 million, 364-day revolving credit facility on essentially the same terms.

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 filings 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, 2008 and in the company's Quarterly Report on Form 10-Q for the three and nine months ended June 30, 2009. 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 3 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)

                                      Year Ended

Statements of Income                  September 30                  Percentage

(000s except per share)               2009           2008           Change

Gross Profit:

Natural gas distribution segment      $ 1,024,628    $ 1,006,066    2    %

Regulated transmission and storage      209,658        195,917      7    %
segment

Natural gas marketing segment           84,612         93,021       (9   )%

Pipeline, storage and other segment     29,496         28,313       4    %

Intersegment eliminations               (1,692    )    (1,991    )  15   %

Gross profit                            1,346,702      1,321,326    2    %

Operation and maintenance expense       494,010        500,234      (1   )%

Depreciation and amortization           217,208        200,442      8    %

Taxes, other than income                182,700        192,755      (5   )%

Asset impairments                       5,382          --           100  %

Total operating expenses                899,300        893,431      1    %

Operating income                        447,402        427,895      5    %

Miscellaneous income (expense)          (3,303    )    2,731        (221 )%

Interest charges                        152,830        137,922      11   %

Income before income taxes              291,269        292,704      --

Income tax expense                      100,291        112,373      (11  )%

Net income                            $ 190,978      $ 180,331      6    %

Basic net income per share            $ 2.10         $ 2.02

Diluted net income per share          $ 2.08         $ 2.00

Cash dividends per share              $ 1.32         $ 1.30

Weighted average shares outstanding:

Basic                                   91,117         89,385

Diluted                                 92,024         90,272

                                      Year Ended

                                      September 30                  Percentage

Summary Net Income by Segment (000s)  2009           2008           Change

Natural gas distribution              $ 116,807      $ 92,648       26   %

Regulated transmission and storage      41,056         41,425       (1   )%

Natural gas marketing                   20,194         29,989       (33  )%

Pipeline, storage and other             12,921         16,269       (21  )%

Consolidated net income               $ 190,978      $ 180,331      6    %

Atmos Energy Corporation

Financial Highlights, continued(Unaudited)

                                            Three Months Ended

Statements of Income                        September 30              Percentage

(000s except per share)                     2009         2008         Change

Gross Profit:

Natural gas distribution segment            $ 167,482    $ 175,414    (5     )%

Regulated transmission and storage segment    46,397       53,145     (13    )%

Natural gas marketing segment                 16,023       33,357     (52    )%

Pipeline, storage and other segment           2,321        9,457      (75    )%

Intersegment eliminations                     (424    )    (301    )  (41    )%

Gross profit                                  231,799      271,072    (14    )%

Operation and maintenance expense             128,698      141,170    (9     )%

Depreciation and amortization                 56,451       52,783     7      %

Taxes, other than income                      32,672       39,585     (17    )%

Total operating expenses                      217,821      233,538    (7     )%

Operating income                              13,978       37,534     (63    )%

Miscellaneous expense                         (2,656  )    (243    )  993    %

Interest charges                              36,795       34,119     8      %

Income (loss) before income taxes             (25,473 )    3,172      (903   )%

Income tax expense (benefit)                  (9,521  )    1,590      (699   )%

Net income (loss)                           $ (15,952 )  $ 1,582      (1,108 )%

Basic net income (loss) per share           $ (0.17   )  $ 0.02

Diluted net income (loss) per share         $ (0.17   )  $ 0.02

Cash dividends per share                    $ .330       $ .325

Weighted average shares outstanding:

Basic                                         91,617       89,883

Diluted                                       91,617       90,761

                                            Three Months Ended

                                            September 30              Percentage

Summary Net (Loss) Income by Segment        2009         2008         Change
(000s)

Natural gas distribution                    $ (19,961 )  $ (20,794 )  4      %

Regulated transmission and storage            976          6,089      (84    )%

Natural gas marketing                         4,172        10,424     (60    )%

Pipeline, storage and other                   (1,139  )    5,863      (119   )%

Consolidated net income (loss)              $ (15,952 )  $ 1,582      (1,108 )%

Atmos Energy Corporation

Financial Highlights, continued(Unaudited)

Condensed Balance Sheets                  September 30,  September 30,

(000s)                                    2009           2008

Net property, plant and equipment         $ 4,439,103    $ 4,136,859

Cash and cash equivalents                   111,203        46,717

Accounts receivable, net                    232,806        477,151

Gas stored underground                      352,728        576,617

Other current assets                        132,203        184,619

Total current assets                        828,940        1,285,104

Goodwill and intangible assets              740,064        739,086

Deferred charges and other assets           335,659        225,650

                                          $ 6,343,766    $ 6,386,699

Shareholders' equity                      $ 2,176,761    $ 2,052,492

Long-term debt                              2,169,400      2,119,792

Total capitalization                        4,346,161      4,172,284

Accounts payable and accrued liabilities    207,421        395,388

Other current liabilities                   457,319        460,372

Short-term debt                             72,550         350,542

Current maturities of long-term debt        131            785

Total current liabilities                   737,421        1,207,087

Deferred income taxes                       570,940        441,302

Deferred credits and other liabilities      689,244        566,026

                                          $ 6,343,766    $ 6,386,699

Atmos Energy Corporation

Financial Highlights, continued(Unaudited)

                                                      Year Ended

Condensed Statements of Cash Flows                    September 30

(000s)                                                2009          2008

Cash flows from operating activities

Net income                                            $ 190,978     $ 180,331

Asset impairments                                       5,382         --

Depreciation and amortization                           217,302       200,589

Deferred income taxes                                   129,759       97,940

Changes in assets and liabilities                       352,131       (127,132 )

Other                                                   23,681        19,205

Net cash provided by operating activities               919,233       370,933

Cash flows from investing activities

Capital expenditures                                    (509,494 )    (472,273 )

Other, net                                              (7,707   )    (10,736  )

Net cash used in investing activities                   (517,201 )    (483,009 )

Cash flows from financing activities

Net increase (decrease) in short-term debt              (283,981 )    200,174

Net proceeds from issuance of long-term debt            445,623       --

Settlement of Treasury lock agreement                   1,938         --

Repayment of long-term debt                             (407,353 )    (10,284  )

Cash dividends paid                                     (121,460 )    (117,288 )

Issuance of common stock                                27,687        25,466

Net cash provided by (used in) financing activities     (337,546 )    98,068

Net increase (decrease) in cash and cash equivalents    64,486        (14,008  )

Cash and cash equivalents at beginning of period        46,717        60,725

Cash and cash equivalents at end of period            $ 111,203     $ 46,717

                              Three Months Ended        Year Ended

                              September 30              September 30

Statistics                    2009         2008         2009         2008

Consolidated natural gas
distribution

throughput (MMcf as metered)    56,804       62,057       408,885      429,354

Consolidated regulated
transmission and storage

transportation volumes          127,990      165,784      528,689      595,542
(MMcf)

Consolidated natural gas
marketing sales

volumes (MMcf)                  88,126       91,041       370,569      389,392

Natural gas distribution        3,178,844    3,191,779    3,178,844    3,191,779
meters in service

Natural gas distribution      $ 4.96       $ 11.39      $ 6.95       $ 9.05
average cost of gas

Natural gas marketing net       13.8         8.0          13.8         8.0
physical position (Bcf)

    Source: Atmos Energy Corporation

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