Atmos Energy has reported consolidated results for its fiscal 2010 first quarter ended December 31, 2009.
Fiscal 2010 first quarter net income was $93.3 million, or $1.00 per diluted share, compared with net income of $76.0 million, or $0.83 per diluted share, the prior-year quarter.
Consolidated results include noncash, unrealized net gains of $26.8 million, or $0.29 per diluted share for the first quarter of fiscal 2010, compared with net losses of $14.2 million, or ($0.16) per diluted share for the prior-year quarter.
Atmos Energy affirms its fiscal 2010 earnings to be in the range of $2.15 to $2.25 per diluted share, excluding unrealized gains and losses.
For the three months ended December 31, 2009, regulated operations contributed $59.9 million, or $0.64 per diluted share, compared with $57.8 million of net income or $0.63 per diluted share in the prior-year quarter. Nonregulated operations contributed $33.4 million of net income, or $0.36 per diluted share, compared with $18.2 million of net income or $0.20 per diluted share for the same period last year.
"We are off to a good start, with net income rising over 23 percent from a year ago," said Robert W. Best, chairman and chief executive officer of Atmos Energy Corporation. "Our utility business continues to benefit from successful rate results, coupled with increased demand from colder weather this quarter. The regulated pipeline saw continued downward pressure on margins and throughput, which were largely offset by lower operating expenses. And, in spite of the ongoing challenges in the economy, our nonregulated business continues to perform as expected, with an emphasis on the expansion of our geographical footprint. We remain confident that Atmos Energy is on track to meet our goal of growing annual earnings in the 4 to 6 percent range, on average."
Natural gas distribution gross profit decreased $3.8 million to $294.6 million for the quarter ended December 31, 2009, compared with $298.4 million in the prior-year quarter. This decrease is the result of a non-recurring $8.0 million adjustment recorded in the prior-year quarter to update the estimate for gas delivered to customers but not yet billed to reflect base rate changes. Additionally, gross profit decreased quarter over quarter by $7.6 million from lower franchise fees and state gross receipts taxes included in revenue as a result of lower natural gas prices. These decreases in gross profit were partially offset by a net $9.8 million increase in rates, primarily in the company’s Mid-Tex, Louisiana and West Texas service areas and a $2.2 million increase associated with a seven percent increase in consolidated distribution throughput.
Regulated transmission and storage gross profit decreased $7.8 million to $46.9 million for the quarter ended December 31, 2009, compared with $54.7 million for the same period last year. This decrease is due primarily to a $4.2 million quarter-over-quarter decrease in transportation volumes and a $3.9 million decrease in per-unit transportation margins, largely due to a substantial reduction in basis spreads. Consolidated throughput decreased 29 percent from the prior-year quarter, principally due to both a decline in Barnett Shale activity and electric generation demand.
Natural gas marketing gross profit increased $29.8 million to $59.8 million for the quarter ended December 31, 2009, compared with $30.0 million for the prior-year quarter. The increase primarily reflects a $62.7 million increase in unrealized margins due to narrowing spreads between current cash prices and forward natural gas prices experienced on Atmos Energy Marketing’s (AEM) net physical position and the deferral of physical storage withdrawals to future periods. This increase was partially offset by a $30.5 million quarter-over-quarter decrease in AEM’s storage and trading activities. During the first quarter of fiscal 2010, AEM elected to defer storage withdrawal gains and roll the associated financial instruments to forward months. This is in contrast to the first quarter of fiscal 2009, when AEM recognized storage withdrawal gains that were originally captured in late fiscal 2008. Additionally, delivered gas margins decreased $2.5 million largely due to a seven percent quarter-over-quarter decrease in consolidated sales volumes.
Pipeline, storage and other gross profit decreased $2.5 million to $10.0 million for the quarter ended December 31, 2009, compared with $12.5 million for the same period last year. The quarter-over-quarter decrease was due principally to lower margins earned under asset management plans of $3.6 million and reduced basis gains earned from utilizing leased pipeline capacity of $1.9 million. These decreases in gross profit were partially offset by an increase in unrealized gains of $3.8 million primarily due to the narrowing of the spreads between current cash prices and forward natural gas prices experienced on physical gas in storage.
Consolidated operation and maintenance expense for the three months ended December 31, 2009, was $123.9 million, compared with $132.7 million for the prior-year quarter. Excluding the provision for doubtful accounts, operation and maintenance expense for the current quarter decreased $8.0 million to $121.4 million, compared with $129.4 million for the prior-year period. The decrease is primarily due to lower pipeline maintenance costs in our Atmos Pipeline – Texas Division.
The provision for doubtful accounts was $2.5 million for the quarter ended December 31, 2009, compared with $3.3 million for the same period last year. The $0.8 million decrease primarily reflects a 38 percent quarter-over-quarter decline in the average cost of gas.
Results for the three months ended December 31, 2008 include a $2.1 million noncash charge to impair certain available-for-sale investments, which did not recur in the current-year quarter.
The debt capitalization ratio at December 31, 2009 was 51.0 percent, compared with 50.7 percent at September 30, 2009, and 54.4 percent at December 31, 2008. Short-term debt outstanding was $179.7 million at December 31, 2009, compared with $72.6 million at September 30, 2009 and $360.8 million at December 31, 2008.
For the three months ended December 31, 2009, operating cash flow was $95.2 million, a $55.5 million reduction from operating cash flow of $150.7 million for the three months ended December 31, 2008. Gas costs, which reached unusually high levels during the 2008 injection season, dropped sharply when the economy slipped into recession and have remained relatively stable since that time. Operating cash flow for the fiscal 2010 first quarter reflects the recovery of lower gas costs through purchased gas recovery mechanisms and sales. This is in contrast to the fiscal 2009 first quarter, when operating cash flow was favorably influenced by the recovery of high gas costs during a period of falling prices.
Capital expenditures increased to $115.4 million for the quarter ended December 31, 2009, compared with $107.4 million for the same period last year. The $8.0 million increase primarily reflects spending for the relocation of our information technology data center.
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