Atmos Energy (ATO) Q4 1997 earnings summary

Executive summary

• FY1997 operating revenue rose 2.3% to $906.8M and gross profit rose 1.6% to $329.7M; reported net income fell 42.1% to $23.8M, or $0.81/share.

• Excluding $2.8M after-tax management-reorganization charges and $12.6M after-tax merger/integration reserves, net income was $39.3M, or $1.34/share, vs. $41.2M, or $1.42/share, in FY1996.

• The July 1997 United Cities merger expanded service to over 1 million customers in 13 states and made the business the 12th-largest U.S. natural gas distributor.

Financial highlights

• Operating revenue was $906.8M vs. $886.7M; gross profit was $329.7M vs. $324.4M; operating income was $52.3M vs. $69.3M in FY1996.

• Net income was $23.8M vs. $41.2M; EPS was $0.81 vs. $1.42. FY1997 included $0.53/share in after-tax management and merger/integration charges.

• Assets increased 7.7% to $1.09B; total capitalization rose 4.0% to $630.2M; total volumes handled declined 4.2% to 213,008 MMcf.

• FY1997 operating revenue growth reflected a 13% increase in average gas sales price per Mcf, more than offsetting a 4% decrease in delivered volumes.

Outlook and guidance

• Expected United Cities merger savings total ~$375M over 10 years; FY1998 results and later periods were expected to begin reflecting integration and service investments.

• FY1998 budgeted capital expenditures were $109.1M, including $41.5M to complete the customer-service initiative; the initiative was targeted for completion in September 1998.

• Management planned to move debt to capitalization nearer 50% over three years from 57.2% at FY1997 year-end, using operating cash flow, stock issuance, cost recovery and possible real-estate sales.

• Strategic priorities included efficient utility operations, expanding propane and gas marketing, assessing behind-the-meter retail services with partners, and continued acquisitions.

• Total shareholder returns targeted the top quartile among similarly sized local distribution companies, supported by customer-base and annual earnings growth.