Atmos Energy (ATO) Q4 2002 earnings summary

Executive summary

• FY02 net income rose to $59.7M from $56.1M; diluted EPS was $1.45 vs. $1.47, while operating income increased 19% to $155.3M.

• Gross profit increased 5% to $392.6M, reflecting Louisiana Gas Service acquisition contributions partly offset by warmer weather.

• Utility operations served 1.39M meters at year-end; the pending Mississippi Valley Gas acquisition was expected to add ~261,500 customers in December 2002.

Financial highlights

• Operating revenue fell 34% to $950.8M as average sales prices declined 31% and sales volumes fell 17% amid warmer weather; Louisiana acquisition volumes partly offset the declines.

• Purchased gas cost fell to $558.2M from $1,067.6M; average gas cost per Mcf sold declined to $3.81 from $6.83.

• Operating expenses increased to $275.8M from $244.9M, including higher pension costs, Louisiana acquisition costs and consolidated Woodward Marketing expenses; lower bad-debt provision partially offset increases.

• Net cash from operations rose to $296.2M from $83.0M; net investing cash use was $158.2M and net financing cash use was $106.4M.

Outlook and guidance

• FY03 capital expenditures were budgeted at ~$160.2M; management expected to fund investment and acquisitions with internally generated cash and financing activities.

• The Mississippi Valley Gas purchase was expected to close in December 2002 for $150M plus repayment of ~$45M of debt; consideration comprised $75M cash and $75M in shares.

• For the 2002–03 heating season, 45–50% of anticipated flowing gas requirements were hedged or covered through storage and fixed forwards at a weighted average cost below $4.00/Mcf.

• Long-term target debt-to-capitalization was 50–52%; the ratio was expected to remain near its current range in the near term.