Atmos Energy (ATO) Q4 2003 earnings summary

Executive summary

• FY2003 revenue was $2.800B, operating income $187.8M and net income $71.7M; diluted EPS was $1.54, including a $0.17 accounting-change charge.

• Utility growth reflected the Mississippi Valley Gas acquisition, while lower natural gas marketing gross profit offset some gains; operating cash flow fell to $49.5M from $297.4M.

• Priorities included profitable acquisitions, steadier earnings and operating efficiency; planned FY2004 capital expenditures were $175M.

Financial highlights

• Revenue $2,799.9M vs. $1,651.0M; gross profit $535.0M vs. $431.1M; operating income $187.8M vs. $155.3M, FY2003 vs. FY2002.

• Net income $71.7M vs. $59.7M; diluted EPS $1.54 vs. $1.45. Excluding the $0.17 cumulative accounting charge, diluted EPS was $1.71.

• Operating cash flow was $49.5M vs. $297.4M; capital expenditures were $159.4M vs. $132.3M.

• Utility throughput increased to 248.0 Bcf from 208.5 Bcf; average utility gas cost rose 51% to $5.71/Mcf, with gas-cost changes passed through to customers.

Outlook and guidance

• FY2004 capital expenditures were expected to approximate $175M, primarily for mains, services, meters and equipment.

• For the 2003–2004 heating season, 50%–55% of anticipated flowing gas requirements were expected to be hedged at a weighted average cost of approximately $5.25/Mcf.

• Additional voluntary pension contributions of $0–$15M during FY2004 might be needed to keep the plan 100% funded on an accumulated benefit obligation basis.

• Long-term target debt-to-capitalization ratio was 50%–52%, supported by operating cash flow, equity issuance and capital-spending discipline.