Atmos Energy Corporation Reports Earnings for Fiscal 2013 First Quarter; Company Affirms Fiscal 2013

Atmos Energy Corporation Reports Earnings for Fiscal 2013 First Quarter; Company Affirms Fiscal 2013 Guidance

DALLAS--(BUSINESS WIRE)-- Atmos Energy Corporation (NYS: ATO) today reported consolidated results for its fiscal 2013 first quarter ended December 31, 2012.

• Fiscal 2013 first quarter consolidated results, excluding net unrealized margins were $67.7 million, or $0.74 per diluted share, compared with results, excluding net unrealized margins of $55.5 million, or $0.61 per diluted share in the prior-year quarter.

• After including noncash, unrealized net gains of $12.8 million, or $0.14 per diluted share, fiscal 2013 first quarter net income was $80.5 million, or $0.88 per diluted share. Net income was $68.5 million, or $0.75 per diluted share in the prior-year quarter, after including unrealized net gains of $13.0 million or $0.14 per diluted share.

• Net income from discontinued operations was $3.1 million, or $0.03 per diluted share for the three months ended December 31, 2012, compared with $6.1 million, or $0.07 per diluted share in the prior-year quarter.

• Atmos Energy expects fiscal 2013 earnings to be at the higher end of the previously announced guidance range of $2.40 and $2.50 per diluted share, excluding unrealized margins and the gain on the sale of the company's Georgia operations.

"Constructive rate outcomes in a number of our jurisdictions and changes in rate design in our Mid-Tex and West Texas Divisions have further enhanced the stability and predictability of our regulated earnings stream, as well as provided greater certainty for our customers, whose gas service costs will be spread more evenly over the year," said Kim Cocklin, president and chief executive officer of Atmos Energy Corporation.

Results for the Quarter Ended December 31, 2012

Natural gas distribution gross profit, excluding discontinued operations, decreased $4.0 million to $279.6 million for the first quarter of fiscal 2013, compared with $283.6 million in the prior-year quarter. The decrease in gross profit was primarily due to a $4.6 million net decrease in rate adjustments due largely to the rate design changes ordered in the recent Mid-Tex and West Texas Divisions rate cases. The new rate design includes an increase in the monthly base customer charge and a decrease in the commodity charge applied to consumption. As a result, margins earned during the first and second fiscal quarters are expected to be lower than in previous periods, while margins in the third and fourth fiscal quarters are expected to be higher than in previous periods. Additionally, revenue-related taxes decreased about $2.7 million, primarily due to lower revenues in both the Mid-Tex and West Texas Divisions. These decreases were partially offset by a $2.4 million increase from colder weather, primarily in the Mid-Tex Division.

Regulated transmission and storage gross profit increased $3.9 million to $60.7 million for the quarter ended December 31, 2012, compared with $56.8 million in the prior-year quarter. This increase is primarily the result of increased revenue from the Gas Reliability Infrastructure Program (GRIP) filing that became effective in April 2012.

Nonregulated gross profit increased $7.1 million to $22.5 million for the first quarter of fiscal 2013, compared with $15.4 million for the prior-year quarter. Realized margins for gas delivery, storage and transportation services and other services decreased $0.7 million quarter-over-quarter, primarily due to a seven percent decrease in consolidated sales volumes, which was largely attributable to warmer weather. Asset optimization margins increased $6.5 million from the prior-year quarter, primarily due to smaller losses incurred from the settlement of financial positions, partially offset by higher storage demand fees. Additionally, realized asset optimization margins in the prior-year quarter included a $1.7 million charge to write down to market certain natural gas inventory that no longer qualified for fair value hedge accounting.

Consolidated operation and maintenance expense, excluding discontinued operations, for the first quarter of fiscal 2013, was $106.5 million, compared with $114.6 million for the prior-year quarter. The $8.1 million quarter-over-quarter decrease resulted primarily from the establishment of regulatory assets for $3.0 million of certain current-quarter costs, a $2.9 million decrease in legal costs and a $1.1 million decrease due to increased capital spending in the current quarter.

Interest charges for the first quarter of fiscal 2013 were $30.5 million, compared with $35.7 million for the prior-year quarter. The $5.2 million quarter-over-quarter decrease resulted primarily from interest capitalized related to Rule 8.209 spending in the current quarter and the early redemption of the 5.125% $250 million senior notes due January 2013, with funds borrowed under a $260 million short-term debt facility in August 2012.

The debt capitalization ratio at December 31, 2012, was 53.5 percent, compared with 51.7 percent at September 30, 2012 and 53.4 percent at December 31, 2011. At December 31, 2012, there was $830.9 million of short-term debt outstanding, compared with $570.9 million at September 30, 2012 and $390.0 million at December 31, 2011. The short-term debt balance at December 31, 2012 included $260 million outstanding under a short-term facility used to redeem the 5.125% $250 million senior notes in August 2012.

For the quarter ended December 31, 2012, the company generated $29.9 million in operating cash flow, a $45.1 million increase compared with the quarter ended December 31, 2011. The increase primarily reflects the timing of customer collections and vendor payments, as well as the effect of a decrease in the amount of cash used to inject gas into storage, primarily in the company's nonregulated segment.

Capital expenditures increased to $190.0 million for the quarter ended December 31, 2012, compared with $154.4 million in the prior-year quarter. The $35.6 million increase primarily reflects Rule 8.209 spending in the Mid-Tex Division of the natural gas distribution segment and for the Line W and Line WX pipeline expansion projects in the regulated transmission and storage segment.

Outlook

The leadership of Atmos Energy remains focused on enhancing shareholder value by delivering consistent earnings growth. Atmos Energy expects fiscal 2013 earnings to be at the higher end of the previously announced range of $2.40 to $2.50 per diluted share, excluding unrealized margins and the gain on the sale of the company's Georgia operations. Net income from regulated operations is expected to be in the range of $211 million to $219 million, while net income from nonregulated operations is expected to be in the range of $9 million to $11 million. Capital expenditures for fiscal 2013 are expected to range between $770 million to $790 million.

Conference Call to be Webcast February 7, 2013

Atmos Energy will host a conference call with financial analysts to discuss the financial results for the fiscal 2013 first quarter on Thursday, February 7, 2013, at 10 a.m. Eastern Time. The telephone number is 877-485-3107. The conference call will be webcast live on the Atmos Energy website at www.atmosenergy.com. A playback of the call will be available on the website later that day. Kim Cocklin, president and chief executive officer and Bret Eckert, senior vice president and chief financial officer will participate in the conference call.

Highlights and Recent Developments

Atmos Energy Completes Successful Senior Note Offering

On January 11, 2013, Atmos Energy completed the public offering of $500 million 4.15% Senior Notes due 2043. The company used approximately $494 million of net proceeds from this offering to repay a total of $260 million borrowed under a short-term financing facility that was scheduled to mature on February 1, 2013 and for general corporate purposes, including the repayment of working capital borrowings pursuant to the company's commercial paper program.

Charles K. Vaughan Retires from Board of Directors

On January 3, 2013, Atmos Energy announced that Charles K. Vaughan had retired from the company's board of directors, effective December 27, 2012. Subsequent to his retirement, the board appointed Vaughan as an honorary director, effective January 1, 2013.

Amendment of Credit Facility

On December 7, 2012, Atmos Energy amended the company's existing $750 million revolving credit agreement, primarily to increase the lenders' commitment from $750 million to $950 million, while retaining the accordion feature that would allow an increase in commitments up to $1.2 billion and allow the company to obtain same-day funding on base rate loans.

Termination of Atmos Energy Marketing Credit Agreement

On December 5, 2012, Atmos Energy Marketing, LLC (AEM), an indirect wholly-owned subsidiary of the company, terminated its $200 million committed and secured credit facility, which was due to expire on December 3, 2014.

Railroad Commission of Texas Issues Final Order

On December 4, 2012, the Railroad Commission of Texas (RRC) issued a final order in the rate case for the Mid-Tex Division (Division) of Atmos Energy. The order authorized an increase in annual margin of about $29.6 million and a net decrease in annual depreciation rates of approximately $13.0 million, generating a net increase in the Division's annual operating income of about $42.6 million. The order also authorized a return on equity of 10.5 percent, a rate base of $1.513 billion and an increase in the monthly residential customer charge to $17.70. The new rates went into effect January 1, 2013.

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 reports filed 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, 2012. 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 one of the country's largest natural-gas-only distributors, serving over three million natural gas distribution customers in over 1,400 communities in nine 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. For more information, visit www.atmosenergy.com.