ATO - Earnings call transcript Q3 2019 | Atmos Energy Corporation

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Operator

Greetings, and welcome to the Atmos Energy Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Jennifer Hills, Vice President of Investor Relations. you. Thank

begin. may You

Jennifer Hills

CEO; Company Good Relations, This joining and joined President morning, Diego. Chris Vice Vice Senior Forsythe, us. Jennifer President, I’m Vice and is are at our CFO; Haefner, Mike and earnings and Investor thank by Akers, call conference Executive Investor available on website live and morning, call Chairman. you, Executive is Cocklin, and webcast President; under everyone. Hills, the presentation on release atmosenergy.com our President This This slide Kim Kevin being Thank you Relations. Internet, for and

review and some discuss future of the Securities we of statements expectations, that might financial discussion meaning mind forward-looking Exchange contain Act. in As results our within these Act please Securities and the keep the

statements fully materially on SEC are in differences results. projections from such could more forward-looking outlined filings. that and differ are actual described cause and could factors The material our Slide XX, Our

Haefner, and of Our first President CEO Mike? speaker Atmos Mike is Energy.

Mike Haefner

Thank an you, says than good more birthday, happy birthday happy Relations And hosting In everyone. Investor call. Jennifer. nothing Jennifer, earnings morning, and

earnings $X.XX So to to earnings I’m our share on report we’re the XXXX we track our per to a XXth per $X.XX, XXXX for quarter an pleased results share that fiscal guidance, reported congratulations. third year. Yesterday, and meet fiscal increased consecutive

modernize of and system. reliability to XX% spending of systems. year, and to our which fiscal we Approximately continue nine spending demonstrates on the increased to transmission risk-based spending execute months Capital commitment modernizing during distribution capital as the our first XX% was program investments, our our safety this focused

well-positioned fiscal supported for our further lowered strengthened cost for balance capital and very billion Through to financing of June $X.X spending, maintain we our XX, ratings financing, XXXX the customers, credit us of long-term. which the leaves sheet, has our XXXX, our completed

our to people to our safety-driven in invest achieve capabilities our and strategy. sustain excellence and We scale continue processes to technology, operating

in future. have continued for success place, we’re extremely we into the the With team well-positioned

the Chief through Yesterday, effective I the the from XX, will that step Company Executive a transition, focus appointed the I down Akers, October the to and Officer XXXX. January Executive by from support I’ll Executive down to Board President X, health. as X, Company, and from Chairman. we announced succeed Also will September to announced President member and year. that effective Cocklin Board my to the with me and step Board end has of President as effective Kim and yesterday of of retire will remain year continue as become been calendar the the CEO, Kevin my plan role Vice currently on this

This been decision this recent for for at I’m optimistic was decision a this extremely for will a is Company, point my difficult and facing right but me that it’s itself for the family. run. the long me, I’ve favorably a in issue health alluded very the diagnosis. resolve definitive

pulling commitments. an requiring on necessitates time, it’s my back me that increasing However, of my and amount

with five Executive Akers and and is experience, our is made for to a industry the operations. of and of the previously was leader President the President XX ready easier of decision much, that Kevin Mid-States He storage company having of company majority This years by nine broad served Officer. President Division, nearly a proven as Mississippi assume our for more Division, pipeline took me and on in with Kentucky deep Chief experience, as much Company’s have the been role leadership position. fact a years responsibility senior over Kevin operating the recently has for years

Financial enabled improvement operations to oversaw also the the well and has company scale driving service other past supply been you the that our instrumental to and And years, he year. functions. two past years, pipeline Analyst process in has chain, several AGA conferences safety, Kevin the the our Kevin and For as Many as our technology customer initiatives Days, success. sustain know its Forum, already from investor of this

senior the by the surrounded of management continue of our together colleagues, team. Chris They but roles. is their X,XXX friends. our a they Kevin Not leadership prior Kevin very also and rest committee. only to even worked years they’re And respected seasoned many employees. full in will being support the closely many, for are has current committee on and management

One Charlie plan public planning, Vaughan years. seamless. XX independent transitions from years important of to been Best founder they’ve to the as Cocklin And will our transition This master our our place over Kevin is several responsibility succession most in me, just Bob with to completely to fully succession has Kim company. Board’s an as and done for that be prior

mentor committee of As as role Chairman. to leader, a company the mentioned I Kim continuing earlier, the management as and the will to him in success. involvement His friend. of forever as Kevin of provide further great assurance continued a rest Executive will Company’s continued as advisor I’ll as a Chairman the well be grateful and the

the before call over to know to past thank distinct the pleasure four And the Chris to like turn for investors analysts the update, and I’d I over to I’ve the lastly, financial years. had get

the investment and strategy. and investment critical so capital our been to of safety time of success Your has support

it questions challenging and have me leader. insights made better us a better Your may a company and

in thank we deliver communities efforts our to the I’d focused are Energy safety, successful to and on capital long-term. be greatest service executing focused the day providing their for modernizing XX every customer work million every alongside them to come footprints. past and for that our eight over years. on will program reason gas in improve employees state They my a to to exceptional continue spending while system. continued day X,XXX They our the been It’s Atmos serve single X,XXX excellent for reliable, for to honor outstanding affordable, natural service our safe, customers like serve also X.X

to Chris, you. over

Chris Forsythe

good with $X.XX or XXXX and of third Yesterday, per income diluted diluted per million we $X.XX or Year-to-date, in reported diluted or net income $XXX per period. share Mike, $XX year million you, share, million morning, $XXX $X.XX or share share, diluted $XX quarter. quarter everyone. the net was compared in prior per prior $X.XX third with Thank million compared the year

year-to-date million share or $X.XX Fiscal included benefit XXXX tax results income $XXX per from reform. non-recurring tax diluted

$XXX or net Excluding the per diluted benefit, tax share. adjusted was million income $X.XX

continuing in details results. Slides expectations line third X will Our year-to-date and during I and the third the underlying results of first year, highlights. our in were our quarter of the touch the our with many the drivers with half into quarter. of provide for few X performance quarter

modest in In a income third offset million contribution increased $XX.X increase was our million We higher and $XX.X customer million million margin from $X increase increase Distribution a nearly by quarter-over-quarter. segment, operating to the $X Contribution new $X experienced as operating rates a margin expenses. up quarter, in growth. increased million from

June XX, net ended represents months which growth. added we customers, X.X% customer XX XX,XXX a net XXXX, At

the due year. track for by X% prior decrease We million on the third compared are to increases consumption, consecutive to quarter customer in growth in $X exceed warmer year. These weather to primarily net the offset were customer third

margin not April, As so a for quarter. weather end contribution most for cover mechanisms in reminder, does most the of normalization

expense with O&M in and planned Operating associated XX% expense. increased capital expenses increase spending, rose higher approximately reflecting depreciation X% quarter-over-quarter,

we related growth in support market. to Mid-Tex As in we DFW discussed headcount service our last our quarter, Division increased the

Additionally, as strong to continued X% growth. quarter-over-quarter locate, communities a experience our increase we line which experienced in in of many we operate

Therefore, our indications. to assess which technology operations. survey We potential into rollout than are sensitive we times hire more indications, the and people This contract survey new the or continue technology. these leak leak drives to more is X,XXX need leak evaluate to finding technology traditional

of increase it technology ability important and the near mitigate O&M identify deployment role this risk. in the will While in to plays an our expense term,

had we that For our or example, several storms assist by technology damage. in of hit during jurisdictions used assess this the to heavy for quarter,

offset the operating our performance Operating by substantially $XX result in partially the our ongoing segment. Contribution segment driven revenue contribution $XX decrease APT’s margin, increased Basin. Permian operating a as filings distribution in combined higher of the result dynamics in GRIP supply million and growth the demand a rise The through-system by in XXXX increased with strong $X.X income pipeline XXXX, affecting million, margin income in million expenses. as of of and offset APT storage quarter-over-quarter

experienced other we in two to higher the activity quarter which pipelines, expected than volumes The on than anticipated due system. events was force higher majeure into our drove unexpected

pipeline in Waha late higher summer, work. margin increased merchant this online the Offsetting expect narrow. depreciation Katy $XX and we planned in operating the However, capital result expenses to contribution the as as spread expenditures in to million a increase growth was to starting increase a pipeline of related new comes integrity

with Year-to-date is spending billion, consolidated our plan. to XX% was XX% line capital $X.X which increased or in

– continue billion. or spending to of our We year, expect spending spending the safety $X.XX the and improving our between continue capital focus of the remainder on our on our planned for to Based work our XX% fiscal and of fiscal and completed focused manually system reliability systems and billion year-to-date reliability. to spending safety $X.XX we to XXXX of reliability be

XX have From income. have $XX about XXXX seeking operating and in operating about annualized we six to-date, of XXXX. pending annualized add And which over completed filings perspective $XXX income we filings, million a fiscal should fiscal regulatory – approximately million

the during first quarter We complete rates to the fourth in of taking of filings with XXXX. these quarter are on fiscal effect track some

annualized to line million million Assuming remain in expectations, we with track completing operating these target meet resolved proceedings on are outcomes. to our $XXX $XXX of in our

program. supports Our spending and our balance continues to sheet strong remain capital

our June facilities $X was capitalization As liquidity fiscal summarizes billion our through equity X credit our and of Slide and under XXXX agreements. XX, had of financing we forward equity total approximately XX%, activities. our

of Year-to-date, billion of and equity. of of including issuance billion $X.X the we $X debt long-term financing, $X.X have billion completed

of utilize forward ATM we our XXXX under to an at help $XXX.XX. X.X shares agreements During issued million the fiscal price needs. quarter, our continue average We meet to

Additionally, we agreements $XXX shares net settled for the approximately of X.X million. forward million proceeds for

had can million equity X. we agreements. Details our Slide XX, on also found be activities remaining $XXX under about on forward June of As forward

mentioned we to Mike positioned in opening our of $X.XX well $X.XX As fiscal diluted are to guidance remarks, earnings range meet share. XXXX per his

However, third expect now the higher saw be Basin during Permian given quarter, range. this we we expected the of end higher the to activity at than

XXXX through XXXX. fiscal to selected positioned our XX our November. forward guidance. fiscal our We’ll our call growth target underlying And and X% through information provide be five-year earnings well EPS plan X% to meet in on XX are five-year of XXXX we annual rolling Slides fiscal year-end

time over Thank to morning. this Kevin I turn will some Kevin? for closing for now your remarks. the you call

Kevin Akers

Mike, morning, of everyone. you, you and Thank Chris, those remarks. thank kind good for

look employees. X,XXX you and your on our your Energy, execution the indebted Atmos for maintain and I Atmos forward I’m for to nation’s support as successful and excited the to safest deeply Mike about leadership, very one our being in continuing of the vision and are every our and of of we vision gas focus provider We natural that the have future put dedication unwavering Energy, of services. of place, Kim strategy

that in key to Company by for our straightforward excellent environmentally continue vision safely long-term. the the modernizing This A improvement we reliability, and and investments to safety while to achieving is making benefits of as manner. strive focused our evolution our all strategy responsible stakeholders business service in customer strategy provide refinement to sustain

proud our mark spending the center, I’m Charles that training cumulative for to also we over we during through crossed XXXX hour of the million opened total provided invest per before, our Vaughan which XXXX. XX% quarter, in requires K. discussed X to fiscal at hours increasing third year state-of-the-art that report in our and we’ve people As technology. X%

qualified employees highly for become essential our is training gas This to professionals.

as enhance on this our Company first mentioned We roll operate And to had continue fiscal technology. to using ability crews our this our construction we out detection approximately digital important advanced technology earlier. Through data asset trained and Chris that of mobile latest system, solution. year, leak of map out our systematically our XX% will nine the months continue roll contract safely collection we to

focus. strategic another is system management safety a Implementing

While management of doing, safety system the system safest our how later plan level the our many vision are system our policies for just had of completed management and addressing and of a road of a safety years, safety us and practices natural components including we services. have have what provider sustained we We’ve is procedures, future. and pipeline formalizes gas position map part the being integral These few in to an training for for gas management are our high supporting technology developed this fall. of success the in investments examples assessment,

X,XXX biggest our to providing successful giving Atmos thank they to back service the like is the our their would customer where live. communities employees, dedication while That operating long-term. I for will Energy system, closing, In be work and to and safely the reason excellent

questions your appreciate morning. time have. we’ll now, And this you We take any may

Jennifer Hills

Operator?

Operator

At Morgan. Please conducting session. question-and-answer be you. we’ll Our J.P. state Turnure question. time, [Operator first Thank with comes from question a this Instructions] Christopher your

Christopher Turnure

to Very family. wishes Good sorry you morning, and best hear Mike, the everyone. your to news.

Mike Haefner

Thank you, Chris.

Christopher Turnure

we and outlook we how for you guys again CapEx beyond can potentially year? quarter changing current last earnings As that about forward of anything acceleration this out fourth given Analyst year, the saw the look potentially to beyond XXXX, plan, kind of of we and Day think there, especially the an

Chris Forsythe

Chris, Forsythe. Yes. this Chris is morning. Good

we’ll off and focused call, have but going the going XXXX. strategy not Our fiscal the the and an same. remains was Analyst of intent this story XXXX, fiscal have we’ll And to really extended be an on earnings remainder where we’re into the really Day, year-end fall cover fiscal to

As call, long of with on have work we’ve backlog you talked and you we others about will. do, the if a to

done a pipe Just of replacement. get in work lot of terms to

So be we just another year. it forward will rolling

is this in in we’ve for on an is is We’ll you’ve point. I us fresh from But spending seen what the see strategy and increases line the that the over XXXX last the consistent you those you’ve roll pretty with going to of just that several years. forward expect just same in will what a at call. increase seen through the key update and capital be well. as think today You’ll to that with be demonstrated takeaway numbers strategy Financing

Christopher Turnure

perhaps or balance sheet that frame, all play into sheet kind time rate come there that strength balance you kind sounds now despite trend? pressures that of even based of feel is right And constraints, Chris, And the Okay. that obviously. slow great, your would customer in of the like growth no would bill

Chris Forsythe

We’re perspective. not seeing customer bill anything from a

the we’ve back bill we’re the bill shown that to lowest our to And far from in forward. that of balance utility is our strength charts go a balance committed and can of the sheet You strength going that the sheet household by maintain perspective. our

Christopher Turnure

then remarks, near-term question around one financing, then And X around mentioned I and million also you the you second shares great. down well and from X the Q Okay, think you quarter, my is earlier pulled shares well, priced the of around as as million guess in ATMs. this as I

ATM there commentary prior So on I that given Was meeting – equity it caused tap there this was changed equity not the think more not your you any year programs. or quarter? that to from something the during

Chris Forsythe

No, no.

what discrete fiscal have think – know on last quarter issuances the we arrangements, did first had as available our of needs. that we planned end we which have we were through is indicating do the we said, expire. any discrete no we In are equity you XXXX. – proceeds forward didn’t We the I equity call

March end now expire September. proceeds the of over of most little the at with right expiring the $XXX a million the at of about Some end of

those So proceeds. we’re utilize needing to

So it that intended to proceeds need down along we to period. draw needs arise had those on arise capital or as all in cash

intend to So baked $X debt $X in five-year baked all And $X.XX forward, have that XXXX in we and guidance. financing fiscal plan fashion a of we both we our our look billion five-year into to current long-term a stated that published that to into again incremental It’s we $X.XX. equity. need is using the balanced as plan, billion finance

But equity did third that needs. is roll and That needs look very the in not FYXXXX is strategy well, satisfy the again we when So, satisfy in roll we that forward going similar FYXXXX beyond. or November. will that financing quarter again, – to

Christopher Turnure

you, Okay. Chris. That’s clear. Thank

Chris Forsythe

Thank you.

Operator

Our question Bank from comes Please with Dennis next Coleman America. your question. of state

Dennis Coleman

that Good as pursue morning. anyone add health get me thoughts. to wishes And your let so well. as thoughts my knew you family certainly Yes. never best likes and your Mike, with

congratulations… side, other the On

Mike Haefner

in comments, I had very again, Dennis, find all this. a talk to miss past. down all in the Thank I opportunities have you a or certainly in I’m you the gear opportunity I two, guys I and solution But so seeing for the mentioned that gear I’ll if will good my optimistic much. as And miss future. to the we

Dennis Coleman

Congratulations Best that’s hope case. so. you Company luck role I of responsibilities. new with to and the Big fill, also with shoes Great. but great Kevin. work the to to

Kevin Akers

Absolutely. Thank you.

Dennis Coleman

it side, more roll certainly Chris, So I bit you help we there, up, about a sort expense be question a of of would can expenses a me. appreciated. but any couple did give – side? transient, the on the Can guess expense little forward of guess Some just you first for than seems thought. on run questions the I certainly a talk

Chris Forsythe

we that that I from with the as we’ve that in just last us, more the what to Sure, like mean, mentioned roll time, came And are trying we of Yes. gain – we’ve so a continuation we Dennis. of going a quarter, that in the out it’s to quarter little the work O&M. commented new about what when assessment. we the come perspective. second proficiency remarks, was to the that really the because on been five-year established over indications line it’s into prepared fall. experiencing A been But should I X.X% and the talk back lot we in continuing that that, technology third for – expect accomplish AMLD to risk-based Kevin is require guidelines plan X.X% bit

O&M expected. low opportunity And the get to risk in an looking take we’re always table an you when talked pressure we assessments. with margins, Additionally, increases off from about

do work, that’s in for low period current that assessments, that’s been right maintenance, we’ve system can the risk-based benefit increasing reduce So pressure future periods. risk will line guess our anything inspections, in we away to that’s O&M so I

the forward arise manage that’s need seeing as line well. going of to O&M And arise you’re to item. type as as we’ll work and So continue the that in that just opportunities

Dennis Coleman

Okay. that. amount I the I fair it said then, guess thought Thanks additional a heard detection for to And obviously, you you’ve leak there. I markets. guess I technology, on rolled out say

it now? I think you about talk it can rolled was all space. you just in it Texas have markets has But mostly last out quarter –

Kevin Akers

Not in markets. of our – currently is in Not had XX all this units. Kevin. We

additional fiscal some year plans rolled addition next Texas units amount the we Here area. roll West our here out to to with

an one as Louisiana well. have and in existing in We Mississippi unit

– that there. we’re markets are those that So the about talking

Dennis Coleman

Okay, me. you. all right. That’s from it Thank

Chris Forsythe

Thank you, Dennis.

Operator

comes question your from next Our with Ryan question. Please state Levine Citi.

Ryan Levine

morning. Good

Mike Haefner

Good morning.

Ryan Levine

I best And But to some echo also about of wanted to to sorry of you previous and hear the that, luck to comments family. development. your this Mike,

Mike Haefner

you, Thank Ryan.

Ryan Levine

CEO just a what And then I are and that you guess few speak steps seat? in transition sudden, this the the as quarters takes question. Can the the process, was Kevin if and lies to over next

Mike Haefner

Sure. and This Mike. is Ryan up. it’s

mentioned even for worked closely and in very has operate, I As I’ve worked closely team with a way comments, entire that, while. together. place the very been succession prior we plan in Kevin my leadership quite this to And the

and two meets days half informally a a a several last years, then day the Over half our and a management committee for week.

I initiatives completely and lockstep. driving Kevin And we’re scope. has that been in of scale all worked for and So he the side-by-side and

along. been I in is smooth all mean, working together So closely internally be the and a since we’ve going uneventful to nutshell, – transition so extremely

earlier, as with the and and and As on a mentioned he through I President X. and basis still assume working meet and now. closely I available calendar whereas regular them he’ll the end the be mentioned, around – CEO on more I position year. But are him October to will I of even

will us he’s to as continue Jim been Executive helpful mentioned, an as tremendously also And and always of as Chairman, all – advisor. I is

to – Atmos it’s not So other single I bullpen the many we’re companies, at every same the in of is in same dug everybody week. know out, but similar day the and

we got is then well, taking process, scaling sure opportunities, development now, compliance. for of years. got a not on a talk mainly about going executing Obviously, our but firm So they’ve employees services change. last to And need, they we regularly, and it’s the the hand that and It’s just matter responsibility shared all making had things in in leadership, leadership pillar training the division Chris the care – as said, couple sustaining be and he’s of so it success, our our of strategy, the right the executed Kevin non-event. will by a

Ryan Levine

Okay. the And Thanks of specific questions. more for color. couple a then

period of think of type improvement? detect In opportunity for centers the you elevated safety as sensitive the there’ll time be an terms O&M additional cost of over some level what do more inflation,

Chris Forsythe

X.X% over we’ll XXXX, I productivity through we’re already that the seeing targeted the improvements back with think forward going O&M say that XXXX. we’re plan – be the would a of And line the in and in in I O&M some crews. to then roll X.X% five-year just November increase to through

Ryan Levine

of so the to differentials Okay. update And quarters, numbers there? what Waha your was some impact I think in basis previous the quarter? past disclosed curious you what business this the

Chris Forsythe

It about $X.X million. quarter-over-quarter was is – the impact

Ryan Levine

income? In

Chris Forsythe

in quarter-over-quarter revenue for quarter, And that’s effectively third contribution which so. us, margin is the In revenue.

Ryan Levine

And helpful. it. you. That’s okay. Okay. – Thank Appreciate

Operator

Stephen question. [Operator next comes question state Morgan your Instructions] Byrd Stanley. Please with Our from

Stephen Byrd

morning. Good

Mike Haefner

Good morning.

Chris Forsythe

Good morning.

Stephen Byrd

you Mike, will say just want I be dearly missed. to

interact You’re just to and great a great person, a with. executive great

help successfully we the family and your enough and for thank So address years. your wish health Can’t issues you you for this all you we’re all really to all wishing best. over the

You will be missed.

Mike Haefner

you Thank done much as well, it. Stephen. you’ve for so Appreciate everything

Stephen Byrd

questions look thought new have my addressed. check plan. been forward the you your really Most financing Kevin, And role. to of just working on with I’d in I

ways kind I But over environment of debt lower to of cost think lock – long a just interest we’re the in that additional I I terms just of of period thought in just very in, just double clear. your low financing check a plan rate opportunistic is time. given very

long at might thought just years, average that check just XX anything but if already else your think I’d I duration I possible? pretty be there

Kevin Akers

evaluating Yes. right That’s a we’re good that question, something now. that’s Stephen. And

so. the have where last of mindful week or We’re certainly gotten markets here in the

average matured about out pointed duration is years. our XX You’ve

our is that after average, X.XX% debt offerings two now debt average fiscal year. in weighted we the of effectuated this we’ve cost right all done For

specific we evaluating debt I drive further that So down, but as forward, overall certainly we’re nothing that on comment point. opportunities to at this look can cost of

Stephen Byrd

That’s you. I all Understood. had. Thank

Kevin Akers

you. Thank

Operator

Jennifer Thank time. it this at are back There I’ll Thanks. Hills no closing you. for further turn remarks. questions to

Jennifer Hills

us All today. joining right. Thank you for

call our of for We reminder, through and X, replay available a a Energy, recording joining on appreciate Goodbye. website in is us. As this Atmos November you XXXX. interest thank for your

Operator

Thank Have you. This today’s conference. may concludes a great parties day. All disconnect.

Atmos Energy (ATO) 8 Aug 192019 Q3 Earnings call transcript