Atmos Energy Corporation · NYSE:ATO
Atmos Energy — Q2 2020 Earnings Presentation
32 slides from Atmos Energy's earnings presentation, May 9, 2020
Slide 1: Analyst Call to Review Fiscal 2020 Second Quarter Financial Results
Analyst Call to Review Fiscal 2020 Second Quarter Financial Results May 7, 2020 10:00 a.m. Eastern
Slide 2: Fiscal 2020 YTD Highlights
Fiscal 2020 YTD Highlights Financial Performance YTD Diluted EPS of $3.42 28% increase in capital spending to $995 million; 87% allocated to safety and reliability spending Fiscal 2020 EPS currently expected to range from $4.58 - $4.73 9.5% increase in fiscal 2020 indicated annual dividend
Slide 3: COVID-19 Summary
COVID-19 Summary Safety Community Support Business Impact Employees are performing their Suspended natural gas Considered an essential regular job responsibilities with disconnection for nonpayment business in all eight states more than 95% working Waived late payment fees and Obtained inc
Slide 4: Consolidated Financial Results Fiscal 2020
Consolidated Financial Results Fiscal 2020 QTD YTD Three Months Ended Six Months Ended Segment Net Income March 31, March 31, March 31, March 31, ($millions, except EPS) 2020 2019 2020 2019 Distribution $ 187 $ 172 $ 317 $ 287 Pipeline & Storage 53 43 101 86 Net Income $ 240 $ 215 $ 418 $ 373 Dilute
Slide 5: Segment Operating Income Results
Segment Operating Income Results Three Months Ended March 31 2020 2019 Change ($millions) Distribution $ 253.5 $ 229.0 $ 24.5 Pipeline & Storage 77.9 68.7 9.2 Operating Income $ 331.4 $ 297.7 $ 33.7 Distribution Key Drivers Pipeline & Storage Key Drivers $28.6MM – Increase in rates $12.9MM – Inc
Slide 6: Segment Operating Income Results
Segment Operating Income Results Six Months Ended March 31 2020 2019 Change ($millions) Distribution $ 433.8 $ 398.4 $ 35.4 Pipeline & Storage 150.4 135.7 14.7 Operating Income $ 584.2 $ 534.1 $ 50.1 Distribution Key Drivers Pipeline & Storage Key Drivers $56.0MM – Increase in rates $26.6MM – In
Slide 7: Capital Spending
Capital Spending ($MMs) 87% Spent On Safety and Reliability $994.7 $777.6 YTD March 2019 YTD March 2020 As of May 6, 2020 7
Slide 8: Capital Spending Mix
Capital Spending Mix Safety & Reliability Investments Support Infrastructure Modernization $millions Fiscal 2020 YTD CapEx Repair and replace transmission and distribution $ 496 pipelines 3% 138 Service line replacement 10% 85 Pipeline integrity management projects 87% Install & replace measurement
Slide 9: Fiscal 2020 YTD Financing Recap
Fiscal 2020 YTD Financing Recap $1.3 billion of long-term financing issued through May 6, 2020 $800 million in long-term debt issued in October 2019 • $300 million 2.625% 10-year senior notes • $500 million 3.375% 30-year senior notes $258 million in settled equity forward arrangements $200
Slide 10: Strong Financial Foundation Further Enhanced
Strong Financial Foundation Further Enhanced Capitalization and Liquidity Profile Total Capitalization Liquidity Profile as of April 30, 2020 100% 2% 5% $3,200 $2,800 $418.3 41% 40% 36% 75% $2,400 $275.6 ~ $2.9 billion $2,000 Available $700.0 $1,600 Liquidity at 50% 4/30/20 7 issues, 3.00% - 6.75% $
Slide 11: Strong Financial Foundation: Credit Metrics
Strong Financial Foundation Improved Weighted Average Cost of Long-Term Debt Credit Metrics Remain Strong Net Long-Term Debt Interest Rate % $5,000 7.0 6.2 Strong Investment $4,500 5.9 5.9 6.0 Grade Credit Ratings $4,000 4.9 5.2 4.6 Standard $3,500 5.0 Moody’s & Poor’s 4.2 ($ millions) $3,000 • Seni
Slide 12: Strong Financial Foundation: Weighted Average Maturity
Strong Financial Foundation Weighted Average Maturity ~21 Years $1,000 $950 3.73% $750 $800 4.125% $600 4.30% $600 $500 $500 ($ millions) 3.0% 4.15% $400 $300 5.5% $400 $150 2.625% $200 6.75% $200 2.29% 5.95% $200 $10 6.67% $0 As of May 6, 2020 12
Slide 13: COVID-19 Key Financial Factors
COVID-19 Key Financial Factors ~70% of distribution revenues earned through March 31 59% of distribution revenue* is included in base charge Revenue >80% of APT revenues earned from LDC customers via demand charge 25% of APT through system revenue retained through Rider Rev Bad Debt Regula
Slide 14: Distribution Segment Revenue Details
Distribution Segment Revenue Details Key Takeaways FY2020 – Actual Results Historical Results(1) Base Charge as a % of Revenue(2) Residential 68% Commercial 43% Industrial 23% Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Transport/Other 20% Oct – Mar 100% ~70% of Total Year Revenue Total 59% Apr
Slide 15: Regulatory Mechanisms To Support Recovery
Regulatory Mechanisms To Support Recovery Key Takeaways Annual Revenue and Revenue Stability and Lag Other Lag Mechanisms Mechanisms Pension and Recovery of Annual Rate Infrastructure Bad Debt in Jurisdiction Retirement WNA COVID-19 Stabilization Mechanisms GCA Cost Trackers Costs Colorado Kansas Ke
Slide 16: Capital Spending Focused on Safety & Reliability
Capital Spending Focused on Safety & Reliability ~85% of Our Capital Spending Committed to Safety and Reliability of Our Systems FY 2020 Estimated FY 2020 Estimated Safety & Reliability Spending ~ $1.6 billion $1.85 - $1.95 billion $160MM Pipeline Integrity Management Increase System Capacity $230MM
Slide 17: Fiscal 2020E Guidance
Fiscal 2020E Guidance ($millions, except EPS) FY 2019 FY 2020E2 Distribution $ 329 $ 380 - 395 Pipeline & Storage 182 180 - 195 Total Net Income $ 511 $ 560 - 590 Average Diluted Shares 117.5 122.3 - 124.7 Diluted EPS1 $ 4.35 $ 4.58 - $ 4.73 Capital Spending $ 1,693 $ 1,850 - $ 1,950 1 Since Atmos E
Slide 18: Fiscal 2020E Guidance
Fiscal 2020E Guidance Selected Expenses FY 2019 FY 2020E1 ($millions) O&M $ 630 $ 615 - 630 D&A $ 391 $ 425 - 435 Interest $ 103 $ 75 - 85 Income Tax $ 139 $ 145 - 160 Effective Tax Rate 21.4% 20% - 22%2 1 Changes in events or other circumstances that the Company cannot currently anticipate could ma
Slide 19: FY2020 Regulatory Accomplishments
FY2020 Regulatory Accomplishments Approved Annualized Key Rate Activity Operating Income Increases Through May 6, 2020 $millions $58.2MM Completed– FY20 $300 $ 34.4MM – Mid-Tex RRM $ 7.6MM – Mississippi SIR $250 $ 6.9MM – Mississippi SRF $ 4.9MM – West TX RRM $200 $ 2.9MM – Kentucky PRP
Slide 20: Key Regulatory Filings – Fiscal 2020E
Key Regulatory Filings – Fiscal 2020E Rate Filing Planned Timing Q1 Q2 Q3 Q4 October December January March April June July September Mississippi – Implemented Stable Mid-Tex(Dallas) – Filed Dallas Kansas – Implemented rate case of Mississippi – Anticipate Stable Rate Filing (SRF) and System Annual
Slide 21: Pipeline & Storage – Regulatory Update Atmos Pipeline - Texas
Pipeline & Storage – Regulatory Update Atmos Pipeline - Texas Atmos Pipeline - Texas: Filed 2019 GRIP on February 14, 2020 Requested an annual operating income increase of $49.3 million Requested ROE: 11.50%; ROR: 8.87% Requested capital structure: 47% debt / 53% equity Requested rate base
Slide 22: Regulatory Update Colorado - Kansas Division
Distribution Operations – Regulatory Update Colorado - Kansas Division Kansas: Implemented rate case on April 1, 2020 Authorized a $0.2 million decrease in annual operating income Authorized ROE: 9.10%; ROR: 7.03% Authorized capital structure: 44% debt / 56% equity Rate base value: $242.3
Slide 23: Regulatory Update Kentucky/Mid-States Division
Distribution Operations – Regulatory Update Kentucky/Mid-States Division Kentucky PRP Rate Filing: Implemented annual Pipe Replacement Program (PRP) filing on October 1, 2019 Authorized an annual operating income increase of $2.9 million Authorized ROE of 9.65%; ROR of 7.49% Authorized capit
Slide 24: Regulatory Update Louisiana Division
Distribution Operations – Regulatory Update Louisiana Division Louisiana: Filed Annual Rate Stabilization Clause (RSC) on March 30, 2020 Combined filing for Trans-La and LGS Requested an increase in annual operating income of $14.8 million Requested ROE of 9.80%; ROR of 7.57% Requested cap
Slide 25: Regulatory Update Mid-Tex Division
Distribution Operations – Regulatory Update Mid-Tex Division Mid-Tex Cities: Filed 2019 Annual Rate Review Mechanism (RRM) on March 31, 2020 Requested an increase in annual operating income of $94.1 million Requested ROE of 9.80%; ROR of 7.56% Requested capital structure of 41% debt / 59% eq
Slide 26: Regulatory Update Mid-Tex Division
Distribution Operations – Regulatory Update Mid-Tex Division Mid-Tex City of Dallas: Filed Dallas Annual Rate Review (DARR) on January 15, 2020 Requested an increase in annual operating income of $17.1 million Requested ROE of 9.80%; ROR of 7.83% Requested capital structure of 40% debt / 60%
Slide 27: Regulatory Update Mississippi Division
Distribution Operations – Regulatory Update Mississippi Division Mississippi: Filed Annual System Integrity Rider (SIR) on March 2, 2020 Requested an annual operating income increase of $10.2 million Requested ROR: 7.81% Requested rate base: $247.6 million Forward-looking components - PP&E
Slide 28: Regulatory Update West Texas Division
Distribution Operations – Regulatory Update West Texas Division West Texas Cities: Filed 2019 Annual Rate Review Mechanism (RRM) on March 31, 2020 Requested an annual operating income increase of $7.1 million Requested ROE: 9.80%; ROR: 7.56% Requested capital structure: 41% debt / 59% equity
Slide 29: Regulatory Update West Texas Division
Distribution Operations – Regulatory Update West Texas Division West Texas Triangle: Implemented 2019 Statement of Intent (SOI) on April 21, 2020 Authorized an annual operating income decrease of $0.8 million Authorized ROE: 9.80%; ROR: 7.71% Authorized capital structure: 40% debt / 60% equi
Slide 30: Regulatory Summary
Regulatory Summary Authorized Effective Date of Operating Requested Date of Last Rate Income Operating Rate Base Requested Authorized Requested Authorized Requested Authorized Requested Last Rate Filing $ Income $ millions Rate Base Rate of Rate of Return on Return on Debt/ Debt/ Meters Jurisdiction
Slide 31: Regulatory Summary (continued)
Regulatory Summary (continued) Date of Authorized Requested Effective Last Rate Operating Operating Rate Base Requested Authorized Requested Authorized Requested Authorized Requested Date of Last Filing Income Income $ millions Rate Base Rate of Rate of Return on Return on Debt/ Debt/ Meters at Juri
Slide 32: Forward Looking Statements
Forward Looking Statements The matters discussed or incorporated by reference in this presentation 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