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Atmos Energy 10-Q 2014

Documents found in this filing:

  1. 10-Q
  2. Ex-12
  3. Ex-15
  4. Ex-31
  5. Ex-32
  6. Ex-32
ATO 2014.06.30 10-Q


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                    
Commission File Number 1-10042
Atmos Energy Corporation
(Exact name of registrant as specified in its charter)
 
Texas and Virginia
 
75-1743247
(State or other jurisdiction of
incorporation or organization)
 
(IRS employer
identification no.)
 
 
Three Lincoln Centre, Suite 1800
5430 LBJ Freeway, Dallas, Texas
 
75240
(Zip code)
(Address of principal executive offices)
 
 
(972) 934-9227
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer  þ
  
Accelerated Filer  ¨
  
Non-Accelerated Filer  ¨
  
Smaller Reporting Company  ¨
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ¨    No  þ
Number of shares outstanding of each of the issuer’s classes of common stock, as of August 1, 2014.
Class
  
Shares Outstanding
No Par Value
  
100,351,676




GLOSSARY OF KEY TERMS
 
 
 
AEC
Atmos Energy Corporation
AEH
Atmos Energy Holdings, Inc.
AEM
Atmos Energy Marketing, LLC
AOCI
Accumulated other comprehensive income
Bcf
Billion cubic feet
FASB
Financial Accounting Standards Board
Fitch
Fitch Ratings, Ltd.
GAAP
Generally Accepted Accounting Principles
GRIP
Gas Reliability Infrastructure Program
GSRS
Gas System Reliability Surcharge
Mcf
Thousand cubic feet
MMcf
Million cubic feet
Moody’s
Moody’s Investors Services, Inc.
NYMEX
New York Mercantile Exchange, Inc.
PPA
Pension Protection Act of 2006
PRP
Pipeline Replacement Program
RRC
Railroad Commission of Texas
RRM
Rate Review Mechanism
S&P
Standard & Poor’s Corporation
SEC
United States Securities and Exchange Commission
WNA
Weather Normalization Adjustment

2



PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
June 30,
2014
 
September 30,
2013
 
(Unaudited)
 
 
 
(In thousands, except
share data)
ASSETS
 
 
 
Property, plant and equipment
$
8,217,954

 
$
7,722,019

Less accumulated depreciation and amortization
1,756,504

 
1,691,364

Net property, plant and equipment
6,461,450

 
6,030,655

Current assets
 
 
 
Cash and cash equivalents
51,421

 
66,199

Accounts receivable, net
388,874

 
301,992

Gas stored underground
207,458

 
244,741

Other current assets
126,890

 
64,201

Total current assets
774,643

 
677,133

Goodwill
741,363

 
741,363

Deferred charges and other assets
379,733

 
485,117

 
$
8,357,189

 
$
7,934,268

CAPITALIZATION AND LIABILITIES
 
 
 
Shareholders’ equity
 
 
 
Common stock, no par value (stated at $.005 per share); 200,000,000 shares authorized; issued and outstanding: June 30, 2014 — 100,346,468 shares; September 30, 2013 — 90,640,211 shares
$
502

 
$
453

Additional paid-in capital
2,172,307

 
1,765,811

Retained earnings
932,576

 
775,267

Accumulated other comprehensive income
11,300

 
38,878

Shareholders’ equity
3,116,685

 
2,580,409

Long-term debt
1,955,907

 
2,455,671

Total capitalization
5,072,592

 
5,036,080

Current liabilities
 
 
 
Accounts payable and accrued liabilities
312,671

 
241,611

Other current liabilities
343,026

 
368,891

Short-term debt

 
367,984

Current maturities of long-term debt
500,000

 

Total current liabilities
1,155,697

 
978,486

Deferred income taxes
1,341,294

 
1,164,053

Regulatory cost of removal obligation
391,785

 
359,299

Pension and postretirement liabilities
347,344

 
358,787

Deferred credits and other liabilities
48,477

 
37,563

 
$
8,357,189

 
$
7,934,268

See accompanying notes to condensed consolidated financial statements.

3



ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
 
Three Months Ended 
 June 30
 
2014
 
2013
 
(Unaudited)
(In thousands, except per
share data)
Operating revenues
 
 
 
Natural gas distribution segment
$
517,707

 
$
467,144

Regulated transmission and storage segment
87,189

 
74,041

Nonregulated segment
465,033

 
421,808

Intersegment eliminations
(127,211
)
 
(105,058
)
 
942,718

 
857,935

Purchased gas cost
 
 
 
Natural gas distribution segment
260,042

 
227,649

Regulated transmission and storage segment

 

Nonregulated segment
450,220

 
418,548

Intersegment eliminations
(127,077
)
 
(104,759
)
 
583,185

 
541,438

Gross profit
359,533

 
316,497

Operating expenses
 
 
 
Operation and maintenance
125,559

 
121,258

Depreciation and amortization
63,955

 
58,129

Taxes, other than income
63,414

 
50,714

Total operating expenses
252,928

 
230,101

Operating income
106,605

 
86,396

Miscellaneous expense
(374
)
 
(467
)
Interest charges
31,840

 
32,741

Income from continuing operations before income taxes
74,391

 
53,188

Income tax expense
28,670

 
19,714

Income from continuing operations
45,721

 
33,474

Gain on sale of discontinued operations, net of tax ($0 and $2,909)

 
5,294

Net income
$
45,721

 
$
38,768

Basic earnings per share
 
 
 
Income per share from continuing operations
$
0.45

 
$
0.37

Income per share from discontinued operations

 
0.06

Net income per share — basic
$
0.45

 
$
0.43

Diluted earnings per share
 
 
 
Income per share from continuing operations
$
0.45

 
$
0.36

Income per share from discontinued operations

 
0.06

Net income per share — diluted
$
0.45

 
$
0.42

Cash dividends per share
$
0.37

 
$
0.35

Weighted average shares outstanding:
 
 
 
Basic
100,267

 
90,603

Diluted
101,150

 
91,550

See accompanying notes to condensed consolidated financial statements.

4



 ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 
 
 
 
 
 
 
 
 
Nine Months Ended 
 June 30
 
2014
 
2013
 
(Unaudited)
(In thousands, except per
share data)
Operating revenues
 
 
 
Natural gas distribution segment
$
2,652,532

 
$
2,039,107

Regulated transmission and storage segment
232,145

 
196,570

Nonregulated segment
1,670,437

 
1,250,650

Intersegment eliminations
(392,926
)
 
(285,241
)
 
4,162,188

 
3,201,086

Purchased gas cost
 
 
 
Natural gas distribution segment
1,710,508

 
1,172,975

Regulated transmission and storage segment

 

Nonregulated segment
1,599,469

 
1,200,624

Intersegment eliminations
(392,556
)
 
(284,123
)
 
2,917,421

 
2,089,476

Gross profit
1,244,767

 
1,111,610

Operating expenses
 
 
 
Operation and maintenance
365,991

 
338,871

Depreciation and amortization
185,731

 
174,888

Taxes, other than income
165,640

 
146,355

Total operating expenses
717,362

 
660,114

Operating income
527,405

 
451,496

Miscellaneous income (expense)
(4,022
)
 
1,943

Interest charges
95,556

 
96,594

Income from continuing operations before income taxes
427,827

 
356,845

Income tax expense
161,723

 
133,683

Income from continuing operations
266,104

 
223,162

Income from discontinued operations, net of tax ($0 and $3,986)

 
7,202

Gain on sale of discontinued operations, net of tax ($0 and $2,909)

 
5,294

Net income
$
266,104

 
$
235,658

Basic earnings per share
 
 
 
Income per share from continuing operations
$
2.78

 
$
2.46

Income per share from discontinued operations

 
0.14

Net income per share — basic
$
2.78

 
$
2.60

Diluted earnings per share
 
 
 
Income per share from continuing operations
$
2.76

 
$
2.43

Income per share from discontinued operations

 
0.14

Net income per share — diluted
$
2.76

 
$
2.57

Cash dividends per share
$
1.11

 
$
1.05

Weighted average shares outstanding:
 
 
 
Basic
95,455

 
90,497

Diluted
96,339

 
91,445

See accompanying notes to condensed consolidated financial statements.


5




ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
Three Months Ended 
 June 30
 
Nine Months Ended 
 June 30
 
2014
 
2013
 
2014
 
2013
 
(Unaudited)
(In thousands)
Net income
$
45,721

 
$
38,768

 
$
266,104

 
$
235,658

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
Net unrealized holding gains (losses) on available-for-sale securities, net of tax of $216, $(202), $1,518 and $(532)
377

 
(348
)
 
2,519

 
(921
)
Cash flow hedges:
 
 
 
 
 
 
 
Amortization and unrealized gain (loss) on interest rate agreements, net of tax of $(13,472), $17,865, $(21,005) and $38,427
(23,440
)
 
31,079

 
(36,545
)
 
66,852

Net unrealized gains (losses) on commodity cash flow hedges, net of tax of $(1,580), $(2,243), $4,122 and $3,174
(2,471
)
 
(3,508
)
 
6,448

 
4,965

Total other comprehensive income (loss)
(25,534
)
 
27,223

 
(27,578
)
 
70,896

Total comprehensive income
$
20,187

 
$
65,991

 
$
238,526

 
$
306,554


See accompanying notes to condensed consolidated financial statements.

6



ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Nine Months Ended 
 June 30
 
2014
 
2013
 
(Unaudited)
(In thousands)
Cash Flows From Operating Activities
 
 
 
Net income
$
266,104

 
$
235,658

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on sale of discontinued operations

 
(8,203
)
Depreciation and amortization:
 
 
 
Charged to depreciation and amortization
185,731

 
176,737

Charged to other accounts
669

 
446

Deferred income taxes
150,457

 
130,365

Other
21,587

 
14,460

Net assets / liabilities from risk management activities
3,158

 
(6,386
)
Net change in operating assets and liabilities
2,504

 
(33,502
)
Net cash provided by operating activities
630,210

 
509,575

Cash Flows From Investing Activities
 
 
 
Capital expenditures
(552,600
)
 
(582,473
)
Proceeds from the sale of discontinued operations

 
153,023

Other, net
(620
)
 
(3,139
)
Net cash used in investing activities
(553,220
)
 
(432,589
)
Cash Flows From Financing Activities
 
 
 
Net decrease in short-term debt
(366,602
)
 
(435,084
)
Net proceeds from equity offering
390,205

 

Net proceeds from issuance of long-term debt

 
493,793

Settlement of Treasury lock agreements

 
(66,626
)
Repayment of long-term debt

 
(131
)
Cash dividends paid
(108,806
)
 
(96,060
)
Repurchase of equity awards
(8,717
)
 
(5,146
)
Issuance of common stock
2,152

 
8

Net cash used in financing activities
(91,768
)
 
(109,246
)
Net decrease in cash and cash equivalents
(14,778
)
 
(32,260
)
Cash and cash equivalents at beginning of period
66,199

 
64,239

Cash and cash equivalents at end of period
$
51,421

 
$
31,979


See accompanying notes to condensed consolidated financial statements.

7



ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2014
1.    Nature of Business
Atmos Energy Corporation (“Atmos Energy” or the “Company”) and our subsidiaries are engaged primarily in the regulated natural gas distribution and transmission and storage businesses as well as certain other nonregulated businesses. For the fiscal year ended September 30, 2013, our regulated businesses generated approximately 95 percent of our consolidated net income.
Through our natural gas distribution business, we deliver natural gas through sales and transportation arrangements to approximately three million residential, commercial, public authority and industrial customers through our six regulated natural gas distribution divisions, which at June 30, 2014, covered service areas located in eight states. On April 1, 2013, we completed the divestiture of our natural gas distribution operations in Georgia, representing approximately 64,000 customers. In addition, we transport natural gas for others through our distribution system. Our regulated businesses also include our regulated pipeline and storage operations, which include the transportation of natural gas to our North Texas distribution system and the management of our underground storage facilities. Our regulated businesses are subject to federal and state regulation and/or regulation by local authorities in each of the states in which our natural gas distribution divisions operate.
Our nonregulated businesses operate primarily in the Midwest and Southeast through various wholly-owned subsidiaries of Atmos Energy Holdings, Inc. (AEH). AEH is wholly owned by the Company and based in Houston, Texas. Through AEH, we provide natural gas management and transportation services to municipalities, natural gas distribution companies, including certain divisions of Atmos Energy, and third parties.

2.    Unaudited Financial Information
These consolidated interim-period financial statements have been prepared in accordance with accounting principles generally accepted in the United States on the same basis as those used for the Company’s audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013. In the opinion of management, all material adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been made to the unaudited consolidated interim-period financial statements. These consolidated interim-period financial statements are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of Atmos Energy Corporation included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013. Because of seasonal and other factors, the results of operations for the nine-month period ended June 30, 2014 are not indicative of our results of operations for the full 2014 fiscal year, which ends September 30, 2014.
Except for the forward starting interest rate swap entered into in July 2014 as noted in Note 8, no events have occurred subsequent to the balance sheet date that would require recognition or disclosure in the condensed consolidated financial statements.

Significant accounting policies
Our accounting policies are described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013.
During the second quarter of fiscal 2014, we completed our annual goodwill impairment assessment. Based on the assessment performed, we determined that our goodwill was not impaired.
Due to the April 1, 2013 sale of our Georgia distribution operations, prior year financial results for this service area are shown in discontinued operations.
Disclosure requirements for offsetting arrangements for financial instruments became effective for us beginning on October 1, 2013. We have presented these disclosures in Note 8. In connection with the adoption of this standard, prior-year risk management assets and liabilities have been reclassified to conform with the current-year presentation. The adoption of this standard and reclassification did not have an impact on our financial position, results of operations or cash flows.
In April 2014, the Financial Accounting Standards Board (FASB) issued updated guidance for discontinued operations that limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have a major effect on an entity’s operations and financial results and requires additional disclosures related to discontinued operations. This standard will become effective for us beginning on October 1, 2015. The adoption of this guidance is not expected to impact our financial position, results of operations or cash flows.

8



In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede virtually all existing revenue recognition guidance under generally accepted accounting principles in the United States. Under the new standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. The new standard will become effective for us beginning on October 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are currently evaluating the impact this standard may have on our financial position, results of operations and cash flows.
There were no other significant changes to our accounting policies during the nine months ended June 30, 2014 that will become applicable to the Company in future periods.
Regulatory assets and liabilities
Accounting principles generally accepted in the United States require cost-based, rate-regulated entities that meet certain criteria to reflect the authorized recovery of costs due to regulatory decisions in their financial statements. As a result, certain costs are permitted to be capitalized rather than expensed because they can be recovered through rates. We record certain costs as regulatory assets when future recovery through customer rates is considered probable. Regulatory liabilities are recorded when it is probable that revenues will be reduced for amounts that will be credited to customers through the ratemaking process. Substantially all of our regulatory assets are recorded as a component of deferred charges and other assets and substantially all of our regulatory liabilities are recorded as a component of deferred credits and other liabilities. Deferred gas costs are recorded either in other current assets or liabilities and the regulatory cost of removal obligation is reported separately.
 
Significant regulatory assets and liabilities as of June 30, 2014 and September 30, 2013 included the following:
 
June 30,
2014
 
September 30,
2013
 
(In thousands)
Regulatory assets:
 
 
 
Pension and postretirement benefit costs(1)
$
172,844

 
$
187,977

Merger and integration costs, net
4,860

 
5,250

Deferred gas costs
9,809

 
15,152

Regulatory cost of removal asset
9,552

 
10,008

Rate case costs
4,436

 
6,329

Texas Rule 8.209(2)
19,349

 
30,364

APT annual adjustment mechanism
5,927

 
5,853

Recoverable loss on reacquired debt
19,517

 
21,435

Other
4,006

 
4,380

 
$
250,300

 
$
286,748

Regulatory liabilities:
 
 
 
Deferred gas costs
$
62,522

 
$
16,481

Deferred franchise fees
5,918

 
1,689

Regulatory cost of removal obligation
441,643

 
427,524

Other
11,509

 
7,887

 
$
521,592

 
$
453,581

 
(1) 
Includes $18.0 million and $17.4 million of pension and postretirement expense deferred pursuant to regulatory authorization.
(2) 
Texas Rule 8.209 is a Railroad Commission rule that allows for the deferral of all expenses associated with capital expenditures incurred pursuant to this rule, including the recording of interest on the deferred expenses until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recovered through base rates.
Currently authorized rates do not include a return on certain of our merger and integration costs; however, we recover the amortization of these costs. Merger and integration costs, net, are generally amortized on a straight-line basis over estimated useful lives ranging up to 20 years.


9



3.    Segment Information
We operate the Company through the following three segments:
The natural gas distribution segment, which includes our regulated natural gas distribution and related sales operations,
The regulated transmission and storage segment, which includes the regulated pipeline and storage operations of our Atmos Pipeline — Texas Division and
The nonregulated segment, which is comprised of our nonregulated natural gas management, nonregulated natural gas transmission, storage and other services.
 
Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. Although our natural gas distribution segment operations are geographically dispersed, they are reported as a single segment as each natural gas distribution division has similar economic characteristics. The accounting policies of the segments are the same as those described in the summary of significant accounting policies found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013. We evaluate performance based on net income or loss of the respective operating units.
Income statements for the three and nine month periods ended June 30, 2014 and 2013 by segment are presented in the following tables:
 
Three Months Ended June 30, 2014
 
Natural
Gas
Distribution
 
Regulated
Transmission
and Storage
 
Nonregulated
 
Eliminations
 
Consolidated
 
(In thousands)
Operating revenues from external parties
$
516,644

 
$
24,990

 
$
401,084

 
$

 
$
942,718

Intersegment revenues
1,063

 
62,199

 
63,949

 
(127,211
)
 

 
517,707

 
87,189

 
465,033

 
(127,211
)
 
942,718

Purchased gas cost
260,042

 

 
450,220

 
(127,077
)
 
583,185

Gross profit
257,665

 
87,189

 
14,813

 
(134
)
 
359,533

Operating expenses
 
 
 
 
 
 
 
 
 
Operation and maintenance
92,994

 
23,570

 
9,129

 
(134
)
 
125,559

Depreciation and amortization
52,542

 
10,281

 
1,132

 

 
63,955

Taxes, other than income
57,596

 
5,054

 
764

 

 
63,414

Total operating expenses
203,132

 
38,905

 
11,025

 
(134
)
 
252,928

Operating income
54,533

 
48,284

 
3,788

 

 
106,605

Miscellaneous income (expense)
678

 
(489
)
 
1,018

 
(1,581
)
 
(374
)
Interest charges
23,649

 
9,162

 
610

 
(1,581
)
 
31,840

Income before income taxes
31,562

 
38,633

 
4,196

 

 
74,391

Income tax expense
13,033

 
13,695

 
1,942

 

 
28,670

Net income
$
18,529

 
$
24,938

 
$
2,254

 
$

 
$
45,721

Capital expenditures
$
146,860

 
$
45,658

 
$
1,073

 
$

 
$
193,591



 

10



 
Three Months Ended June 30, 2013
 
Natural
Gas
Distribution
 
Regulated
Transmission
and Storage
 
Nonregulated
 
Eliminations
 
Consolidated
 
(In thousands)
Operating revenues from external parties
$
465,982

 
$
26,730

 
$
365,223

 
$

 
$
857,935

Intersegment revenues
1,162

 
47,311

 
56,585

 
(105,058
)
 

 
467,144

 
74,041

 
421,808

 
(105,058
)
 
857,935

Purchased gas cost
227,649

 

 
418,548

 
(104,759
)
 
541,438

Gross profit
239,495

 
74,041

 
3,260

 
(299
)
 
316,497

Operating expenses
 
 
 
 
 
 
 
 
 
Operation and maintenance
93,490

 
17,035

 
11,034

 
(301
)
 
121,258

Depreciation and amortization
48,368

 
8,676

 
1,085

 

 
58,129

Taxes, other than income
45,686

 
4,287

 
741

 

 
50,714

Total operating expenses
187,544

 
29,998

 
12,860

 
(301
)
 
230,101

Operating income (loss)
51,951

 
44,043

 
(9,600
)
 
2

 
86,396

Miscellaneous income (expense)
268

 
(247
)
 
215

 
(703
)
 
(467
)
Interest charges
25,001

 
8,049

 
392

 
(701
)
 
32,741

Income (loss) from continuing operations before income taxes
27,218

 
35,747

 
(9,777
)
 

 
53,188

Income tax expense (benefit)
11,401

 
12,650

 
(4,337
)
 

 
19,714

Income (loss) from continuing operations
15,817

 
23,097

 
(5,440
)
 

 
33,474

Gain (loss) on sale of discontinued operations, net of tax
5,649

 

 
(355
)
 

 
5,294

Net income (loss)
$
21,466

 
$
23,097

 
$
(5,795
)
 
$

 
$
38,768

Capital expenditures
$
114,606

 
$
78,012

 
$
738

 
$

 
$
193,356


 

11



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended June 30, 2014
 
Natural
Gas
Distribution
 
Regulated
Transmission
and Storage
 
Nonregulated
 
Eliminations
 
Consolidated
 
(In thousands)
Operating revenues from external parties
$
2,648,505

 
$
67,162

 
$
1,446,521

 
$

 
$
4,162,188

Intersegment revenues
4,027

 
164,983

 
223,916

 
(392,926
)
 

 
2,652,532

 
232,145

 
1,670,437

 
(392,926
)
 
4,162,188

Purchased gas cost
1,710,508

 

 
1,599,469

 
(392,556
)
 
2,917,421

Gross profit
942,024

 
232,145

 
70,968

 
(370
)
 
1,244,767

Operating expenses
 
 
 
 
 
 
 
 
 
Operation and maintenance
289,433

 
57,465

 
19,463

 
(370
)
 
365,991

Depreciation and amortization
152,113

 
30,223

 
3,395

 

 
185,731

Taxes, other than income
155,286

 
8,485

 
1,869

 

 
165,640

Total operating expenses
596,832

 
96,173

 
24,727

 
(370
)
 
717,362

Operating income
345,192

 
135,972

 
46,241

 

 
527,405

Miscellaneous income (expense)
304

 
(2,751
)
 
1,785

 
(3,360
)
 
(4,022
)
Interest charges
69,802

 
27,274

 
1,840

 
(3,360
)
 
95,556

Income from before income taxes
275,694

 
105,947

 
46,186

 

 
427,827

Income tax expense
105,665

 
37,454

 
18,604

 

 
161,723

Net income
$
170,029

 
$
68,493

 
$
27,582

 
$

 
$
266,104

Capital expenditures
$
413,921

 
$
137,579

 
$
1,100

 
$

 
$
552,600



 

12



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended June 30, 2013
 
Natural
Gas
Distribution
 
Regulated
Transmission
and Storage
 
Nonregulated
 
Eliminations
 
Consolidated
 
(In thousands)
Operating revenues from external parties
$
2,035,712

 
$
65,084

 
$
1,100,290

 
$

 
$
3,201,086

Intersegment revenues
3,395

 
131,486

 
150,360

 
(285,241
)
 

 
2,039,107

 
196,570

 
1,250,650

 
(285,241
)
 
3,201,086

Purchased gas cost
1,172,975

 

 
1,200,624

 
(284,123
)
 
2,089,476

Gross profit
866,132

 
196,570

 
50,026

 
(1,118
)
 
1,111,610

Operating expenses
 
 
 
 
 
 
 
 
 
Operation and maintenance
266,570

 
48,745

 
24,679

 
(1,123
)
 
338,871

Depreciation and amortization
146,059

 
25,756

 
3,073

 

 
174,888

Taxes, other than income
132,029

 
12,513

 
1,813

 

 
146,355

Total operating expenses
544,658

 
87,014

 
29,565

 
(1,123
)
 
660,114

Operating income
321,474

 
109,556

 
20,461

 
5

 
451,496

Miscellaneous income (expense)
2,728

 
(473
)
 
1,791

 
(2,103
)
 
1,943

Interest charges
74,228

 
22,777

 
1,687

 
(2,098
)
 
96,594

Income from continuing operations before income taxes
249,974

 
86,306

 
20,565

 

 
356,845

Income tax expense
94,874

 
30,574

 
8,235

 

 
133,683

Income from continuing operations
155,100

 
55,732

 
12,330

 

 
223,162

Income from discontinued operations, net of tax
7,202

 

 

 

 
7,202

Gain (loss) on sale of discontinued operations, net of tax
5,649

 

 
(355
)
 

 
5,294

Net income
$
167,951

 
$
55,732

 
$
11,975

 
$

 
$
235,658

Capital expenditures
$
391,942

 
$
189,051

 
$
1,480

 
$

 
$
582,473

 

13



Balance sheet information at June 30, 2014 and September 30, 2013 by segment is presented in the following tables:

 
June 30, 2014
 
Natural
Gas
Distribution
 
Regulated
Transmission
and Storage
 
Nonregulated
 
Eliminations
 
Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
$
5,036,007

 
$
1,366,928

 
$
58,515

 
$

 
$
6,461,450

Investment in subsidiaries
933,660

 

 
(2,096
)
 
(931,564
)
 

Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
17,042

 

 
34,379

 

 
51,421

Assets from risk management activities
36,438

 

 
7,918

 

 
44,356

Other current assets
461,644

 
15,813

 
581,221

 
(379,812
)
 
678,866

Intercompany receivables
775,175

 

 

 
(775,175
)
 

Total current assets
1,290,299

 
15,813

 
623,518

 
(1,154,987
)
 
774,643

Goodwill
574,190

 
132,462

 
34,711

 

 
741,363

Noncurrent assets from risk management activities
20,708

 

 
5,109

 

 
25,817

Deferred charges and other assets
325,035

 
22,474

 
6,407

 

 
353,916

 
$
8,179,899

 
$
1,537,677

 
$
726,164

 
$
(2,086,551
)
 
$
8,357,189

CAPITALIZATION AND LIABILITIES
 
 
 
 
 
 
 
 
 
Shareholders’ equity
$
3,116,685

 
$
464,914

 
$
468,746

 
$
(933,660
)
 
$
3,116,685

Long-term debt
1,955,907

 

 

 

 
1,955,907

Total capitalization
5,072,592

 
464,914

 
468,746

 
(933,660
)
 
5,072,592

Current liabilities
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt
500,000

 

 

 

 
500,000

Short-term debt
357,000

 

 

 
(357,000
)
 

Liabilities from risk management activities
609

 

 

 

 
609

Other current liabilities
477,726

 
14,837

 
183,241

 
(20,716
)
 
655,088

Intercompany payables

 
717,134

 
58,041

 
(775,175
)
 

Total current liabilities
1,335,335

 
731,971

 
241,282

 
(1,152,891
)
 
1,155,697

Deferred income taxes
988,737

 
338,350

 
14,207

 

 
1,341,294

Noncurrent liabilities from risk management activities
7,024

 

 

 

 
7,024

Regulatory cost of removal obligation
391,785

 

 

 

 
391,785

Pension and postretirement liabilities
347,344

 

 

 

 
347,344

Deferred credits and other liabilities
37,082

 
2,442

 
1,929

 

 
41,453

 
$
8,179,899

 
$
1,537,677

 
$
726,164

 
$
(2,086,551
)
 
$
8,357,189


14





 
September 30, 2013
 
Natural
Gas
Distribution
 
Regulated
Transmission
and Storage
 
Nonregulated
 
Eliminations
 
Consolidated
 
(In thousands)
ASSETS
 
 
 
 
 
 
 
 
 
Property, plant and equipment, net
$
4,719,873

 
$
1,249,767

 
$
61,015

 
$

 
$
6,030,655

Investment in subsidiaries
831,136

 

 
(2,096
)
 
(829,040
)
 

Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
4,237

 

 
61,962

 

 
66,199

Assets from risk management activities
1,837

 

 
10,129

 

 
11,966

Other current assets
428,366

 
11,709

 
452,126

 
(293,233
)
 
598,968

Intercompany receivables
783,738

 

 

 
(783,738
)
 

Total current assets
1,218,178

 
11,709

 
524,217

 
(1,076,971
)
 
677,133

Goodwill
574,190

 
132,462

 
34,711

 

 
741,363

Noncurrent assets from risk management activities
109,354

 

 

 

 
109,354

Deferred charges and other assets
347,687

 
19,227

 
8,849

 

 
375,763

 
$
7,800,418

 
$
1,413,165

 
$
626,696

 
$
(1,906,011
)
 
$
7,934,268

CAPITALIZATION AND LIABILITIES
 
 
 
 
 
 
 
 
 
Shareholders’ equity
$
2,580,409

 
$
396,421

 
$
434,715

 
$
(831,136
)
 
$
2,580,409

Long-term debt
2,455,671

 

 

 

 
2,455,671

Total capitalization
5,036,080

 
396,421

 
434,715

 
(831,136
)
 
5,036,080

Current liabilities
 
 
 
 
 
 
 
 
 
Current maturities of long-term debt

 

 

 

 

Short-term debt
645,984

 

 

 
(278,000
)
 
367,984

Liabilities from risk management activities
1,543

 

 

 

 
1,543

Other current liabilities
491,681

 
20,288

 
110,306

 
(13,316
)
 
608,959

Intercompany payables

 
712,768

 
70,970

 
(783,738
)
 

Total current liabilities
1,139,208

 
733,056

 
181,276

 
(1,075,054
)
 
978,486

Deferred income taxes
871,360

 
283,554

 
8,960

 
179

 
1,164,053

Regulatory cost of removal obligation
359,299

 

 

 

 
359,299

Pension and postretirement liabilities
358,787

 

 

 

 
358,787

Deferred credits and other liabilities
35,684

 
134

 
1,745

 

 
37,563

 
$
7,800,418

 
$
1,413,165

 
$
626,696

 
$
(1,906,011
)
 
$
7,934,268


15




4.    Earnings Per Share
We use the two-class method of computing earnings per share because we have participating securities in the form of non-vested restricted stock units with a nonforfeitable right to dividend equivalents, for which vesting is predicated solely on the passage of time. The calculation of earnings per share using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive impact of those shares from the denominator. Basic and diluted earnings per share for the three and nine months ended June 30, 2014 and 2013 are calculated as follows:
 
Three Months Ended 
 June 30
 
Nine Months Ended 
 June 30
 
2014
 
2013
 
2014
 
2013
 
(In thousands, except per share amounts)
Basic Earnings Per Share from continuing operations
 
 
 
 
 
 
 
Income from continuing operations
$
45,721

 
$
33,474

 
$
266,104

 
$
223,162

Less: Income from continuing operations allocated to participating securities
107

 
91

 
674

 
760

Income from continuing operations available to common shareholders
$
45,614

 
$
33,383

 
$
265,430

 
$
222,402

Basic weighted average shares outstanding
100,267

 
90,603

 
95,455

 
90,497

Income from continuing operations per share — Basic
$
0.45

 
$
0.37

 
$
2.78

 
$
2.46

 
 
 
 
 
 
 
 
Basic Earnings Per Share from discontinued operations
 
 
 
 
 
 
 
Income from discontinued operations
$

 
$
5,294

 
$

 
$
12,496

Less: Income from discontinued operations allocated to participating securities

 
14

 

 
43

Income from discontinued operations available to common shareholders
$

 
$
5,280

 
$

 
$
12,453

Basic weighted average shares outstanding
100,267

 
90,603

 
95,455

 
90,497

Income from discontinued operations per share — Basic
$

 
$
0.06

 
$

 
$
0.14

Net income per share — Basic
$
0.45

 
$
0.43

 
$
2.78

 
$
2.60



16



 
Three Months Ended 
 June 30