ATOAtmos Energy

We note your disclosure on page 38 that you believe gross profit is a better indicator of your financial performance than revenues since increases in the cost of gas are offset by a corresponding increase in revenues. In future filings, please disclose that gross profit is a non-GAAP financial measure and why management believes the non-GAAP measure provides useful information to investors.

Rest of the question

Refer to Item 10(e) of Regulation S-K.

Beginning with our Form 10-Q for the three and nine months ended June 30, 2017, we will disclose that gross profit is a non-GAAP financial measure. We are also mindful of the additional disclosure requirements relating to the use of non-GAAP financial measures, as set forth in Item 10(e) of Regulation S-K.

Rest of the answer

The disclosures in our future filings that use any such financial measures will be prepared in accordance with such requirements, including the requirement in Item 10(e)(1)(i)(C) that a statement be included disclosing the reasons why management believes that presentation of the non-GAAP financial measure provides useful information to investors. The following statement is indicative of the disclosure that we may include regarding gross profit:

We calculate gross profit as operating revenues less purchased gas cost. This net amount is considered a non-GAAP financial measure. Management uses this financial measure because operating revenues include the cost of purchased gas, which is a tracked cost that is passed through to our customers without markup under purchased gas cost adjustment mechanisms. Accordingly, we believe that gross profit provides investors a useful and more relevant measure to analyze our financial performance than operating revenues because purchased gas cost does not impact our operating income.

To facilitate the reconciliation between gross profit and GAAP operating revenues, we will include operating revenues and purchased gas cost in the tables included in our financial highlights within Management's Discussion and Analysis in all our future Form 10-K and 10-Q filings.

Read in the reply ↗