Chris Forsythe
Senior Vice President & Chief Financial Officer at Atmos Energy
Thank you, Kevin, and good morning, everybody. Last night, we reported fiscal 2021 third quarter net income of $102 million, or $0.78 per diluted share compared to adjusted earnings of $97 million or $0.39 per diluted share in the prior-year quarter. Year-to-date, earnings were $617 million, or $4.77 per diluted share compared with adjusted earnings of $550 million, or $4.20 per diluted share in the prior-year period. Adjusted earnings in both prior year periods excluding $21 million, or $0.17 non-cash income tax benefit recognized in the third quarter of fiscal 2020, led to the enacted of new tax legislation in Kansas. Our third quarter and year-to-date performance reflects the continued execution of our strategy and was in line with our expectations outlined in our last quarterly call.
Additionally, our results for the nine months ended June 30, continue to reflect the impact of refunding excess deferred tax liabilities to our customers. As a reminder, last quarter we received authorization to refund excess deferred tax liabilities to APT's customers, and distribution customers in Tennessee over a three-year period. During the third quarter and in July, we received authorization to begin refunding excess deferred tax liabilities to distribution customers in Louisiana, Virginia and for certain of our customers in our West Texas division over a three-year period. The refund of excess deferred taxes is recognized as a reduction in revenue and a reduction in income tax expense. However, there is a timing difference between the recognition of the income tax benefit, which is recognized in our annual effective tax rate when the regulatory orders are approved, and the corresponding reduction in revenue, which is recognized over time as it is billed to customers. This timing difference, resulting in a $0.06 benefit during the nine months ended June 30. We anticipate that most of this timing difference will reverse during the fourth quarter.
Taking a closer look at our performance, consolidated operating income increased about 13% to $814 million during the nine months ending June 30. Slides 4 and 5 summarize the key performance drivers for each of our operating segments. Rate increases in both of our operating segments totaled $170 million. Customer growth in our distribution segment contributed an incremental $15 million as we continue to benefit from strong population growth in virtually all of our service territories. New customer connections increased 1.68% over the last 12 months, and net customer growth over the same period was 1.82%.
Sales volumes for commercial customers continue to trend in a favorable direction. Third quarter sales volumes increased 25% over the prior-year quarter and were consistent with what we experienced before the pandemic. Year-over-year commercial sales volumes were 6% higher. We experienced an $8.5 million decline in service order revenues in our distribution segment, primarily due to the temporary suspension of collection activities and waiver of our customer service fees for disconnections or reconnections. Additionally, our bad debt expense has increased about $22 million year-over-year. We've been focused on keeping our customers connected to our system by offering more flexible payment arrangements and helping our customers find financial assistance to help with their bills. During the third quarter, we resumed collection activities focusing first on the largest past-due balances which are typically the oldest. Additionally, we continue to remain in close contact with our regulators about our customer outreach efforts and we believe this bad debt expense will be recovered over time.
Consolidated O&M expense excluding bad debt increased $8 million year-over-year and $22 million quarter-over-quarter as we increased pipeline maintenance activities in each of our segments and in-line inspection work at APT. Additionally, we experienced a 12.5% quarter-over-quarter increase in line locate requests as a result of increased economic activity in the effects of our third-party damage prevention efforts. The O&M spending we experienced during the third quarter was in line with our expectations, we outlined during the second quarter call and is expected to continue into the fourth quarter. Consolidated capital spending decreased 3% to $1.36 billion, with 80% of our spending directed toward safety and reliability to modernize our system. The slight year-over-year decrease primarily reflects timing of spending in our distribution segment. We remain on track to spend $2 billion to $2.2 billion in capital expenditures this fiscal year to monetize our distribution and transmission network to further enhance safety and reliability while reducing methane emissions.
From a regulatory perspective, we've completed all the filings that will impact fiscal 2021, we are now focused on filings that will impact fiscal '22. To date, we've completed $186 million in annualized regulatory outcomes. As a reminder, many of these regulatory outcomes reflect the lower revenues due to the refund of excess deferred tax liabilities. However, this amount does not include the corresponding reduction in income tax expense. And we currently have about $53 million in progress, most of which is expected to be implemented during the first quarter of fiscal 2022. Slides 13 through 28 provide additional details.
From a financial perspective, the third quarter was relatively quiet. During the quarter, we executed forward sales arrangements under our ATM program for approximately 1 million shares for $100 million. As of June 30, we had approximately $213 million in net proceeds available under existing forward sales agreements. We have now priced all of our fiscal 2021 equity needs as well as a portion of our fiscal 2022 equity needs. As we said before, using our ATM equity sales program is our preferred method to meet our planned equity needs.
During the third quarter, we issued a new $5 billion shelf registration statement and a new $1 billion ATM equity sales program. The new shelf and ATM program positions us well to meet our future financing needs while maintaining the strength of our balance sheet. Securitization is also another tool that will help preserve the strength of our balance sheet. On June 16, Governor Abbott signed House Bill 1520, Texas's statewide securitization program to address the extraordinary gas costs incurred by natural gas utilities during Winter Storm, Yuri. Last week, we filed our application to participate in the program, seeking to recover $2 billion. We are currently awaiting a formal procedure schedule from the Texas Railroad Commission. We are also making progress with our securitization application in Kansas, anticipate making a filing before the end of the fiscal year. As of June 30, our equity capitalization was 60.2%, excluding the $2.2 billion of storm-related financing issued during the second quarter, and we finished the quarter with approximately $3.2 billion of liquidity. Details of our financing activities and our financial profile can be found on Slide 7 through 10.
Yesterday, we reaffirmed our fiscal 2021 earnings per share guidance in the range of $4.90 to $5.10 per diluted share. Based on our third quarter performance and what we're anticipating for the fourth quarter, we continue to believe earnings per share will be at the upper end of this range. We anticipate the fourth quarter's activities will mirror what we experienced during the third quarter with sales volumes consistent with seasonal norms and O&M spending that will be continue to focus on system maintenance and compliance. Slides 11 through 12 provide additional details around our guidance.
Thank you for your time today. And I'll now turn the call over to Kevin for his closing remarks. Kevin?
