10-KPeriod: FY2018

ATMOS ENERGY CORP Annual Report, Year Ended Sep 30, 2018

Filed November 13, 2018For Securities:ATO

Summary

Atmos Energy Corporation's (ATO) 2018 10-K filing highlights a year of strategic infrastructure investment and regulatory advancements. The company, a significant natural gas distributor, focused on modernizing its systems to enhance safety and reliability, which has driven an increase in its rate base and subsequently earnings per share. Key to this strategy are the company's efforts to reduce regulatory lag through mechanisms like formula rate plans and infrastructure programs, enabling timely recovery of capital expenditures. The company reported strong operational performance, with growth in its distribution and pipeline segments. A notable event impacting the financial results was the implementation of the Tax Cuts and Jobs Act of 2017 (TCJA), which led to a lower federal statutory income tax rate. While this generated a one-time non-cash tax benefit, the company is working with regulators to pass these savings on to customers through adjusted rates, demonstrating a commitment to customer benefit alongside shareholder value. Atmos Energy also continued its consistent dividend payout, reflecting confidence in its financial stability and future outlook.

Financial Highlights

46 data points
Beta

Revenue

$3.12B

62.5% Gross Margin

Net Income

$603.06M

19.4% Net Margin

EPS (Diluted)

$5.43

Total Assets

$11.87B

Cash & Equivalents

$13.77M

Free Cash Flow

$1.12B

Financial Statements
Beta
Revenue$3.12B
Cost of Revenue$1.17B
Gross Profit$1.95B
Operating Income$727.93M
Interest Expense$106.65M
Net Income$603.06M
EPS (Basic)$5.43
EPS (Diluted)$5.43
Shares Outstanding (Basic)111.01M
Shares Outstanding (Diluted)111.01M

Key Highlights

  • 1Atmos Energy is a leading natural gas-only distributor serving over three million customers across eight states.
  • 2The company's core strategy involves significant annual capital expenditures (approximately 13% annually since 2011) to modernize its distribution and transmission systems, focusing on safety and reliability.
  • 3Atmos Energy actively pursues regulatory mechanisms to reduce "regulatory lag" and ensure timely recovery of capital investments, with over 85% of capex recovered within six months.
  • 4The Tax Cuts and Jobs Act of 2017 (TCJA) resulted in a lower federal tax rate, leading to a one-time non-cash tax benefit for the company, while also initiating regulatory processes to pass savings to customers.
  • 5The distribution segment showed strong performance, with a significant increase in operating income driven by rate adjustments from infrastructure investments and customer growth.
  • 6The pipeline and storage segment also saw growth, with increased transportation revenues and positive impacts from rate cases and GRIP filings.
  • 7Atmos Energy maintained an investment-grade credit rating with a stable outlook from both S&P and Moody's, underscoring its financial health.

Frequently Asked Questions

Atmos Energy's primary strategy involves significant capital investment in modernizing its natural gas distribution and transmission infrastructure to enhance safety and reliability. This strategy is supported by proactive engagement with state regulatory bodies to implement mechanisms that reduce "regulatory lag" and allow for the timely recovery of these investments, thereby growing the company's rate base and earnings per share.

The TCJA led to a reduction in the federal statutory income tax rate. This resulted in a one-time, non-cash income tax benefit for Atmos Energy in fiscal year 2018. The company is working with its regulators to pass these tax savings on to customers through adjusted rates, reflecting a commitment to sharing the benefits of tax reform.

Atmos Energy actively employs strategies to minimize regulatory lag. This includes implementing formula rate mechanisms in several states for annual rate adjustments and utilizing infrastructure programs that allow for the recovery of qualifying capital expenditures on an expedited basis, typically within six to twelve months of incurring the costs.

Atmos Energy funds its operations and capital expenditures through a combination of internally generated cash flows and external debt and equity financing. The company aims to maintain a balanced capital structure with an equity-to-total-capitalization ratio between 50% and 60% to support its credit ratings and access to capital markets.