10-KPeriod: FY2021

ATMOS ENERGY CORP Annual Report, Year Ended Sep 30, 2021

Filed November 12, 2021For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported a strong fiscal year 2021, driven by significant capital investments in safety and reliability across its natural gas distribution and pipeline operations. The company experienced a 17% increase in operating income for its distribution segment, primarily due to favorable rate adjustments and customer growth, partially offset by increased bad debt expense and maintenance costs. The pipeline and storage segment saw a slight decrease in operating income, mainly due to tighter regional spreads impacting APT's thru-system activities, though rate adjustments from GRIP filings provided a partial offset. Financially, ATO demonstrated resilience, with net income rising to $665.6 million ($5.12/share) from $601.4 million ($4.89/share) in the prior year, even after accounting for a non-recurring tax benefit in 2020. The company successfully managed its capital expenditures, with over 85% allocated to safety and reliability projects, and secured substantial long-term debt and equity financing. Despite a temporary credit rating downgrade by S&P following Winter Storm Uri, the company maintained investment-grade ratings and sufficient liquidity. The company's commitment to shareholder returns is evidenced by an 8.8% increase in its quarterly dividend for fiscal year 2022.

Financial Highlights

47 data points
Beta

Revenue

$3.41B

69.7% Gross Margin

Net Income

$665.56M

19.5% Net Margin

EPS (Diluted)

$5.12

Total Assets

$19.61B

Cash & Equivalents

$116.72M

Free Cash Flow

-$1.08B

Financial Statements
Beta
Revenue$3.41B
Cost of Revenue$1.03B
Gross Profit$2.37B
Operating Income$905.00M
Interest Expense$83.55M
Net Income$665.56M
EPS (Basic)$5.12
EPS (Diluted)$5.12
Shares Outstanding (Basic)129.78M
Shares Outstanding (Diluted)129.83M

Key Highlights

  • 1Atmos Energy reported a 17% increase in operating income for its distribution segment, driven by rate adjustments and customer growth.
  • 2Net income increased to $665.6 million ($5.12 per diluted share) in fiscal 2021, up from $601.4 million ($4.89 per diluted share) in fiscal 2020.
  • 3Capital expenditures totaled $2.0 billion, with over 85% dedicated to improving safety and reliability of its infrastructure.
  • 4The company secured over $3.4 billion in long-term debt and equity financing during fiscal 2021, strengthening its financial position.
  • 5Despite the impact of Winter Storm Uri, Atmos Energy maintained investment-grade credit ratings and reported approximately $2.9 billion in total liquidity as of September 30, 2021.
  • 6The company announced an 8.8% increase in its quarterly dividend for fiscal year 2022, reflecting financial stability and commitment to shareholder returns.
  • 7Regulatory mechanisms, including formula rate mechanisms and infrastructure programs, are effectively reducing regulatory lag, allowing for timely recovery of capital investments.

Frequently Asked Questions

Key drivers included significant capital investments in safety and reliability projects, leading to favorable rate adjustments across its service territories. Customer growth in the distribution segment also contributed positively. These factors were partially offset by increased bad debt expenses and system maintenance costs.

Winter Storm Uri resulted in unprecedented natural gas costs, leading to approximately $2.3 billion in aggregated natural gas purchases in February 2021. To manage these costs, Atmos Energy incurred incremental financing and recorded a significant regulatory asset. While the storm led to a temporary credit rating downgrade by S&P, the company maintained sufficient liquidity and plans to recover these costs through securitization and regulatory mechanisms.

Atmos Energy employs a strategy focused on modernizing its natural gas distribution and transmission systems. It utilizes regulatory mechanisms such as formula rate mechanisms and infrastructure programs in all its operating states. These programs allow for annual adjustments to rates to recover qualifying capital expenditures, effectively reducing regulatory lag and enabling recovery of approximately 90% of capital expenditures within six months.

The company actively manages its debt through a combination of internally generated cash flows and external debt and equity financing. It has access to a $1.5 billion commercial paper program and $2.5 billion in committed revolving credit facilities. During fiscal year 2021, it raised over $3.4 billion in long-term debt and equity to fund capital expenditures and manage obligations, maintaining an equity capitalization ratio between 50% and 60%.