01—Abstract
Summary
Summary of the 10-K filed November 14, 2022. Cited figures are marked; the original filing is the authoritative source.
Atmos Energy Corporation (ATO) reported solid financial performance for the fiscal year ended September 30, 2022, with net income of $774.4 milliona, an increase from $665.6 million in the prior year.
This growth was driven by robust rate outcomes reflecting investments in safety and reliability, alongside customer growth. The company effectively managed increased operating costs, including employee-related expenses and higher depreciation, through a combination of operational efficiencies and favorable regulatory adjustments. The company's strategic focus on modernizing its infrastructure and reducing regulatory lag continues to yield positive results.
Atmos Energy successfully implemented rate adjustments across its divisions, largely recovering capital expenditures within six months. With a strong capital program and robust liquidity, the company demonstrated its commitment to shareholder value by increasing its quarterly dividend. However, investors should remain aware of ongoing regulatory risks and the potential impacts of economic conditions and climate-related factors on future operations.
02—Key points
Key Highlights
- Net income increased to $774.4 million from $665.6 million in the prior year, driven by rate increases and customer growth.
- Capital expenditures for fiscal 2022 were $2.4 billion, with over 85% invested in improving the safety and reliability of distribution and transportation systems.
- Atmos Energy implemented rate adjustments resulting in a $96.2 million increase in annual operating income for the distribution segment.
- The company's equity capitalization ratio was 53.6% as of September 30, 2022, reflecting a stable financial structure.
- The Board of Directors increased the quarterly dividend by 8.8% for fiscal year 2023, signaling confidence in future performance.
- The company has implemented mechanisms to reduce regulatory lag, allowing for the recovery of approximately 90% of capital expenditures within six months.
- While managing increased operating costs, the company saw a decrease in bad debt expense due to the resumption of normal collection activities post-pandemic.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Atmos Energy Corp kept $0.18.
- Revenue$4.20B100.0%
- Cost of revenue−$1.68B40.0%
- Gross profit$2.52B60.0%
- Operating costs−$1.60B38.0%
- Operating income$921.0M21.9%
- Interest, other & tax−$146.6M3.5%
- Net income$774.4M18.4%
Where FY2022 revenue went
$4.20B- Cost of revenue: $1.68B, 40% of revenue
- Operating costs: $1.60B, 38% of revenue
- Net income: $774.4M, 18% of revenue
- Interest, other & tax: $146.6M, 3.5% of revenue
Kept 18% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed November 14, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $4.20B$3.41B | +23.3% |
| Cost of Revenue | $1.68B$1.03B | +62.9% |
| Gross Profit | $2.52B$2.37B | +6.1% |
| Operating Income | $920.98M$905.00M | +1.8% |
| Interest Expense | $102.81M$83.55M | +23.0% |
| Net Income | $774.40M$665.56M | +16.4% |
| EPS (Basic) | $5.61$5.12 | +9.6% |
| EPS (Diluted) | $5.60$5.12 | +9.4% |
| Shares Outstanding (Basic) | 137.83M129.78M | +6.2% |
| Shares Outstanding (Diluted) | 138.10M129.83M | +6.4% |
05—Questions
Frequently Asked Questions
What are the primary drivers of Atmos Energy's financial performance?
Atmos Energy's financial performance is primarily driven by its ability to recover capital investments through regulatory rate adjustments, customer growth, and effective management of operating expenses. The company's strategy to modernize infrastructure and reduce regulatory lag is key to ensuring timely recovery of investments and maintaining stable margins.
How does Atmos Energy manage the impact of rising natural gas prices on its business?
Atmos Energy's distribution segment is largely insulated from the direct impact of rising natural gas prices through purchased gas cost adjustment mechanisms. These mechanisms allow the company to pass through the cost of gas to customers dollar-for-dollar, meaning fluctuations in gas costs are generally offset by corresponding changes in revenue, with minimal impact on operating income. However, higher gas costs can still indirectly affect the company through slower customer collections and potentially increased bad debt expense, which are mitigated by specific rate designs.
What is the company's approach to capital expenditures and infrastructure investment?
Atmos Energy invests significantly in modernizing and improving the safety and reliability of its distribution and transmission systems. In fiscal year 2022, capital expenditures were $2.4 billion, with over 85% dedicated to these infrastructure improvements. A key element of their strategy is to recover these capital expenditures quickly through regulatory mechanisms designed to reduce regulatory lag, often recovering investments within six months.
How is the company managing its debt and liquidity?
Atmos Energy maintains a balanced approach to financing its operations and capital expenditures through a combination of internally generated cash flows and external debt and equity financing. The company has access to substantial liquidity through credit facilities and a commercial paper program. As of September 30, 2022, its equity capitalization was 53.6%, and it was in compliance with all debt covenants. The company also actively manages interest rate risk through financial instruments.
06—Continue