10-KPeriod: FY2022

ATMOS ENERGY CORP Annual Report, Year Ended Sep 30, 2022

Filed November 14, 2022For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid financial performance for the fiscal year ended September 30, 2022, with net income of $774.4 million, 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.

Financial Highlights

48 data points
Beta

Revenue

$4.20B

60.0% Gross Margin

Net Income

$774.40M

18.4% Net Margin

EPS (Diluted)

$5.60

Total Assets

$22.19B

Cash & Equivalents

$51.55M

Free Cash Flow

$977.58M

Financial Statements
Beta
Revenue$4.20B
Cost of Revenue$1.68B
Gross Profit$2.52B
Operating Income$920.98M
Interest Expense$102.81M
Net Income$774.40M
EPS (Basic)$5.61
EPS (Diluted)$5.60
Shares Outstanding (Basic)137.83M
Shares Outstanding (Diluted)138.10M

Key Highlights

  • 1Net income increased to $774.4 million from $665.6 million in the prior year, driven by rate increases and customer growth.
  • 2Capital expenditures for fiscal 2022 were $2.4 billion, with over 85% invested in improving the safety and reliability of distribution and transportation systems.
  • 3Atmos Energy implemented rate adjustments resulting in a $96.2 million increase in annual operating income for the distribution segment.
  • 4The company's equity capitalization ratio was 53.6% as of September 30, 2022, reflecting a stable financial structure.
  • 5The Board of Directors increased the quarterly dividend by 8.8% for fiscal year 2023, signaling confidence in future performance.
  • 6The company has implemented mechanisms to reduce regulatory lag, allowing for the recovery of approximately 90% of capital expenditures within six months.
  • 7While managing increased operating costs, the company saw a decrease in bad debt expense due to the resumption of normal collection activities post-pandemic.

Frequently Asked Questions

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.

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.

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.

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.