10-QPeriod: Q2 FY2021

ATMOS ENERGY CORP Quarterly Report for Q2 Ended Mar 31, 2021

Filed May 5, 2021For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid financial results for the first half of fiscal year 2021, demonstrating resilience despite challenges. Net income increased by 23% year-over-year to $514.4 million, or $4.01 per diluted share. This growth was primarily driven by positive rate outcomes from infrastructure investments and customer growth within its distribution segment, along with effective management of operating expenses. A significant event impacting the period was Winter Storm Uri, which led to extraordinary natural gas costs. Atmos Energy proactively addressed this by securing substantial debt and equity financing, including a $2.2 billion issuance specifically for these costs. The company has established regulatory assets to recover these incremental costs in affected states, though this also led to a temporary negative outlook from credit rating agencies. Despite these events, Atmos Energy maintains a strong capital structure and sufficient liquidity, with plans to continue investing in system modernization and safety initiatives.

Financial Highlights

45 data points
Beta

Revenue

$1.32B

56.5% Gross Margin

Net Income

$296.75M

22.5% Net Margin

EPS (Diluted)

$2.30

Total Assets

$19.41B

Cash & Equivalents

$865.31M

Free Cash Flow

-$1.56B

Financial Statements
Beta
Revenue$1.32B
Cost of Revenue$573.81M
Gross Profit$745.26M
Operating Income$381.80M
Interest Expense$26.10M
Net Income$296.75M
EPS (Basic)$2.30
EPS (Diluted)$2.30
Shares Outstanding (Basic)129.16M
Shares Outstanding (Diluted)129.16M

Key Highlights

  • 1Net income for the six months ended March 31, 2021, increased 23% year-over-year to $514.4 million, or $4.01 per diluted share, driven by rate increases and expense management.
  • 2Capital expenditures for the six months totaled $845.7 million, with over 85% allocated to improving safety and reliability of distribution and transportation systems.
  • 3The company raised approximately $3.1 billion in long-term debt and equity financing during the period, including $2.2 billion to address extraordinary costs from Winter Storm Uri.
  • 4Atmos Energy established a $2.1 billion regulatory asset to account for incremental costs incurred during Winter Storm Uri in Kansas and Texas.
  • 5The Board of Directors increased the quarterly dividend by 8.7% for fiscal year 2021, reflecting sustained financial performance.
  • 6Total capitalization as of March 31, 2021, was 49% debt to total capitalization, demonstrating a strong financial footing.
  • 7The company maintained compliance with all debt covenants as of March 31, 2021.

Frequently Asked Questions

Winter Storm Uri led to extraordinary natural gas costs of approximately $2.3 billion, which Atmos Energy paid by the end of March 2021. The company secured $2.2 billion in debt and equity financing to cover these costs and recorded a $2.1 billion regulatory asset to recover these incremental expenses in affected states. While this event led to a temporary negative outlook from credit rating agencies, the company remains compliant with debt covenants.

Atmos Energy invested $845.7 million in capital expenditures for the first six months of fiscal year 2021, with over 85% dedicated to enhancing the safety and reliability of its distribution and transportation systems. The company plans to continue significant investments in modernizing its infrastructure.

Atmos Energy actively manages its capital structure to maintain an equity-to-total-capitalization ratio between 50% and 60%. As of March 31, 2021, its debt-to-total-capitalization ratio was 49%. The company raised significant debt and equity financing during the period to manage liquidity and fund capital expenditures, demonstrating its ability to access capital markets.

Regulatory actions are crucial for Atmos Energy's performance. The company benefits from ratemaking regulatory actions that resulted in a $109.8 million increase in annual operating income during the first six months of fiscal 2021. Mechanisms like formula rate mechanisms help reduce regulatory lag and ensure timely recovery of investments.