10-QPeriod: Q3 FY2022

ATMOS ENERGY CORP Quarterly Report for Q3 Ended Jun 30, 2022

Filed August 3, 2022For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported strong financial results for the nine months ended June 30, 2022, with net income increasing to $702.8 million, or $5.12 per diluted share, compared to $616.8 million, or $4.77 per diluted share, in the prior year period. This 14% increase was primarily driven by positive rate outcomes from significant capital investments in safety and reliability, coupled with customer growth in the distribution segment. The company continues to execute its capital spending program, with over 85% of the $1.7 billion invested during the period directed towards improving its distribution and transportation systems, often under regulatory mechanisms that reduce cost recovery lag. Liquidity remains robust, supported by $1.5 billion in long-term debt and equity financing completed during the period. As of June 30, 2022, Atmos Energy maintained a healthy equity capitalization of 53.8% (or 61.7% excluding Winter Storm Uri financing) and approximately $3.5 billion in total liquidity, including cash, equity forward sales agreements, and undrawn credit facilities. The company's Board of Directors also approved an 8.8% increase in the quarterly dividend for fiscal 2022, reflecting sustained financial performance and a commitment to shareholder returns.

Financial Highlights

44 data points
Beta

Revenue

$816.43M

69.5% Gross Margin

Net Income

$128.55M

15.7% Net Margin

EPS (Diluted)

$0.92

Total Assets

$21.66B

Cash & Equivalents

$328.07M

Free Cash Flow

$288.83M

Financial Statements
Beta
Revenue$816.43M
Cost of Revenue$249.16M
Gross Profit$567.27M
Operating Income$154.59M
Interest Expense$26.19M
Net Income$128.55M
EPS (Basic)$0.92
EPS (Diluted)$0.92
Shares Outstanding (Basic)139.88M
Shares Outstanding (Diluted)140.23M

Key Highlights

  • 1Net income increased by 14% to $702.8 million for the nine months ended June 30, 2022.
  • 2Diluted EPS rose to $5.12 from $4.77 in the comparable prior-year period.
  • 3Capital expenditures totaled $1.7 billion for the nine months, with over 85% focused on safety and reliability improvements.
  • 4Total liquidity remained strong at approximately $3.5 billion as of June 30, 2022.
  • 5Equity capitalization stood at 53.8% (61.7% excluding Winter Storm Uri financing) as of June 30, 2022.
  • 6The quarterly dividend was increased by 8.8% for fiscal year 2022.

Frequently Asked Questions

Atmos Energy's revenue growth is primarily driven by its ability to earn authorized rates of return on its significant capital investments in modernizing its natural gas distribution and transmission systems. Regulatory mechanisms that allow for timely recovery of these investments, often with reduced lag, and customer growth are key factors.

Winter Storm Uri resulted in extraordinary purchased gas costs of approximately $2.3 billion. The company recorded a $2.1 billion regulatory asset to account for these costs and has initiated securitization proceedings in Kansas and Texas to recover these expenses over extended periods. While the storm had a significant impact, regulatory approvals are in place for recovery, and securitization bonds are expected to be issued to repay related debt.

Atmos Energy aims to maintain an equity-to-total-capitalization ratio between 50% and 60%. They achieve this through a balanced approach of internal cash flows, long-term debt, and equity financing. The company utilizes a shelf registration statement and an at-the-market (ATM) equity sales program to access capital markets efficiently. Strong liquidity is maintained through cash reserves, credit facilities, and forward sale agreements.

Atmos Energy manages interest rate risk by periodically entering into financial instruments, such as interest rate swaps, to effectively fix the Treasury yield component of the interest cost associated with anticipated financings. These instruments are often designated as cash flow hedges.