10-QPeriod: Q2 FY2023

ATMOS ENERGY CORP Quarterly Report for Q2 Ended Mar 31, 2023

Filed May 3, 2023For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported solid financial results for the six months ended March 31, 2023, with net income increasing by 10% to $629.5 million, or $4.40 per diluted share, compared to $574.2 million, or $4.24 per diluted share, in the prior year period. This growth was primarily driven by rate outcomes reflecting significant investments in safety and reliability initiatives across its regulated distribution and pipeline segments. The company continued its substantial capital expenditure program, investing $1.4 billion in the first six months of fiscal 2023, with over 85% allocated to improving system safety and reliability. These investments are increasingly being recovered through regulatory mechanisms that minimize lag. Atmos Energy also strengthened its financial position by completing approximately $1.2 billion in long-term debt and equity financing and maintaining robust liquidity, ending the period with $3.3 billion in total liquidity. Key financial highlights include a strong equity capitalization of 60.9% and the successful issuance of new debt and equity. The company's Board of Directors demonstrated confidence in its performance by increasing the quarterly dividend by 8.8%. Despite increased operating expenses and depreciation, the positive impact of regulatory rate adjustments and customer growth supported the company's financial performance.

Financial Highlights

45 data points
Beta

Revenue

$1.54B

56.8% Gross Margin

Net Income

$357.67M

23.2% Net Margin

EPS (Diluted)

$2.48

Total Assets

$21.31B

Cash & Equivalents

$95.17M

Free Cash Flow

$2.70B

Financial Statements
Beta
Revenue$1.54B
Cost of Revenue$666.21M
Gross Profit$874.76M
Operating Income$422.64M
Interest Expense$37.37M
Net Income$357.67M
EPS (Basic)$2.48
EPS (Diluted)$2.48
Shares Outstanding (Basic)143.94M
Shares Outstanding (Diluted)143.99M

Key Highlights

  • 1Net income for the six months ended March 31, 2023, increased by 10% year-over-year to $629.5 million, or $4.40 per diluted share.
  • 2Capital expenditures totaled $1.4 billion for the first six months of fiscal 2023, with over 85% focused on safety and reliability improvements.
  • 3The company implemented regulatory actions resulting in a $115.1 million increase in annual operating income during the first six months of fiscal 2023.
  • 4Total liquidity stood at approximately $3.3 billion as of March 31, 2023, including cash, equity forward sales, and credit facility capacity.
  • 5Atmos Energy's equity capitalization was 60.9% as of March 31, 2023, indicating a strong balance sheet.
  • 6The Board of Directors approved an 8.8% increase in the quarterly dividend for fiscal 2023.
  • 7The company repaid $2.2 billion in long-term debt and received approximately $1.2 billion in net proceeds from new debt and equity issuances during the period.

Frequently Asked Questions

Atmos Energy's revenue growth is primarily driven by positive rate outcomes from regulatory proceedings. The company is recovering significant investments made in safety and reliability of its distribution and pipeline systems through updated tariffs and rate designs that help minimize regulatory lag.

Atmos Energy is undertaking substantial capital expenditures, primarily focused on safety and reliability. These investments are financed through a combination of internally generated cash flows, debt, and equity. The company maintains access to capital markets through its shelf registration statement and at-the-market (ATM) equity sales program, ensuring sufficient liquidity and financial flexibility.

The company has largely resolved the financial impact of Winter Storm Uri. A significant portion of the related regulatory assets, particularly those in Texas, were securitized through the issuance of bonds. The proceeds received from this securitization were used to repay debt, and the related regulatory assets were relieved, minimizing the direct impact on earnings.

Atmos Energy manages interest rate risk through the use of financial instruments, such as interest rate swaps, to fix the interest cost component of anticipated debt issuances. Commodity price risk, primarily for natural gas, is managed through a combination of physical storage, forward contracts, and financial instruments, with the impact largely mitigated by purchased gas cost adjustment mechanisms in its distribution segment.