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Atmos Energy Corporation Reports Earnings for Fiscal 2022 Second Quarter; Tightens Fiscal 2022 Guidance

Atmos Energy Corporation (NYSE: ATO) today reported consolidated results for its second fiscal quarter ended March 31, 2022.

Highlights

  • Earnings per diluted share was $4.24 for the six months ended March 31, 2022; $2.37 per diluted share for the second fiscal quarter.
  • Consolidated net income was $574.2 million for the six months ended March 31, 2022; $325.0 million for the second fiscal quarter.
  • Capital expenditures totaled $1,190.0 million for the six months ended March 31, 2022, with approximately 87 percent of capital spending related to system safety and reliability investments.

Outlook

  • Earnings per diluted share for fiscal 2022 is expected to be in the adjusted range of $5.50 to $5.60.
  • Capital expenditures are expected to be in the range of $2.4 billion to $2.5 billion in fiscal 2022.
  • The company's Board of Directors has declared a quarterly dividend of $0.68 per common share. The indicated annual dividend for fiscal 2022 is $2.72, which represents an 8.8% increase over fiscal 2021.

"At every level, our employees remain focused on executing our strategy of modernizing our systems as we invest in safety and reliability," said Kevin Akers, President, and Chief Executive Officer of Atmos Energy. "I'm so proud of them and their hard work as we remain well positioned to deliver annual earnings per share growth between 6% and 8% for fiscal 2022."

Results for the Three Months Ended March 31, 2022

Consolidated operating income increased $3.3 million to $385.1 million for the three months ended March 31, 2022, from $381.8 million in the prior-year quarter. The refund of excess deferred income taxes reduced operating income by $43.3 million quarter over quarter, which was substantially offset by a corresponding decrease in income tax expense. Excluding the impact of these refunds, operating income increased $46.6 million due to rate outcomes in both segments and customer growth in our distribution segment, partially offset by lower weather and consumption in our distribution segment and increased system maintenance and depreciation expenses.

Distribution operating income increased $8.0 million to $311.3 million for the three months ended March 31, 2022, compared with $303.3 million in the prior-year quarter. Refunds of excess deferred taxes reduced operating income by $39.9 million quarter over quarter. Key operating drivers for this segment include a net $60.0 million increase in rates, a $6.3 million increase due to net customer growth and a $6.6 million decrease in other operation and maintenance expense primarily due to lower bad debt expense in the current-year quarter, partially offset by a $15.5 million decrease in consumption, net of our weather normalization adjustments (WNA), an $11.0 million increase in depreciation and property tax expenses and a $4.1 million increase in system maintenance expense.

Pipeline and storage operating income decreased $4.7 million to $73.8 million for the three months ended March 31, 2022, compared with $78.5 million in the prior-year quarter. Refunds of excess deferred taxes reduced operating income by $3.4 million quarter over quarter. Key operating drivers for this segment include a $13.9 million increase in rates due to the GRIP filing approved in fiscal 2021, partially offset by a $7.6 million increase in system maintenance expense and a $3.8 million increase in depreciation expense due to increased capital investments.

Results for the Six Months Ended March 31, 2022

Consolidated operating income decreased $19.6 million to $661.0 million for the six months ended March 31, 2022, compared to $680.6 million in the prior year. The refund of excess deferred income taxes reduced operating income by $81.9 million year over year, which was substantially offset by a corresponding decrease in income tax expense. Excluding the impact of these refunds, operating income increased $62.3 million due to rate outcomes in both segments and customer growth in our distribution segment, partially offset by lower weather and consumption in our distribution segment, lower thru-system revenue in our pipeline and storage segment and increased system maintenance, depreciation and property tax expenses.

Distribution operating income decreased $11.0 million to $501.8 million for the six months ended March 31, 2022, compared with $512.8 million in the prior-year period. Refunds of excess deferred taxes reduced operating income by $68.6 million year over year. Key operating drivers for this segment include a $92.1 million increase in rates, and customer growth of $10.6 million partially offset by a $16.5 million decrease in consumption, net of WNA, a $12.0 million increase in operation and maintenance expense driven primarily by higher pipeline maintenance costs and other administrative costs and a $21.1 million increase in depreciation and property tax expenses associated with increased capital investments.

Pipeline and storage operating income decreased $8.6 million to $159.2 million for the six months ended March 31, 2022, compared with $167.8 million in the prior year. Refunds of excess deferred income taxes decreased operating income by $13.3 million year over year. Key operating drivers for this segment include a $28.3 million increase from our GRIP filings approved in fiscal 2021 partially offset by a $13.4 million increase in system maintenance, a $6.7 million increase in depreciation and property tax expenses due to increased capital investments and a $2.4 million decrease in through system revenues.

Capital expenditures increased $344.3 million to $1,190.0 million for the six months ended March 31, 2022, compared with $845.7 million in the prior year, due to increased system modernization and expansion spending.

For the six months ended March 31, 2022, the company generated operating cash flow of $640.5 million, compared to $691.3 million excluding the $2.1 billion incurred in the prior-year period for gas costs incurred during Winter Storm Uri. The year-over-year decrease primarily reflects the refund of excess deferred tax liabilities of $81.9 million and the timing of gas cost recoveries, partially offset by the positive effects of successful rate case outcomes achieved in fiscal 2021.

Our equity capitalization ratio at March 31, 2022 was 53.0%, compared with 51.9% at September 30, 2021, due to the issuance of $600 million of 2.85% senior notes in October 2021 and $200 million of 2.625% senior notes in January 2022, partially offset by $594.3 million in equity issuances under our forward equity agreements. Excluding the $2.2 billion of incremental financing issued to pay for the purchased gas costs incurred during Winter Storm Uri, our equity capitalization ratio was 60.9% at March 31, 2022.

Conference Call to be Webcast May 5, 2022

Atmos Energy will host a conference call with financial analysts to discuss the fiscal 2022 second quarter financial results on Thursday, May 5, 2022, at 10:00 a.m. Eastern Time. The domestic telephone number is 877-407-3088 and the international telephone number is 201-389-0927. Kevin Akers, President and Chief Executive Officer, and Chris Forsythe, Senior Vice President and Chief Financial Officer, will participate in the conference call. The conference call will be webcast live on the Atmos Energy website at www.atmosenergy.com. A playback of the call will be available on the website later that day.

Forward-Looking Statements

The matters discussed in this news release may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this news release are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this news release or any of the company’s other documents or oral presentations, the words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “objective”, “plan”, “projection”, “seek”, “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this presentation, including the risks relating to regulatory trends and decisions, the company’s ability to continue to access the credit and capital markets, and the other factors discussed in the company’s reports filed with the Securities and Exchange Commission. These risks and uncertainties include the following: federal, state and local regulatory and political trends and decisions, including the impact of rate proceedings before various state regulatory commissions; increased federal regulatory oversight and potential penalties; possible increased federal, state and local regulation of the safety of our operations; the impact of greenhouse gas emissions or other legislation or regulations intended to address climate change; possible significant costs and liabilities resulting from pipeline integrity and other similar programs and related repairs; the inherent hazards and risks involved in distributing, transporting and storing natural gas; the availability and accessibility of contracted gas supplies, interstate pipeline and/or storage services; increased competition from energy suppliers and alternative forms of energy; adverse weather conditions; the impact of climate change; the inability to continue to hire, train and retain operational, technical and managerial personnel; increased dependence on technology that may hinder the Company's business if such technologies fail; the threat of cyber-attacks or acts of cyber-terrorism that could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive customer, employee or Company information; natural disasters, terrorist activities or other events and other risks and uncertainties discussed herein, all of which are difficult to predict and many of which are beyond our control; the capital-intensive nature of our business; our ability to continue to access the credit and capital markets to execute our business strategy; market risks beyond our control affecting our risk management activities, including commodity price volatility, counterparty performance or creditworthiness and interest rate risk; the concentration of our operations in Texas; the impact of adverse economic conditions on our customers; changes in the availability and price of natural gas; increased costs of providing health care benefits, along with pension and postretirement health care benefits and increased funding requirements; and the outbreak of COVID-19 and its impact on business and economic conditions.

Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, the company undertakes no obligation to update or revise any of our forward-looking statements whether as a result of new information, future events or otherwise.

About Atmos Energy

Atmos Energy Corporation, an S&P 500 company headquartered in Dallas, is the country’s largest natural gas-only distributor. We safely deliver reliable, affordable, efficient and abundant natural gas to more than 3 million distribution customers in over 1,400 communities across eight states located primarily in the South. As part of our vision to be the safest provider of natural gas services, we are modernizing our business and infrastructure while continuing to invest in safety, innovation, environmental sustainability and our communities. Atmos Energy manages proprietary pipeline and storage assets, including one of the largest intrastate natural gas pipeline systems in Texas. Find us online at http://www.atmosenergy.com, Facebook, Twitter, Instagram and YouTube.

This news release should be read in conjunction with the attached unaudited financial information.

Atmos Energy Corporation

Financial Highlights (Unaudited)

 

Statements of Income

 

Three Months Ended March 31

(000s except per share)

 

 

2022

 

 

 

2021

 

Operating revenues

 

 

 

 

Distribution segment

 

$

1,610,546

 

 

$

1,282,674

 

Pipeline and storage segment

 

 

163,747

 

 

 

154,168

 

Intersegment eliminations

 

 

(124,474

)

 

 

(117,769

)

 

 

 

1,649,819

 

 

 

1,319,073

 

Purchased gas cost

 

 

 

 

Distribution segment

 

 

993,854

 

 

 

691,147

 

Pipeline and storage segment

 

 

1,683

 

 

 

113

 

Intersegment eliminations

 

 

(124,159

)

 

 

(117,451

)

 

 

 

871,378

 

 

 

573,809

 

Operation and maintenance expense

 

 

163,352

 

 

 

156,375

 

Depreciation and amortization

 

 

133,374

 

 

 

118,636

 

Taxes, other than income

 

 

96,583

 

 

 

88,449

 

Operating income

 

 

385,132

 

 

 

381,804

 

Other non-operating income

 

 

5,213

 

 

 

2,834

 

Interest charges

 

 

28,928

 

 

 

26,096

 

Income before income taxes

 

 

361,417

 

 

 

358,542

 

Income tax expense

 

 

36,418

 

 

 

61,788

 

Net income

 

$

324,999

 

 

$

296,754

 

 

 

 

 

 

Basic net income per share

 

$

2.37

 

 

$

2.30

 

Diluted net income per share

 

$

2.37

 

 

$

2.30

 

Cash dividends per share

 

$

0.680

 

 

$

0.625

 

Basic weighted average shares outstanding

 

 

136,834

 

 

 

129,161

 

Diluted weighted average shares outstanding

 

 

137,250

 

 

 

129,164

 

 

 

Three Months Ended March 31

Summary Net Income by Segment (000s)

 

 

2022

 

 

2021

Distribution

 

$

268,851

 

$

232,336

Pipeline and storage

 

 

56,148

 

 

64,418

Net income

 

$

324,999

 

$

296,754

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Statements of Income

 

Six Months Ended March 31

(000s except per share)

 

 

2022

 

 

 

2021

 

Operating revenues

 

 

 

 

Distribution segment

 

$

2,582,968

 

 

$

2,159,324

 

Pipeline and storage segment

 

 

326,665

 

 

 

313,881

 

Intersegment eliminations

 

 

(247,028

)

 

 

(239,652

)

 

 

 

2,662,605

 

 

 

2,233,553

 

Purchased gas cost

 

 

 

 

Distribution segment

 

 

1,490,653

 

 

 

1,102,219

 

Pipeline and storage segment

 

 

(1,728

)

 

 

(1,131

)

Intersegment eliminations

 

 

(246,384

)

 

 

(239,019

)

 

 

 

1,242,541

 

 

 

862,069

 

Operation and maintenance expense

 

 

322,462

 

 

 

295,018

 

Depreciation and amortization

 

 

261,230

 

 

 

233,921

 

Taxes, other than income

 

 

175,379

 

 

 

161,901

 

Operating income

 

 

660,993

 

 

 

680,644

 

Other non-operating income

 

 

13,915

 

 

 

8,906

 

Interest charges

 

 

48,779

 

 

 

48,106

 

Income before income taxes

 

 

626,129

 

 

 

641,444

 

Income tax expense

 

 

51,921

 

 

 

127,012

 

Net income

 

$

574,208

 

 

$

514,432

 

 

 

 

 

 

Basic net income per share

 

$

4.24

 

 

$

4.01

 

Diluted net income per share

 

$

4.24

 

 

$

4.01

 

Cash dividends per share

 

$

1.36

 

 

$

1.25

 

Basic weighted average shares outstanding

 

 

135,259

 

 

 

128,098

 

Diluted weighted average shares outstanding

 

 

135,470

 

 

 

128,100

 

 

 

Six Months Ended March 31

Summary Net Income by Segment (000s)

 

 

2022

 

 

2021

Distribution

 

$

448,422

 

$

386,028

Pipeline and storage

 

 

125,786

 

 

128,404

Net income

 

$

574,208

 

$

514,432

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Balance Sheets

 

March 31,

 

September 30,

(000s)

 

 

2022

 

 

2021

Net property, plant and equipment

 

$

16,084,973

 

$

15,063,970

Cash and cash equivalents

 

 

582,495

 

 

116,723

Accounts receivable, net

 

 

565,184

 

 

342,967

Gas stored underground

 

 

96,295

 

 

178,116

Other current assets

 

 

2,285,022

 

 

2,200,909

Total current assets

 

 

3,528,996

 

 

2,838,715

Goodwill

 

 

731,257

 

 

731,257

Deferred charges and other assets

 

 

925,917

 

 

974,720

 

 

$

21,271,143

 

$

19,608,662

 

 

 

 

 

Shareholders' equity

 

$

8,983,231

 

$

7,906,889

Long-term debt

 

 

5,757,595

 

 

4,930,205

Total capitalization

 

 

14,740,826

 

 

12,837,094

Accounts payable and accrued liabilities

 

 

354,003

 

 

423,222

Other current liabilities

 

 

653,009

 

 

686,681

Current maturities of long-term debt

 

 

2,201,404

 

 

2,400,452

Total current liabilities

 

 

3,208,416

 

 

3,510,355

Deferred income taxes

 

 

1,848,626

 

 

1,705,809

Regulatory excess deferred taxes

 

 

470,918

 

 

549,227

Deferred credits and other liabilities

 

 

1,002,357

 

 

1,006,177

 

 

$

21,271,143

 

$

19,608,662

Atmos Energy Corporation

Financial Highlights, continued (Unaudited)

 

Condensed Statements of Cash Flows

 

Six Months Ended March 31

(000s)

 

 

2022

 

 

 

2021

 

Cash flows from operating activities

 

 

 

 

Net income

 

$

574,208

 

 

$

514,432

 

Depreciation and amortization

 

 

261,230

 

 

 

233,921

 

Deferred income taxes

 

 

40,122

 

 

 

128,725

 

Other

 

 

(12,812

)

 

 

(938

)

Change in Winter Storm Uri long-term regulatory asset

 

 

 

 

 

(2,093,534

)

Changes in other assets and liabilities

 

 

(222,264

)

 

 

(184,852

)

Net cash provided by (used in) operating activities

 

 

640,484

 

 

 

(1,402,246

)

Cash flows from investing activities

 

 

 

 

Capital expenditures

 

 

(1,190,029

)

 

 

(845,728

)

Debt and equity securities activities, net

 

 

3,758

 

 

 

(5,506

)

Other, net

 

 

4,302

 

 

 

5,171

 

Net cash used in investing activities

 

 

(1,181,969

)

 

 

(846,063

)

Cash flows from financing activities

 

 

 

 

Proceeds from issuance of long-term debt, net of premium/discount

 

 

798,802

 

 

 

2,797,346

 

Net proceeds from equity issuances

 

 

594,320

 

 

 

460,678

 

Issuance of common stock through stock purchase and employee retirement plans

 

 

8,010

 

 

 

8,291

 

Repayment of long-term debt

 

 

(200,000

)

 

 

 

Cash dividends paid

 

 

(183,944

)

 

 

(159,348

)

Debt issuance costs

 

 

(8,196

)

 

 

(14,155

)

Other

 

 

(1,735

)

 

 

 

Net cash provided by financing activities

 

 

1,007,257

 

 

 

3,092,812

 

Net increase in cash and cash equivalents

 

 

465,772

 

 

 

844,503

 

Cash and cash equivalents at beginning of period

 

 

116,723

 

 

 

20,808

 

Cash and cash equivalents at end of period

 

$

582,495

 

 

$

865,311

 

 

 

Three Months Ended March 31

 

Six Months Ended March 31

Statistics

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Consolidated distribution throughput (MMcf as metered)

 

 

189,298

 

 

191,243

 

 

297,440

 

 

319,713

Consolidated pipeline and storage transportation volumes (MMcf)

 

 

129,395

 

 

130,578

 

 

265,462

 

 

275,165

Distribution meters in service

 

 

3,422,900

 

 

3,380,153

 

 

3,422,900

 

 

3,380,153

Distribution average cost of gas

 

$

6.99

 

$

4.75

 

$

7.04

 

$

4.70

 

Contacts

Analysts and Media Contact:

Dan Meziere (972) 855-3729

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