Atmos Energy Corporation — Form 10-Q Summary
Reporting period: Fiscal first quarter ended December 31, 2023, compared with the three months ended December 31, 2022, unless noted. Atmos Energy operates regulated natural gas distribution, pipeline and storage businesses, serving more than 3.3 million customers in eight states. Interim results are seasonal and are not indicative of full-year results.
Financial performance
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Operating revenue | $1.158 billion | $1.484 billion | Down 21.9% |
| Operating income | $399.1 million | $321.2 million | Up 24.3% |
| Net income | $311.3 million | $271.9 million | Up 14.5% |
| Diluted EPS | $2.08 | $1.91 | Up $0.17 |
| Operating cash flow | $245.3 million | $188.9 million | Up $56.4 million |
| Capital expenditures | $769.7 million | $795.7 million | Down $26.0 million |
Revenue fell mainly as lower natural gas prices and distribution sales volumes reduced gas-sales revenue; the cost of gas is generally passed through to customers. Distribution sales volumes declined to 82,716 MMcf from 100,078 MMcf. Operating income rose in both segments: distribution increased $48.7 million to $280.5 million, and pipeline and storage increased $29.2 million to $118.6 million. Management cited rate adjustments, customer growth and lower bad-debt expense, partly offset by lower consumption and higher depreciation. The filing does not provide a reported consolidated margin measure.
Operating cash flow less capital expenditures was approximately negative $524.4 million, calculated from the reported figures. Investing activities used $764.4 million; financing activities provided $785.3 million. Cash and restricted cash totaled $285.4 million at quarter-end, compared with $19.2 million at September 30, 2023.
Debt and liquidity
- Long-term debt, net, was $7.44 billion; there was no commercial paper outstanding at December 31, 2023. The company issued $900 million of senior notes in October 2023: $500 million due 2053 at 6.20% and $400 million due 2033 at 5.90%.
- Debt was 39.8% and shareholders’ equity 60.2% of capitalization, excluding securitized debt. The covenant-defined debt-to-capitalization ratio was 41%; the company reported compliance with its covenants.
- Management reported approximately $3.2 billion of total liquidity: $278.3 million cash, $473.5 million available under equity forward sales agreements and $2.494 billion of undrawn credit capacity.
- Quarterly capital expenditures were $769.7 million; approximately 82% supported distribution and transportation system safety and reliability.
Material changes, outlook and risks
- Implemented or approved rate actions increased annual operating income by $161.9 million, including $134.9 million in distribution actions and a $27.0 million APT rate increase. Management said liquidity sources are expected to fund working capital and the capital program for the remainder of fiscal 2024, and expects continued access to financing on reasonable terms.
- A Mississippi regulatory decision reduced first-quarter bad-debt expense by $13.9 million. Texas property-tax legislation favorably affected year-to-date results by $5.6 million. These benefits were partly offset by higher depreciation and interest expense.
- In January 2024, the NTSB began investigating an incident at a Jackson, Mississippi residence that resulted in one fatality. Atmos Energy is cooperating with investigators and regulators; the filing does not state a financial estimate for the incident.
- Management identifies regulatory and rate-recovery outcomes, pipeline safety and integrity costs, natural-gas supply and price volatility, adverse weather, Texas operating concentration, access to capital markets, cyber risks and climate-related regulation among factors that could affect results. No material changes to previously disclosed risk factors were reported.
- Other items: a $0.8 million pension settlement charge followed an executive retirement. The company hedged approximately 30.2 Bcf of anticipated winter gas requirements for the 2023–2024 heating season in jurisdictions where permitted.
Important facts for investors to verify
- Whether rate increases are implemented as expected and recover infrastructure spending promptly, including the pending or recently approved proceedings described in the filing.
- How lower distribution sales volumes, weather and customer demand affect earnings after the seasonal first-quarter period.
- Capital spending, operating cash generation and financing needs, particularly given first-quarter capital expenditures materially exceeded operating cash flow.
- Debt issuance costs, interest expense and continued access to credit and equity markets; monitor covenant compliance and credit ratings.
- Developments from the Jackson incident investigation and any resulting safety, regulatory, litigation or financial consequences.