UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

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Atmos Energy Corporation

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December 20, 2019

DEAR SHAREHOLDER:

We are pleased to invite you to attend the annual meeting of shareholders on Wednesday, February 5, 2020, at 9:00 a.m. Central Standard Time, at the Westin Galleria Dallas, 13340 Dallas Parkway, Dallas, TX 75240.

The annual meeting will include a report on our operations and consideration of the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement. All shareholders of record as of December 13, 2019, are entitled to vote.

Your vote is very important. Whether or not you plan to attend the meeting in person, please cast your vote over the internet, by telephone or by mailing back a proxy card as soon as possible.

On behalf of your Board of Directors, thank you for your continued support and interest in Atmos Energy Corporation.

 

Sincerely,
Kim R. Cocklin				J. Kevin Akers
Executive Chairman of the Board				President and Chief Executive Officer

Table of Contents

 

 

		2020 Proxy Statement

 

		2020 Proxy Statement		1

About Atmos Energy

An S&P 500 company headquartered in Dallas, Atmos Energy (the “Company”) serves more than 3 million distribution customers in over 1,400 communities across eight states and manages proprietary pipeline and storage assets, including one of the largest intrastate natural gas pipeline systems in Texas. As part of our vision to be the safest provider of natural gas services, we are modernizing our business and our infrastructure while continuing to invest in safety, innovation, environmental sustainability and our communities.

 

Our Company

Our Vision

Our Strategy

We are the nation’s largest fully regulated, natural gas-only distributor of safe, clean, efficient and affordable energy.

Our vision is for Atmos Energy to be the safest provider of natural gas services. We will be recognized for exceptional customer service, for being a great employer, and for achieving superior financial results.

Atmos Energy’s strategy is to:   •   operate our business exceptionally well •   invest in our people and our infrastructure •   enhance our culture

2019 Financial Results and Accomplishments

2019 was a strong year for Atmos Energy. Earnings and earnings per share increased for a 17^th consecutive year. In fiscal 2019, we generated net income of $511.4 million or $4.35 per diluted share, compared with net income of $603.1 million, or $5.43 per diluted share, in the prior year. Adjusted net income for the year ended September 30, 2018, was $444.3 million, or $4.00 per diluted share, after excluding the effects of implementing the Tax Cuts and Jobs Act of 2017 (“TCJA”) from the prior year.* Capital expenditures for fiscal 2019 totaled approximately $1.7 billion, with approximately 87% of this amount invested to improve the safety and reliability of our distribution and transmission systems.

In August 2019, consistent with the long-term leadership succession plan conducted by our Board of Directors (the “Board”), we announced that J. Kevin Akers, Executive Vice President, would assume the role of President and Chief Executive Officer, effective October 1, 2019. Mr. Akers and his leadership team are committed to maintaining Atmos Energy’s vision to be the safest provider of natural gas services.

 

DILUTED EARNINGS PER SHARE*

DECLARED DIVIDENDS PER SHARE

TOTAL SHAREHOLDER RETURN

$4.35

$2.10

23.8%

17th Consecutive Year of EPS Growth

Up from $1.94 for FY2018

3-year cumulative total shareholder return of 63.3%

8th Year of Organic Growth Strategy				Significant Regulatory Developments
✓ EPS of $4.35*; 17th  consecutive year of EPS  growth   ✓ FY 2019 Dividend of $2.10; 8.2% growth over FY 2018   ✓ Capital spending of $1.7 billion   ✓ Maintained strong balance sheet; equity capitalization of 59% as of September 30, 2019				✓Implemented $117 million of annualized regulatory outcomes during fiscal 2019   ✓Continued to implement tax reform into customer bills

 

 

*

Represents a measure of performance that is calculated and presented other than in accordance with generally accepted accounting principles (“GAAP”). See Appendix A for an explanation of these non-GAAP measures, a full reconciliation of these non-GAAP results to our GAAP net income and diluted net income per share results, and a brief discussion of why we use these non-GAAP performance measures.

 

2		ATMOS ENERGY

 

		2020 Proxy Statement		3

Director Nominees

We have included summary information about each director nominee in the table below. Each director is elected annually by a majority of votes. See “Nominees for Director” beginning on page 18 for more information regarding our director nominees.

 

COMMITTEES

Name and Primary Occupation

Age

Director   Since

Independent

AC

HR

NC

CR

EC

J. Kevin Akers(a) President and Chief Executive Officer, Atmos Energy

56

2019

Robert W. Best Director, Associated Electric & Gas Insurance Services Limited

73

1997

●

M

Kim R. Cocklin(a) Executive Chairman of Board, Atmos Energy

68

2009

Kelly H. Compton Executive Director, Hoglund Foundation

62

2016

●

M

M

Sean Donohue Chief Executive Officer, DFW International Airport

58

2018

●

M

M

Rafael G. Garza President and Founder, RGG Capital Partners, LLC

59

2016

●

M

M

Richard K. Gordon General Partner, Juniper Capital LP, Juniper Energy LP, Juniper Capital II, and Juniper Capital III

70

2001

● Lead Director

M

M

C

C

Robert C. Grable Founding Partner, Kelly Hart & Hallman LLP

73

2009

●

M

C

M

Nancy K. Quinn Director, Helix Energy Solutions Group, Inc.

66

2004

●

M

C

M

M

Richard A. Sampson General Partner and Founder, RS Core Capital, LLC

69

2012

●

C

M

M

Stephen R. Springer(a) Director, Atmos Energy

73

2005

M

Diana J. Walters Founder and Managing Member, Amichel, LLC

56

2018

●

M

M

Richard Ware II Chairman, Amarillo National Bank

73

1994

●

M

M

AC = Audit    HR = Human Resources    NC = Nominating and Corporate Governance    CR = Corporate Responsibility, Sustainability, & Safety     EC = Executive

M = Member    C = Chair

 

(a)	The director is not independent and accordingly is not eligible to be a member of any of the committees except the Executive Committee and/or the Corporate Responsibility, Sustainability, & Safety Committee, pursuant to the rules of the New York Stock Exchange.

 

4		ATMOS ENERGY

 

		2020 Proxy Statement		5

 

6		ATMOS ENERGY

CORPORATE GOVERNANCE AND OTHER BOARD MATTERS

Independence of Directors

Our Corporate Governance Guidelines and the listing requirements of the New York Stock Exchange (“NYSE”) each require that a majority of the Board be comprised of “independent” directors, as defined from time to time by law, NYSE standards, and any specific requirements established by the Board. A director may be determined to be independent only if the Board has determined that he or she has no material relationship with the Company, either directly or as a partner, shareholder, or officer of the Company. To assist it in making its determination of the independence of each of its non-employee members, the Board has adopted its Categorical Standards of Director Independence (“Standards”). The Standards specify the criteria by which the independence of our non-employee directors will be determined and the types of relationships the Board has determined to be categorically immaterial, including relationships of such directors and their immediate families with respect to past employment or affiliation with the Company, our management or our independent registered public accounting firm. The Standards and our Guidelines are posted on our website at www.atmosenergy.com/esg/corporate-governance.

The Nominating Committee considers all relevant facts and circumstances in evaluating the independence of directors, including without limitation, written responses to submitted questionnaires completed annually by each of our directors. On the basis of this information, the Nominating Committee advised the full Board of its conclusions regarding director independence. After considering the committee’s recommendation, the Board affirmatively determined that each of the Company’s directors other than Mr. Akers, Mr. Cocklin, and Mr. Springer is independent in accordance with applicable NYSE and Securities and Exchange Commission (“SEC”) independence rules and requirements and the standards described above. The Board determined that Mr. Akers is not independent because he is the President and Chief Executive Officer of the Company; that Mr. Cocklin is not independent because he is the Executive Chairman of the Company; and that Mr. Springer is not independent because his son-in-law is a partner with the firm of E&Y, our independent registered public accounting firm. Mr. Springer’s son-in-law is not involved in our audit and is not considered a “covered person” with respect to us, as defined under the SEC’s independence-related rules and regulations for auditors. Thus, this relationship has no effect on E&Y’s independence as our independent registered public accounting firm.

Board Leadership Structure

The Company’s Corporate Governance Guidelines provide that our Board has the right to exercise its discretion to either separate or combine the offices of the Chairman of the Board and the CEO. This decision is based upon the Board’s determination of what is in the best interests of the Company and its shareholders, in light of the circumstances and taking into consideration succession planning, skills and experience of the individuals filling those positions and other relevant factors. The current leadership structure is based on the experienced leadership provided by an Executive Chairman of the Board (currently Mr. Cocklin) and a full-time President and CEO (currently Mr. Akers), with both positions being subject to oversight and review by the Company’s independent directors. The Board recognizes that if the circumstances change in the future, other leadership structures might also be appropriate and it has the discretion to revisit this determination of the Company’s leadership structure.

The Board’s leadership structure is designed so that independent directors exercise oversight of the Company’s management and key issues related to strategy and risk. Only independent directors serve on our Audit Committee, Human Resources Committee (“HR Committee”) and Nominating and Corporate Governance Committee (“Nominating Committee”), and all standing Board committees are chaired by independent directors. Additionally, independent directors regularly hold executive sessions of the Board led by the Lead Director (defined below) outside the presence of the Executive Chairman, the President and CEO or any other Company employee, and they generally meet in a private session with the Executive Chairman and the President and CEO at regularly scheduled Board meetings.

 

		2020 Proxy Statement		7

Each year, the independent directors of the Board select an independent director to serve as a lead director (the “Lead Director”). The Lead Director is expected to consult with the chairs of the appropriate Board committees and solicit their participation. The Lead Director also has the authority to call meetings of the independent directors as well as the non-management directors; and if requested by major shareholders, will ensure that he or she is available for consultation and direct communication. In 2019, the independent directors of the Board designated Mr. Richard K. Gordon as the Lead Director.

Risk Management and Oversight Framework

The Board is actively involved in the oversight of risks that could affect the Company. This oversight is conducted primarily through committees of the Board pursuant to the charters of each committee, as described in the summaries of each of the committees beginning on page 10. The full Board has retained responsibility for oversight of strategic risks. The Board satisfies this responsibility through reports by each committee chair regarding the committee’s consideration and actions, as well as through regular reports directly from officers responsible for management of particular risks within the Company.

 

8		ATMOS ENERGY

While the Board and its committees have responsibility for general risk oversight, Company management is charged with managing risk. Through the Company’s Risk Management and Compliance Committee, the Company has a robust strategic planning and enterprise risk management process that facilitates the identification and management of risks. Our enterprise risk management program is supported by regular internal audits and audits by our independent public accounting firm. KPMG LLP (“KPMG”), which serves as the Company’s internal auditor, presents to the Audit Committee at its regularly scheduled quarterly meetings on its internal audit activities, including the audit activities performed the previous quarter, which address the key business risks identified by the Audit Committee, including evaluations and assessments of internal controls and procedures.

 

Corporate Governance Guidelines

In accordance with, and pursuant to, the corporate governance standards of the NYSE, the Board has adopted and periodically updates our Corporate Governance Guidelines, which govern the structure and proceedings of the Board and contain the Board’s position on many governance issues. The Corporate Governance Guidelines are available on our website at www.atmosenergy.com/esg/corporate-governance.

 

		2020 Proxy Statement		9

Committees of the Board of Directors

Atmos Energy’s Board committee structure is organized around key strategic issues to facilitate oversight of management. Committee chairs regularly coordinate with one another to ensure appropriate information sharing. To further facilitate information sharing, all committees provide a summary of significant actions to the full Board. As required under our Corporate Governance Guidelines, each standing committee conducts an annual self-assessment and review of its charter.

 

AUDIT COMMITTEE        Richard A. Sampson      (Chair)      Kelly H. Compton      Rafael G. Garza      Robert C. Grable      Nancy K. Quinn      Richard Ware II        Meetings Held in      Fiscal 2019: 4		The Audit Committee oversees our accounting and financial reporting processes and procedures, reviews the scope and procedures of the internal audit function, appoints our independent registered public accounting firm and is responsible for the oversight of its work and the review of the results of its independent audits. The Audit Committee charter is available on our website at www.atmosenergy.com/esg/corporate-governance.   The Board has determined that each member of the Audit Committee satisfies the independence requirements of the NYSE and SEC applicable to members of an audit committee.   All members are financially literate within the meaning of stock exchange listing rules.   The Board has determined that the following individuals are each an audit committee financial expert, as defined by the SEC: Mr. Garza, Ms. Quinn, Mr. Sampson, and Mr. Ware.
HUMAN RESOURCES COMMITTEE        Nancy K. Quinn      (Chair)      Kelly H. Compton      Richard K. Gordon      Richard A. Sampson      Diana J. Walters        Meetings Held in      Fiscal 2019: 4		The Human Resources Committee reviews and makes recommendations to the Board regarding executive compensation policy and strategy, and specific compensation recommendations for the Executive Chairman, the President and CEO, as well as our other officers. In addition, the committee determines, develops and makes recommendations to the Board regarding severance agreements, succession planning and other related matters concerning our Executive Chairman, the President and CEO, as well as other officers. This committee also administers our LTIP and our Incentive Plan. The Human Resources Committee charter is available on our website at www.atmosenergy.com/esg/corporate-governance.   The Board has determined that each member of the committee satisfies the independence requirements of the NYSE and SEC applicable to members of a compensation committee.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE        Robert C. Grable      (Chair)      Sean Donohue      Rafael G. Garza      Richard K. Gordon      Richard Ware II        Meetings Held in      Fiscal 2019: 2		The Nominating and Corporate Governance Committee makes recommendations to the Board regarding the nominees for director to be submitted to our shareholders for election at each annual meeting of shareholders, selects candidates for consideration by the full Board to fill any vacancies on the Board which may occur from time to time and oversees all of our corporate governance matters. The Nominating and Corporate Governance Committee charter is available on our website at www.atmosenergy.com/esg/corporate-governance.   The Board has determined that each member of the committee satisfies the independence requirements of the NYSE and SEC.

 

10		ATMOS ENERGY

CORPORATE RESPONSIBILITY, SUSTAINABILITY, & SAFETY COMMITTEE        Richard K. Gordon      (Chair)      Robert W. Best      Sean Donohue      Nancy K. Quinn      Stephen R. Springer      Diana J. Walters        Meetings Held in      Fiscal 2019: 2		The Corporate Responsibility, Sustainability, & Safety Committee oversees matters relating to responsibility, sustainability, and the Company’s vision, values, culture, and diversity. The Committee also assists management in setting strategy, establishing goals and integrating responsibility and sustainability into strategic and tactical business activities across the Company to create long-term shareholder value. The Corporate Responsibility, Sustainability, & Safety Committee charter is available on our website at www.atmosenergy.com/esg/corporate-governance.
EXECUTIVE COMMITTEE        Richard K. Gordon      (Chair)      Robert C. Grable      Nancy K. Quinn      Richard A. Sampson        Meetings Held in      Fiscal 2019: 0		The Executive Committee has, and may exercise, all of the powers of the Board of Directors during the intervals between the Board’s meetings, subject to certain limitations and restrictions as set forth in the bylaws or as may be established by resolution of the Board from time to time. The Executive Committee charter is available on our website at www.atmosenergy.com/esg/corporate-governance.

Board and Committee Meetings in 2019    

In fiscal 2019, each of the directors attended at least 75% of the total meetings of the Board and the Committees on which he or she served. In addition, we strongly support and encourage each member of our Board to attend our annual meeting of shareholders. All members of the Board attended our annual meeting of shareholders in person on February 6, 2019.

Succession Planning

The Board is actively engaged and involved in succession planning. This includes a detailed discussion of the Company’s leadership and succession plans with a focus on key positions at the senior officer level. As part of these activities, the Board engages in a robust CEO succession planning process, including reviewing development plans for potential CEO candidates and engaging with potential successors at board meetings and in less formal settings to allow directors to personally assess candidates.

 

		2020 Proxy Statement		11

Shareholder Engagement

We believe that maintaining an active dialogue with our shareholders is important to our commitment to deliver sustainable, long-term value to our shareholders. We engage with shareholders on a variety of topics throughout the year to ensure we are addressing questions and concerns, to seek input, and to provide perspective on our policies and practices. We also engage with proxy and other advisory firms that represent the interests of various shareholders. Shareholder feedback is regularly reviewed and considered by the Board and is reflected in adjustments or enhancements to our policies and practices. We remain committed to investing time with our shareholders to maintain transparency and to better understand their views on key issues.

 

 

Corporate Responsibility and Sustainability

Operating our business safely, ethically, and transparently, and meeting our responsibilities to the environment, to our employees, and to the communities in which we operate and live, are among our highest priorities. To learn more about our corporate responsibility and sustainability efforts, see our 2019 Corporate Responsibility and Sustainability Report on our website at www.atmosenergy.com/esg/reports.

Code of Conduct

The Board has also adopted and periodically updates the Code of Conduct for our directors and employees. The Code of Conduct provides guidance to the Board and management in areas of ethical business conduct and risk, and provides guidance to employees and directors by helping them to recognize and deal with ethical issues including, but not limited to (i) conflicts of interest, (ii) gifts and entertainment, (iii) confidential information, (iv) fair dealing, (v) protection of corporate assets and (vi) compliance with rules and regulations. We have provided to our directors, employees, customers, and any other member of the public a toll-free compliance helpline and website by which they may report on an anonymous basis any suggestions, recommendations, questions, observations of unethical behavior, or any suspected violations of our Code of Conduct. A copy of the Code of Conduct may be found at www.atmosenergy.com/esg/corporate-governance.

Executive and Director Share Ownership Requirements

We have share ownership guidelines for our named executive officers and directors that require each named executive officer and director to hold a multiple of his or her base salary (or annual retainer) in shares of Company stock. The HR Committee believes that executive share ownership promotes better alignment of the interests of our

 

12		ATMOS ENERGY

named executive officers with those of our shareholders, and it monitors compliance with the ownership guidelines each year. Minimum ownership levels are as follows:

 

Position		Holding Requirement
Executive Chairman		5X base salary value
President and CEO		5X base salary value
Other Named Executive Officers		3X base salary value
Non-Employee Directors		5X annual retainer
Ownership Sources Included
●    Direct or indirect ownership of common stock ●    Unvested time-lapse RSUs ●    Share units held under our Directors Plan (defined on page 25) and the LTIP

Clawback Policy

Our Board has adopted an incentive compensation clawback policy to help ensure that incentive compensation is paid based on accurate financial and operating data, and the correct calculation of performance against incentive targets. Our policy addresses recoupment of amounts from performance-based awards paid to employees under the Incentive Plan and LTIP to the extent that they would have been materially less due to inaccurate financial statements, fraud, or intentional, willful or gross misconduct.

Anti-Hedging and Pledging Policy

Our Insider Trading Policy prohibits our directors and employees (including officers) from engaging in transactions that hedge or offset, or are designed to hedge or offset any decrease in the market value of Company stock including engaging in short sales or trading in options, puts, calls, or other derivative instruments related to Company stock or debt. The policy also prohibits directors and executive officers from pledging Company stock, borrowing against an account in which our common stock is held, or trading Company stock on margin.

Related Party Transactions Review and Approval Policy

The Board recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interest and may create the appearance that Company decisions are based on considerations other than the best interests of the Company and its shareholders. As a result, the Board prefers to avoid related party transactions, while also recognizing that there are situations where related party transactions may be in the best interests of or may not be inconsistent with the best interests of the Company and its shareholders. The Board has adopted and periodically reviews written guidelines with respect to related party transactions delegated to the Nominating Committee the responsibility to review and, if not adverse to the Company’s best interests, approve, related party transactions.

A related party transaction is any transaction (or series of related transactions) involving the Company and in which the amount involved exceeds $120,000 and a related person has a direct or indirect material interest. A “related person” is:

 

•

A director or executive officer of the Company;

 

•

A shareholder who beneficially owns more than 5% of the Company’s stock or any immediate family member of such shareholder;

 

•

An immediate family member of any of the Company’s directors or executive officers; or

 

•

A company or charitable organization or entity in which any of these persons has a role similar to that of an officer or general partner or beneficially owns 10% or more of the entity.

 

		2020 Proxy Statement		13

Under the guidelines, all named executive officers, directors and director nominees are required to identify, to the best of their knowledge after reasonable inquiry, business and financial affiliations involving themselves or their immediate family members, which could reasonably be expected to give rise to a related person transaction. Named executive officers, directors and director nominees are required to advise the Corporate Secretary promptly of any change in the information provided and are asked periodically to review and reaffirm this information.

In accordance with the guidelines, the Nominating Committee reviews the material facts of all related person transactions and either approves or disapproves of the entry into any such transaction. However, if advance committee approval of a related person transaction is not feasible, then it shall be considered and, if the committee determines it to be appropriate, ratified at the committee’s next regularly scheduled meeting.

The Nominating Committee has considered and adopted standing pre-approvals under the guidelines for limited types of transactions that meet specific criteria. Such pre-approved transactions are limited to:

 

●

certain transactions in the ordinary course of business with an entity for which a related person serves as an employee or director, provided the aggregate amount involved in any such transactions during any particular fiscal year does not exceed the greater of (a) $1 million or (b) two percent (2%) of the entity’s gross revenues for the most recently completed fiscal year;

 

●

certain charitable contributions made to a foundation, university or other charitable organization for which a related person serves as an employee or a director, provided the aggregate amount of contributions during any particular fiscal year does not exceed the greater of (a) $500,000 or (b) two percent (2%) of the charitable organization’s annual receipts for its most recently completed fiscal year;

 

●

employment by the Company of a family member of a named executive officer, provided the named executive officer does not participate in decisions regarding the hiring, performance evaluation or compensation of the family member; and

 

●

payments under the Company’s employee benefit plans and other programs that are available generally to the Company’s employees.

Mr. Cocklin and Mr. Best each have a son-in-law employed by the Company in a non-executive officer position whose total compensation exceeds the SEC’s reporting threshold of $120,000 per fiscal year. Kevin Freel, Mr. Cocklin’s son-in-law, received $147,482 in total compensation for fiscal 2019. Robert Cook, Mr. Best’s son-in-law, received $279,838 in total compensation for fiscal 2019.

State Street is a beneficial owner of more than five percent (5%) of the Company’s common stock outstanding as of the record date of December 13, 2019. During fiscal 2019, State Street (i) acted as trustee of several benefits plans and trusts; (ii) provided fiduciary services for a benefits plan; and (iii) provided retiree benefit payment processing services for several benefits plans and trusts, for which the Company paid a total of approximately $200,000 in fees. For the Master Trust, State Street (i) acted as trustee; (ii) provided fiduciary services for a benefits plan; (iii) provided retiree benefit processing services for a benefit plan whose assets are held in the Master Trust; and (iv) provided investment management services relating to assets held in the Master Trust. For such services, the Master Trust paid a total of approximately $220,000 in fees during fiscal 2019. All such services provided to the Company and the Master Trust were made in the ordinary course of business and on substantially the same terms as other comparable transactions with third parties.

 

14		ATMOS ENERGY

Board Evaluation Process

The Board is committed to assessing its own performance as a board in order to identify its strengths as well as areas in which it may improve its performance. The self-evaluation process, which is established by the Nominating Committee, involves the completion of annual written questionnaires of the Board and its committees, review and discussion of the results of the evaluations by both the committee and full board, and consideration of action plans to address any issues.

 

 

Identifying and Evaluating Nominees for Directors

The Nominating Committee uses a variety of methods for identifying and evaluating nominees for director. In the event vacancies are anticipated, or arise, the Nominating Committee considers various potential candidates for director, considering the skill areas and characteristics discussed above and qualifications of the individual candidate. The Nominating Committee will consider candidates that come to their attention through current board members, professional search firms, shareholders, or other persons. The Nominating Committee may interview potential candidates to further assess the qualifications possessed by the candidates and their ability to serve as a director. The Committee then determines the best qualified candidates based on the established criteria and recommends those candidates to the Board for election at the next annual meeting of shareholders.

Shareholder Nominees

If a shareholder wishes to nominate a candidate for election to the Board at the annual meeting, he or she should write to the Corporate Secretary, Atmos Energy Corporation, 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, no later than the close of business on January 14, 2020, the 25th day following the day on which notice of the meeting is to be sent, December 20, 2019. Such notice should set forth (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) the class and number of shares of stock held of record, owned beneficially and represented by proxy by such shareholder as of the record date for the meeting (December 13, 2019) and of the date of such notice; (iii) a representation that the shareholder is a record holder of the Company’s stock entitled to vote at the meeting and that the shareholder intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iv) a description of all arrangements or understandings between such shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such shareholder; (v) such other information regarding each nominee proposed by such shareholder as would be required to be disclosed in solicitations for proxies for election of directors pursuant to the proxy rules of the Securities and Exchange Commission; and (vi) the consent of each nominee to serve as director of the Company if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

 

		2020 Proxy Statement		15

Communication with the Board

Communications to the Board, any Board committee, the independent directors, or any individual director (including the Lead Director) may be sent to the Board of Directors, Atmos Energy Corporation, P.O. Box 650205, Dallas, Texas 75265-0205. Communications may also be sent by email to boardofdirectors@atmosenergy.com. If you wish to contact the Lead Director or the independent directors on an anonymous and confidential basis, you may do so by contacting the Company’s Compliance Helpline at 1-866-543-4065 or https://www.compliance-helpline.com/welcomeAtmosEnergy.jsp.

 

16		ATMOS ENERGY

PROPOSAL ONE—ELECTION OF DIRECTORS

The Board is nominating the 13 individuals below to continue serving as directors and whose one-year terms will expire in 2021. All nominees were recommended for nomination by the Nominating Committee. The names, ages, biographical summaries and qualifications of the persons who have been nominated to serve as our directors are set forth under “Nominees for Director,” beginning on page 18. Each of the nominees has consented to be a nominee and to serve as a director if elected.

Qualifications for Directors

Nominees for director must possess, at a minimum, the level of education, experience, sophistication and expertise required to perform the duties of a member of the board of directors of a public company of our size and scope. Once a person is nominated, the committee will assess the qualifications of the nominee, including an evaluation of his or her judgment and skills. The Board has adopted guidelines outlining the qualifications sought when considering non-employee director nominees, which are discussed in our Corporate Governance Guidelines on our website at www.atmosenergy.com/esg/corporate-governance.

Based on the Corporate Governance Guidelines, the specific qualifications and skills the Board seeks across its membership to achieve a balance of experiences important to the Company include, but are not limited to, outstanding achievement in personal careers; prior board experience; wisdom, integrity and ability to make independent, analytical inquiries; understanding of our business environment and a willingness to devote adequate time to Board duties. Other required specific qualifications and skills include a basic understanding of principal operational and financial objectives, and plans and strategies of a corporation or organization of our stature; results of operations and financial condition of an organization and of any significant subsidiaries or business segments and a relative understanding of an organization and its business segments in relation to its competitors.

The Board is committed to diversified membership and does not discriminate based on race, color, national origin, gender, religion or disability in selecting nominees. The Board and the Nominating Committee believe it is important that our directors represent diverse viewpoints and backgrounds. Our Corporate Governance Guidelines provide that the Nominating Committee shall evaluate each director’s continued service on the Board, at least annually, by considering the appropriate skills and characteristics of members of the Board in the context of the then current makeup of the Board. This assessment includes the following factors: diversity (including diversity of skills, background and experience); age; business or professional background; financial literacy and expertise; availability and commitment; independence and other criteria that the committee or the full Board finds to be relevant. It is also the practice of the committee to consider these factors when screening and evaluating candidates for nomination to the Board.

 

		2020 Proxy Statement		17

Director Nominees’ Skills and Experience

 

 

Nominees for Director

Each of the following current directors has been nominated to serve an additional one-year term on the Board of Directors with such term expiring in 2021.

 

J. Kevin Akers
Director since 2019     Age: 56		President and Chief Executive Officer since October 1, 2019; formerly Executive Vice President from November 2018 through September 2019; Senior Vice President, Safety and Enterprise Services from January 2017 through November 2018; President of the Kentucky/Mid-States Division of the Company from May 2007 through December 2016; and President of the Company’s Mississippi Division from 2002 to 2007   Qualifications: Mr. Akers has more than 30 years’ experience in the natural gas industry, including 28 with the Company. Over the course of his career, he has gained extensive management and operational experience. Such experience and management skills, as well as his demonstration of those attributes discussed in the “Qualifications for Directors” section, has led the Board to nominate Mr. Akers to continue serving as a director of Atmos Energy.

 

18		ATMOS ENERGY

Robert W. Best
Director since 1997     Age: 73		Formerly Chairman of the Board of Atmos Energy from April 2013 through September 2017 and Executive Chairman of the Board of Atmos Energy from October 2010 through March 2013   Board Committees: Corporate Responsibility, Sustainability, & Safety   Qualifications: Mr. Best led the senior management team of Atmos Energy from March 1997 until his retirement as the Executive Chairman in April 2013. Prior to joining Atmos Energy, Mr. Best had an extensive background in the natural gas industry, especially in the interstate pipeline, gas marketing and gas distribution segments of the industry, while serving in leadership roles at Consolidated Natural Gas Company, Transco Energy Company and Texas Gas Transmission Corporation during his almost 40-year career. Mr. Best also has outside board experience as a member of the boards of Associated Electric & Gas Insurance Services Limited and the Gas Technology Institute, with leadership experience as chairman of the boards of Atmos Energy, the American Gas Association, the Southern Gas Association and the Dallas Regional Chamber of Commerce.   Mr. Best’s knowledge and expertise in the energy industry and leadership abilities developed while with Atmos Energy, other energy companies and industry associations, as well as his demonstration of those attributes discussed in the “Qualifications for Directors” section, has led the Board to nominate Mr. Best to continue serving as a director of Atmos Energy.

 

Kim R. Cocklin
Director since 2009     Age: 68		Executive Chairman of the Board since October 1, 2017; formerly Chief Executive Officer of Atmos Energy from October 2015 through September 2017 and President and Chief Executive Officer of Atmos Energy from October 2010 through September 2015   Qualifications: Mr. Cocklin was appointed as Executive Chairman of the Board, effective October 1, 2017, after having served as Chief Executive Officer or President and Chief Executive Officer from October 2010 through September 2017. Mr. Cocklin has served on the Company’s senior management team since June 2006, having served as President and Chief Operating Officer from October 2008 through September 2010, Senior Vice President, Regulated Operations from October 2006 through September 2008 and Senior Vice President from June 2006 through September 2006. Mr. Cocklin has over 35 years of experience in the natural gas industry, most of that serving in senior management positions at Atmos Energy, Piedmont Natural Gas Company and The Williams Companies. Mr. Cocklin has a strong background in the natural gas industry, including interstate pipeline companies, local distribution companies and gas treatment facilities. He also has extensive experience in rates and regulatory matters, business development and Sarbanes-Oxley compliance matters. In addition, Mr. Cocklin has held leadership roles within leading natural gas industry associations, including the Southern Gas Association and the American Gas Association.   Due to his professional experience in the energy industry and leadership roles with Atmos Energy, other energy companies and industry associations, as well as possessing those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Mr. Cocklin to continue serving as a director of Atmos Energy.

 

		2020 Proxy Statement		19

Kelly H. Compton
Director since 2016     Age: 62		Executive Director of The Hoglund Foundation in Dallas, Texas since 1992   Board Committees: Audit and Human Resources   Qualifications: Ms. Compton has been a philanthropic leader for over 30 years with The Hoglund Foundation, which partners with education and family support agencies in Dallas, Texas. Prior to managing operations for The Hoglund Foundation, Ms. Compton served as Vice President of Commercial Lending for NationsBank Texas and its predecessors for 13 years. Her responsibilities included loan production and administration for large national corporations as well as middle market companies in the Dallas area. Ms. Compton also currently serves on the Board of Trustees for the Southern Methodist University and the Board of Trustees for The Perot Museum of Nature and Science.   As a result of Ms. Compton’s leadership abilities and experience in public and private finance, development and strategic matters, in addition to displaying those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Ms. Compton to continue serving as a director of Atmos Energy.

 

Sean Donohue
Director since 2018     Age: 58		Chief Executive Officer of Dallas Fort Worth International Airport since 2013   Board Committees: Nominating and Corporate Governance and Corporate Responsibility, Sustainability, & Safety   Qualifications: In his role as Chief Executive Officer of Dallas Fort Worth International Airport (the “Airport”), Mr. Donohue is responsible for the management, operation and future strategy and development of the Airport. Mr. Donohue joined the Airport following a 28-year career in the airline industry. Prior to his arrival at the Airport, Mr. Donohue served for three years as the Chief Operating Officer for Virgin Australia Airlines, where he led day-to-day operations for Australia’s second largest air carrier. Prior to that, Mr. Donohue served for 25 years with United Airlines in a variety of executive roles that included operations, sales and commercial startups.   As a result of Mr. Donohue’s leadership abilities and experience in strategy and development matters, in addition to displaying those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Mr. Donohue to continue serving as a director of Atmos Energy.

 

20		ATMOS ENERGY

Rafael G. Garza
Director since 2016     Age: 59		President and Founder of RGG Capital Partners, LLC in Ft. Worth, Texas since 2000, and Co-Founder and Managing Director of Bravo Equity Partners, LP   Board Committees: Audit and Nominating and Corporate Governance   Qualifications: For Bravo Equity Partners and RGG Capital Partners, LLC, private investment companies, Mr. Garza has been responsible for managing various portfolio companies with a particular focus on the U.S. and Mexico. Prior to working with Bravo Equity Partners, Mr. Garza held numerous senior leadership positions with E&Y’s Audit and Advisory and Corporate Finance divisions. Mr. Garza also has served as a leader on the boards of several non-profit organizations, including Texas Christian University, the Modern Art Museum of Fort Worth and Baylor Scott & White Holdings.   Mr. Garza’s in-depth experience with financial management and strategic planning, his leadership abilities and his display of the attributes discussed in the “Qualifications for Directors” section have resulted in the Board’s nomination of Mr. Garza to continue serving as a director of Atmos Energy.

 

Richard K. Gordon
Director since 2001     Age: 70		General Partner of Juniper Capital LP in Houston, Texas since March 2003; General Partner of Juniper Energy LP in Houston, Texas since August 2006; General Partner of Juniper Capital II in Houston, Texas since September 2014; and General Partner of Juniper Capital III in Houston, Texas since November 2017   Board Committees: Human Resources, Nominating and Corporate Governance, Executive (Chair), Corporate Responsibility, Sustainability, & Safety (Chair)   Other Public Company Boards: ExoStat Medical, Inc.   Qualifications: For private equity funds Juniper Capital LP, Juniper Energy LP, Juniper Capital II and Juniper Capital III, Mr. Gordon has been responsible for managing various portfolios that collectively include power generation, mineral, oil and gas, natural gas gathering and oilfield services assets. Prior to working with Juniper Capital, Juniper Energy, Juniper Capital II and Juniper Capital III, Mr. Gordon spent 29 years working with such financial services firms as Dillon, Read & Co., The First Boston Corporation and Merrill Lynch & Co. At such firms, Mr. Gordon was responsible for investment banking activities related to energy and power companies, including natural gas distribution companies.   Based upon his extensive business experience in investment banking and the energy industry, his in-depth leadership experience as the Lead Director of the Company and as the former Chair of the HR Committee and as a member of the board of ExoStat Medical, Inc., as well as possessing those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Mr. Gordon to continue serving as a director of Atmos Energy.

 

		2020 Proxy Statement		21

Robert C. Grable
Director since 2009     Age: 73		Founding Partner, Kelly Hart & Hallman LLP in Fort Worth, Texas since April 1979   Board Committees: Audit, Nominating and Corporate Governance (Chair), and Executive   Qualifications: Mr. Grable possesses advanced leadership skills developed as a partner and one of seven founders of Kelly Hart & Hallman LLP, a large regional law firm. Mr. Grable has extensive experience in representing companies in the oil and gas industry, having represented oil and gas producers, pipelines and utilities in transactions, regulatory matters and litigation, for over 40 years. Mr. Grable also has outside board experience as a Trustee of the University of Texas Law School Foundation and as an advisory board member for the local division of a global financial services firm. Mr. Grable is also a member of the McDonald Observatory and Astronomy Board of Visitors at the University of Texas at Austin.   As a result of his extensive legal experience with clients in the energy industry and leadership experience with boards of for-profit and non-profit organizations, as well as possessing those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Mr. Grable to continue serving as a director of Atmos Energy.

 

Nancy K. Quinn
Director since 2004     Age: 66		Independent energy consultant since July 1996; currently a director and chair of the audit committee of Helix Energy Solutions Group, Inc., a New York Stock Exchange company   Board Committees: Audit, Human Resources (Chair), Corporate Responsibility, Sustainability, & Safety, and Executive   Other Public Company Boards: Helix Energy Solutions Group, Inc.   Qualifications: Ms. Quinn provides senior financial and strategic advice, primarily to clients in the energy and natural resources industries. Prior to 2000, Ms. Quinn also held a senior advisory role with the Beacon Group, focusing on energy industry private equity opportunities and merger and acquisition transactions. Ms. Quinn gained extensive experience in independent exploration and production, as well as in diversified natural gas and oilfield service sectors, while holding leadership positions at PaineWebber Incorporated and Kidder, Peabody & Co. Incorporated. Ms. Quinn has extensive corporate governance leadership experience as Chair of the HR Committee as well as the former Lead Director and Chair of the Audit Committee of Atmos Energy, and as a member of the board and chair of the audit committee of Helix Energy Solutions Group. Ms. Quinn was also previously a member of the boards of Louis Dreyfus Natural Gas Corp. and DeepTech International Inc.   The Board has nominated Ms. Quinn, based upon her considerable experience in the natural gas industry, her demonstrated leadership abilities as a board leader in several public companies and her exhibition of those attributes discussed in the “Qualifications for Directors” section, to continue serving as a director of Atmos Energy.

 

22		ATMOS ENERGY

Richard A. Sampson
Director since 2012     Age: 69		General Partner and Founder of RS Core Capital, LLC, a registered investment advisory firm in Denver, Colorado since January 2013; formerly Managing Director and Client Adviser of JPMorgan Chase & Co. in New York, San Francisco and Denver from May 2006 to May 2012.   Board Committees: Audit (Chair), Human Resources, and Executive   Qualifications: Mr. Sampson held numerous senior leadership positions with JPMorgan Chase, a global financial services firm, through which he gained extensive knowledge of portfolio management, investment concepts, strategies and analytical methodologies. Mr. Sampson’s experience of over 30 years in investment management has provided him with an understanding of global and domestic macroeconomics and capital market issues, financial markets, securities and a solid understanding of state and federal laws, regulations and policies.   In addition to his display of the attributes discussed in the “Qualifications for Directors” section, his substantial experience in investment management, his leadership as Chair of the Audit Committee and his knowledge of complex financial transactions, has led the Board to nominate Mr. Sampson to continue serving as a director of Atmos Energy.

 

Stephen R. Springer
Director since 2005     Age: 73		Formerly Senior Vice President and General Manager, Midstream Division, The Williams Companies, Inc.   Board Committees: Corporate Responsibility, Sustainability, & Safety   Qualifications: Mr. Springer’s professional career includes 32 years of experience in the regulated and nonregulated energy industry, while holding leadership roles at Texas Gas Transmission Corporation, Transco Energy Company and The Williams Companies. Mr. Springer’s knowledge of the natural gas industry is based on his experience in the natural gas transmission, marketing, supply, transportation, business development, distribution and gathering and processing segments of the industry. Mr. Springer has outside board experience as an honorary director on the Indiana University Foundation Board and formerly on the board of DCP Midstream Partners, LP, a New York Stock Exchange company.   The Board has nominated Mr. Springer to continue serving as a director of Atmos Energy in light of his considerable experience in the natural gas industry, his leadership abilities developed while with The Williams Companies and service on the boards of other public companies, and non-profit institutions, as well as his exhibition of those attributes discussed in the “Qualifications for Directors” section.

 

		2020 Proxy Statement		23

Diana J. Walters
Director since 2018     Age: 56		Founder and Managing Member of Amichel, LLC since 2019   Board Committees: Human Resources and Corporate Responsibility, Sustainability, & Safety   Other Public Company Boards: Alta Mesa Resources, Inc., Platinum Group Metals Ltd., Trilogy Metals, Inc.   Qualifications: Ms. Walters has more than 30 years of experience in the natural resources sector, as an equity investor and investment banker, and in other roles within the sector. Ms. Walters is the owner and sole manager of Amichel, LLC, a company that provides advisory services in the field of natural resources. She was the founder of 575 Grant, LLC, a natural resources advisory firm, from 2014 to 2019. She served as the President of Liberty Metals & Mining Holdings, LLC managing direct equity investments in the mining sector and as a member of senior management of Liberty Mutual Asset Management from 2010 to 2014. Ms. Walters has extensive investment experience with both debt and equity through various leadership roles at Credit Suisse, HSBC and other firms. She also served previously as Chief Financial Officer of Tatham Offshore Inc., an independent oil and gas company with assets in the Gulf of Mexico.   As a result of Ms. Walters’ leadership abilities and investments experience, in addition to displaying those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Ms. Walters to continue serving as a director of Atmos Energy.

 

Richard Ware II
Director since 1994     Age: 73		Chairman of Amarillo National Bank in Amarillo, Texas since May 2014, formerly President of Amarillo National Bank from January 1982 to January 2018   Board Committees: Audit and Nominating and Corporate Governance   Qualifications: Mr. Ware has developed substantial knowledge of the financial services industry during his over 45-year career with a nationally recognized banking institution. Mr. Ware has a strong background in assessing and overseeing complex financial matters, as well as leadership experience in supervising principal financial officers and experience on the audit or finance committees of Atmos Energy, Southwest Coca Cola Bottling Company and the board of trustees of Southern Methodist University.   Due to his valuable insight into financial-related matters gained through his extensive banking industry experience and demonstrated leadership, including in his past and present directorships, as well as his demonstration of those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Mr. Ware to continue serving as a director of Atmos Energy.

 

		The Board of Directors recommends that our shareholders vote FOR each of the nominees named above for election to the Board.

 

 

 

24		ATMOS ENERGY

DIRECTOR COMPENSATION

Annual Compensation

The Board believes that the level of non-employee director compensation should be based on Board and committee responsibilities and be competitive with comparable companies. The Board generally targets compensation near the median of our proxy peer group (discussed below). In addition, the Board believes that a significant portion of non-employee director compensation should be awarded in the form of equity to align director interests with the long-term interests of shareholders.

In fiscal 2019, our director fees included the following components:

 

Retainer and Fees
Annual Board Retainer		$100,000
Committee Chair Annual Fees		$15,000 Audit
		$12,500 Human Resources
		$10,000 Nominating & Corporate Governance
		$10,000 Corporate Responsibility, Sustainability, & Safety
Lead Director Fee		$25,000
Annual Grant of Share Units		$150,000

The Company provides our non-employee directors the option to receive all or part of their director fees (in 10% increments) in Atmos Energy common stock through the LTIP. The selected common stock portion of the fee earned in each quarter is issued as soon as possible following the first business day of each quarter. The number of shares issued is equal to the amount of the cash fee that would have been paid to the non-employee director during a quarter divided by the fair market value (average of the highest and lowest prices as reported on the NYSE Consolidated Tape) on the first business day of such quarter. Only whole numbers of shares of common stock may be issued. Fractional shares are paid in cash. Two of our directors elected this option during fiscal 2019.

All directors are reimbursed for reasonable expenses incurred in connection with attendance at Board and committee meetings. A director who is also an officer or employee receives no compensation for his or her service as a director. We provide business travel accident insurance for non-employee directors and their spouses. The policy provides $100,000 coverage to directors and $50,000 coverage to their spouses per accident while traveling on Company business.

Long-Term Compensation

Each non-employee director is also eligible to participate in the Atmos Energy Corporation Equity Incentive and Deferred Compensation Plan for Non-Employee Directors (“Directors Plan”). This plan allows each such director to defer receipt of his or her annual retainer fee or other director fees and to invest such deferred fees in either a cash account or a stock account (in 10% increments). The amount of the fee allocated as a credit to the cash account is converted to a cash balance as of the first business day of each quarter to be credited with interest at a rate equal to 2.5% plus the annual yield reported on a 10-year U.S. Treasury Note for the first business day of January for each plan year. Interest on the accumulated balance of the cash account is credited monthly. The amount of the fee allocated as a credit to the stock account is converted to share units. The fee payable for the quarter is converted to a number of whole and, if applicable, fractional share units on the first business day of that quarter. Share units are also

 

		2020 Proxy Statement		25

credited with dividend equivalents whenever dividends are declared on shares of the Company’s common stock. Such dividend equivalent credits are converted to whole and, if applicable, fractional share units on the same day on which such dividends are paid. At the time of a participating director’s separation from service, plan benefits paid from the cash account are paid in the form of cash. At this time, plan benefits paid from the stock account are paid in the form of shares of common stock issued, which are equal in number to whole share units in the director’s stock account. Any fractional share units are rounded up to a whole share unit prior to distribution.

Each non-employee director also receives an annual grant of share units under the LTIP each year he or she serves on the Company’s Board of Directors. The grants generally occur on the 30th day following the Company’s annual meeting of shareholders each year and must be held until the director’s separation from service. Such share units accrue dividend equivalents and are settled in the same manner as share units under the Directors Plan. On November 5, 2019, the Board approved a change to the annual grant of share units for Directors. Beginning in January 2020, Directors may elect to receive restricted stock units with a one-year vest period in lieu of share units of the same dollar amount.

Annual Review of Compensation

The Company’s non-employee director compensation program reflects best practices, as follows:

 

●

Retainer-only compensation with no fees for attending meetings, which is an expected part of board service;

 

●

Additional retainers for special roles such as lead director and committee chairs to recognize incremental time and effort involved;

 

●

Equity delivered in the form of full-value shares; and

 

●

Director stock ownership requirements of five times the annual cash retainer.

Together with its independent compensation consultant, the HR Committee annually reviews the non-employee director pay program to ensure it remains competitive.

Summary of Cash and Other Compensation

The following table sets forth all compensation paid to our non-employee directors for fiscal 2019:

Director Compensation for Fiscal Year 2019(a)

 

Name		Fees Earned or Paid in Cash ($)(b)					Stock Awards ($)(c)					Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(d)					All Other Compensation ($)(e)					Total   ($)
Robert W. Best				100,000					150,000					—					—					250,000
Kelly H. Compton				100,000					150,000					—					—					250,000
Sean Donohue				93,750					150,000					—					—					243,750
Ruben E. Esquivel(f)				35,125					150,000					9,559					57,245					251,929
Rafael G. Garza				100,000					150,000					—					—					250,000
Richard K. Gordon				129,011					150,000					—					—					279,011
Robert C. Grable				110,000					150,000					—					—					260,000
Nancy K. Quinn				112,500					150,000					4					5					262,509
Richard A. Sampson				115,000					150,000					—					—					265,000
Stephen R. Springer				100,000					150,000					—					—					250,000
Diana J. Walters				93,750					150,000					169					269					244,188
Richard Ware II				100,000					150,000					—					—					250,000

 

26		ATMOS ENERGY

 

(a)	No stock options were awarded to our directors and no non-equity incentive plan compensation was earned by our directors in fiscal 2019.

 

(b)

Non-employee directors may defer all or a part of their annual cash retainer under our Directors Plan. During fiscal 2019, Mr. Esquivel, Ms. Quinn, Mr. Springer, and Ms. Walters elected to defer a portion of their director fees (a total of $106,375), under such plan, which amounts are included in this column and are described in the table below. Deferred amounts are invested, at the election of the participating director, either in a stock account or a cash account. Mr. Grable elected to forego the receipt in cash of a total of 30% of his director fees ($33,000) and instead received shares of our common stock under our LTIP in fiscal 2019, while Mr. Ware elected to receive in lieu of cash a total of 70% of his director fees ($70,000) in common stock under our LTIP. These shares do not contain any restrictions and were awarded on the first trading day of the quarter in which such fees were earned based on the fair market value of our stock on that date. As a result of such elections, a total of 337 shares were issued to Mr. Grable and 717 shares to Mr. Ware on the following dates and at the following fair market values during fiscal 2019: (i) October 1, 2018, at a fair market value of $93.40 per share; (ii) January 2, 2019, at a fair market value of $91.02 per share; (iii) April 1, 2019, at a fair market value of $102.25 per share and (iv) July 1, 2019, at a fair market value of $105.01 per share. Fractional shares were paid in cash subsequent to the end of fiscal 2019.

 

(c)

The amounts in this column represent the fair market value on the date of grant, calculated in accordance with FASB ASC Topic 718, of the share units awarded to each of our non-employee directors (except Mr. Esquivel) under our LTIP for service on the Board in fiscal 2019 on March 8, 2019 at a fair market value of $99.73 per share. As of the last day of fiscal 2019, no non-employee director held any stock options or unvested stock awards. The amount for Mr. Esquivel was calculated as of the effective date of his retirement, February 6, 2019.

 

(d)

The amounts in this column represent the amount of above-market interest earned during fiscal 2019 on the accumulated amount of Board fees deferred to cash accounts. Interest considered above-market is the incremental rate of interest earned above 120% of the 10-year U.S. Treasury Note rate, which is reset on January 1 each year.

 

(e)

The amounts in this column represent the market rate of interest accrued during fiscal 2019 on the accumulated amount of board fees deferred to a cash account, including deferrals made to the cash account in fiscal 2019 for Mr. Esquivel, Ms. Quinn, and Ms. Walters. No director received perquisites and other personal benefits with an aggregate value equal to or exceeding $10,000 during fiscal 2019, except for Mr. Esquivel. Mr. Esquivel received perquisites and other benefits relating to retirement gifts and related items in the amount of $42,354 in recognition of his service on the Board of Directors. All such perquisites and other benefits were valued at the aggregate incremental cost to the Company. Mr. Esquivel served as a director during fiscal 2019 until his retirement on February 6, 2019, following our 2019 annual meeting of shareholders.

 

(f)

Mr. Esquivel elected to receive distributions of cash from his deferred cash account and share units under the LTIP in five annual installments following his retirement. The first installment from his deferred cash account was in the amount of $108,983 and the first installment from his stock account was a total of 6,901 shares issued on February 6, 2019, with a total value of $658,424, based on the fair market value of the shares on that date of $95.41 per share. Mr. Esquivel’s remaining balance of share units has accumulated quarterly dividend equivalents, bringing his aggregate total to 29,551 share units as of September 30, 2019.

Director Deferred Board Fees

The following table sets forth, for each participating non-employee director, the amount of director compensation deferred during fiscal 2019 and cumulative deferred compensation as of September 30, 2019:

Director Deferred Board Fees for Fiscal Year 2019

 

Name		Board Fees Deferred to Stock Account ($)(a)					Dividend Equivalents Earned on Stock Account and Reinvested ($)(b)					Cumulative Board Fees Deferred to Stock Account at September 30 ($)					Board Fees Deferred to Cash Account ($)					Interest Earned on Cash Account ($)(c)					Cumulative Board Fees Deferred to Cash Account at September 30 ($)
Ruben E. Esquivel				—					—					—					17,000					24,450					449,119
Nancy K. Quinn				40,625					12,088					294,586					—					9					177
Stephen R. Springer				32,500					370					32,870					—					—					—
Diana J. Walters				—					—					—					16,250					438					16,688

 

(a)

Ms. Quinn elected to receive 40% of her director fees in deferred stock for fiscal 2019. The $40,625 amount represents 415 share units received in fiscal 2019. Mr. Springer elected to receive 40% of his director fees in deferred stock for fiscal 2019. The $32,500 amount represents 330 share units received in fiscal 2019. Deferrals of amounts in the stock account are treated as though the deferred amounts are invested in our common stock at the fair market value of the shares on the date earned. Shares of our common stock equal to the number of share units in a director’s stock account are issued to such director on the last day of the director’s service.

 

(b)

Dividend equivalents earned on the accumulated amount of share units in the stock account are reinvested in additional share units based on the fair market value of the shares on the quarterly dividend payment dates. Such fair market values during fiscal 2019 were as follows: $97.61 on December 10, 2018; $100.16 on March 11, 2019; $103.23 on June 10, 2019 and $108.09 on September 9, 2019.

 

(c)

The amounts in this column represent interest earned during fiscal 2019 on the accumulated amount of board fees deferred to the cash account, including deferrals made to the cash account in fiscal 2019, at a rate equal to the 10-year U.S. Treasury Note rate (2.62%) on the first day of each plan year (January 1) plus 250 basis points.

 

		2020 Proxy Statement		27

PROPOSAL TWO—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed E&Y to continue as our independent registered public accounting firm for the fiscal year ending September 30, 2020. The firm of E&Y (and its predecessors) has been our independent registered public accounting firm since our incorporation in 1983. It is expected that representatives of E&Y will be present at the annual meeting. The representatives of E&Y will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

In accordance with good corporate governance practices, the Company submits the Audit Committee’s appointment of E&Y as its independent registered public accounting firm to our shareholders for ratification each year. If the appointment of E&Y is not so ratified, the Audit Committee will consider the outcome of the vote in its future selection of an independent registered public accounting firm.

As discussed in “Audit Committee Pre-Approval Policy” below, all professional services provided by E&Y were pre-approved by the Audit Committee in accordance with its pre-approval policy.

 

 

 

		The Board of Directors recommends that our shareholders vote FOR the ratification of the appointment of E&Y as the Company’s independent registered public accounting firm for fiscal 2020.

 

 

Audit and Related Fees

Fees for professional services provided by our independent registered public accounting firm, E&Y, in each of the last two fiscal years, in each of the following categories are:

 

		September 30
		2019				2018
		($ In thousands)
Audit Fees			3,522				3,365
Audit-Related Fees			—				—
Tax Fees			—				15
All Other Fees			—				—
Total Fees			3,522				3,380

Audit Fees.    Fees for audit services include fees associated with the audit of our Annual Report on Form 10-K, the assessment by the firm of our design and operating effectiveness of internal control over financial reporting and the reviews of our quarterly reports on Form 10-Q. In addition, this amount includes fees associated with the issuance of consents and comfort letters relating to the registration of Company securities and assistance with the review of documents filed with the SEC, as well as fees for an audit provided in connection with a statutory filing.

 

28		ATMOS ENERGY

Tax Fees.    Tax fees include fees relating to reviews of tax returns, tax consulting, and assistance with sales and use tax filings and audits.

Audit Committee Pre-Approval Policy

The Audit Committee has adopted a pre-approval policy relating to the provision of both audit and non-audit services by E&Y. Our Audit Committee Pre-Approval Policy provides for the pre-approval of audit, audit-related, tax and other services specifically described in appendices to the policy on an annual basis. Such services are pre-approved up to a specified fee limit. All other permitted services, as well as proposed services exceeding the pre-approved fee limit, must be separately pre-approved by the Audit Committee. Requests for services that require separate approval by the Audit Committee must be submitted to the Audit Committee by both our Chief Financial Officer and our independent registered public accounting firm and must include a joint statement as to whether, in their view, the request is consistent with the SEC’s rules on auditor independence. The policy authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services. The Audit Committee did not delegate pre-approval authority to any members during fiscal 2019 and pre-approved all audit and tax fees for services performed by E&Y in fiscal 2019 in accordance with such pre-approval policy. The Audit Committee further concluded that the provision of these services by E&Y was compatible with maintaining its independence. The Audit Committee Pre-Approval Policy is available on our website at www.atmosenergy.com/esg/corporate-governance.

Audit Committee Report

Management is responsible for the Company’s internal controls and the financial reporting process. E&Y is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and for issuing audit reports on the financial statements and the assessment of the effectiveness of internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes on behalf of the Board.

In discharging its responsibility for the year ended September 30, 2019:

 

●

The Audit Committee has reviewed and discussed the audited financial statements of the Company with management.

 

●

The Audit Committee has discussed with E&Y the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as amended.

 

●

The Audit Committee has received the written disclosures and the letter from E&Y required by the Public Company Accounting Oversight Board regarding E&Y’s communications with the Audit Committee concerning independence, and has reviewed, evaluated and discussed with that firm the written report and its independence from the Company.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (which the Board has approved) that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the year ended September 30, 2019 for filing with the SEC.

Respectfully submitted by the members of the Audit Committee.

Richard A. Sampson, Chair

Kelly H. Compton

Rafael G. Garza

Robert C. Grable

Nancy K. Quinn

Richard Ware II

 

		2020 Proxy Statement		29

PROPOSAL THREE—APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Background of the Proposal

It has been our practice since our February 2011 annual meeting to ask our shareholders to vote to approve the compensation of our named executive officers (“Say-on-Pay”) at every annual meeting. At our annual meeting of shareholders in February 2011 and again in February 2016, our shareholders voted by a substantial margin to adopt the recommendation of our Board to vote on the Say-on-Pay proposal every year at our annual meeting until the next frequency vote on the Say-on-Pay proposal is held, which is expected at our 2021 annual meeting.

Executive Compensation

As discussed below in the “Compensation Discussion and Analysis” section of this proxy statement, the Board believes that our current executive compensation program directly links executive compensation to our financial performance and aligns the interests of our named executive officers with those of our shareholders and customers. Our Board also believes that our executive compensation program provides our named executive officers with a balanced compensation package that includes a reasonable base salary along with annual and long-term incentive compensation plans that provide compensation based on the Company’s financial performance.

The HR Committee annually reviews the Company’s overall approach to executive compensation to see that the Company’s current benefits, perquisites, policies and practices continue to be in line with the best practices of companies in the natural gas distribution industry and to assist us with the hiring and retention of a high-quality management team. The “Compensation Discussion and Analysis” section, beginning on page 31, includes additional details about our executive compensation program. We ask that our shareholders indicate their support for our Say-on-Pay proposal by voting “FOR” the following resolution:

RESOLVED, that the shareholders of Atmos Energy Corporation approve, on an advisory basis, the compensation of its named executive officers for fiscal 2019, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders, pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis and the related compensation tables, notes and narrative.

This Say-on-Pay vote is advisory, therefore it will not be binding on the Company. However, the HR Committee and the Board value the opinions of our shareholders and will take into account the outcome of the vote when considering future executive compensation arrangements.

 

 

 

		The Board of Directors recommends that our shareholders vote FOR this advisory proposal to approve the compensation of our named executive officers.

 

 

 

30		ATMOS ENERGY

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

This Compensation Discussion and Analysis provides an overview of our executive compensation program objectives and strategy, and the elements of compensation that we provide to our named executive officers, including the process we employed in reaching the decisions to pay the specific amounts and types of executive compensation discussed. Our named executive officers for fiscal 2019 are listed below:

 

Name		Title
Kim R. Cocklin(a)		Executive Chairman of the Board
Michael E. Haefner(b)		Past President and Chief Executive Officer
J. Kevin Akers(c)		President and Chief Executive Officer
Christopher T. Forsythe(d)		Senior Vice President and Chief Financial Officer
David J. Park(e)		Senior Vice President, Utility Operations

 

(a)

Mr. Cocklin, who served as President and Chief Executive Officer from October 1, 2010 through September 30, 2015 and Chief Executive Officer of the Company from October 1, 2015 through September 30, 2017, was appointed by the Board of Directors as Executive Chairman of the Board, effective October 1, 2017.

 

(b)

Mr. Haefner, who served as President and Chief Operating Officer of the Company from October 1, 2015 through September 30, 2017, was appointed by the Board of Directors as President and Chief Executive Officer of the Company, effective October 1, 2017. Mr. Haefner resigned as President and Chief Executive Officer effective September 30, 2019, and will retire from the Company and Board of Directors January 2, 2020.

 

(c)

Mr. Akers, who served as President of the Kentucky/Mid-States Division of the Company from May 2007 through December 31, 2016, and Senior Vice President, Safety and Enterprise Services from January 1, 2017 to November 5, 2018, was appointed by the Board as Executive Vice President, effective November 6, 2018. On August 5, 2019, the Board of Directors appointed Mr. Akers as President and Chief Executive Officer, effective October 1, 2019.

 

(d)

Mr. Forsythe, who served as Vice President and Controller of the Company from May 2009 through January 31, 2017, was appointed by the Board of Directors as Senior Vice President and Chief Financial Officer, effective February 1, 2017.

 

(e)

Mr. Park, who served as President of the West Texas Division of the Company from May 2012 through December 31, 2016, was appointed by the Board of Directors as Senior Vice President, Utility Operations, effective January 1, 2017.

Fiscal 2019 Business and Performance Highlights

Over the past eight years, our operating strategy has focused on modernizing our distribution and transmission system to improve the safety and reliability of the system. Since that time, our capital expenditures have increased approximately 13% annually. Our ability to increase capital spending each year to modernize our system has increased our rate base, which has also resulted in increasing earnings per share.

This trend continued during fiscal 2019, as adjusted net income increased to $511.4 million, or $4.35 per diluted share for the year ended September 30, 2019, compared with net income of $603.1 million, or $5.43 per diluted share in the prior year. Adjusted net income for the year ended September 30, 2018, was $444.3 million, or $4.00 per diluted share, after excluding the effects of implementing the TCJA from the prior year.^* Capital expenditures for fiscal 2019 totaled approximately $1.7 billion, with approximately 87% of this amount invested to improve the safety and reliability of our distribution and transmission systems.

 

Diluted Earnings Per Share*

Declared Dividends Per Share

Total Shareholder Return

$4.35

$2.10

23.8%

17th Consecutive Year of EPS Growth

Up from $1.94 for Fiscal 2018

3-year cumulative total shareholder return of 63.3%

 

*

Represents a measure of performance that is calculated and presented other than in accordance with GAAP. See Appendix A for an explanation of these non-GAAP measures, a full reconciliation of these non-GAAP results to our GAAP net income and diluted net income per share results, and a brief discussion of why we use these non-GAAP performance measures.

 

		2020 Proxy Statement		31

Compensation Highlights

Our executive compensation program is built upon our strategy of “Total Rewards.” Under Total Rewards, we take a comprehensive view of all compensation plans and employee benefits that comprise the total package of executive compensation we provide to our named executive officers. Total Rewards is based on the payment of (i) total cash compensation, composed of base salary and the annual incentive compensation award and (ii) total direct compensation, composed of total cash compensation and the annualized present value of long-term incentive compensation awards, being targeted at the 50th percentile of all such compensation for equivalent positions at companies of comparable size in our primary industry, natural gas distribution, which is represented primarily by companies in our proxy peer group, as discussed below under “Competitive Executive Compensation Benchmarking,” beginning on page 40. We believe this strategy fosters a philosophy of “pay for executive performance” through the use of both annual and long-term incentive compensation. The pay mix at target grant date value for our Chief Executive Officer and other named executive officers for fiscal 2019 was primarily long-term and performance-based, as described in the graphics below.

 

 

 

2019 Actual Results

The table below shows the target performance and actual results for our fiscal 2019 performance-based compensation. Based on our fiscal 2019 performance, the following incentive programs resulted in above target payouts. See “Annual Incentive Compensation,” beginning on page 36 and “Long-Term Incentive Compensation,” beginning on page 37.

 

Incentive Program Element		Performance Metric		Target Performance		2019 Actual Performance		2019 Payout (as a % of   Target)
Annual Incentive Plan		EPS (100% of award)		$4.28		$4.35		133%
Long-Term Incentive Program 2017-2019 Cycle		EPS (100% of award)		$11.42		$11.99		150%

 

32		ATMOS ENERGY

Executive Compensation Program Objectives and Strategy

Our Total Rewards strategy is reviewed each year and updated as needed by our HR Committee, with assistance from its independent executive compensation consultant. None of our named executive officers have an employment agreement with the Company. We believe that our executive compensation program provides our named executive officers with a balanced compensation approach each year by providing a market-competitive base salary along with participation in annual and long-term incentive compensation plans that are based solely on the Company’s financial performance. These incentive plans are designed to reward our named executive officers on both an annual and long-term basis if they attain specified target goals, the attainment of which does not require the taking of an unreasonable amount of risk, as discussed in “Compensation Risk Assessment,” beginning on page 57.

Our executive compensation program is designed to ensure that the interests of our named executive officers are closely aligned with those of our shareholders and customers and that our named executive officers are paid above-target incentive compensation only when the Company’s financial performance warrants the payment of such compensation. We believe that our executive compensation program is effective in allowing our organization to attract and retain highly-qualified senior management team members who can deliver outstanding performance. Our executive compensation program is founded upon the following principles:

 

●

Our compensation strategy should be aligned with our overall business strategy of providing safe, quality and reliable service to our customers, seeking ongoing improvements in operating efficiencies and focusing upon growth opportunities.

 

●

Overall pay targets should reflect the intent to pay named executive officer base salaries at the 50th percentile of the competitive market practice with targeted total cash compensation (base salary plus annual incentive award) and targeted total direct compensation (total cash compensation plus annualized present value of grants of long-term equity incentive compensation) to be paid at the 50th percentile of competitive market practice, if established performance targets are reached.

 

●

Key executives charged with the responsibility for establishing and executing business strategy should have incentive compensation opportunities that are aligned with the creation of shareholder value and include upside potential with commensurate downside risk.

 

●

Stock ownership, which is an important component of our executive compensation strategy, should be closely aligned with the interests of our shareholders. To facilitate stock ownership, stock-based incentive plans should be utilized, along with share ownership guidelines.

 

		2020 Proxy Statement		33

 

34		ATMOS ENERGY

Elements of Executive Compensation

The following table summarizes the various elements of executive compensation that we provided to our named executive officers for fiscal 2019, followed by a more detailed discussion of each element, why we pay each element, how we determine the amount we pay under each element and how each element fits into our overall compensation objectives.

 

		Element		Description		Objective within Compensation Program
		Base Salary		Fixed cash compensation, subject to annual review and adjusted in response to changes in performance, duties, strategic importance or competitive salary practices		•  Reflects roles, responsibilities, skills, experience and performance
						•  Provides base compensation at a level consistent with competitive salary practices
		Annual Incentive Compensation		Annual cash performance award based on achievement of Company financial performance measures with option to convert all or portion of award to time-lapse RSUs under LTIP with three-year cliff vesting at 20% premium		•  Increases alignment of senior management and shareholders’ interests by linking pay and performance   •  Promotes achievement of annual Company financial goals by linking pay to attainment of such goals
		Long-Term Incentive Compensation		Performance-based awards payable only if performance goals are achieved during the three-fiscal year performance period. Time-lapse awards also payable, with cliff vesting, at the end of the three-fiscal year period.		•  Motivates and rewards financial performance over a sustained period
						•  Increases alignment of senior management and shareholders’ interests by encouraging share ownership of senior management
						•  Enhances retention of senior management
						•  Rewards strong total shareholder return and earnings growth
		Retirement Benefits		Tax-qualified retirement benefits, supplemental retirement and other benefits		•  Provides for current and future needs of senior management
						•  Enhances recruitment and retention
						•  Follows competitive market practices
		Change in Control Severance Benefits		Change in control severance agreements with contingent amounts payable only if employment is terminated under certain conditions following change in control		•  Enhances retention of senior management by providing continuity of employment
						•  Promotes objective evaluation and execution of potential changes to the Company’s strategy and structure

Base Salary.    The payment of a base salary is intended to provide a stable, fixed amount of income to our named executive officers for their day-to-day job performance. Base salaries represent a relatively small portion of total compensation. However, the amount of base salary paid to each named executive officer is a major determinant of the amounts of all other elements of compensation. Base salaries for each position are compared on the basis of job content primarily to base salaries for similar positions in companies in our proxy peer group generally targeting the 50^th percentile of the competitive market practice.

 

		2020 Proxy Statement		35

The base salaries for all named executive officers were determined by the HR Committee after considering the competitive benchmarking data for each position discussed below, the committee’s subjective evaluation of the performance of each named executive officer, the value of the individual in the position to the Company relative to other positions and their level of experience, the Company’s base salary increase budget and guidelines as well as current economic conditions. As a result, the HR Committee approved base salaries in the amounts noted in the table below for calendar year 2019, with the exception of Mr. Akers whose base salary was effective on November 6, 2018, due to his promotion to Executive Vice President as of that date.

 

Name		Base     Salary ($)
Kim R. Cocklin				700,000
Michael E. Haefner				975,000
J. Kevin Akers				475,000
Christopher T. Forsythe				450,000
David J. Park				425,000

The HR Committee believes that the base salaries provided to each of the named executive officers are appropriate to retain and motivate them, are competitive with salaries offered for similar positions by companies in our proxy peer group and are consistent with our Total Rewards strategy.

Annual Incentive Compensation.    Through our Incentive Plan, we provide our named executive officers an opportunity to earn an annual incentive award based upon the Company’s financial performance each year as measured by our fully diluted EPS. The HR Committee believes that EPS is the most appropriate measurement of our financial performance both on an annual and long-term basis, because it most accurately reflects the growth and performance of our operations. The EPS measurement is also one of the most currently well-known measurements of overall financial performance of public companies. The HR Committee believes that using this measurement as the basis for our incentive compensation plans best aligns the interests of our named executive officers with the interests of our shareholders and customers.

For fiscal 2019, the HR Committee reviewed competitive compensation benchmarking data, as discussed below, to establish an annual target opportunity expressed as a percentage of base salary earned during fiscal 2019 for each named executive officer. Such target incentive award opportunities are reviewed each year and benchmarked against the 50th percentile for similar positions within companies in our proxy peer group as described above in “Executive Compensation Program Objectives and Strategy,” beginning on page 33. The Incentive Plan targets for fiscal 2019 for each of the named executive officers were as follows:

 

Name		Fiscal Year 2019     Incentive Plan Target      as Percentage (%) of Base Salary Earned
Kim R. Cocklin				100
Michael E. Haefner				100
J. Kevin Akers				65
Christopher T. Forsythe				65
David J. Park				60

At its meeting in October 2018, the HR Committee established the threshold, target and maximum performance levels of EPS upon which the Incentive Plan’s awards would be based for fiscal 2019, along with the corresponding percentages of target awards to be paid out. The target EPS performance level was based on our annual business plan and budget and considered such factors as the allowed rates of return in our established service areas, natural

 

36		ATMOS ENERGY

gas pricing and volatility, budgeted capital expenditures, expected growth within our service areas, competitive factors from other service providers and other business considerations embedded in our annual business planning process. The HR Committee has continued to set increasingly challenging EPS target performance levels under the Incentive Plan each fiscal year, as demonstrated by increasing such target performance levels on average by 9% per year over the last three fiscal years. Such target performance levels have also continued to be within the range of announced EPS guidance provided to the public in November of each year.

The following table summarizes the performance levels and actual performance level attainment under the Incentive Plan for fiscal 2019: 

 

Performance Level		Annual EPS Performance		Percentage (%) of Target Award Earned
Below Threshold		<$4.07		No award
Threshold		$4.07		50
Target		$4.28		100
Actual EPS		$4.35		133
Maximum		$4.49		200

Since the actual EPS performance level attained was between the target of $4.28 per share and maximum of $4.49 per share, straight-line interpolation was used to compute the percentage of the target award earned. The HR Committee has the discretion under the Incentive Plan to make downward adjustments to earned awards but may not make upward adjustments. For fiscal 2019, the HR Committee did not use its discretion to make negative adjustments to any awards for any of our named executive officers. However, the HR Committee does place a limit under certain conditions on the amount of earned awards for all our named executive officers. If the Company’s TSR during any fiscal year is negative, the earned award for each such officer for that fiscal year will be limited to the amount earned at the target level of performance. This limitation was not applicable in fiscal 2019 since the Company’s TSR was positive for the fiscal year at 24%.

Awards under the Incentive Plan are paid in cash and are based on the participant’s eligible earnings received during the fiscal year. However, under the terms of the Incentive Plan, participants may elect prior to the beginning of each fiscal year to convert all or a portion of their awards to time-lapse RSUs with three-year cliff vesting, with a premium equal to 20% of the amount converted, and with such units being awarded under our LTIP.

Long-Term Incentive Compensation.    The HR Committee grants awards under our LTIP each fiscal year that are structured with 50% of the targeted long-term value in the form of three-fiscal year performance-based RSUs (measured by cumulative EPS over the three-year period) and with the remaining 50% in the form of time-lapse RSUs with three-year cliff vesting. The HR Committee bases the actual number and value of awards granted primarily on the competitive compensation benchmarking of grants made by the companies in our proxy peer group, as discussed below.

 

TIME-LAPSE RSUs   50%				PERFORMANCE-BASED RSUs   50%
•  Alignment with shareholders   •  Facilitates share ownership   •  Strong retention vehicle				•  Tied to achievement of long-term operational objectives •  Alignment with shareholders   •  Facilitates share ownership   •  Strong retention vehicle

 

		2020 Proxy Statement		37

The HR Committee bases the three fiscal year cumulative EPS target performance levels on the same factors they utilize for our Incentive Plan described above. The HR Committee has also historically set increasingly challenging cumulative three-fiscal year EPS target performance levels each year, by increasing such target performance levels on average of about 17% per year for grants over the last three fiscal years. The HR Committee believes this performance is in alignment with the Company’s shareholder return performance over that same time period. The following table summarizes the performance levels and actual performance attainment levels for the fiscal 2017-2019 performance period relating to the grants of performance-based RSUs awarded in May 2017:

 

Performance Level		Cumulative EPS Performance		Percentage (%) of Target Award Earned
Below Threshold		<$10.28		No award
Threshold		$10.28		50
Target		$11.42		100
Actual Performance (a)		$11.99		150
Maximum		$12.56		200

 

 

(a)  The performance levels and actual performance attainment during the three-fiscal year performance period exclude the effects both of (i) a one-time income tax benefit related to the TCJA during fiscal 2018 of $1.43 per diluted share and (ii) unrealized gains or losses recognized of $0.10 per diluted share by the Company’s nonregulated operations during the portion of the performance period prior to the sale of our natural gas marketing business on January 1, 2017.

Since the actual performance level attained over the performance period was $11.99 per share, each named executive officer earned 150% of their target award. The awards were paid in the form of shares of common stock issued in November 2019 with the named executive officers also receiving cumulative cash dividend equivalents over the three-fiscal year performance period on such awards. As with the payout of Incentive Plan awards, if the Company’s TSR during the performance period is negative, the earned award for each such officer for such performance period will be limited to the amount earned at the target level of performance. This limitation was not applicable for the fiscal 2017-2019 performance period since the Company’s TSR was positive for such performance period at 63%.

At its meeting in October 2018, the HR Committee also established the threshold, target and maximum performance levels of cumulative EPS upon which performance-based RSUs awards would be based for the fiscal 2019-2021 performance period, along with the corresponding percentages of target awards. The three-fiscal year cumulative EPS target performance level was based on the same factors utilized by the HR Committee for our Incentive Plan described above. The HR Committee then awarded grants to the named executive officers at its meeting in May 2019, which were later ratified by the Board, of performance-based RSUs for the fiscal 2019-2021 performance period. The following table shows the three year performance criteria for such period:

 

Performance Level		Cumulative EPS Performance		Percentage (%) of Target Award Earned
Below Threshold		<$13.07		No award
Threshold		$13.07		50
Target		$13.76		100
Maximum		$14.45		200

Retirement Benefits.    All our current named executive officers participate in our Pension Account Plan (“PAP”), which is a qualified, cash balance defined benefit pension plan. Benefits under this plan become vested and non-forfeitable after completion of three years of continuous employment. For any named executive officer who retires

 

38		ATMOS ENERGY

with vested benefits under the plan, the compensation shown as “Salary” in the “Summary Compensation Table for Fiscal Year 2019,” beginning on page 43, would be considered eligible compensation in determining benefits. See the discussion under “Pension Account Plan” on page 48, for more information about this plan.

In addition, all our named executive officers participate in our Retirement Savings Plan (“RSP”), which is a qualified defined contribution plan. Any named executive officer who joined the Company after September 30, 2010, would not be eligible to participate in the PAP. However, in lieu thereof, he or she would receive a fixed annual contribution (“FAC”) which is equal to 4% of his or her eligible earnings. See the discussion under “Retirement Savings Plan” on page 48 for more information about this plan.

Mr. Cocklin, Mr. Haefner and Mr. Akers also participate in the Supplemental Executive Retirement Plan (“SERP”), which provides retirement benefits (as well as supplemental disability and death benefits). Each of these named executive officers who has participated in the plan for at least two years and who has attained the age of 55 is entitled to an annual retirement supplement in an amount that, when added to the annual retirement amount payable to him under the PAP, equals 60% of their total cash compensation. The annual supplemental retirement amount will generally be equal to 60% of the sum of the amount of the participant’s last annual base salary and the amount of their last award under the Incentive Plan, subject to reductions for less than ten years of employment with the Company and for retirement prior to age 62. Mr. Forsythe and Mr. Park participate in the Account Balance SERP, which is a non-qualified defined contribution plan that provides an annual contribution of 25% of the participant’s total annual earnings (base salary and incentive payment under our Incentive Plan) into a notional supplemental retirement account, as well as supplemental disability and death benefits.

The HR Committee believes that these retirement benefits at the amounts provided to our named executive officers are an important component of total compensation and benefits and are required to ensure that our overall executive compensation package remains competitive with executive compensation packages offered by other major public companies in our industry. See the discussion under “Retirement Plans,” beginning on page 48, for more information on our retirement benefits.

Change in Control Severance Benefits.    We have severance agreements in place with each of our named executive officers to provide certain severance benefits for them in the event of the termination of their employment within three years following a “change in control” of the Company (as defined in the severance agreements and described generally in “Change in Control Severance Agreements,” beginning on page 50). The severance agreement for each named executive officer generally provides that the Company will pay such officer as severance pay in one lump sum an amount equal to (a) 2.5 times their total compensation (annual base salary and the higher of the last annual award under the Incentive Plan or the average of the three highest annual awards received under such plan) and (b) the total of (i) an amount that is actuarially equivalent to an additional three years of annual age and service credits payable to the officer under the PAP and (ii) an amount that is actuarially equivalent to an additional three years of Company matching contributions payable to the officer under the RSP.

In addition, each named executive officer is paid (i) an amount that is generally actuarially equivalent to an additional 36 months of health and welfare benefits and (ii) an amount that is actuarially equivalent to 36 months of accident and life insurance coverage, along with disability coverage. If the total of such lump sum severance payment results in the imposition of excise taxes imposed by Section 4999 of the IRC, the named executive officer has the ability to elect to have the payment reduced to a level that will result in no payment of such excise tax. In lieu of reducing the severance payment under the agreement, each named executive officer may elect to have the Company pay the full severance payment amount, thereby leaving such officer responsible for personally paying the excise tax penalties imposed on such “excess parachute payments.”

Additional Information on Named Executive Officer Compensation

The compensation of our Past President and CEO, Mr. Haefner, was higher in fiscal 2019 than that of any of our other named executive officers primarily in recognition of Mr. Haefner’s level of responsibility and the competitive market data for chief executive officers of comparably-sized companies in our proxy peer group. However, Mr. Haefner

 

		2020 Proxy Statement		39

participated in all the same compensation plans as the other named executive officers and was subject to the same performance measurement determinations under our annual and long-term incentive compensation plans. We do not have any individual compensation policies or plans that are not applied consistently to all our named executive officers. Each year, we set our target opportunities in incentive compensation based solely upon competitive market conditions and the other factors discussed below.

In addition, in determining executive compensation, the HR Committee and our Board considered the results of our most recent shareholder advisory vote on executive compensation at our February 6, 2019, meeting of shareholders. Our shareholders approved the compensation of our named executive officers for fiscal 2018, with over 95% of the shares voted in favor of such compensation. Accordingly, the HR Committee and our Board decided to continue to adhere to its pay-for-performance philosophy and did not materially change our executive compensation programs and policies over the last fiscal year as a result of the most recent shareholders’ advisory vote on executive compensation or otherwise. However, the HR Committee and Board will continue to review our executive compensation program each year and will consider the views of our shareholders and other developments during such review.

Competitive Executive Compensation Benchmarking

Like all major corporations, we operate in a competitive environment for talented executives. In August 2018, Pay Governance LLC (“Pay Governance”), our independent compensation consultant through May 2019, provided our HR Committee with a review of the compensation program elements and pay levels for companies similar to us and of comparable size as measured by financial measures and market capitalization for fiscal 2018. The competitive compensation benchmarking data reviewed by the HR Committee included base salary, annual incentive compensation and long-term incentive compensation found in the proxy statements filed by companies in the proxy peer group. The companies in the proxy peer group were selected because they represent those companies considered by the HR Committee to be the most comparable to the Company in terms of business operations, market capitalization and overall financial performance. The companies in the proxy peer group for the following fiscal year are selected annually by the HR Committee after its review of the recommendation of and presentation by its independent compensation consultant, which selection is then reviewed and approved by the Board. Below is our peer group for fiscal 2019. This same proxy peer group was used in the stock performance graph appearing in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

 

Fiscal 2019 Peer Group
Alliant Energy Corporation		NiSource Inc.
Ameren Corporation		ONE Gas, Inc.
CenterPoint Energy, Inc.		Spire Inc.
CMS Energy Corporation		WEC Energy Group, Inc.
DTE Energy Company		Xcel Energy Inc.
National Fuel Gas Company

The annual revenues shown below for the companies in our proxy peer group are for the most recent fiscal year reported. The market capitalizations shown below are as of June 30, 2019.

 

		Revenues ($ Million)					Market Cap.     ($ Million)
25th Percentile				2,033					4,772
50th Percentile				3,605					10,564
75th Percentile				5,657					14,530
Atmos Energy Corporation				2,902					12,349

 

40		ATMOS ENERGY