DEF 14A 1 d18693ddef14a.htm DEFINITIVE PROXY STATEMENT DEFINITIVE PROXY STATEMENT
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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

(Amendment No.     )

Filed by the Registrant  

Filed by a Party other than the Registrant  

Check the appropriate box:

 

  

Preliminary Proxy Statement

      Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

  

Definitive Proxy Statement

  

Definitive Additional Materials

  

Soliciting Material Pursuant to §240.14a-12

Atmos Energy Corporation

(Name of Registrant as Specified in its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

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LOGO


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LOGO   LOGO

December 18, 2020

DEAR SHAREHOLDER:

Atmos Energy is rooted in the belief that safety is at the center of everything we do, and it is our enduring vision to be the safest provider of natural gas services. Fiscal 2020 brought challenges, however our steadfast commitment to safety paired with the guiding principles of our culture, AtmoSpirit, enabled us to emerge stronger and demonstrate the resiliency and reliability of natural gas.

The safety of our employees, customers, communities and shareholders is our first priority. As part of our precautions regarding COVID-19, the annual meeting of shareholders on Wednesday, February 3, 2021, at 9:00 a.m. Central Standard Time, will be conducted virtually via webcast. You will be able to attend the meeting, vote your shares, and submit questions by logging on to www.virtualshareholdermeeting.com/ATO2021.

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 11, 2020, are entitled to vote.

Your vote is very important. Whether you plan to attend the virtual meeting or not, 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,    
LOGO     LOGO
Kim R. Cocklin     J. Kevin Akers
Chairman of the Board     President and Chief Executive Officer


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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

 

2021 ANNUAL MEETING INFORMATION

 

LOGO

 

               

LOGO      

 

               

LOGO      

 

               

LOGO      

 

Meeting Date:

February 3, 2021

                    

Virtual Meeting
Location:

Webcast at
www.virtualshareholder
meeting.com/
ATO2021

                    

Meeting Time:

9:00 a.m. (Central)

                    

Record Date:

December 11, 2020

ANNUAL MEETING BUSINESS

Atmos Energy Corporation’s annual meeting of shareholders will be held February 3, 2021 to:

 

1.

elect the 14 directors named in the proxy statement for one-year terms expiring in 2022;

2.

approve an amendment to our 1998 Long-Term Incentive Plan (“LTIP”) to extend the term of the plan;

3.

ratify the Audit Committee’s appointment of Ernst & Young LLP (“Ernst & Young” or “E&Y”) to serve as the Company’s independent registered public accounting firm for fiscal 2021;

4.

approve, on an advisory basis, the compensation of the named executive officers of the Company for fiscal 2020 (“Say-on-Pay”); and

5.

transact such other business as may properly come before the meeting or any adjournment thereof.

ATTENDING AND VOTING AT THE ANNUAL MEETING

There will be no physical location for the annual meeting. Shareholders may attend, vote, and ask questions at the meeting only by logging in at www.virtualshareholdermeeting.com/ATO2021. To participate, you will need your unique control number included on your proxy card or on the instructions that accompanied your proxy materials.

VOTING

YOUR VOTE IS VERY IMPORTANT TO US. Shareholders of record of our common stock at the close of business on December 11, 2020, will be entitled to notice of, and to vote at, our meeting. Whether or not you plan to attend the annual meeting, we urge you to vote as soon as possible by one of these methods.

 

LOGO

 

 

LOGO

 

 

LOGO

 

By Internet

www.proxyvote.com

 

By Telephone

1.800.690.6903

 

By Mail

Follow the instructions on your proxy card or voting instruction form

If you are a beneficial owner of shares held through a broker, bank or other holder of record, you must follow the voting instructions you receive from the holder of record to vote your shares. Shareholders may also vote during the virtual meeting using the unique control number assigned to him or her. For more information on how to vote your shares, please refer to “Information About the Meeting beginning on page 68.

 

LOGO

Karen E. Hartsfield
Senior Vice President, General Counsel and Corporate Secretary

December 18, 2020

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING

OF SHAREHOLDERS TO BE HELD ON FEBRUARY 3, 2021:

This Proxy Statement, along with the Company’s Annual Report, which includes our Annual

Report on Form 10-K for the fiscal year ended September 30, 2020, are available at www.proxyvote.com.

 



Table of Contents

Table of Contents

 

PROXY STATEMENT OVERVIEW     1  
CORPORATE GOVERNANCE AND OTHER BOARD MATTERS     7  

Independence of Directors

    7  

Board Leadership Structure

    7  

Risk Management and Oversight Framework

    8  

Corporate Governance Guidelines

    9  

Committees of the Board of Directors

    10  

Board and Committee Meetings in 2020

    11  

Succession Planning

    11  

Shareholder Engagement

    12  

Corporate Responsibility and Sustainability

    12  

Code of Conduct

    12  

Executive and Director Share Ownership Requirements .

    13  

Clawback Policy

    13  

Anti-Hedging and Pledging Policy

    13  

Related Party Transactions Review and Approval Policy

    13  

Board Evaluation Process

    15  

Identifying and Evaluating Nominees for Directors

    15  

Shareholder Nominees

    15  

Communication with the Board

    16  
PROPOSAL ONE—ELECTION OF DIRECTORS     17  

Qualifications for Directors

    17  

Director Nominees’ Skills and Experience

    18  

Nominees for Director

    18  
DIRECTOR COMPENSATION     26  

Annual Compensation

    26  

Long-Term Compensation

    26  

Annual Review of Compensation

    27  

Summary of Cash and Other Compensation

    27  

Director Deferred Board Fees

    28  
PROPOSAL TWO—AMENDMENT TO THE 1998 LONG-TERM INCENTIVE PLAN     29  

Description of the Plan

    29  

Share Overhang and Annual Share Usage

    32  
PROPOSAL THREE—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     34  

Audit and Related Fees

    34  

Audit Committee Pre-Approval Policy

    35  

Audit Committee Report

    35  
PROPOSAL FOUR—APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS     36  

Background of the Proposal

    36  

Executive Compensation

    36  
COMPENSATION DISCUSSION AND ANALYSIS     37  

Executive Summary

    37  

Fiscal 2020 Business and Performance Highlights

    37  

Compensation Highlights

    38  

2020 Actual Results

    38  

Executive Compensation Program Objectives and Strategy

    39  

Elements of Executive Compensation

    41  

Additional Information on Named Executive Officer Compensation

    45  

Competitive Executive Compensation Benchmarking

    46  

Independent Compensation Consultant

    47  

Management’s Role in Setting Named Executive Officer Compensation

    47  

Executive Chairman Transition

    48  
NAMED EXECUTIVE OFFICER COMPENSATION     49  

Summary of Cash and Other Compensation

    49  

Grants of Plan-Based Awards

    51  

Outstanding Equity Awards

    52  

Vested Common Stock

    53  

Retirement Plans

    54  

Retirement Plans Tables

    55  

Change in Control Severance Agreements

    56  

Potential Payments Upon Termination or Change in Control

    57  
OTHER EXECUTIVE COMPENSATION MATTERS     63  

Human Resources Committee Report

    63  

Human Resources Committee Interlocks and Insider Participation

    63  

Compensation Risk Assessment

    63  

Chief Executive Officer Pay Ratio

    64  
BENEFICIAL OWNERSHIP OF COMMON STOCK     65  

Security Ownership of Certain Beneficial Owners

    65  

Security Ownership of Management and Directors

    66  

Delinquent Section 16(a) Reports

    67  
INFORMATION ABOUT THE MEETING     68  

Date, Time, and Location

    68  

Internet Availability of Proxy Materials

    68  

Access to the Webcast

    68  

Questions

    68  

Voting Matters

    68  

Proxy Solicitation

    69  

Shareholder Proposals

    69  

Annual Report

    70  

Other Business

    70  
APPENDIX A—RECONCILIATION OF NON-GAAP PERFORMANCE MEASURES TO GAAP     A-1  
APPENDIX B—ATMOS ENERGY CORPORATION 1998 LONG-TERM INCENTIVE PLAN (AS PROPOSED TO BE AMENDED)     B-1  
 

 

  2021 Proxy Statement  


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PROXY STATEMENT OVERVIEW

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider before casting your vote. Please read this entire proxy statement carefully before voting.

2021 Annual Meeting Information

For additional information about our Annual Meeting, see “Information About the Meeting” on page 68.

 

                
LOGO   LOGO        LOGO   LOGO
     

Meeting Date:

February 3, 2021

 

Virtual Meeting Location:

Webcast at www.virtualshareholder

meeting.com/

ATO2021

 

Meeting Time:

9:00 a.m. (Central)

 

Record Date:

December 11, 2020

                
                 

Meeting Agenda and Voting Recommendations

The Atmos Energy Corporation Board of Directors asks shareholders to vote on these matters:

 

Items of Business

  

Board

Recommendation

  

      Page      

Number

 

1.

 

  

 

Election of the 14 directors named as nominees in the proxy statement

 

  

 

FOR

 

  

 

17

2.

 

  

Approval of an amendment to the 1998 Long-Term Incentive Plan

 

   FOR

 

  

 

29

 

3.

 

  

Ratification of selection of independent registered public accounting firm

 

 

  

FOR

 

 

  

 

34

 

 

4.

 

  

Approval, on an advisory basis, of the compensation of our named executive officers

 

   FOR    36

In addition to the above matters, we will transact any other business that is properly brought before the shareholders at the annual meeting.

 

Advance Voting Methods

 

There will be no physical location for the annual meeting. Shareholders may attend, vote, and ask questions at the meeting only by logging in at www.virtualshareholdermeeting.com/ATO2021. To participate, you will need your unique control number included on your proxy card or on the instructions that accompanied your proxy materials. Even if you plan to attend the 2021 annual meeting of shareholders, we urge you to vote in advance of the meeting using one of these advance voting methods.

 

           
LOGO   LOGO   LOGO
   

Via the Internet:

www.proxyvote.com

 

Call Toll-Free:

1.800.690.6903

 

Mail Signed Proxy Card:

Follow the instructions on your proxy card or voting instruction form

           
            

If you are a beneficial owner of shares held through a broker, bank or other holder of record, you must follow the voting instructions you receive from the holder of record to vote your shares.

 


 

  2021 Proxy Statement   1


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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

   

2020 Financial Results and Accomplishments

Fiscal 2020 brought unforeseen challenges, and Atmos Energy remained resilient as we work to achieve our vision of being the safest provider of natural gas services. Earnings and earnings per share increased for the 18th consecutive year. In fiscal 2020, we generated net income of $601.4 million or $4.89 per diluted share. After adjusting for a nonrecurring income tax benefit recognized during fiscal 2020, we recorded adjusted net income of $580.5 million, or $4.72 per diluted share for the year ended September 30, 2020.* Net income for the year ended September 30, 2019, was $511.4 million, or $4.35 per diluted share. Capital expenditures for fiscal 2020 totaled approximately $1.9 billion, with over 85% of this amount invested to improve the safety and reliability of our distribution and transmission systems.

 

   

ADJUSTED DILUTED EARNINGS

PER SHARE*

          DECLARED DIVIDENDS PER SHARE           3-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN    
  $4.72         $2.30         21.6%  
   

18th Consecutive Year of

EPS Growth

          Up from $2.10 for FY2019                

 

9th Year of Organic Growth Strategy

   

Significant Regulatory Developments

 

EPS of $4.72*; 18th consecutive year of EPS growth

 

FY 2020 Dividend of $2.30; 9.5% growth over FY 2019

 

Capital spending of $1.9 billion

 

Maintained strong balance sheet; equity capitalization of 60% as of September 30, 2020

   

 

Implemented $160 million of annualized regulatory outcomes during fiscal 2020

 

Received regulatory orders in most states to defer into a regulatory asset all expenses beyond the normal course of business related to COVID-19

 
 
         

 

 

*

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.

 

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Corporate Governance Highlights

Our corporate governance policies and practices promote the long-term interests of our shareholders, strengthen the accountability of our Board and management, and help build public trust in the Company. Below is a summary of some of the highlights of our corporate governance framework.

 

BOARD PRACTICES

independent lead director

separation of board chair and CEO

11 of 14 director nominees are independent

annual election of all directors

regular executive sessions of independent directors

comprehensive and strategic risk oversight

mandatory retirement age for directors

annual board and committee evaluations

all committees chaired by independent directors

 

SHAREHOLDER MATTERS

robust shareholder engagement

annual say-on-pay voting

majority voting for director elections

no poison pill in force

 

      

OTHER GOVERNANCE PRACTICES

executive and director stock ownership guidelines

clawback policy

prohibition on hedging or pledging stock

 


 

  2021 Proxy Statement   3


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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

 

 

57

 

  2019                        

 

Robert W. Best

Director, Associated Electric & Gas Insurance Services Limited

 

 

 

74

 

 

1997

 

 

             

 

M

   

Kim R. Cocklin(a)

Chairman of the Board, Atmos Energy

 

 

 

69

 

 

2009

                       

Kelly H. Compton

Executive Director, Hoglund Foundation

 

 

 

63

 

 

2016

 

 

 

 

M

 

 

M

           

Sean Donohue

Chief Executive Officer, DFW International Airport

 

 

 

59

  2018             M   M    

Rafael G. Garza

President and Founder, RGG Capital Partners, LLC

 

 

 

60

 

 

2016

 

 

 

 

M

     

 

M

       

Richard K. Gordon

General Partner, Juniper Capital LP and

Juniper Energy LP; Senior Advisor,

Juniper Capital II and

Juniper Capital III

 

 

 

71

 

 

2001

 

 

Lead

Director

     

 

M

 

 

M

 

 

C

 

 

C

Robert C. Grable

Founding Partner, Kelly Hart & Hallman LLP

 

  74   2009     M       C       M

Nancy K. Quinn

Independent Energy Consultant

 

 

 

67

 

 

2004

 

 

 

 

M

 

 

C

     

 

M

 

 

M

Richard A. Sampson

General Partner and Founder, RS Core Capital, LLC

 

 

 

70

 

 

2012

 

 

 

 

C

 

 

M

         

 

M

Stephen R. Springer(a)

Director, Atmos Energy

 

  74   2005                   M    

Diana J. Walters

Founder and Managing Member, Amichel, LLC

 

 

 

57

 

 

2018

 

 

     

 

M

     

 

M

   

Richard Ware II

Chairman, Amarillo National Bank

 

 

 

74

 

 

1994

 

 

 

 

M

     

 

M

       

Frank Yoho

Former Executive Vice President and President of Natural Gas, Duke Energy

 

 

 

61

 

 

2020

 

 

 

 

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.

 

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Director Nominee Composition

 

Gender Diversity   Tenure   Independence
 
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Compensation Highlights

Our compensation programs are designed to both attract and retain top-level executive talent and align the long- and short-term interests of our executives with those of our shareholders. We received more than 95% shareholder support for our “Say-on-Pay” vote in 2020, which our Human Resources Committee considers to be among the most important items of feedback about our compensation programs. We recognize and reward our executive officers through compensation arrangements that directly link their pay to the Company’s performance, and we ensure a strong alignment of interests with our shareholders by including a significant amount of equity in the overall mix of pay. Our pay mix includes base salary, an annual incentive cash bonus plan (“Incentive Plan”), and a long-term incentive plan (“LTIP”) under which we grant time-based and performance-based restricted stock units (“RSUs”).

 

Fiscal 2020 Target Compensation Mix

 

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  2021 Proxy Statement   5


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Key Features of Our Executive Compensation Program

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Executive officer awards under the Incentive Plan are generally capped at 200% of target. These awards are capped at target if the Company’s total shareholder return (“TSR”) for the performance period is negative.

 

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Fifty percent of long-term incentive compensation is performance-contingent.

 

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Clawback policy that provides for the repayment or forfeiture of all incentive-based compensation in certain circumstances.

 

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Executives and directors are subject to stock ownership guidelines and retention requirements.

 

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Severance under our change in control severance arrangements does not exceed three times the sum of a named executive officer’s base salary and their most recent annual award of incentive compensation.

 

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Our change in control severance arrangements are triggered only by an involuntary job loss or substantial diminution of duties.

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We have no employment agreements with our officers.

 

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We prohibit hedging and pledging of our securities at any time by any employees or directors.

 

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There is no single trigger vesting of outstanding awards under our LTIP upon a change in control.

 

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Our change in control severance arrangements do not contain excise tax gross-up payments.

 

  LOGO

We have no excessive perquisites for executives.

 

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We pay dividends on performance-contingent stock awards when vesting is complete and then only if performance targets are met.

 

 

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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 was the Executive Chairman of the Company until December 10, 2020; 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 a 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 Chairman, the President and CEO or any other Company employee, and they generally meet in a private session with the Chairman and the President and CEO at regularly scheduled Board meetings.

 

  2021 Proxy Statement   7


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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 2020, 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  


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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.

 

 

LOGO

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.

 

  2021 Proxy Statement   9


Table of Contents

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

Frank Yoho

 

Meetings Held in

Fiscal 2020: 5

  

 

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, Mr. Ware, and Mr. Yoho.

  

                                     

  
  

 

HUMAN

RESOURCES

COMMITTEE

 

Nancy K. Quinn

(Chair)

Kelly H. Compton

Richard K. Gordon

Richard A. Sampson

Diana J. Walters

 

Meetings Held in

Fiscal 2020: 3

  

 

The Human Resources Committee reviews and makes recommendations to the Board regarding executive compensation policy and strategy, and specific compensation recommendations for 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 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 2020: 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.

 

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CORPORATE

RESPONSIBILITY,

SUSTAINABILITY,

& SAFETY

COMMITTEE

 

Richard K. Gordon (Chair)

Robert W. Best

Sean Donohue

Nancy K. Quinn

Stephen R. Springer

Diana J. Walters

Frank Yoho

 

Meetings Held in

Fiscal 2020: 3

  

 

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 2020: 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 2020    

In fiscal 2020, the Board held 14 meetings. 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 5, 2020.

Succession Planning

The Board is actively engaged and involved in succession planning, including detailed discussions of the Company’s leadership and succession plans for 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.

Succession planning does not stop with senior officers. We perform succession planning annually throughout the organization to ensure that we are building a strong bench of talent capable of performing at the highest levels. Not only is talent identified, but potential paths of development are discussed to ensure that employees have an opportunity to build their skills and are well-prepared for future roles. The strength of our succession planning process is evident through our long history of promoting our senior leadership from within the organization.

 

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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.

 

 

LOGO

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 2020 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.

 

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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 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

Chairman of the Board

   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 26) 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. Under the guidelines, a related party transaction is any transaction (or series of related transactions) involving the Company and in which the amount involved exceeds $100,000 and a related person has a direct or indirect material interest. A “related person” is:

 

 

A director or executive officer of the Company;

 

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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.

Under the guidelines, all 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. 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 an executive officer whose compensation will not exceed $120,000 in a fiscal year, provided the 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 $172,070 in total compensation for fiscal 2020. Robert Cook, Mr. Best’s son-in-law, received $367,266 in total compensation for fiscal 2020.

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 11, 2020. During fiscal 2020, 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 $100,000 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 $310,000 in fees during fiscal 2020. 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.

 

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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.

 

 

LOGO

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 12, 2021, the 25th day following the day on which notice of the meeting is to be sent, December 18, 2020. 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 11, 2020) 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.

 

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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.

 

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PROPOSAL ONE—ELECTION OF DIRECTORS

The Board is nominating the 14 individuals below to continue serving as directors and whose one-year terms will expire in 2022. 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.

 

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Director Nominees’ Skills and Experience

 

 

   

 

Years  

Serving  

  Independent     Diversity    

 

Public Co  
Leadership  

 

 

Public Co  
BOD  

 

 

Industry  
Experience  

  Safety    

 

Regulatory/  

Policy  

 

 

Strategy/  

M&A  

 

 

Finance/  

Accounting  

         

 

J. Kevin Akers

 

 

 

1

 

        🌑

 

      🌑

 

  🌑

 

  🌑

 

  🌑

 

 
         

 

Robert W. Best

 

 

 

23

 

  🌑

 

      🌑

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

 
         

 

Kim R. Cocklin

 

 

 

11

 

        🌑

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

 
         

 

Kelly H. Compton

 

 

 

4

 

  🌑

 

  🌑

 

                    🌑

 

         

 

Sean Donohue

 

 

 

2

 

  🌑

 

              🌑

 

  🌑

 

     
         

 

Rafael G. Garza

 

 

 

4

 

  🌑

 

  🌑

 

                🌑

 

  🌑

 

         

 

Richard K. Gordon

 

 

 

19

 

  🌑

 

            🌑

 

        🌑

 

  🌑

 

         

 

Robert C. Grable

 

 

 

11

 

  🌑

 

            🌑

 

      🌑

 

     
         

 

Nancy K. Quinn

 

 

 

16

 

  🌑

 

  🌑

 

    🌑

 

  🌑

 

        🌑

 

  🌑

 

         

 

Richard A. Sampson

 

 

 

8

 

  🌑

 

                    🌑

 

  🌑

 

         

 

Stephen R. Springer

 

 

 

15

 

          🌑

 

  🌑

 

      🌑

 

  🌑

 

 
         

 

Diana J. Walters

 

 

 

2

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

        🌑

 

  🌑

 

         

 

Richard Ware II

 

 

 

27

 

  🌑

 

                        🌑

 

         

 

Frank Yoho

 

 

 

-

 

  🌑

 

      🌑

 

      🌑

 

  🌑

 

  🌑

 

  🌑

 

  🌑

 

         

 

% of Board

     

 

79%

 

 

29%

 

 

36%

 

 

36%

 

 

64%

 

 

36%

 

 

50%

 

 

71%

 

 

57%

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 2022.

 

 

J. Kevin Akers

 

   LOGO

  Director since 2019

 

  Age: 57

 

  

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 29 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.

 

 

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Robert W. Best

 

   LOGO

  Director since 1997

 

  Age: 74

 

  

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

 

   LOGO

  Director since 2009

 

  Age: 69

 

  

Chairman of the Board since December 10, 2020; formerly Executive Chairman of the Board from October 2017 to December 2020; 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 Chairman of the Board, effective December 10, 2020. He was previously 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.

 

 

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Kelly H. Compton

 

   LOGO

  Director since 2016

 

  Age: 63

 

  

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

 

   LOGO

  Director since 2018

 

  Age: 59

 

  

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.

 

 

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Rafael G. Garza

 

   LOGO

  Director since 2016

 

  Age: 60

 

  

President and Founder of RGG Capital Partners, LLC and Bravo Equity Partners, LP in Fort Worth, Texas since 2000, and Founder, Managing Director, and Executive Vice Chairman of Vantage Bank Texas since 2018

 

Board Committees: Audit and Nominating and Corporate Governance

 

Qualifications:

For RGG Capital Partners, LLC and Bravo Equity Partners, LP, private investment companies, Mr. Garza has been responsible for managing various portfolio companies with a particular focus on the U.S. and Mexico. Mr. Garza serves as Executive Vice Chairman of Vantage Bank Texas. Previously, Mr. Garza held numerous senior leadership positions with E&Y’s Audit and Advisory and Corporate Finance divisions. Due to Mr. Garza’s involvement in private investments, banking, and corporate finance, he has significant experience in audit, complex financial matters, mergers and acquisitions, and financial strategy. Mr. Garza also has served as a leader on the boards of several non-profit organizations, and currently serves on the boards of 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

 

   LOGO

  Director since 2001

 

  Age: 71

 

  

General Partner of Juniper Capital LP in Houston, Texas since March 2003; General Partner of Juniper Energy LP in Houston, Texas since August 2006; Senior Advisor of Juniper Capital II in Houston, Texas since January 2020; and Senior Advisor of Juniper Capital III in Houston, Texas since January 2020

 

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 oversees 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.

 

 

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Robert C. Grable

 

   LOGO

  Director since 2009

 

  Age: 74

 

  

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

 

   LOGO

  Director since 2004

 

  Age: 67

 

  

Independent energy consultant since July 1996

 

Board Committees: Audit, Human Resources (Chair), Corporate Responsibility, Sustainability, & Safety, and Executive

 

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. Ms. Quinn was also previously a member of the boards of Helix Energy Solutions Group, 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.

 

 

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Richard A. Sampson

 

   LOGO

  Director since 2012

 

  Age: 70

 

  

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

 

   LOGO

  Director since 2005

 

  Age: 74

 

  

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 more than 30 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.

 

 

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Diana J. Walters

 

   LOGO

  Director since 2018

 

  Age: 57

 

  

Founder and Managing Member of Amichel, LLC since 2019

 

Board Committees: Human Resources and Corporate Responsibility, Sustainability, & Safety

 

Other Public Company Boards: 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. Ms. Walters also served as the Chairperson of the Audit Committee for Alta Mesa Resources, Inc.

 

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

 

   LOGO

  Director since 1994

 

  Age: 74

 

  

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.

 

 

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Frank Yoho

 

   LOGO

  Director since 2020

 

  Age: 61

 

  

Former Executive Vice President and President of Natural Gas of Duke Energy

 

Board Committees: Audit and Corporate Responsibility, Sustainability, & Safety

 

Qualifications:

Mr. Yoho has more than 35 years of experience in the natural gas industry in a variety of roles that included marketing, business development and gas supply. In his role as Executive Vice President and President of Natural Gas, Mr. Yoho was involved in the strategic planning process for Duke Energy. He was instrumental in the integration of Piedmont Natural Gas into Duke Energy and oversaw operations, commercial, regulatory and community responsibilities for all aspects of the natural gas business for Duke Energy. Previously, Mr. Yoho was Senior Vice President and Chief Commercial Officer of Piedmont Natural Gas. He previously served on the boards of the American Gas Association, Southern Gas Association and Energy Production and Infrastructure Center (EPIC) at UNC Charlotte and the board of trustees for the Institute of Gas Technology.

 

Mr. Yoho’s knowledge and expertise in the energy industry and leadership abilities developed at Duke Energy, Piedmont Natural Gas and industry associations, as well as his demonstration of those attributes discussed in the “Qualifications for Directors” section, the Board has nominated Mr. Yoho to continue serving as a director of Atmos Energy.

 

 

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

 

 

 

  2021 Proxy Statement   25


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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 2020, our director fees remained unchanged from fiscal 2019 and 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 cash director retainer and 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 2020.

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 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 and 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

 

26   ATMOS ENERGY  


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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 to the number of whole share units credited to 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 based on his or her election of share units or restricted stock units with a one-year vest period 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. Share units accrue dividend equivalents and are settled in the same manner as share units under the Directors Plan. Restricted stock units earn dividends paid in cash at the time dividends are paid to the Company’s shareholders. Share units must be held until the director’s separation from service.

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 2020:

Director Compensation for Fiscal Year 2020(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

 

  

 

—  

 

  

 

1,581

 

  

 

251,581

 

 

Sean Donohue

  

 

100,000

 

  

 

150,000

 

  

 

—  

 

  

 

1,581

 

  

 

251,581

 

 

Rafael G. Garza

  

 

100,000

 

  

 

150,000

 

  

 

—  

 

  

 

—  

 

  

 

250,000

 

 

Richard K. Gordon

  

 

135,000

 

  

 

150,000

 

  

 

—  

 

  

 

—  

 

  

 

285,000

 

 

Robert C. Grable

  

 

110,000

 

  

 

150,000

 

  

 

—  

 

  

 

1,581

 

  

 

261,581

 

 

Nancy K. Quinn

  

 

112,500

 

  

 

150,000

 

  

 

4

 

  

 

4

 

  

 

262,508

 

 

Richard A. Sampson

  

 

115,000

 

  

 

150,000

 

  

 

—  

 

  

 

1,581

 

  

 

266,581

 

 

Stephen R. Springer

  

 

100,000

 

  

 

150,000

 

  

 

—  

 

  

 

1,581

 

  

 

251,581

 

 

Diana J. Walters

  

 

100,000

 

  

 

150,000

 

  

 

624

 

  

 

719

 

  

 

251,343

 

 

Richard Ware II

  

 

100,000

 

  

 

150,000

 

  

 

—  

 

  

 

1,581

 

  

 

251,581

 

 

Frank Yoho

  

 

41,667

 

  

 

99,965

 

  

 

—  

 

  

 

—  

 

  

 

141,632

 

 

 

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(a)

No stock options were awarded to our directors and no non-equity incentive plan compensation was earned by our directors in fiscal 2020.

 

(b)

Non-employee directors may defer all or a part of their annual cash retainer and fees under our Directors Plan. During fiscal 2020, Ms. Quinn, Mr. Springer, and Ms. Walters elected to defer a portion of their director fees (a total of $105,000), 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 2020, 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 313 shares were issued to Mr. Grable and 667 shares to Mr. Ware on the following dates and at the following fair market values during fiscal 2020: (i) October 1, 2019, at a fair market value of $113.57 per share; (ii) January 2, 2020, at a fair market value of $110.73 per share; (iii) April 1, 2020, at a fair market value of $96.18 per share and (iv) July 1, 2020, at a fair market value of $100.55 per share. Fractional shares were paid in cash subsequent to the end of fiscal 2020.

 

(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 or restricted stock units awarded to each of our non-employee directors (except Mr. Yoho) under our LTIP for service on the Board in fiscal 2020 on March 6, 2020 at a fair market value of $109.09 per share. Mr. Yoho received 1,000 share units under our LTIP for his service on the Board beginning May 1, 2020, at a fair market value of $99.97 per share. Per their election, each of Ms. Compton, Mr. Donohue, Mr. Grable, Mr. Sampson, Mr. Springer, and Mr. Ware received 1,375 restricted stock units of which all had not vested at 2020 fiscal year end.

 

(d)

The amounts in this column represent the amount of above-market interest earned during fiscal 2020 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)

For Ms. Quinn and Ms. Walters, the amounts in this column represent the market rate of interest accrued during fiscal 2020 on the accumulated amount of board fees deferred to a cash account, including deferrals made to the cash account in fiscal 2020. For Ms. Compton, Mr. Donohue, Mr. Grable, Mr. Sampson, Mr. Springer, and Mr. Ware, the amounts in this column represent the dividends paid on their restricted stock units on June 8, 2020, and September 8, 2020. No director received perquisites and other personal benefits with an aggregate value equal to or exceeding $10,000 during fiscal 2020.

Director Deferred Board Fees

The following table sets forth, for each participating non-employee director, the amount of director compensation deferred during fiscal 2020 and cumulative deferred compensation as of September 30, 2020:

Director Deferred Board Fees for Fiscal Year 2020

 

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

($)

       

Nancy K. Quinn

 

 

45,000

 

 

 

14,525

 

 

 

354,111

 

 

 

—  

 

 

 

8

 

 

 

185

 

 

Stephen R. Springer

 

 

40,000

 

 

 

1,312

 

 

 

74,183

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

Diana J. Walters

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

20,000

 

 

 

1,343

 

 

 

38,031

 

 

 

(a)

Ms. Quinn elected to receive 40% of her director fees in deferred stock for fiscal 2020. The $45,000 amount represents 430 share units received in fiscal 2020. Mr. Springer elected to receive 40% of his director fees in deferred stock for fiscal 2020. The $40,000 amount represents 382 share units received in fiscal 2020. 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 2020 were as follows: $106.44 on December 9, 2019; $105.40 on March 9, 2020; $104.89 on June 8, 2020 and $96.38 on September 8, 2020.

 

(c)

The amounts in this column represent interest earned during fiscal 2020 on the accumulated amount of board fees deferred to the cash account, including deferrals made to the cash account in fiscal 2020, at a rate equal to the 10-year U.S. Treasury Note rate (1.88%) on the first day of each plan year (January 1) plus 250 basis points.

 

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PROPOSAL TWO—AMENDMENT TO THE 1998 LONG-TERM INCENTIVE PLAN

Description of Plan

Background and Purpose. Our shareholders are being asked to approve an amendment to our LTIP to extend the term for an additional ten year period expiring on November 11, 2030. We are not requesting approval of any other amendments to the LTIP at this time. The proposed amendment would allow the Company to continue to attract, retain and reward the best available personnel for our positions of substantial responsibility. Accordingly, the Board believes that approval of the amendment to extend the term of the plan is advisable and is in the best interests of our shareholders.

The complete text of the LTIP, as amended, is set forth in Appendix B to this proxy statement. The summary of the LTIP provided herein is qualified in its entirety by reference to Appendix B.

The LTIP represents an integral part of our compensation program for key employees and non-employee directors. The Board of Directors originally adopted the LTIP in August 1998, which our shareholders approved in February 1999. Our shareholders also approved amendments to the LTIP in February 2002, February 2007, February 2011, and February 2016 primarily to add shares to the total number of shares available for issuance under the plan and extend the term of the plan. The LTIP is a comprehensive, omnibus-type long-term incentive compensation plan, under which we have provided discretionary awards of time-lapse restricted stock units, performance-based restricted stock units, shares of restricted stock, shares of bonus stock and non-qualified stock options to our key employees since the plan’s adoption. We have also awarded to each of our non-employee directors restricted stock units with a one-year vest period and share units which vest upon grant with an equivalent number of shares issued to such directors upon their retirement. Other types of equity compensation may be awarded under the LTIP, including without limitation, incentive stock options and stock appreciation rights (“SARs”), other stock unit awards or stock-based forms of awards to help attract, retain and reward our key employees and non-employee directors.

Key LTIP Features: The LTIP, as proposed to be amended, continues to include the following features and we have implemented responsible grant practices that help protect the interests of our shareholders:

 

 

the HR Committee, an independent committee of the Board, administers the plan;

 

 

the annual “burn rate” under the LTIP (defined as the annual amount of equity granted divided by the average number of shares outstanding) over the last three years has averaged less than 0.3% per year;

 

 

no options or SARs may be granted with exercise prices below fair market value on the date of grant;

 

 

dividends or dividend equivalents cannot be paid out on performance-based awards unless and until the shares or units are earned; and

 

 

nearly all employee time-based awards have been granted with three-year cliff vesting requirements.

Eligibility for Participation. Any of our employees, approximately 4,700 as of September 30, 2020, including any employee who is also a director or officer, and any non-employee director is eligible to participate in the LTIP. However, since the LTIP was approved in February 1999, only our officers and other key employees (177 employees during fiscal 2020) as well as non-employee directors (12) have participated in the LTIP. The LTIP is intended to motivate our employee participants using performance-related incentives linked to longer range performance goals and the interests of our shareholders. These incentives and long-range performance goals have increased and should continue to increase the interests of employees in our overall performance and encourage such persons to continue their services for us.

Administration. The LTIP is administered and interpreted by the HR Committee. Actions taken by the HR Committee with respect to the LTIP have been and will continue to be taken by those members who are non-employee directors

 

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and who qualify as “non-employee directors” under the rules promulgated under Section 16 of the Exchange Act, insofar as such actions are affected by Section 16. The HR Committee determines eligible persons to whom awards will be granted, as well as all terms, conditions, performance criteria and restrictions applicable to each award. In addition to any other powers, and subject to the provisions of the LTIP, the HR Committee (i) interprets the LTIP, (ii) prescribes, amends and rescinds any rules and regulations necessary or appropriate for the administration of the LTIP and (iii) makes such other determinations and takes other actions as it deems necessary or advisable in the administration of the LTIP. Any interpretation, determination or action made or taken by the HR Committee is binding and conclusive on all interested parties.

General Description of Plan. The LTIP, which became effective as of October 1, 1998, previously had a termination date of September 30, 2021. Our Board has approved the extension of this termination date to November 11, 2030, subject to shareholder approval of this Proposal Two. The Board may amend, suspend or terminate the LTIP, in whole or in part, at any time; provided, however, that any amendment which requires shareholder approval shall be made only with shareholder approval. The maximum cumulative number of shares that may be issued under the LTIP shall not exceed 11,200,000 shares of common stock (which would represent approximately 9% of the Company’s common stock outstanding as of September 30, 2020), including shares of common stock previously subject to awards which are forfeited, terminated, cancelled or rescinded, settled in cash in lieu of common stock or exchanged for awards that do not involve common stock, or expire unexercised. Shares of common stock may be available from authorized but unissued shares of common stock or common stock we may purchase on the open market or otherwise. No one participant can receive, during any fiscal year, awards of stock options and SARs covering more than 500,000 shares. The LTIP allows us to enter into award agreements to grant restricted stock/restricted stock units, tandem awards, performance units, performance shares, bonus stock, nonqualified stock options, incentive stock options, SARs, and other stock unit awards or stock-based forms of awards.

Restricted Stock/Restricted Stock Units. The HR Committee may grant shares of restricted stock or restricted stock units to participants in such amounts and for such duration as it shall determine. Each restricted stock/restricted stock unit grant is evidenced by an award agreement specifying the number of shares of common stock and/or the number of restricted stock units awarded, the period of restriction, as well as the conditions and performance goals of us, our subsidiary or any of our divisions that must be satisfied prior to removal of the restriction and such other provisions as the HR Committee determines. The participants receiving restricted stock/restricted stock unit awards generally are not required to pay for them (except applicable tax withholding) other than by rendering services to us.

The restriction period of restricted stock and/or restricted stock units commences on the date of grant and expires upon satisfaction of the conditions set forth in the award agreement (if any). Such conditions may provide for vesting based on (i) length of continuous service, (ii) achievement of specific business objectives, (iii) increases in performance compared to specified indices, (iv) attainment of specified growth rates or (v) other comparable performance measurements, as determined by the HR Committee in its sole discretion.

Performance-Based Awards. The HR Committee may issue performance awards in the form of either performance units or performance shares, subject to the performance goals and performance period it determines. The extent to which performance measures are met will determine the value of each performance unit or the number of performance shares earned by the participant. The terms and conditions of each performance award are set forth in the applicable award agreement. Payment of the amount due upon settlement of a performance award is made in a lump sum or installments in cash, shares of common stock or a combination thereof as determined by the HR Committee.

Bonus Stock. The HR Committee may award shares of bonus stock to participants under the LTIP without cash consideration. In the event the HR Committee assigns restrictions on the shares of bonus stock awarded under the LTIP, then such shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated if the restrictions have not lapsed or vested. If any vesting condition is not met on the shares, then such shares must be returned to us, without any payment from us, within 60 days.

 

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Stock Options. Although the HR Committee has not granted stock options under the LTIP since March 2003, it may still grant stock options under the existing provisions of the LTIP, including non-qualified stock options (“NQSOs”) and incentive stock options (“ISOs”) to employees and directors; provided, however, that non-employee directors may receive only NQSOs. The terms applicable to each option grant, including the exercise price, expiration date and other material conditions upon which the options may be exercised, will be detailed in an award agreement. We do not require any consideration to be paid by a recipient to us in exchange for the granting or extension of stock options. We require consideration to be paid by a recipient only at the time of the exercise of the option in the amount of the exercise price. Stock option grants entitle the participant to purchase stock at prices not less than 100% of the fair market value on the date of grant.

The HR Committee may not grant ISOs under the LTIP to any employee which would permit the aggregate fair market value of the common stock with respect to which ISOs are exercisable for the first time during any calendar year to exceed $100,000. Any stock option granted under the LTIP which is designated as an ISO that exceeds this limit or otherwise fails to qualify as an ISO will be a NQSO. If an option qualifies as either an ISO or NQSO, there will generally be no federal income tax consequences to either the recipient or us upon the issuance of such options. In the case of an ISO, there should also be no federal income tax consequences to either the recipient or us upon its exercise. However, if a stock option is categorized as a NQSO, the recipient must recognize compensation income in the year of exercise equal to the difference between the fair market value of the common stock on the date of exercise and the exercise price, while we will receive a corresponding deduction for compensation paid for the same amount.

Stock Appreciation Rights. SARs entitle the participant at his or her election to surrender to us the SARs, or portion thereof, and to receive from us in exchange therefor, cash or shares in an amount equal to the excess of the fair market value per share over the price per share specified in such SARs, multiplied by the total number of shares of the SARs being surrendered. We may satisfy our obligation upon exercise of the SARs by the distribution of that number of shares of common stock having an aggregate fair market value equal to the amount of cash otherwise payable to the participant. A cash settlement would be made for any fractional share interests. In addition, the HR Committee may grant two or more incentives in one award in the form of a “tandem award,” so that the right of the participant to exercise one incentive shall be cancelled if, and to the extent, the other incentive is exercised.

Other Stock-Based Awards. The HR Committee may issue to participants, either alone or in addition to other awards made under the LTIP, stock unit awards, which may be in the form of common stock or other securities. The value of such award will be based, in whole or in part, on the value of the underlying common stock or other securities. The HR Committee, in its sole and complete discretion, may determine that an award may provide to the participant (i) dividends or dividend equivalents (payable on a current or deferred basis) and (ii) cash payments in lieu of or in addition to an award. Subject to the provisions of the LTIP, the HR Committee determines the terms, restrictions, conditions, vesting requirements and payment rules of the award as specified in an award agreement.

Termination of Service Following Change in Control. In the event of the termination of service of a participant within three years following a change in control (as defined in the text of the LTIP attached hereto as Appendix B), at the effective date of such termination, all unvested installments of any awards outstanding are automatically be accelerated and exercisable in full and all restrictions on any award are automatically terminated.

New Plan Benefits. Because any awards under the LTIP are granted in the discretion of the HR Committee and ratified by the Board, the total amount of incentive compensation that will be awarded in the future under the LTIP is not determinable at this time. For information on fiscal 2020 awards under the LTIP to our non-employee directors, see the “Director Compensation For Fiscal Year 2020” table on page 27 and to our named executive officers see the “Grants of Plan-Based Awards for Fiscal Year 2020” table on page 51.

 

  2021 Proxy Statement   31


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Historical Grants of Awards under the LTIP. The following table sets forth the number of shares subject to all stock options granted under the LTIP and all other equity awards under the LTIP since its adoption in 1998 through September 30, 2020, irrespective of whether the awards have been exercised, cancelled, have vested or are still outstanding.

 

Name and Principal Position

  

# of Shares

Covered by

Options

    

# of Shares

Covered by

Stock Awards

 

J. Kevin Akers, President and Chief Executive Officer

     10,500        47,428  

Kim R. Cocklin, Chairman of the Board

     —          447,502  

Christopher T. Forsythe, Senior Vice President and Chief Financial Officer

     —          43,233  

David J. Park, Senior Vice President, Utility Operations

     —          30,714  

Karen E. Hartsfield, Senior Vice President, General Counsel, and Corporate Secretary

     —          13,084  

All Current Executive Officer as a Group

     10,500        598,854  

All Non-Employee Directors as a Group

     448,492        288,706  

All Employees as a Group (Excluding Executive Officers)

     153,001        1,378,201  

Share Overhang and Annual Share Usage

While the use of equity awards is an important part of our overall executive compensation program, we are also aware of our responsibility to our shareholders to exercise judgment in the granting of such awards. As a result, we monitor both our “share overhang” and annual share usage, or “burn rate,” and the LTIP’s potential impact on our shareholders as described below. We note that the proposed amendment to the LTIP does not request any additional shares for issuance thereunder.

Share Overhang. As of the end of fiscal 2020, we had 952,586 shares of common stock subject to outstanding equity awards, of which 591,547 shares were subject to unvested restricted stock units (with performance-based restricted stock units at target performance) and 361,039 shares were subject to director share units, for which shares will be issued to our non-employee directors upon retirement. Additionally, a total of 1,288,782 shares were available for future equity awards under the LTIP as of such date. The total share overhang of 2,241,368 shares represents approximately 1.8% of our common stock outstanding (the “overhang percentage”) at September 30, 2020.

The annual share usage, or burn rate, under the LTIP for the last three fiscal years was as follows:

 

     Fiscal 2020     Fiscal 2019     Fiscal 2018     Average        

A Time-Lapse RSUs Granted

  

 

112,237

 

 

 

122,773

 

 

 

133,211

 

 

 

122,740

 

 

B Performance-Based RSUs Granted

  

 

87,748

 

 

 

118,699

 

 

 

115,499

 

 

 

107,315

 

 

C Total Units Granted

  

 

199,985

 

 

 

241,472

 

 

 

248,710

 

 

 

230,055

 

 

D Weighted Average Shares Outstanding

  

 

122,787,765

 

 

 

117,200,244

 

 

 

111,011,702

 

 

 

116,999,904

 

 

E Annual Share Usage (C/D)

  

 

0.16

 

 

0.21

 

 

0.22

 

 

0.20

 

 

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Equity Compensation Plan Information. The following table sets forth the number of securities authorized for issuance under the LTIP at September 30, 2020.

 

     Number of
securities
to be issued
upon exercise
of outstanding
options,
restricted
stock units,
warrants and
rights (a)
    Weighted-
average
exercise
price of
outstanding
options,
warrants
and rights
(b)
     Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a)) (c)
       

Equity compensation plans approved by security holders:

         

1998 Long-Term Incentive Plan

  

 

952,586

(1) 

 

 

            —  

 

  

 

1,288,782

 

 
  

 

 

   

 

 

    

 

 

   

 

 

 

Total equity compensation plans approved by security holders

  

 

952,586

 

 

 

—  

 

  

 

1,288,782

 

 

Equity compensation plans not approved by security holders

  

 

—  

 

 

 

—  

 

  

 

—  

 

 
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

  

 

952,586

 

 

 

—  

 

  

 

1,288,782

 

 
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

Comprised of a total of 355,481 time-lapse restricted stock units, 361,039 director share units, and 236,066 performance-based restricted stock units at the target level of performance granted under our 1998 Long-Term Incentive Plan.

On November 11, 2020, the Board of Directors approved and adopted the amendment to the LTIP, which is subject to the approval of our shareholders at the annual meeting of shareholders on February 3, 2021. The Board of Directors believes that the LTIP will continue to accomplish its primary purpose of motivating employees using performance-related incentives linked to longer-range performance goals and the interests of our shareholders.

The amendment to the LTIP is being submitted to our shareholders for their approval pursuant to the provisions of the LTIP, as well as to comply with the rules of the NYSE. According to our Bylaws, this proposal to adopt the amendment to the LTIP requires the affirmative vote of the holders of a majority of the shares of common stock entitled to vote on the matter and present or represented by proxy at a meeting in which a quorum is present and the NYSE listing rules require this proposal to receive the support of a majority of the votes cast. Abstentions will have the same effect as an “against” vote for purposes of our Bylaws and no effect for purposes of the NYSE approval requirement. Broker non-votes will have no effect on the vote for this proposal.

 

 

 

LOGO    The Board of Directors recommends that our shareholders
vote FOR the approval of the amendment to the 1998
Long-Term Incentive Plan to extend its term.

 

 

 

 

  2021 Proxy Statement   33


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PROPOSAL THREE—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, 2021. 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.

 

 

 

LOGO    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 2021.

 

 

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

 
    

2020

    

2019

 
    

($ In thousands)

 

Audit Fees

  

 

3,584

 

  

 

3,522

 

Audit-Related Fees

  

 

—  

 

  

 

—  

 

Tax Fees

  

 

25

 

  

 

—  

 

All Other Fees

  

 

—  

 

  

 

—  

 

  

 

 

    

 

 

 

Total Fees

  

 

3,609

 

  

 

3,522

 

  

 

 

    

 

 

 

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.

 

34   ATMOS ENERGY  


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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 2020 and pre-approved all audit and tax fees for services performed by E&Y in fiscal 2020 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, 2020:

 

   

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, 2020 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

Frank Yoho

 

  2021 Proxy Statement   35


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PROPOSAL FOUR—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 2022 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 37, 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 2020, as disclosed in the Company’s Proxy Statement for the 2021 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.

 

 

 

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

 

 

 

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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 2020 are listed below:

 

Name

 

Title

J. Kevin Akers(a)

 

President and Chief Executive Officer

Kim R. Cocklin(b)

 

Past Executive Chairman of the Board

Christopher T. Forsythe(c)

 

Senior Vice President and Chief Financial Officer

David J. Park(d)

 

Senior Vice President, Utility Operations

Karen E. Hartsfield(e)

 

Senior Vice President, General Counsel, and Corporate Secretary

 

  (a)

Mr. Akers, who served as President of the Kentucky/Mid-States Division of the Company from May 2007 through December 31, 2016, Senior Vice President, Safety and Enterprise Services from January 1, 2017 through November 5, 2018, and Executive Vice President from November 6, 2018 through September 30, 2019, was appointed by the Board of Directors as President and Chief Executive Officer, effective October 1, 2019.

 

 

  (b)

Mr. Cocklin, who served as Executive Chairman of the Board from October 1, 2017 through December 10, 2020, 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 Chairman of the Board, effective December 10, 2020.

 

 

  (c)

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.

 

 

  (d)

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.

 

 

  (e)

Ms. Hartsfield, who served as Senior Attorney from June 2015 through August 2017, was appointed by the Board of Directors as Senior Vice President, General Counsel, and Corporate Secretary, effective August 7, 2017.

 

Fiscal 2020 Business and Performance Highlights

Over the past nine 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 14% 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 2020. In fiscal 2020, we generated net income of $601.4 million or $4.89 per diluted share. After adjusting for a nonrecurring income tax benefit recognized during fiscal 2020, we recorded adjusted net income of $580.5 million, or $4.72 per diluted share for the year ended September 30, 2020.* Net income for the year ended September 30, 2019 was $511.4 million or $4.35 per diluted share. Capital expenditures for fiscal 2020 totaled approximately $1.9 billion, with over 85% of this amount invested to improve the safety and reliability of our distribution and transmission systems.

 

Adjusted Diluted Earnings Per Share*         Declared Dividends Per Share         3-Year Cumulative Total Shareholder Return
$4.72         $2.30         21.6%

18th Consecutive Year of

EPS Growth

        Up from $2.10 for Fiscal 2019        

 

*

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.

 

  2021 Proxy Statement   37


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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 46. 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 2020 was primarily long-term and performance-based, as shown in the graphics below.

 

Fiscal 2020 Target Compensation Mix

 

 

LOGO   LOGO

 

2020 Actual Results

The table below shows the target performance and actual results for our fiscal 2020 performance-based compensation. Based on our fiscal 2020 performance, the following incentive programs resulted in above target payouts. See “Annual Incentive Compensation,” beginning on page 42 and “Long-Term Incentive Compensation,” beginning on page 43.

 

Incentive Program Element

  

Performance

Metric

  

Target

Performance

  

2020 Actual

Performance

  

2020

Payout

(as a % of  

Target)

Annual Incentive Plan

   EPS

(100% of award)

   $4.65    $4.72    130%*

Long-Term Incentive Program

2018-2020 Cycle

   EPS

(100% of award)

   $12.77    $13.07    123%

 

*

Because the Company’s TSR for fiscal 2020 was negative, compensation for the executive officers under the Incentive Plan for fiscal 2020 was limited to the target level of performance.

 

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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 targets, the attainment of which does not require the taking of an unreasonable amount of risk, as discussed in “Compensation Risk Assessment,” beginning on page 63.

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 closely align our executives with the interests of our shareholders. To facilitate stock ownership, stock-based incentive plans should be utilized, along with share ownership guidelines.

 

  2021 Proxy Statement   39


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Our executive compensation practices include:

 

  LOGO

Executive officer awards under the Incentive Plan are generally capped at 200% of target. These awards are capped at target if the Company’s total shareholder return for the performance period is negative.

 

  LOGO

Fifty percent of long-term incentive compensation is performance-contingent.

 

  LOGO

Clawback policy that provides for the repayment or forfeiture of all incentive-based compensation in certain circumstances.

 

  LOGO

Executives and directors are subject to stock ownership guidelines and retention requirements.

 

  LOGO

Severance under our change in control severance arrangements does not exceed three times the sum of a named executive officer’s base salary and their most recent annual award of incentive compensation.

 

  LOGO

Our change in control severance arrangements are triggered only by an involuntary job loss or substantial diminution of duties.

  LOGO

We have no employment agreements with our officers.

 

  LOGO

We prohibit hedging and pledging of our securities at any time by any employees and directors.

 

  LOGO

There is no single trigger vesting of outstanding awards under our LTIP upon a change in control.

 

  LOGO

Our change in control severance arrangements do not contain excise tax gross-up payments.

 

  LOGO

We have no excessive perquisites for executives.

 

  LOGO

We pay dividends on performance-contingent stock awards when vesting is complete and then only if performance targets are met.

 

 

40   ATMOS ENERGY  


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Elements of Executive Compensation

The following table summarizes the various elements of executive compensation that we provided to our named executive officers for fiscal 2020, 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

 

   
   

 

 

 

LOGO

 

  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 a 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 determinant of other elements of compensation. The HR Committee reviews base salaries annually, and generally targets the 50th

 

  2021 Proxy Statement   41


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percentile of the competitive market practice. Annual salary adjustments are not automatic or guaranteed, but rather based on 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 2020.

 

Name

  

Base

    Salary ($)    

J. Kevin Akers

    

 

850,000

Kim R. Cocklin

    

 

850,000

Christopher T. Forsythe

    

 

481,500

David J. Park

    

 

454,750

Karen E. Hartsfield

    

 

420,000

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 2020, 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 2020 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 39. The Incentive Plan targets for fiscal 2020 for each of the named executive officers were as follows:

 

Name

  

Fiscal Year 2020

    Incentive Plan Target    

as Percentage (%) of

Base Salary Earned

J. Kevin Akers

    

 

100

Kim R. Cocklin

    

 

100

Christopher T. Forsythe

    

 

65

David J. Park

    

 

60

Karen E. Hartsfield

    

 

60

At its meeting in November 2019, 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 2020, 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 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.

 

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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 2020:

 

 

Performance Level

  

 

Annual EPS
Performance

  

 

Percentage (%) of
Target Award Earned

 

Below Threshold

  

 

<$4.42  

  

 

No award

 

Threshold

  

 

$4.42

  

 

50

 

Target

  

 

$4.65

  

 

100

 

Actual EPS (a)

  

 

$4.72

  

 

130

 

Maximum

  

 

$4.88

  

 

200

 

 

(a)  The performance level and actual performance attainment under the Incentive Plan exclude the effects of a one-time income tax benefit related to a legislative change in Kansas that reduced our state deferred tax rate during fiscal 2020 of $0.17 per diluted share. Because the Company’s TSR for fiscal 2020 was negative, compensation for the executive officers under the Incentive Plan for fiscal 2020 was limited to the target level of performance.

Since the actual EPS performance level attained was between the target of $4.65 per share and maximum of $4.88 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 2020, the HR Committee did not use its discretion to make negative adjustments to any awards for any of our executive officers. However, the HR Committee does place a limit under certain conditions on the amount of earned awards for all our 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. Because the Company’s TSR for fiscal 2020 was negative, compensation for the executive officers under the Incentive Plan for fiscal 2020 was limited to the target level of performance.

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 final earned 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

            

 

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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 2018-2020 performance period relating to the grants of performance-based RSUs awarded in May 2018:

 

 

Performance Level

  

 

Cumulative
EPS Performance

  

 

Percentage (%) of
Target Award Earned

 

Below Threshold

  

 

<$11.49  

  

 

No award

 

Threshold

  

 

$11.49

  

 

50

 

Target

  

 

$12.77

  

 

100

 

Actual Performance (a)

  

 

$13.07

  

 

123

 

Maximum

  

 

$14.05

  

 

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 Tax Cuts and Jobs Act (TCJA) during fiscal 2018 of $1.43 per diluted share and (ii) a one-time income tax benefit related to a legislative change in Kansas that reduced our state deferred tax rate during fiscal 2020 of $0.17 per diluted share.

Since the actual performance level attained over the performance period was $13.07 per share, each named executive officer earned 123% of their target award. The awards were paid in the form of shares of common stock issued in November 2020 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 2018-2020 performance period since the Company’s TSR was positive for such performance period at 21.6%.

At its meeting in November 2019, 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 2020-2022 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 2020, which were later ratified by the Board, of performance-based RSUs for the fiscal 2020-2022 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

  

 

<$14.21  

  

 

No award

 

Threshold

  

 

$14.21

  

 

50

 

Target

  

 

$14.96

  

 

100

 

Maximum

  

 

$15.71

  

 

200

Retirement Benefits.    All our current named executive officers, other than Ms. Hartsfield, 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 with vested benefits under the plan, the compensation shown as “Salary” in the “Summary Compensation Table for Fiscal Year 2020,” beginning on page 49, would be considered eligible compensation in determining benefits. See the discussion under Pension Account Plan on page 54, for more information about this plan.

 

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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 company contribution (“FACC”) which is equal to 4% of his or her eligible earnings to the RSP. Ms. Hartsfield receives this FACC. See the discussion under “Retirement Savings Plan” on page 54 for more information about this plan.

Mr. Akers and Mr. Cocklin 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 his 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, Mr. Park, and Ms. Hartsfield participate in the Account Balance SERP, which is a non-qualified defined contribution plan, under which the Company currently 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 provides supplemental disability and death benefits.

The HR Committee believes that these retirement benefits 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 54, 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 56). 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 or the FACC, as applicable, 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.”

The HR Committee believes that providing severance protection to our named executive officers following a change in control is a key component to ensuring that our executive compensation program remains competitive and that our named executive officers remain engaged before and during any potential change in control transaction.

Additional Information on Named Executive Officer Compensation

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

 

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compensation at our February 5, 2020, meeting of shareholders. Our shareholders approved the compensation of our named executive officers for fiscal 2019, 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 November 2019, Meridian Compensation Partners, LLC (“Meridian”), our independent compensation consultant, 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 2019. 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 and other public filings 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 2020.

 

 

Fiscal 2020 Peer Group

 

Alliant Energy Corporation

  

 

NiSource Inc.

 

Ameren Corporation

  

 

OGE Energy Corp.

 

Black Hills Corporation

  

 

ONE Gas, Inc.

 

CenterPoint Energy, Inc.

  

 

Southwest Gas Holdings, Inc.

 

CMS Energy Corporation

  

 

Spire Inc.

 

Evergy, Inc.

  

 

WEC Energy Group, Inc.

 

National Fuel Gas Company

  

 

Xcel Energy Inc.

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, 2020.

 

    

 

Revenues
($ Million)

  

 

    Market Cap.    
($ Million)

 

25th Percentile

    

 

 

 

1,915

 

    

 

 

 

3,873

 

 

50th Percentile

    

 

 

 

4,260

 

    

 

 

 

9,437

 

 

75th Percentile

    

 

 

 

6,371

 

    

 

 

 

15,901

 

 

Atmos Energy Corporation

    

 

 

 

2,821

 

    

 

 

 

12,180

 

To supplement the executive compensation information derived from its study of the proxy peer group, the HR Committee also considered, on a limited basis, executive compensation benchmarking data from the latest Willis Towers Watson U.S. CDB Energy Services Executive Compensation Survey (“energy services industry survey”) compiled by Meridian. The companies in this survey include companies in the natural gas, nuclear and electric utilities industries. To adjust for size differences, Meridian employed a statistical analysis (single regression) in the survey based on relative total annual revenues to determine competitive pay rates for our named executive officers based

 

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upon the data derived from such survey. The HR Committee also reviewed compensation data from broader energy industry and general industry surveys compiled by Meridian, as a secondary reference point that reflects broader pay practices.

Using primarily the proxy peer group compensation analysis, as well as limited supplemental data from the energy services industry survey, the HR Committee reviewed competitive target compensation levels for each named executive officer at the 50th percentile level of the competitive market. For each named executive officer position, base salary, target total cash compensation (base salary plus annual incentive award) and target total direct compensation (base salary plus annual incentive award plus the annualized present value of long-term incentive compensation) were benchmarked and analyzed with reference to the Company’s desired competitive compensation positioning.

Independent Compensation Consultant

The HR Committee has been granted through its charter the sole authority from the Board for the appointment, compensation and oversight of the Company’s independent compensation consultant. The HR Committee retained Meridian as its independent compensation consultant to assist with its responsibilities related to the Company’s compensation program for its named executive officers and non-employee directors. The HR Committee directed our independent compensation consultants to (i) regularly attend meetings of the committee, (ii) conduct studies of competitive compensation practices and (iii) develop conclusions and recommendations related to the executive compensation plans of the Company for consideration by the committee. Our independent compensation consultants assisted with (i) the identification of the Company’s proxy peer group, (ii) an assessment of competitive compensation for non-employee directors of the Company, and (iii) a review of base salary, annual incentives and long-term incentive compensation opportunities of Company executive officers relative to competitive practices. Our independent compensation consultants also advised the HR Committee on emerging trends and developments in executive compensation, provided recommendations regarding our executive compensation strategy and performed an assessment of the risks contained in the Company’s incentive compensation plans.

Our independent compensation consultant attended all three HR Committee meetings held in fiscal 2020. Based on policies and procedures implemented by the HR Committee and by our independent compensation consultants to ensure the objectivity and independence of the individual executive compensation consultants for Meridian, the HR Committee believes that the consulting advice it received during the fiscal year from our consultants was objective, not influenced by any other relationships our consultants had with the Company and raised no conflicts of interest. In making this determination, the HR Committee also assessed the independence factors set forth in applicable SEC regulations and rules, NYSE corporate governance standards, and other facts and circumstances, and it concluded that the retention of Meridian and its individual executive compensation consultants raised no conflicts of interest.

Management’s Role in Setting Named Executive Officer Compensation

The HR Committee and Mr. Akers met with representatives of Meridian at the beginning of fiscal 2020 to review and discuss the compensation of all other named executive officers, except for Mr. Cocklin. However, at no time did Mr. Akers meet with representatives of Meridian regarding his own compensation. For fiscal 2020, Mr. Akers recommended to the HR Committee compensation for the other named executive officers except for Mr. Cocklin, while Meridian provided to the HR Committee general guidance and competitive compensation data for Mr. Akers and Mr. Cocklin.

Mr. Akers and Mr. Cocklin may be present during a portion of the HR Committee’s meetings on executive compensation. However, both Mr. Akers and Mr. Cocklin (along with any other named executive officers in attendance at HR Committee meetings), are excused when the compensation of such named executive officers is discussed and decisions regarding their compensation are reached by the HR Committee. All decisions by the HR Committee concerning all forms of executive compensation to be paid to the President and CEO and the other named executive officers are approved by the Board.

 

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Executive Chairman Transition

Kim R. Cocklin retired from the Company and as Executive Chairman of the Board, effective December 10, 2020. The Board of Directors appointed Mr. Cocklin as Chairman of the Board, effective December 10, 2020.

 

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NAMED EXECUTIVE OFFICER COMPENSATION

Summary of Cash and Other Compensation

The following table provides information concerning compensation we paid to or accrued on behalf of our Principal Executive Officer, our Principal Financial Officer and the three other most highly compensated executive officers serving as such on September 30, 2020:

Summary Compensation Table for Fiscal Year 2020(a)

 

Name and Principal Position

 

  

Year

 

    

Salary
($)

 

    

Stock
Awards
($)(b)

 

    

Non-Equity
Incentive Plan
Compensation
($)(c)

 

    

 

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(d)

 

    

All Other
Compensation
($)(e)

 

   

Total
($)

 

       

J. Kevin Akers(f)

  

 

 

 

2020

 

 

  

 

 

 

 

 

841,346

 

 

 

  

 

 

 

 

 

2,366,076

 

 

 

  

 

 

 

 

 

841,346

 

 

 

  

 

 

 

 

 

5,765,795

 

 

 

  

 

 

 

 

 

12,096

 

 

 

 

 

 

 

 

 

9,826,659

 

 

 

 

President and Chief Executive Officer

 

     2019        463,435        809,197        401,633        6,169,053        12,221       7,855,539    
    

 

2018

 

 

 

    

 

373,154

 

 

 

    

 

520,080

 

 

 

    

 

298,516

 

 

 

    

 

532,993

 

 

 

    

 

11,867

 

 

 

   

 

1,736,610

 

 

 

 

Kim R. Cocklin(g)

  

 

 

 

2020

 

 

  

 

 

 

 

 

846,539

 

 

 

  

 

 

 

 

 

2,366,076

 

 

 

  

 

 

 

 

 

846,539

 

 

 

  

 

 

 

 

 

826,914

 

 

 

  

 

 

 

 

 

14,859

 

 

 

 

 

 

 

 

 

4,900,927

 

 

 

 

Past Executive Chairman of the Board

     2019        740,962        2,923,804        740,943        1,456,531        15,194       5,877,434  
    

 

2018

 

 

 

    

 

852,972

 

 

 

    

 

2,627,833

 

 

 

    

 

852,950

 

 

 

    

 

 

 

 

    

 

11,865

 

 

 

   

 

4,345,620

 

 

 

 

 

Christopher T. Forsythe(h)

  

 

 

 

2020

 

 

  

 

 

 

472,777

 

 

  

 

 

 

728,494

 

 

  

 

 

 

307,305

 

 

  

 

 

 

276,697

 

 

  

 

 

 

224,460

 

 

 

 

 

 

2,009,733

 

 

 

Senior Vice President and Chief Financial Officer

     2019        434,639        809,197        376,678        342,141        198,620       2,161,275    
    

 

2018

 

 

 

    

 

388,702

 

 

 

    

 

520,080

 

 

 

    

 

310,954

 

 

 

    

 

179,097

 

 

 

    

 

168,205

 

 

 

   

 

1,567,038

 

 

 

 

 

David J. Park(i)

  

 

 

 

2020

 

 

  

 

 

 

446,512

 

 

  

 

 

 

532,597

 

 

  

 

 

 

267,907

 

 

  

 

 

 

256,764

 

 

  

 

 

 

210,335

 

 

 

 

 

 

1,714,115

 

 

 

Senior Vice President,

Utility Operations

     2019        412,165        591,021        329,724        321,174        194,521       1,848,605    
     2018        373,154        520,080        298,516        173,678        161,094       1,526,522    

 

Karen E. Hartsfield(j)

  

 

 

 

2020

 

 

  

 

 

 

407,539

 

 

  

 

 

 

532,597

 

 

  

 

 

 

244,523

 

 

  

 

 

 

191,051

 

 

  

 

 

 

199,252

 

 

 

 

 

 

1,574,962

 

 

 

Senior Vice President, General Counsel, and Corporate Secretary

                     

 

(a)

No bonuses, as defined by applicable SEC rules and regulations, were paid or stock options awarded to any named executive officers in fiscal years 2020, 2019 or 2018.

 

(b)

In accordance with applicable SEC rules, the valuation of stock awards in this table is based upon the grant date fair value of time-lapse RSUs granted during fiscal 2018-2020, along with performance-based RSUs granted during fiscal 2018-2020. The stock awards are valued at the grant date fair value calculated in accordance with FASB ASC Topic 718 excluding any estimate of forfeitures related to service vesting conditions. The fair value of the performance-based RSUs on the grant date are shown in the following table at their maximum value, assuming the highest level of performance conditions (200% of the target) will be achieved during the performance period.

 

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Name

 

   Year     

 

Stock
Awards
($)

 

 

J. Kevin Akers

 

  

 

 

 

2020

 

 

  

 

 

 

 

 

2,366,076

 

 

 

     2019        809,197  
    

 

2018

 

 

 

    

 

520,080

 

 

 

Kim R. Cocklin

 

  

 

 

 

2020

 

 

    
2,366,076
 
     2019        2,627,330  
    

 

2018

 

 

 

    

 

2,286,618

 

 

 

 

Christopher T. Forsythe

  

 

 

 

2020

 

 

  

 

 

 

728,494

 

 

     2019        809,197  
    

 

2018

 

 

 

    

 

520,080

 

 

 

 

David J. Park

  

 

 

 

2020

 

 

  

 

 

 

532,597

 

 

     2019        591,021  
    

 

2018

 

 

 

    

 

520,080

 

 

 

 

Karen E. Hartsfield

 

  

 

 

 

 

2020

 

 

 

 

  

 

 

 

 

532,597

 

 

 

 

 

(c)

The amounts shown for fiscal 2020 reflect the cash payments attributable to the target level payouts under our Incentive Plan. Such awards were capped at target payouts as a result of our negative fiscal 2020 TSR despite performance being achieved at the level of 130% of target EPS in fiscal 2020 under our Incentive Plan. For a discussion of the performance criteria established by our HR Committee for awards in fiscal 2020 under our Incentive Plan, see “Elements of Executive Compensation,” beginning on page 41. Awards under the Incentive Plan are generally paid in cash and are based on the participant’s eligible earnings received during the fiscal year. However, 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 a premium equal to 20% of the amount converted, with such units being awarded under our LTIP. Each named executive officer elected to receive 100% cash for his or her fiscal 2020 Incentive Plan award.

 

(d)

The amounts shown reflect (i) above-market interest earned on the Account Balance Supplemental Executive Retirement Plan for Mr. Forsythe ($19,174), Mr. Park ($14,587), and Ms. Hartsfield ($8,257) and (ii) the aggregate current year increase in pension values for each named executive officer based on the change in the present value of the benefit as presented in the “Retirement Plans Tables,” beginning on page 55. The present value is based on the earliest age for which an unreduced benefit is available and assumptions from the September 30, 2019, and September 30, 2020, measurement dates. The above-market interest is also included in the amounts shown in the “Aggregate Earnings in Last Fiscal Year” column of the “Non-Qualified Deferred Compensation Table for Fiscal Year 2020” on page 56.

 

(e)

The components of “All Other Compensation” are reflected in the table below.

 

(f)

Mr. Akers was appointed as President and Chief Executive Officer by the Board of Directors, effective October 1, 2019.

 

(g)

Mr. Cocklin was appointed Chairman of the Board, effective December 10, 2020, after previously serving as Executive Chairman of the Board from October 1, 2017 through December 10, 2020.

 

(h)

Mr. Forsythe was appointed as Senior Vice President and Chief Financial Officer by the Board of Directors, effective February 1, 2017.

 

(i)

Mr. Park was appointed as Senior Vice President, Utility Operations, effective January 1, 2017.

 

(j)

Ms. Hartsfield was appointed as Senior Vice President, General Counsel, and Corporate Secretary, effective August 7, 2017.

 

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All Other Compensation for Fiscal Year 2020

 

Name

  

Company
Contributions
to Retirement
Savings Plan
($)(a)

 

    

Company
Contributions
to Account
Balance
SERP
($)

 

    

 

Cost of
Premiums for
Company-
Paid
Term Life
Insurance
($)

 

    

Financial
Planning
($)(b)

 

    

Perquisites
($)(c)

 

    

    Total    

($)

 

 

J. Kevin Akers

     11,029              —          1,067              —                —       

 

12,096

 

Kim R. Cocklin

     11,029              —          1,067        2,763     

 

      —  

 

  

 

14,859

 

Christopher T. Forsythe

     11,029        212,364        1,067              —       

 

      —  

 

  

 

224,460

 

David J. Park

     11,029        194,059        1,067        4,180     

 

      —  

 

  

 

210,335

 

Karen E. Hartsfield

     22,429        173,606        1,067        2,150     

 

      —  

 

  

 

199,252

 

 

(a)

Ms. Hartsfield’s company contributions to the Retirement Savings Plan include the FACC.

 

(b)

We provide financial planning services to our named executive officers, which benefit is valued at the actual charge for the services.

 

(c)

No named executive officer received perquisites and other personal benefits with an aggregate value equal to or exceeding $10,000 during fiscal 2020.

Grants of Plan-Based Awards

The following table shows the grants of equity and incentive plan-based awards to the named executive officers during fiscal 2020 and the portion of fiscal 2020 awards under the Incentive Plan elected to be received in time-lapse RSUs:

Grants of Plan-Based Awards for Fiscal Year 2020(a)

 

         

 

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(b)

    Estimated Future Payouts
Under Equity Incentive Plan
Awards(c)
   

 

All Other
Stock Awards:
Number of
Shares of
Stock or Units
(#)

 

   

Grant Date
Fair Value
of Stock
Awards
($)

 

 

Name

 

Grant

Date

   

Threshold
($)

 

   

Target
($)

 

   

Maximum
($)

 

   

Threshold
(#)

 

   

Target
(#)

 

   

Maximum
(#)

 

 

J. Kevin Akers

                 

Incentive Plan

 

 

10/01/19

 

 

 


420,673


 


 

 


841,346


 


 

 


1,682,692


 


 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Time-Lapse RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

11,595

 

 

 

1,183,038

 

Performance-Based RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

5,798

 

 

 

11,595

 

 

 

23,190

 

 

 

—  

 

 

 

1,183,038

 

Kim R. Cocklin

                 

Incentive Plan

 

 

10/01/19

 

 

 

423,269

 

 

 

846,539

 

 

 

1,693,077

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Time-Lapse RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

11,595

 

 

 

1,183,038

 

Performance-Based RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

5,798

 

 

 

11,595

 

 

 

23,190

 

 

 

—  

 

 

 

1,183,038

 

Christopher T. Forsythe

                 

Incentive Plan

 

 

10/01/19

 

 

 

153,652

 

 

 

307,305

 

 

 

614,610

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Time-Lapse RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

3,570

 

 

 

364,247

 

Performance-Based RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

1,785

 

 

 

3,570

 

 

 

7,140

 

 

 

—  

 

 

 

364,247

 

David J. Park

                 

Incentive Plan

 

 

10/01/19

 

 

 

133,953

 

 

 

267,907

 

 

 

535,814

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Time-Lapse RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

2,610

 

 

 

266,298

 

Performance-Based RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

1,305

 

 

 

2,610

 

 

 

5,220

 

 

 

—  

 

 

 

266,298

 

Karen E. Hartsfield

                 

Incentive Plan

 

 

10/01/19

 

 

 

122,262

 

 

 

244,523

 

 

 

489,046

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Time-Lapse RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

2,610

 

 

 

266,298

 

Performance-Based RSUs

 

 

05/05/20

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

1,305

 

 

 

2,610

 

 

 

5,220

 

 

 

—  

 

 

 

266,298

 

 

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(a)

No stock options were awarded to any named executive officer in fiscal 2020.

 

(b)

The amounts reflect the estimated payments which could have been made under our Incentive Plan, based upon the participant’s annual salary. The plan provides that our named executive officers may receive annual cash incentive awards based on the performance and profitability of the Company. The HR Committee establishes annual target awards for each such officer. The actual amounts received by the named executive officers in fiscal 2020 under the plan are set forth under the “Non-Equity Incentive Plan Compensation” column in the “Summary Compensation Table for Fiscal Year 2020,” beginning on page 49.

 

(c)

The amounts reflect the performance-based RSUs granted under our LTIP, which vest three years from the beginning of the performance measurement period (October 1, 2019), at which time the holder is entitled to receive a percentage of the performance-based RSUs granted, based on our cumulative EPS performance over the period October 1, 2019 to September 30, 2022, payable in shares of our common stock, plus dividend equivalents payable in stock or cash. The grant date fair market value on May 5, 2020 of $102.03 is reflected at the target level of performance.

Outstanding Equity Awards

The following table shows the outstanding equity awards held by the named executive officers at September 30, 2020:

Outstanding Equity Awards at Fiscal Year-End for 2020(a)

 

   

 

Stock Awards

       

Name

 

 

Number of Shares
of Stock or
Units of Stock
That Have
Not Vested
(#) (b)

 

   

Market Value of
Shares of Stock
or Units of Stock
That Have
Not Vested
($) (c)

 

   

 

Equity Incentive Plan
Awards: Number
of
Unearned Shares,
Units or Other
Rights That
Have Not Vested
(#) (d)

 

   

Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares, Units or
Other Rights That
Have Not Vested
($) (c)

 

       

J. Kevin Akers

 

 

18,545

 

 

 


1,772,717


 


 

 

31,090

 

 

 

2,971,893

 

 

Kim R. Cocklin

 

 

48,204

 

 

 

4,607,820

 

 

 

48,840

 

 

 

4,668,616

 

 

Christopher T. Forsythe

 

 

10,520

 

 

 

1,005,607

 

 

 

15,040

 

 

 

1,437,674

 

 

David J. Park

 

 

9,998

 

 

 

955,709

 

 

 

10,990

 

 

 

1,050,534

 

 

Karen E. Hartsfield

 

 

8,987

 

 

 

859,067

 

 

 

10,990

 

 

 

1,050,534

 

 

 

(a)

This table does not include amounts of time-lapse RSUs that were granted in November 2020 as a result of elections by the named executive officers to convert all or a portion of incentive compensation attributable to fiscal 2020. However, it does include amounts of time-lapse RSUs that were granted in November 2019 as a result of elections by the named executive officers to convert all or a portion of their incentive compensation attributable to fiscal 2019.

 

(b)

Represents time-lapse RSUs, which generally vest three years from the date of grant, as reflected in the next table.

 

(c)

Market value is based on the closing price of our common stock of $95.59, as reported on the NYSE Consolidated Tape on September 30, 2020.

 

(d)

Represents performance-based RSUs, assuming maximum level of performance. See footnote (c) to the “Grants of Plan-Based Awards for Fiscal Year 2020” table on page 51 for a discussion of the vesting terms of our performance-based RSUs. Based on our performance through September 30, 2020, performance-based RSUs, at the target level of performance, will vest as indicated in the “Performance-Based Restricted Stock Units Vesting Schedule” on page 53 below.

 

52   ATMOS ENERGY  


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Time-Lapse Restricted Stock Units Vesting Schedule(a)

 

Name

   11-07-20(b)      5-01-21(c)      11-06-21(b)      5-07-22(c)      11-05-22(b)      5-05-23(c)      Total  

J. Kevin Akers

     —          3,000        —          3,950        —          11,595        18,545  

Kim R. Cocklin

     4,236        13,190        3,623        12,825        2,735        11,595        48,204  

Christopher T. Forsythe

     —          3,000        —          3,950        —          3,570        10,520  

David J. Park

     1,503        3,000        —          2,885        —          2,610        9,998  

Karen E. Hartsfield

     492        3,000        —          2,885        —          2,610        8,987  

 

(a)

This table does not include amounts of time-lapse RSUs that were granted in November 2020 as a result of elections by the named executive officers to convert all or a portion of incentive compensation received for fiscal 2020.

 

(b)

The amounts represent time-lapse RSUs granted under our LTIP as a result of the participant’s election to convert all or a portion of his or her Incentive Plan payment attributable to prior fiscal years.

 

(c)

The amounts represent time-lapse RSUs granted under our LTIP, which vest three years from the date of grant.

Performance-Based Restricted Stock Units Vesting Schedule(a)

 

Name

   9-30-21      9-30-22      Total  

J. Kevin Akers

     3,950        11,595        15,545  

Kim R. Cocklin

     12,825        11,595        24,420  

Christopher T. Forsythe

     3,950        3,570        7,520  

David J. Park

     2,885        2,610        5,495  

Karen E. Hartsfield

     2,885        2,610        5,495  

 

(a)

The amounts represent performance-based RSUs, assuming the target level of performance, which vest at the end of each applicable three-fiscal year performance period. Although these units vest at the dates indicated, they are not available for distribution in the form of shares until the number of units earned based on the cumulative EPS amount for the performance period, along with dividend equivalents for the performance period payable in the form of cash or additional units, is finally determined and approved by the Board at its November meeting each year.

Vested Common Stock

The following table sets forth the stock awards held by the named executive officers that vested during fiscal 2020:

Stock Vested for Fiscal Year 2020     

 

 

 

   Stock Awards (a)  

Name

   Stock
Awards
(#) (b)
     Value
Realized on
Vesting
($) (c)
 

J. Kevin Akers

     6,229        627,454  

Kim R. Cocklin

     35,172        3,571,517  

Christopher T. Forsythe

     6,229        627,454  

David J. Park

     6,672        675,152  

Karen E. Hartsfield

     7,211        745,251  

 

(a)

The named executive officers elected to have vested shares withheld, in each case, to cover applicable state and federal taxes incurred, upon receipt of their vested shares. The amounts reflected in this column are not reduced for the shares withheld.

 

(b)

Includes shares that vested during fiscal 2020 attributable to time-lapse RSUs as well as performance-based RSUs at the 123% level of performance for the fiscal 2018-20 performance period.

 

(c)

The value received on vesting represents the fair market value of the shares received on the following dates: $107.67 on November 8, 2019; $99.97 on May 1, 2020; $105.25 on August 7, 2020; and $101.25 on November 11, 2020.

 

  2021 Proxy Statement   53


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Retirement Plans

Pension Account Plan.    Mr. Akers, Mr. Cocklin, Mr. Forsythe, and Mr. Park participate in the Company’s PAP. Our PAP is a qualified, cash balance defined benefit pension plan under both the Internal Revenue Code (“IRC”) and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The plan covers a majority of our employees. Benefits under this plan become vested and non-forfeitable after completion of three years of continuous employment. Under the terms of the PAP, a vested participant receives a benefit based on the value of the cash balance account at termination or retirement from the Company. Benefits payable under the PAP are not offset by Social Security benefits. Under the IRC, the annual compensation of each employee to be considered under our retirement plan for 2020 cannot exceed $285,000.

The amount of eligible earnings utilized under the PAP generally includes base salary earned, deferrals to the RSP and IRC Section 125 (“cafeteria plan”) reductions, while it excludes any imputed income attributable primarily to Company-provided life insurance or financial planning services and all incentive compensation, as well as expense reimbursements. All participants may choose to receive their account balances in the form of a lump sum or an annuity. For any named executive officer who retires with vested benefits under the plan, the compensation shown as “Salary” in the “Summary Compensation Table for Fiscal Year 2020,” beginning on page 49, would be considered eligible compensation in determining benefits, subject to applicable limitations under the IRC.

Retirement Savings Plan.    The RSP is a qualified, defined contribution plan, which is intended to comply with Section 404(c) of ERISA. All employees are eligible to participate in the RSP immediately upon joining the Company. Investments may be made in shares of Company common stock or in a variety of other equity and fixed income investments offered by the RSP administrator. Employees may make pre-tax contributions to the RSP based on the amount of eligible earnings, which is composed generally of base salary, pre-tax contributions to the RSP and cafeteria plan reductions, but excludes any imputed income attributable primarily to Company-provided life insurance or financial planning services and all incentive compensation, as well as expense reimbursements. The Company matches a participant’s contribution up to 4% of eligible earnings. The Company also includes a FACC, which is equal to 4% of eligible earnings for all participants in the RSP who joined the Company after September 30, 2010, when new employees ceased to be eligible to participate in the PAP. Eligible participants begin receiving the FACC after one year of employment and Ms. Hartsfield is the only named executive officer who received such a contribution in fiscal 2020. All participants are immediately vested in their contributions to the RSP and matching Company contributions. Participants are vested in the FACC component of their RSP account balances after three continuous years of employment.

Supplemental Executive Retirement Plans.    Mr. Akers and Mr. Cocklin participate in the Company’s SERP, which provides retirement benefits (as well as supplemental disability and death benefits) to certain officers. The SERP provides that an officer who has participated in the SERP for at least two years and has attained age 55 is entitled to an annual supplemental pension in an amount that, when added to their annual pension payable under the PAP, equals 60% of their compensation, subject to reductions for less than ten years of employment at the Company and for retirement prior to age 62. The SERP covers compensation in an amount equal to the sum of (a) the greater of the participant’s annual base salary at the date of termination of employment or the average of the participant’s annual base salary for the highest of three calendar years (whether or not consecutive) of employment with the Company and (b) the greater of the amount of the participant’s last award under any of the Company’s annual performance bonus or incentive plans or the average of the participant’s highest three performance awards under such plans (whether or not consecutive). The amount of current compensation covered by the SERP at the end of fiscal 2020 for the following named executive officers listed in the Summary Compensation Table is as follows: Mr. Akers, $1,691,346; and Mr. Cocklin, $2,284,653.

Mr. Forsythe, Mr. Park, and Ms. Hartsfield participate in the Account Balance SERP, which is a non-qualified defined contribution plan that provides an annual contribution of 25%, which percentage is established by the Board of Directors for participants who are members of the Company’s Management Committee, of the participant’s total annual earnings (base salary and incentive payment under our Annual Incentive Plan) into a notional supplemental retirement account. The Account Balance SERP is open only to any employee of the Company selected by the Board,

 

54   ATMOS ENERGY  


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in its discretion, to participate in the plan. In addition to receiving an annual pay credit at the end of each calendar year in their account balance equal to a percentage of each participant’s total annual earnings, each participant receives an interest credit to participant’s account balance at the end of each plan year. A participant is eligible to receive a distribution of their supplemental benefit under the plan upon retirement, which is defined as a voluntary termination from employment with the Company that constitutes a separation from service after he has completed at least three (3) years of participation in the plan and has attained age 55.

Retirement Plans Tables

The tables below show the present value of accumulated benefits payable to each of the named executive officers under our PAP, RSP and SERP or Account Balance SERP, as applicable. See the discussion under “Pension Account Plan” on page 54, and “Supplemental Executive Retirement Plans,” beginning on page 54, for more information on these plans.

Pension Benefits Table for Fiscal Year 2020

 

Retirement age:   

(a) 65, or current age if later, for the PAP

(b) 62, or current age if later, for the

SERP

Discount Rate:    2.80%
Postretirement mortality:   

Annuities:

  

Pri-2012 White Collar Annuitant Table Projected Generationally from 2012 using Scale MP-2020

Lump Sums:   

Use of the applicable mortality table for 2020, as defined in IRC Section 417(e)(3)

 

Name

  Plan Name  

Number of

Years

Credited

Service

(#)

   

Present

Value of

Accumulated

Benefit ($)

   

Payments

During

Last Fiscal

Year ($)

 

J. Kevin Akers(a)

  Pension Account Plan     29.08       783,959       —          

 

  Supplemental Executive Retirement Plan     17.83       15,912,270       —          

Kim R. Cocklin(b)

  Pension Account Plan     14.33       412,238       —          

 

  Supplemental Executive Retirement Plan     14.33       20,846,695       —          

Christopher T. Forsythe(c)

 

Pension Account Plan

    17.27       400,186       —          

David J. Park(c)

 

Pension Account Plan

    26.70       375,436       —          

 

(a)

Mr. Akers is eligible for early retirement with an immediate PAP benefit and a reduced benefit under the SERP.

 

(b)

Mr. Cocklin is eligible for retirement with an immediate PAP benefit and a full benefit under the SERP.

 

(c)

Mr. Forsythe and Mr. Park are eligible for early commencement of an immediate PAP benefit.

 

  2021 Proxy Statement   55


Table of Contents

Non-Qualified Deferred Compensation Table for Fiscal Year 2020

 

Name

  Plan Name  

Executive

Contributions

in Last Fiscal

Year

   

Company

Contributions

in Last Fiscal

Year(a)

   

Aggregate

Earnings

in Last

Fiscal Year(b)

   

Aggregate

Withdrawals/

Distributions

   

Aggregate

Balance

at Last

Fiscal

Year End

 

Christopher T. Forsythe(c)

  Account Balance Supplemental Executive Retirement Plan     —         212,364       40,512       —         1,048,064  

David J. Park(c)

  Account Balance Supplemental Executive Retirement Plan     —         194,059       30,820       —         822,110  

Karen E. Hartsfield(c)

  Account Balance Supplemental Executive Retirement Plan     —         173,606       17,445       —         510,863  

 

(a)

Amounts reported in this column represent employer contributions under the Account Balance Supplemental Executive Retirement Plan. These amounts are also reported in the Summary Compensation Table under All Other Compensation.

 

(b)

The amounts attributable to above-market interest on non-qualified deferred compensation in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column in the Summary Compensation Table and identified in footnote (d) to that table are also included in this column.

 

(c)

Upon attainment of age 55, Mr. Forsythe, Mr. Park, and Ms. Hartsfield will be eligible for an immediate distribution of their AB SERP account balance.

Change in Control Severance Agreements

We have entered into severance agreements with each of the named executive officers to provide certain severance benefits for them in the event of certain terminations of their employment within three years following a “change in control” of the Company (as defined in the severance agreements and described generally below). In addition, each such named executive officer will be entitled to all rights and benefits, if any, provided under any other plan or agreement between him and the Company.

The severance agreement for each such 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 award under the Incentive Plan or the average of the three highest awards under such plan (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 or the FACC (as applicable) and (ii) an amount that is actuarially equivalent to an additional three years of Company matching contributions payable to the officer under the RSP. The Company is also obligated to provide the officer with all medical, dental, vision and any other health benefits which qualify for continuation coverage under IRC Section 4980B (COBRA), for a period of 18 months following the date of termination. In addition, following the end of the 18-month period, the Company is to pay such officer a lump sum amount equal to the present value of the cost to the Company of providing those benefits to him for an additional 18-month period. Also, the Company must pay the officer a lump sum amount equal to the present value of the cost to the Company of providing accident and life insurance benefits as well as disability benefits for a period of 36 months from their date of termination, equal to such benefits in effect for the officer at the time of the change in control.

However, if an executive officer is terminated by the Company for “cause” (as defined in the severance agreement), or their employment is terminated by retirement, death or disability, the Company is not obligated to pay such officer the lump sum severance payment. Further, if an executive officer voluntarily terminates their employment except for “constructive termination” (as defined in the severance agreement), the Company is not obligated to pay such officer the lump sum severance payment. The Company is not responsible for the payment of any excise tax gross-up payments which may be due on the payment of severance benefits to our named executive officers. However, if such

 

56   ATMOS ENERGY  


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lump sum severance benefit payments result in the imposition of excise taxes imposed by Section 4999 of the IRC, the officer will have the option to elect to have the payment reduced to a level that will result in no payment of such excise tax by such officer.

For the purposes of these agreements, a “change in control” will generally be deemed to have occurred at any one of the following times:

 

 

on the date any person acquires ownership of common stock, that together with stock already held by such person, results in the person having beneficial ownership of 50% or more of the total fair market value or total voting power of our common stock;

 

 

on the date that a person acquires, or has acquired over a 12-month period, ownership of our common stock possessing 30% or more of the total voting power of our stock;

 

 

on the date a majority of the members of our Board is replaced during any 12-month period by directors whose election is not endorsed by a majority of the Board before the date of the election; or

 

 

on the date that a person acquires, or has acquired during the 12-month period ending on the date of the most recent acquisition, at least 40% of the total gross fair market value of our assets, as measured immediately before such acquisition, except if such sale is to a person or entity owning, directly or indirectly, at least 50% of the total value or voting power of our common stock before such acquisition.

Potential Payments Upon Termination or Change in Control

Payments Made Upon Any Termination.    Regardless of the way a named executive officer’s employment is terminated, he or she is entitled to receive the following amounts earned during his or her term of employment, subject to the additional restrictions discussed below under “Payments Made Upon Termination for Cause.” Such amounts include:

 

 

amount of accrued but unpaid base salary;

 

 

amounts contributed under, or otherwise vested in our RSP; and

 

 

amounts accrued and vested through our PAP and SERP or Account Balance SERP.

Payments Made Upon Retirement.    In the event of the retirement of a named executive officer (only Mr. Akers and Mr. Cocklin are eligible for retirement), in addition to the items identified above, such named executive officer will be entitled to receive:

 

 

a pro rata portion, at the end of the three-year performance period of each outstanding grant of performance-based RSUs under our LTIP, at a value equal to the actual level of performance achieved during the period; and

 

 

upon the termination of the restricted period, shares of stock equal to the number of time-lapse RSUs granted under our LTIP or issued as a result of an election to convert all or a portion of an Incentive Plan payment.

Payments Made Upon Death or Disability.    In the event of the death or disability of a named executive officer, in addition to the benefits listed above under “Payments Made Upon Any Termination,” the named executive officer or designated beneficiary will be entitled to receive:

 

 

a pro rata portion, based on the number of months completed of such performance period, of each outstanding grant of performance-based RSUs under our LTIP, at a value equal to the target level of performance for the period;

 

 

shares of our common stock equal to the number of cumulative time-lapse RSUs granted under our LTIP or issued as a result of an election to convert all or a portion of an Incentive Plan payment; and

 

 

payments under the Company’s life insurance plan or benefits under the Company’s disability plan, as appropriate.

Payments Made Upon Voluntary Termination or Termination Without Cause.    In the event of a voluntary termination or termination without cause for Mr. Forsythe, Mr. Park, or Ms. Hartsfield (except for a termination without cause due to a general reduction in force or the specific elimination of a named executive officer’s position, in which case the benefits would be substantially equivalent to those described under “Payments Made Upon Death or

 

  2021 Proxy Statement   57


Table of Contents

Disability”), no equity or retirement benefits would be payable to these named executive officers since they are not yet eligible for retirement.

Payments Made Upon Termination for Cause.    The benefits for a termination for cause are substantially equivalent to the benefits described above under “Payments Made Upon Any Termination,” except that for all the named executive officers, no benefit under the SERP or Account Balance SERP would be payable. In addition, all outstanding grants of time-lapse RSUs and performance-based RSUs, as well as any unvested FACC under the RSP, would be forfeited by all named executive officers.

Payments Made Upon a Change in Control.    As discussed above in “Change in Control Severance Agreements,” beginning on page 56, we have entered into severance agreements with each of the named executive officers to provide certain severance benefits for them in the event of a termination without “cause” or “constructive termination” of their employment within three years following a “change in control” of the Company, as such terms are defined in the agreements. As is also discussed above, under the “best net” approach, the Company is not liable for the tax gross-up payments on behalf of those individuals whose severance payments would trigger excise tax penalties. In the tables below under the heading “Termination Upon/Following Change in Control,” we assume the named executive officers would pay any related excise tax penalties. The severance agreement for each such named executive officer provides that the Company will pay such named executive officer a lump sum severance payment as described in “Change in Control Severance Agreements,” beginning on page 56.

Potential Post-Employment Payment Tables.    The following tables reflect estimates of the total amount of compensation due each named executive officer in the event of such executive’s termination of employment by reason of death, disability, retirement, termination for cause, or termination of employment upon or following a change in control. There are no separate columns presented below showing amounts payable in the event of either a voluntary termination or a termination without cause since such amounts would be substantially equivalent to the amounts shown under Termination Upon Retirement. The amounts shown below assume that such termination was effective as of September 30, 2020, and are estimates of the amounts which would be paid out to the executives upon such termination. The amounts shown below with respect to accelerated equity assume a value based on the closing price of our common stock of $95.59, as reported on the NYSE Consolidated Tape on September 30, 2020. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company.

 

J. Kevin Akers

  

Termination

Upon

Death

($)

    

Termination

Upon

Disability

($)

    

Termination

Upon

Retirement

($)

    

Termination

For

Cause

($)

    

Termination

Upon/

Following

Change in

Control

($)

 

Cash Severance

     —          —          —          —          4,228,365  

Equity

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Time-Lapse Restricted Stock Units

     1,772,717        1,772,717        1,772,717        —          1,772,717  

Performance-Based Restricted Stock Units

     641,313        641,313        641,313        —          641,313  

Total

     2,414,030        2,414,030        2,414,030        —          2,414,030  

Retirement Benefits

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Pension Account Plan

     610,179        1,229,331        610,179        610,179        701,244  

Supplemental Executive Retirement Plan

     20,254,361        18,020,277        15,599,295        —          18,332,186  

Retirement Savings Plan

     1,613,274        1,613,274        1,613,274        1,613,274        1,646,228  

Total

     22,477,814        20,862,882        17,822,748        2,223,453        20,679,658  

Other Benefits

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Health & Welfare

     —          —          —          —          39,904  

Total

     24,891,844        23,276,912        20,236,778        2,223,453        27,361,957  

 

58   ATMOS ENERGY  


Table of Contents

Kim R. Cocklin

  

Termination

Upon

Death

($)

    

Termination

Upon

Disability

($)

    

Termination

Upon

Retirement

($)

    

Termination

For

Cause

($)

    

Termination

Upon/

Following

Change in

Control

($)

 

Cash Severance

     —          —          —          —          5,325,340  

Equity

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Time-Lapse Restricted Stock Units

     4,607,820        4,607,820        4,607,820        —          4,607,820  

Performance-Based Restricted Stock Units

     1,233,334        1,233,334        1,233,334        —          1,233,334  

Total

     5,841,154        5,841,154        5,841,154        —          5,841,154  

Retirement Benefits

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

Pension Account Plan

     390,147        452,988        390,147        390,147        481,212  

Supplemental Executive Retirement Plan

     21,498,735        19,457,118        19,420,803        —          19,420,803  

Retirement Savings Plan

     1,121,554        1,121,554        1,121,554        1,121,554        1,154,508  

Total

     23,010,436        21,031,660        20,932,504