UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1800 Three Lincoln Centre
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
(214) 934-9227
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X .No .
Number of shares outstanding of each of the issuer's classes of
common stock, as of July 27, 1995.
Class Shares Outstanding
------------ ------------------
No Par Value 15,498,349<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, September 30,
1995 1994
------------ ------------
ASSETS (Unaudited)
Property, plant and equipment $585,388 $543,692
Less accum. depreciation and amort. 233,936 216,285
-------- --------
Net property, plant and equipment 351,452 327,407
Current assets
Cash and cash equivalents 2,421 2,766
Accounts receivable, net 20,489 29,678
Inventories 6,782 5,888
Gas stored underground 7,099 12,657
Prepayments 2,179 2,309
-------- --------
Total current assets 38,970 53,298
Deferred charges and other assets 33,771 35,973
-------- --------
$424,193 $416,678
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock outstanding:
15,480,915 shares at 6/30/95 and
15,297,166 shares at 9/30/94 $ 77 $ 77
Additional paid-in capital 105,622 102,456
Retained earnings 56,901 47,023
-------- --------
Total shareholders' equity 162,600 149,556
Long-term debt 131,303 138,303
-------- --------
Total capitalization 293,903 287,859
Current liabilities
Current maturities of long-term debt 7,000 4,000
Notes payable to banks 3,500 18,100
Accounts payable 28,029 21,975
Taxes payable 9,763 4,864
Customers' deposits 9,159 8,257
Other current liabilities 8,936 7,038
-------- --------
Total current liabilities 66,387 64,234
Deferred income taxes 29,005 30,184
Deferred credits and other liabilities 34,898 34,401
-------- --------
$424,193 $416,678
======== ========
See accompanying notes to consolidated financial statements.
- 2 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
June 30,
-------------------
1995 1994
-------- --------
Operating revenues $84,685 $ 90,013
Purchased gas cost 50,616 58,223
-------- --------
Gross profit 34,069 31,790
Operating expenses
Operation 20,976 20,796
Maintenance 1,072 1,634
Depreciation and amortization 5,177 4,941
Taxes, other than income 3,825 3,673
Income taxes (benefit) 32 (687)
------- -------
Total operating expenses 31,082 30,357
------- -------
Operating income 2,987 1,433
Other income 473 203
Interest charges 3,378 2,860
------- -------
Net income (loss) $ 82 $(1,224)
======= =======
Net income (loss) per share $ .01 $ (.08)
======= =======
Atmos dividends declared per share
(See Note 2) $ .23 $ .22
======= =======
Average shares outstanding 15,450 15,233
======= =======
See accompanying notes to consolidated financial statements.
- 3 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Nine months ended
June 30,
------------------
1995 1994
-------- --------
Operating revenues $359,827 $422,458
Purchased gas cost 222,699 282,881
-------- --------
Gross profit 137,128 139,577
Operating expenses
Operation 63,119 67,815
Maintenance 3,224 4,630
Depreciation and amortization 15,500 14,280
Taxes, other than income 13,290 14,020
Income taxes 11,533 10,752
-------- --------
Total operating expenses 106,666 111,497
-------- --------
Operating income 30,462 28,080
Other income 387 288
Interest charges 10,346 9,262
-------- --------
Net income $ 20,503 $ 19,106
======== ========
Net income per share $ 1.33 $ 1.26
======== ========
Atmos dividends declared per share
(See Note 2) $ .69 $ .66
======== ========
Average shares outstanding 15,386 15,168
======== ========
See accompanying notes to consolidated financial statements.
- 4 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Twelve months ended
June 30,
---------------------
1995 1994
-------- --------
Operating revenues $437,177 $493,942
Purchased gas cost 271,389 326,963
-------- --------
Gross profit 165,788 166,979
Operating expenses
Operation 87,436 88,025
Maintenance 4,482 6,370
Depreciation and amortization 20,061 18,246
Taxes, other than income 16,078 17,194
Income taxes 8,883 9,721
-------- --------
Total operating expenses 136,940 139,556
-------- --------
Operating income 28,848 27,423
Other income 602 249
Interest charges 13,374 12,377
-------- --------
Net income $ 16,076 $ 15,295
======== ========
Net income per share $ 1.05 $ 1.02
======== ========
Atmos dividends declared per share
(See Note 2) $ .91 $ .87
======== ========
Average shares outstanding 15,358 15,045
======== ========
See accompanying notes to consolidated financial statements.
- 5 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended
June 30,
------------------
1995 1994
-------- --------
Cash Flows From Operating Activities
Net income $ 20,503 $ 19,106
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 15,500 14,280
Charged to other accounts 2,732 2,092
Deferred income taxes (benefit) (1,179) (2,414)
Other 1,838 605
-------- --------
39,394 33,669
Net change in operating assets and
liabilities 28,597 15,302
-------- --------
Net cash provided by operating
activities 67,991 48,971
Cash Flows From Investing Activities
Capital expenditures (44,796) (35,682)
Retirements of property, plant and
equipment 2,519 (492)
-------- --------
Net cash used in investing activities (42,277) (36,174)
Cash Flows From Financing Activities
Net decrease in notes payable to banks (54,600) (2,100)
Issuance of long-term debt 40,000 -
Cash dividends and distributions paid (10,625) (9,371)
Repayment of long-term debt (4,000) (9,850)
Issuance of common stock 3,166 7,199
-------- --------
Net cash used in financing
activities (26,059) (14,122)
-------- --------
Net decrease in cash and cash equivalents (345) (1,325)
Cash and cash equivalents at beginning
of period 2,766 2,286
-------- --------
Cash and cash equivalents at end
of period $ 2,421 $ 961
======== ========
See accompanying notes to consolidated financial statements.
- 6 -<PAGE>
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
1. Unaudited interim financial information
In the opinion of management, all material adjustments necessary
for a fair presentation have been made to the unaudited interim
period financial statements. Such adjustments consisted only of
normal recurring accruals. Because of seasonal and other fac-
tors, the results of operations for the nine month period ended
June 30, 1995 are not indicative of expected results of opera-
tions for the year ending September 30, 1995. These interim
financial statements and notes are condensed as permitted by the
instructions to Form 10-Q, and should be read in conjunction with
the audited consolidated financial statements in the 1994 annual
report to shareholders of Atmos Energy Corporation ("Atmos" or
the "Company"). The condensed consolidated balance sheet of
Atmos Energy Corporation, as of June 30, 1995, and the related
condensed consolidated statements of income for the three-month,
nine-month, and twelve-month periods ended June 30, 1995, and
statement of cash flows for the nine-month period ended June 30,
1995, included herein have been subjected to a review by Ernst &
Young LLP, the Company's independent accountants, whose report is
included herein.
Deferred charges and other assets - Deferred charges and other
assets at June 30, 1995 and September 30, 1994 include assets of
the Company's qualified defined benefit retirement plans in
excess of the plans' recorded obligations in the amounts of
$10,213,000 and $12,275,000, respectively, and Company assets
related to the Company's nonqualified retirement plans at June
30, 1995 and September 30, 1994 of $16,559,000 and $15,735,000,
respectively.
Common stock - At the annual meeting of shareholders on
February 8, 1995, the shareholders approved an increase in the
number of authorized shares of common stock from 50,000,000 to
75,000,000. As of June 30, 1995, the Company had 75,000,000
shares of common stock, no par value (stated at $.005 per share),
authorized and 15,480,915 shares outstanding. In May 1994, the
Company implemented a three-for-two split of its common stock.
All share information in this report is adjusted for the 3-for-2
stock split unless otherwise noted.
2. Business Combination
On December 22, 1993, Atmos acquired by means of a merger all of
the assets and liabilities of Greeley Gas Company ("GGC") in
accordance with the terms and provisions of an Agreement and Plan
of Reorganization dated July 2, 1993. Subsequent to the merger,
- 7 -<PAGE>
the business of GGC has been operated through the Company's
Greeley Gas Company division (the "Greeley Gas Division").
The Atmos dividends declared per share for the prior periods
presented below and on the consolidated statements of income
reflect Atmos' dividends declared per share as adjusted for the
3-for-2 stock split in May 1994. The restated cash dividends and
distributions per share presented below reflect the total amounts
paid by Atmos and GGC to their shareholders in each of those
periods, divided by the total number of weighted average shares
outstanding in those periods as restated for the shares issued to
effect the merger between Atmos and GGC and the 3-for-2 stock
split in May 1994.
For the periods ended June 30, 1994
-----------------------------------
Three Nine Twelve
months months months
------ ------ ------
Atmos dividends
declared per share $.22 $.66 $.87
Restated cash dividends
and distributions per
share, including GGC $.22 $.62 $.80
3. Postemployment Benefits
Effective October 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers Accounting for
Postemployment Benefits" ("SFAS No. 112"). SFAS No. 112 requires
that certain benefits provided to former or inactive employees,
after employment but before retirement, such as workers'
compensation, disability benefits and health care continuation
coverage be accrued if attributable to the employees' prior
service. Prior to October 1, 1994, postemployment benefit costs
were recorded and recovered in rates on the pay-as-you-go basis.
Both the cumulative effect of adopting SFAS No. 112, as well as
the effect of the new standard upon the recurring expense being
recognized for these benefits, were not material.
4. Contingencies
On March 15, 1991, suit was filed in the 15th Judicial District
Court of Lafayette Parish, Louisiana, by the "Lafayette Daily
Advertiser" and others against the Trans La Division, Trans
Louisiana Industrial Gas Company, Inc. ("TLIG"), a wholly owned
subsidiary of the Company, and Louisiana Intrastate Gas
Corporation and certain of its affiliates ("LIG"). LIG is the
Company's primary supplier of natural gas in Louisiana and is not
otherwise affiliated with the Company.
The plaintiffs purported to represent a class consisting of all
residential and commercial gas customers in the Trans La
- 8 -<PAGE>
Division's service area. Among other things, the lawsuit alleged
that the defendants violated antitrust laws of the state of
Louisiana by manipulating the cost-of-gas component of the Trans
La Division's gas rate to the purported customer class, thereby
causing such purported class members to pay a higher rate. The
plaintiffs made no specific allegation of an amount of damages.
The defendants brought an appeal to the Louisiana Supreme Court
of rulings by the trial court and the Third Circuit Court of
Appeal which denied defendants' exceptions to the jurisdiction of
the trial court. It was the position of the defendants that the
plaintiffs' claims amount to complaints about the level of gas
rates and should be within the exclusive jurisdiction of the
Louisiana Commission.
On January 19, 1993 the Louisiana Supreme Court issued a decision
reversing in part the lower courts' rulings, dismissing all of
plaintiffs' claims against the defendants which seek damages due
to alleged overcharges and further ruling that all such claims
are within the exclusive jurisdiction of the Louisiana
Commission. Any claims which seek damages other than overcharges
were remanded to the trial court but were stayed pending the
completion of the Louisiana Commission proceeding referred to
below. The Company has reached a tentative settlement with the
plaintiffs in the context of the Louisiana Commission proceeding
referred to below, which settlement will resolve all outstanding
issues relating to the Company, subject to certain procedural
conditions.
On July 14, 1995, the Louisiana Commission entered an order
approving a settlement with the Company and TLIG in connection
with its investigation of the costs included in the Trans La
Division's purchased gas adjustment component in its rates. The
order exonerated the Company of any wrongdoing or manipulation of
the cost of gas component of its gas rate to residential and
commercial customers. In the settlement, the Company agreed to
refund approximately $541,000 plus interest to the Trans La
Division's customers over a two-year period due to certain issues
related to the calculation of the weighted average cost of gas.
The refund totalling approximately $1,016,000, which includes
interest calculated through October 1, 1995, will begin in
September 1995 and will be credited to customer bills along with
interest that accrues after October 1, 1995. Most of the issues
that generated the refunds arose before Trans Louisiana Gas
Company was acquired by the Company in 1986.
The Greeley Gas Company Division of the Company is a defendant in
several lawsuits filed as a result of a fire in a building in
Steamboat Springs, Colorado on February 3, 1994. The plaintiffs
claim that the fire resulted from a leak in a severed gas service
line owned by the Greeley Division. The Company believes that
the evidence shows that any damage to the line was caused by a
third party or parties and occurred prior to the Company's
- 9 -<PAGE>
acquisition of Greeley Gas Company in 1993. The Company has
adequate insurance and/or reserves to cover any potential damages
that may be awarded against the Company in this matter except for
any punitive damages due to prior Colorado court rulings that the
insuring of punitive damages violates public policy in Colorado.
It is not possible, at this time, to estimate the extent of the
exposure to the Company. The Company believes that the allega-
tions against it are without merit and that the chances of an
award of punitive damages against the Company are remote. The
Company will vigorously protect its interest in this matter.
From time to time, claims are made and lawsuits are filed against
the Company arising out of the ordinary business of the Company.
In the opinion of the Company's management, liabilities, if any,
arising from these actions are either covered by insurance, ade-
quately reserved for by the Company or would not have a material
adverse effect on the financial condition of the Company.
5. Long-term and short-term debt
In November 1994, the Company entered into note purchase agree-
ments with two insurance companies and issued at par $20,000,000
of unsecured Senior Notes at 8.07% payable in annual installments
of $4,000,000 beginning October 31, 2002 through October 31, 2006
with semiannual interest payments and $20,000,000 of unsecured
Senior Notes at 8.26% payable in annual installments of
$1,818,182 beginning October 31, 2004 through October 31, 2014
with semiannual interest payments.
During the quarter ended December 31, 1994, the Company paid
installments due of $2,000,000 on its 9.75% Senior Notes and
$2,000,000 on its 11.2% Senior Notes.
At June 30, 1995, the Company had committed, short-term,
unsecured bank credit facilities totaling $70,000,000, all of
which was unused. The Company also had aggregate uncommitted
lines of $140,000,000, of which $136,500,000 was unused.
- 10 -<PAGE>
6. Statements of cash flows
Supplemental disclosures of cash flow information for the nine
month periods ended June 30, 1995 and 1994 are presented below.
Nine months ended
June 30,
-----------------
1995 1994
------ -------
(In thousands)
Cash paid for
Interest $10,983 $10,806
Income taxes 7,184 6,370
- 11 -<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Atmos Energy Corporation
We have reviewed the accompanying condensed consolidated balance
sheets of Atmos Energy Corporation as of June 30, 1995 and 1994,
and the related condensed consolidated statements of income for
the three-month, nine-month and twelve-month periods ended June
30, 1995 and 1994 and the statements of cash flows for the nine-
month period ended June 30, 1995 and 1994. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit con-
ducted in accordance with generally accepted auditing standards,
which will be performed for the full year with the objective of
expressing an opinion regarding the financial statements taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifi-
cations that should be made to the accompanying condensed con-
solidated financial statements at June 30, 1995 and 1994, and for
the three-month, nine-month, and twelve-month periods then ended
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Atmos
Energy Corporation as of September 30, 1994, and the related con-
solidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein) and in our
report dated November 9, 1994, we expressed an unqualified opin-
ion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consoli-
dated balance sheet as of September 30, 1994, is fairly stated,
in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
August 2, 1995
- 12 -<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company distributes and sells natural gas to residential,
commercial, industrial and agricultural customers in six states.
Such business is subject to regulation by state and/or local
authorities in each of the states in which the Company operates.
In addition, the Company's business is affected by seasonal
weather patterns, competition within the energy industry, and
economic conditions in the areas that the Company serves.
Revenues and sales volume statistics for the three-month, nine-
month, and twelve-month periods ended June 30, 1995 and 1994
appear on pages 20-22. Meters in service are as follows:
June 30,
-------------------
1995 1994
------- -------
Meters in Service
Residential 571,760 564,149
Commercial 60,151 59,683
Industrial (including agricultural) 19,397 19,718
Public authority and other 4,978 4,954
------- -------
Total 656,286 648,504
======= =======
Rate Activity
In September 1994, the Company filed to increase revenues by ap-
proximately $2.6 million for a portion of its Energas Company
service area ("Energas Division"), which affects approximately
217,000 customers and reflects recovery of accrual accounting of
postretirement benefits in accordance with SFAS No. 106. In
November 1994, the Company implemented an annual revenue increase
of approximately $1.5 million affecting approximately 195,000
customers located inside the city limits of towns in this portion
of its Energas Division. Upon approval of the Railroad Commis-
sion of Texas in January 1995, the Company implemented an annual
increase of approximately $.2 million relating to the 22,000
remaining rural customers.
GGC filed a request for an increase in annual revenues of $4.5
million with the Colorado Public Utility Commission ("Colorado
Commission") in September, 1993. On May 1, 1994, the Company
implemented an annual increase of $3.2 million or 6.9% in Phase I
of this proceeding. The Phase I rates reflect recovery of SFAS
No. 106 expenses with external funding. In October 1994, the
Colorado Commission issued its order affirming the increase as
- 13 -<PAGE>
set forth in Phase I. In March 1995, the Greeley Gas Division
filed Phase II in the rate proceeding, which will address rate
structure.
Effective December 1, 1993, GGC received an annual rate increase
of approximately $2.1 million or 10.6% in its Kansas service
area. The increase reflects SFAS No. 106 expenses with external
funding and a moratorium on rate requests in Kansas until
December 1, 1996.
In September 1992, the Louisiana Public Service Commission
("Louisiana Commission") issued a rate order to the Company's
Trans La Division which included a rate stabilization clause
("RSC") for three years that provides for an annual adjustment to
the Company's rates to reflect changes in expenses, revenues and
invested capital following an annual review. The RSC provides an
opportunity for a return on jurisdictional common equity of
between 11.75% and 12.25%. As a result of the Company's filings
under the RSC, an increase of $730,000 annually or 2% went into
effect on March 1, 1993, an increase of $1.1 million annually or
2.7% went into effect on March 1, 1994 and the third increase of
$1.0 million annually or 2.0% went into effect on March 6, 1995.
The Company expects to have a hearing before the Louisiana
Commission on extending the rate stabilization mechanism.
In September 1990, the Kentucky Public Service Commission (the
"Kentucky Commission") issued an order that increased annual
revenues approximately $1.0 million for the Company's Kentucky
service area. In May 1991, the Kentucky Commission issued an
Order on Rehearing increasing allowed revenues an additional $2.6
million. The Attorney General and the Company separately pursued
unsuccessful appeals of the Rehearing Order.
On February 10, 1995, the Company filed with the Kentucky Commis-
sion for a rate increase for its Western Kentucky Gas Company
Division. The filing requested an annual revenue increase of
approximately $7.7 million, or 5.5 percent. The Kentucky Commis-
sion has suspended the increase until August 12, 1995, and stat-
utes provide that they act on the filing within 10 months of the
filing date. In July 1995 a settlement agreement was filed with
the Kentucky Commission for a total operating income increase of
approximately $4.0 million for the Company, of which a portion
becomes effective in August 1996. The settlement includes
recovery of expenses related to adoption of SFAS No. 106. The
Kentucky Commission is expected to take action on the rate
settlement in August. The Company provides natural gas service
to approximately 168,000 customers in Kentucky.
On February 11, 1992, the Company filed a rate case with the city
of Amarillo, Texas seeking to increase annual revenues by approx-
imately $4.4 million, or 12%. In November 1992, the Railroad
Commission issued its decision resulting in a total annual in-
crease of $2.1 million. The Company and the city requested a
- 14 -<PAGE>
rehearing of the Order. On January 11, 1993, the Railroad
Commission denied rehearing to both parties. In February 1993,
the city appealed the Railroad Commission's rate order to the
District Court of Travis County, Texas. In January 1994, the
District Court denied the city's appeal. The city appealed to
the Court of Appeals. On March 1, 1995 the Austin Court of
Appeals issued its decision affirming the Railroad Commission's
1993 Amarillo Rate Order in all respects.
FINANCIAL CONDITION
For the nine months ended June 30, 1995, net cash provided by
operating activities totaled $68.0 million compared with $49.0
million for the nine months ended June 30, 1994. The net change
in operating assets and liabilities was $28.6 million for the
nine months ended June 30, 1995 compared with $15.3 million for
the nine months ended June 30, 1994. Due to the seasonal nature
of the natural gas distribution business, large swings in
accounts receivable, accounts payable and inventories of gas in
underground storage will occur when entering and leaving the
winter or heating season.
Major cash flows used for investing activities for the nine
months ended June 30, 1995 included capital expenditures of $44.8
million compared with $35.7 million for the nine months ended
June 30, 1994. The capital expenditures budget for fiscal year
1995 is currently $56.1 million, as compared with actual capital
expenditures of $50.4 million in fiscal 1994. Capital projects
planned for 1995 include major expenditures for mains, services,
meters, and vehicles. These expenditures will be financed from
internally generated funds and financing activities.
For the nine months ended June 30, 1995, cash used in financing
activities amounted to $26.1 million compared with $14.1 million
for the nine months ended June 30, 1994. During November 1994
the Company issued $40 million of unsecured Senior Notes. The
proceeds were used to repay short-term borrowings. During the
nine months ended June 30, 1995, notes payable to banks was
reduced $54.6 million, as compared with $2.1 million for the nine
months ended June 30, 1994. Payments of long-term debt decreased
$5.85 million to $4.0 million for the nine months ended June 30,
1995. Payments of long-term debt consisted of a $2.0 million
installment on the Company's 9.75% Senior Notes due in 1996 and a
$2.0 million installment on its 11.2% Senior Notes. The Company
paid $10.6 million in cash dividends during the nine months ended
June 30, 1995, compared with $9.4 million in cash dividends and
distributions paid during the nine months ended June 30, 1994.
This reflects a $.01 per share increase in the quarterly dividend
rate and an increase in the number of shares outstanding. In the
quarter ended December 31, 1993, the Company issued 3,849,294
shares of common stock as adjusted for the 3-for-2 stock split in
May 1994 (2,566,196 shares on a pre-split basis). This included
3,493,995 shares (2,329,330 pre-split shares) issued in
- 15 -<PAGE>
connection with the merger with Greeley Gas Company and 355,299
shares (236,866 pre-split shares) issued under its Employee Stock
Ownership Plan ("ESOP"), its Restricted Stock Grant Plan and its
Dividend Reinvestment and Stock Purchase Plan ("DRSPP") prior to
the merger on December 22, 1993. In the nine month period ended
June 30, 1995, the Company issued 183,749 shares under its plans
compared with 381,052 shares issued during the nine months ended
June 30, 1994.
In May 1994 the Company implemented a three-for-two split of its
common stock in the form of a stock dividend, which resulted in
shareholders receiving one new share for every two shares pre-
viously held. Fractional shares were paid in cash or credited to
DRSPP or ESOP accounts.
In January 1995, the Company amended its DRSPP to a Direct Stock
Purchase Plan ("DSPP") allowing customers and other investors to
purchase common stock directly from the Company with a $200
minimum initial investment.
The Company believes that internally generated funds, its short-
term credit facilities and access to the debt and equity capital
markets will provide necessary working capital and liquidity for
capital expenditures and other cash needs for the remainder of
fiscal 1995. At June 30, 1995 the Company had $70.0 million of
committed, short-term credit facilities, all of which was avail-
able for additional borrowing. The committed lines are renewed
or renegotiated at least annually. At June 30, 1995, the Company
also had $140.0 million of uncommitted short-term lines, $136.5
million of which was unused.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995, COMPARED WITH THREE MONTHS
ENDED JUNE 30, 1994
Operating revenues decreased by approximately 6% to $84.7 million
for the three months ended June 30, 1995 from $90.0 million for
the three months ended June 30, 1994. The primary factors con-
tributing to the decrease in operating revenues were decreased
sales to irrigation customers and lower cost of gas, which is
reflected in sales price. During the quarter ended June 30,
1995, temperatures averaged 24% colder than in the corresponding
quarter of the prior year, and approximately 11% colder than
normal. However, the impact of colder weather in the quarter
ended June 30, 1995 was more than offset by decreased irrigation
sales and lower gas costs. The total volume of gas sold and
transported for the three months ended June 30, 1995 was 27.7
billion cubic feet ("Bcf") compared with 28.9 Bcf for the three
months ended June 30, 1994. Reasons for the decreased volumes
include lower transportation volumes and decreased irrigation
sales. Rainfall in Lubbock County, Texas was 2.3 inches in June
1995 compared with .5 inch in June 1994. The average sales price
- 16 -<PAGE>
per Mcf sold decreased $.15 to $3.90 as a result of a $.30
decrease in the average cost of gas. Lower gas costs are passed
on to customers, but do not affect the Company's margins.
Gross profit increased by approximately 7% to $34.1 million for
the three months ended June 30, 1995, from $31.8 million for the
three months ended June 30, 1994. Contributing to the improved
margins were rate increases implemented in Texas, Louisiana and
Colorado since May 1, 1994. Operating expenses, excluding income
taxes, increased less than .4% from $31.0 million for the three
months ended June 30, 1994 to $31.1 million for the three months
ended June 30, 1995. Operating income increased for the three
months ended June 30, 1995 to $3.0 million from $1.4 million for
the three months ended June 30, 1994. The increase in operating
income primarily resulted from increased gross profit.
Net income increased from a loss of $1.2 million for the three
months ended June 30, 1994 to a gain of $.1 million for the three
months ended June 30, 1995. This increase in net income primari-
ly resulted from the increase in operating income, partially off-
set by an increase in interest expense as a result of $40 million
of Senior Notes issued in November 1994 and higher short-term
interest rates in the nine months ended June 30, 1995.
NINE MONTHS ENDED JUNE 30, 1995, COMPARED WITH NINE MONTHS ENDED
JUNE 30, 1994
Operating revenues decreased by approximately 15% to $359.8 mil-
lion for the nine months ended June 30, 1995 from $422.5 million
for the nine months ended June 30, 1994. Factors contributing to
the lower operating revenues were the lower average cost of gas,
which is reflected in the sales price, warmer weather in most
service areas and decreased demand in the irrigation market.
Weather in the Company's service areas was 11% warmer than normal
and 10% warmer than weather in the corresponding nine-month
period of the prior fiscal year. Volumes sold to irrigation cus-
tomers decreased from the corresponding period of the prior year
by 7%. The average sales price per Mcf decreased from $4.19 for
the nine months ended June 30, 1994 to $3.87 for the nine months
ended June 30, 1995. The decrease in the average sales price re-
flects decreased cost of gas. The average cost of gas per Mcf
sold decreased from $2.91 for the nine months ended June 30, 1994
to $2.49 for the nine months ended June 30, 1995.
Gross profit decreased to $137.1 million for the nine months
ended June 30, 1995, compared with $139.6 million for the nine
months ended June 30, 1994. The decrease in gross profit was
primarily due to an 8% decrease in sales volumes which resulted
from warmer weather than experienced in the nine months ended
June 30, 1994. The impact of 10% warmer weather in the nine
months ended June 30, 1995 more than offset the impact of rate
increases implemented in Texas, Louisiana, Colorado and Kansas
subsequent to October 1, 1993. Operating expenses, excluding
- 17 -<PAGE>
income taxes, decreased from $100.7 million in the nine months
ended June 30, 1994, to $95.1 million in the nine months ended
June 30, 1995. The principal factors contributing to the de-
crease in operating expenses were decreases in all major expense
categories except depreciation. The completion of the assimila-
tion of Greeley Gas Company into Atmos, realization of operating
efficiencies, and cost control measures all contributed to lower
operating expenses in fiscal 1995.
Operating income increased for the nine months ended June 30,
1995 to $30.5 million from $28.1 million for the nine months
ended June 30, 1994. The increase in operating income primarily
resulted from decreased operating expenses.
Interest expense increased approximately $1.1 million for the
nine months ended June 30, 1995 compared with the nine months
ended June 30, 1994, because of the $40 million of Senior Notes
issued in November 1994 and higher short-term interest rates in
the nine months ended June 30, 1995.
Net income increased for the nine months ended June 30, 1995, by
approximately 7% to $20.5 million from $19.1 million for the nine
months ended June 30, 1994. The increase in net income resulted
from the increase in operating income, partially offset by the
increase in interest expense. Earnings per share increased to
$1.33 for the nine months ended June 30, 1995 from $1.26 for the
nine months ended June 30, 1994, while average shares outstanding
increased approximately 1%. Dividends per share increased 5% to
$.69 for the nine months ended June 30, 1995. All per share
information is adjusted for the 3-for-2 stock split in May 1994.
The Company estimates that the impact of the weather being 11%
warmer than normal for the nine months ended June 30, 1995 caused
net income to be approximately $4.3 million less that it would
have been had the Company experienced normal temperatures in its
respective service areas. Weather was approximately 1% warmer
than normal for the nine months ended June 30, 1994.
TWELVE MONTHS ENDED JUNE 30, 1995, COMPARED WITH TWELVE MONTHS
ENDED JUNE 30, 1994
Operating revenues decreased by approximately 11% to $437.2
million for the 12 months ended June 30, 1995 from $493.9 million
for the 12 months ended June 30, 1994. The decreased revenues
for the 12 months ended June 30, 1995 were caused by decreased
sales volumes and lower gas costs as a result of warmer winter
weather and decreased demand. Sales and transportation volumes
decreased to 143.3 Bcf for the 12 months ended June 30, 1995
compared with 149.8 Bcf for the corresponding prior 12-month
period. The average sales price per Mcf decreased from $4.16 to
$3.87. The average cost of gas per Mcf sold decreased from $2.86
to $2.50 for the 12 months ended June 30, 1995, reflecting a
general decline in gas supply costs over the last two years. The
- 18 -<PAGE>
average sales price reflects the decreased cost of gas and rate
increases implemented in Texas, Louisiana, Colorado and Kansas
subsequent to July 1, 1993.
Gross profit decreased by approximately 1% to $165.8 million for
the 12 months ended June 30, 1995, from $167.0 million for the 12
months ended June 30, 1994. Operating expenses, excluding income
taxes, decreased from $129.8 million for the 12 months ended June
30, 1994, to $128.1 million for the 12 months ended June 30,
1995. Factors contributing to the decrease in operating expenses
included decreases in all major categories of expense except
depreciation. Income taxes decreased $.8 million for the 12
months ended June 30, 1995, as compared with the 12 months ended
June 30, 1994. Operating income increased in the 12 months ended
June 30, 1995 by approximately 5% to $28.8 million. The primary
reason for the increase in operating income was the decrease in
operating expenses discussed above.
Interest charges increased $1.0 million to $13.4 million, com-
pared with $12.4 million for the prior year. This was caused by
the issuance of $40 million of Senior Notes in November 1994 and
higher short-term borrowing rates for the twelve months ended
June 30, 1995.
Net income for the 12 months ended June 30, 1995 was $16.1
million compared with $15.3 million for the 12 months ended June
30, 1994. The increase in net income resulted primarily from the
increase in operating income discussed above. Earnings per share
increased by 3% to $1.05. Average shares outstanding increased
approximately 2% as compared with the prior year. Dividends per
share increased approximately 5% to $.91. All per share
information is adjusted for the 3-for-2 stock split in May 1994.
The Company estimates that the impact of the weather being 11%
warmer than normal for the twelve months ended June 30, 1995
caused net income to be approximately $4.3 million less than it
would have been had the Company experienced normal temperatures
in its respective service areas. Weather was approximately
normal for the 12 months ended June 30, 1994.
- 19 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS (1)
Three months ended June 30,
1995 1994
------- -------
Sales Volumes -- MMcf (2)
Residential 6,885 6,160
Commercial 3,037 2,713
Industrial (including agricultural) 10,143 11,768
Public authority and other 582 522
------- -------
Total 20,647 21,163
Transportation Volumes -- MMcf (2) 7,026 7,720
------- -------
Total Volumes Handled - MMcf (2) 27,673 28,883
======= =======
Operating Revenues (000's)
Gas Sales Revenues
Residential $35,552 $ 34,709
Commercial 13,373 12,998
Industrial (including agricultural) 29,188 35,705
Public authority and other 2,433 2,402
------- --------
Total Gas Revenues 80,546 85,814
Transportation Revenues 2,773 2,859
Other Revenues 1,366 1,340
------- --------
Total Operating Revenues $84,685 $ 90,013
======= ========
Average Gas Sales Revenues per Mcf $ 3.90 $ 4.05
Average Transportation Revenue per Mcf $ .39 $ .37
Cost of Gas per Mcf Sold $ 2.45 $ 2.75
HEATING DEGREE DAYS
Weather Three months ended June 30,
Service Sensitive ---------------------------
Area Customers % 1995 1994 Normal
-------------- ----------- ---- ---- ------
Texas 47% 288 250 237
Kentucky 26% 266 287 349
Louisiana 11% 51 71 37
Colorado, Kansas
and Missouri 16% 978 599 768
----
System Average 100% 365 295 328
Percent of Normal 111% 90%
1. Consolidated operating statistics have been restated to
include Greeley operations for all periods presented.
2. Volumes are reported as metered in million cubic feet("MMcf").
- 20 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS (1)
Nine months ended June 30,
1995 1994
-------- --------
Sales Volumes -- MMcf (2)
Residential 42,641 47,552
Commercial 17,544 19,102
Industrial (including agricultural) 25,059 25,701
Public authority and other 4,343 4,853
-------- --------
Total 89,587 97,208
Transportation Volumes -- MMcf (2) 24,449 24,944
-------- --------
Total Volumes Handled - MMcf (2) 114,036 122,152
======== ========
Operating Revenues (000's)
Gas Sales Revenues
Residential $185,361 $222,431
Commercial 69,785 82,601
Industrial (including agricultural) 75,071 81,975
Public authority and other 16,353 20,746
-------- --------
Total Gas Revenues 346,570 407,753
Transportation Revenues 9,444 10,854
Other Revenues 3,813 3,851
-------- --------
Total Operating Revenues $359,827 $422,458
======== ========
Average Gas Sales Revenues per Mcf $ 3.87 $ 4.19
Average Transportation Revenue per Mcf $ .39 $ .44
Cost of Gas per Mcf Sold $ 2.49 $ 2.91
HEATING DEGREE DAYS
Weather Nine months ended June 30,
Service Sensitive -----------------------------
Area Customers % 1995 1994 Normal
-------------- ----------- ------ ------ ------
Texas 47% 3,090 3,546 3,512
Kentucky 26% 3,738 4,290 4,341
Louisiana 11% 1,443 1,922 1,760
Colorado, Kansas
and Missouri 16% 5,800 5,793 6,060
----
System Average 100% 3,507 3,917 3,939
Percent of Normal 89% 99%
See footnotes on page 20.
- 21 -<PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS (1)
Twelve months ended June 30,
1995 1994
-------- --------
Sales Volumes -- MMcf (2)
Residential 46,298 51,616
Commercial 19,576 21,164
Industrial (including agricultural) 37,860 36,130
Public authority and other 4,732 5,226
-------- --------
Total 108,466 114,136
Transportation Volumes -- MMcf (2) 34,813 35,654
-------- --------
Total Volumes Handled - MMcf (2) 143,279 149,790
======== ========
Operating Revenues (000's)
Gas Sales Revenues
Residential $208,861 $247,629
Commercial 79,691 92,573
Industrial (including agricultural) 112,818 111,605
Public authority and other 18,070 22,508
-------- --------
Total Gas Sales Revenues 419,440 474,315
Transportation Revenues 12,708 14,730
Other Revenues 5,029 4,897
-------- --------
Total Operating Revenues $437,177 $493,942
======== ========
Average Gas Sales Revenues per Mcf $ 3.87 $ 4.16
Average Transportation Revenue per Mcf $ .37 $ .41
Cost of Gas per Mcf Sold $ 2.50 $ 2.86
HEATING DEGREE DAYS
Weather Twelve months ended June 30,
Service Sensitive ----------------------------
Area Customers % 1995 1994 Normal
-------------- ----------- ------ ------ ------
Texas 47% 3,105 3,569 3,528
Kentucky 26% 3,790 4,338 4,376
Louisiana 11% 1,443 1,924 1,760
Colorado, Kansas
and Missouri 16% 5,890 6,001 6,234
----
System Average 100% 3,543 3,974 3,983
Percent of Normal 89% 100%
See footnotes on page 20.
- 22 -<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 4 of notes to consolidated financial statements on pages
8 and 9 herein for a description of legal proceedings.
Item 5. Other Information
On May 3, 1995 Mary Lovell was named senior vice president of
utility services, responsible for all gas supply, rates and
regulatory affairs, and marketing functions. Ms. Lovell, 43,
previously was vice president, rates and regulatory affairs.
Don James was named senior vice president of public affairs,
responsible for investor relations, corporate and employee
communications, and governmental affairs functions. Mr. James,
47, previously was senior vice president and general counsel.
Glen Blanscet was named vice president, general counsel and
corporate secretary, replacing Mr. James. Mr. Blanscet, 37,
previously was assistant general counsel and corporate secretary.
Lee Everett was named vice president, rates and regulatory af-
fairs, replacing Ms. Lovell. Mr. Everett, 42, was previously
director of regulatory affairs.
Gene Mattingly was named vice president of marketing, responsible
for large volume sales as well as residential and commercial mar-
keting. Mr. Mattingly, 47, previously was director of large
volume services.
Also on May 3, 1995, the Company named B.J. Hackler to the posi-
tion of president of its Trans Louisiana Gas Company division.
Mr. Hackler, 51, was previously director of operations services
for Atmos. He joined the Company in 1966 and has held a variety
of management positions, including senior vice president of Texas
operations for Energas Company.
In June 1995, the Company signed a letter of intent to acquire
privately held Oceana Heights Gas Company of Thibodaux, La.,
which is located near the Trans La Division service area and
serves approximately 9,200 customers. The Company expects to
account for the merger as a pooling of interests, with outstand-
ing shares of Oceana Heights capital stock to be converted to
Atmos stock having a market value equal to approximately $6.4
million. The merger is subject to certain conditions, including
the execution of a definitive agreement and the approval of
various regulatory authorities on terms acceptable to the
Company. The transaction is not expected to have a material
effect on the Company's financial condition or results of
operations.
- 23 -<PAGE>
On August 9, 1995 Dewey G. Williams, 70, retired from the
Company's Board of Directors, in accordance with its policy on
retirement of Board members. Mr. Williams, president of
Protective Assurance General Agency in Dallas, Texas, has served
on the Atmos Board since 1987.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required by Item 601 of Regulation
S-K and filed as part of this report is set forth in the
Exhibits Index, which immediately precedes such exhibits.
(b) Reports on Form 8-K
None
- 24 -<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ATMOS ENERGY CORPORATION
(Registrant)
Date: August 9, 1995 By: /s/ James F. Purser
------------------------------
James F. Purser
Executive Vice President
and Chief Financial Officer
Date: August 9, 1995 By: /s/ David L. Bickerstaff
------------------------------
David L. Bickerstaff
Vice President and Controller
(Principal Accounting Officer)
- 25 -<PAGE>
EXHIBITS INDEX
Item 6. (a)
Page Number or
Exhibit Incorporation
Number Description by Reference to
------- -------------------------------------- ---------------
10.1 Letter dated May 3, 1995 amending the
employment agreement between the
Company and Robert F. Stephens
10.2 Employment Agreement dated May 3, 1995
between the Company and Mary S. Lovell
10.3 Employment Agreement dated April 1,
1995 between the Company and J. Charles
Goodman
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos
Energy Corporation for the nine months
ended June 30, 1995
- 26 -<PAGE>
EXHIBIT 15
----------
August 9, 1995
Board of Directors
Atmos Energy Corporation
We are aware of the incorporation by reference in the Registra-
tion Statements (Form S-8 No. 33-57687, Form S-8 No. 33-68852,
Form S-8 No. 33-57695, Form S-3 No. 33-58220, and Form S-3 No.
33-56915) of Atmos Energy Corporation of our report dated
August 2, 1995, relating to the unaudited condensed consolidated
interim financial statements of Atmos Energy Corporation which
are included in its Form 10-Q for the quarter ended June 30,
1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report
is not a part of the registration statement prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
ERNST & YOUNG LLP
Dallas, Texas<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL SATEMENTS OF ATMOS ENERGY CORPORATION FOR THE NINE MONTHS
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 351,452
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 38,970
<TOTAL-DEFERRED-CHARGES> 33,771
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 424,193
<COMMON> 77
<CAPITAL-SURPLUS-PAID-IN> 105,622
<RETAINED-EARNINGS> 56,901
<TOTAL-COMMON-STOCKHOLDERS-EQ> 162,600
0
0
<LONG-TERM-DEBT-NET> 131,303
<SHORT-TERM-NOTES> 3,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 7,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,716
<LEASES-CURRENT> 191
<OTHER-ITEMS-CAPITAL-AND-LIAB> 116,883
<TOT-CAPITALIZATION-AND-LIAB> 424,193
<GROSS-OPERATING-REVENUE> 359,827
<INCOME-TAX-EXPENSE> 11,533
<OTHER-OPERATING-EXPENSES> 317,832
<TOTAL-OPERATING-EXPENSES> 329,365
<OPERATING-INCOME-LOSS> 30,462
<OTHER-INCOME-NET> 387
<INCOME-BEFORE-INTEREST-EXPEN> 30,849
<TOTAL-INTEREST-EXPENSE> 10,346
<NET-INCOME> 20,503
0
<EARNINGS-AVAILABLE-FOR-COMM> 20,503
<COMMON-STOCK-DIVIDENDS> 10,626
<TOTAL-INTEREST-ON-BONDS> 1,215
<CASH-FLOW-OPERATIONS> 67,991
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
EXHIBIT 10.1
------------
May 3, 1995
Mr. Robert F. Stephens
Atmos Energy Corporation
P.O. Box 650205
Dallas, TX 75265
RE: Amendment to August 8, 1991 Letter Agreement Regarding
Severance Benefits
Dear Mr. Stephens:
Reference is hereby made to that certain letter agreement
amended and restated as of August 8, 1991 from Atmos Energy
Corporation (the "Company") to you (the "Severance Agreement"),
pursuant to which the Company agreed to provide certain severance
benefits to you in the event your employment with the Company is
terminated after a change in control of the Company as described
in the Severance Agreement. The Company and you now desire to
amend the Severance Agreement and do, by execution hereof, agree
to amend, and do hereby amend, the Severance Agreement by
modifying the provisions contained in the first paragraph of
Section 3 of the Severance Agreement to read in its entirety as
follows:
If your employment by the Company is terminated by the
Company other than for cause or if you voluntarily
terminate your employment within one hundred and eighty
(180) days following the occurrence of any change in
control as defined in Subsection 2(i) hereof (the
"Evaluation Period"), you shall be entitled to the
benefits provided in Subsection 4(iii) hereof upon such
termination, unless such termination is because of
death, Disability or Retirement. If your employment by
the Company is terminated after the Evaluation Period
but during the term of this Agreement, you shall be
entitled to the benefits provided in Subsection 4(iii)
hereof upon such termination, unless such termination
is (A) because of your death, Disability or Retirement,
(B) by the Company for Cause, or (C) by you other than
for Good Reason.<PAGE>
Except as expressly modified herein, the Severance Agreement
is and shall remain in full force and effect in accordance with
its terms and provisions.
If this letter sets forth our agreement on the subject
matter hereof, please sign and return the enclosed copy of this
letter to the undersigned.
Sincerely,
ATMOS ENERGY CORPORATION
By: /s/ James F. Purser
----------------------------
James F. Purser
Executive Vice President and
Chief Financial Officer
AGREED TO:
/s/ Robert F. Stephens
-----------------------------
Robert F. Stephens
Date: 5/30/95
------------------------
- 2 -<PAGE>
EXHIBIT 10.2
------------
May 3, 1995
Ms. Mary S. Lovell
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265
Dear Ms. Lovell:
Atmos Energy Corporation (the "Company") considers it
essential to the best interests of its shareholders to foster the
continuous employment of key management personnel. In this
connection, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist
and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the
Company and its shareholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including
yourself, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no
such change is now contemplated.
In order to induce you to remain in the employ of the<PAGE>
Company and in consideration of your agreement set forth in
Subsection 2(ii) hereof, the Company agrees that you shall
receive the severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Company is
terminated subsequent to a "change in control of the Company" (as
defined in Section 2 hereof) under the circumstances described
below.
1. Term of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1995; provided, however, that commencing on January 1, 1996 and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not
later than July 1 of the preceding year, the Company shall have
given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall
have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period
of thirty-six (36) months beyond the month in which such change
in control occurred.
2. Change in Control. (i) No benefits shall be payable
hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a
"change in control of the Company" shall be deemed to have
occurred if (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other
fiduciary holding securities under an employee benefit plan of
- 2 -<PAGE>
the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 33 1/3% or more of the
combined voting power of the Company's then outstanding
securities; or (B) during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (A) or (C)
of this Subsection) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 60% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
- 3 -<PAGE>
substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A)
the Company enters into an agreement, the consummation of which
would result in the occurrence of a change in control of the
Company, (B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which if consummated would constitute a change in control of the
Company; (C) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
who is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 9.5% or more of the
combined voting power of the Company's then outstanding
securities, increases his beneficial ownership of such securities
by 5% or more over the percentage so owned by such person on the
date hereof; or (D) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential change in
control of the Company has occurred. You agree that, subject to
the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in
the employ of the Company until the earliest of (i) a date which
is six (6) months after the occurrence of such potential change
in control of the Company, (ii) the termination by you of your
employment by reason of Disability or Retirement (at your normal
retirement age), as defined in Subsection 3(i), or (iii) the
occurrence of a change in control of the Company.
3. Termination Following Change in Control. If any of the
- 4 -<PAGE>
events described in Subsection 2(i) hereof constituting a change
of control shall have occurred, you shall be entitled to the
benefits provided in Subsection 4(iii) hereof upon the subsequent
termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability
or Retirement, (B) by the Company for Cause, or (C) by you other
than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Company for twelve (12) consecutive months, and within thirty
(30) days after written Notice of Termination (as defined in
Subsection (iv) below) is given you shall not have returned to
the full-time performance of your duties, your employment may be
terminated for "Disability." Termination by the Company or you
of your employment based on "Retirement" shall mean termination
in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees
or in accordance with any retirement arrangement established with
your consent with respect to you.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of
Termination by you for Good Reason, as defined in Subsections
- 5 -<PAGE>
3(iv) and 3(iii), respectively) after a written demand for
substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
or (B) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes of this Subsection, no act, or
failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best
interest of the Company. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of
this Subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent,
the occurrence after a change in control of the Company of any of
the following circumstances unless, in the case of Paragraphs
(A), (E), (F), (G), or (H), such circumstances are fully
- 6 -<PAGE>
corrected prior to the Date of Termination specified in the
Notice of Termination, as defined in Subsections 3(v) and 3(iv),
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your status as a senior executive officer of the
Company or a substantial and adverse alteration in the
nature or status of your responsibilities from those in
effect immediately prior to the change in control of the
Company;
(B) a reduction by the Company in your annual base
salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board
salary reductions similarly affecting all senior executives
of the Company and all senior executives of any person in
control of the Company;
(C) the Company's requiring you to be based anywhere
other than the offices at which you were based immediately
prior to the change in control of the Company except for
required travel on the Company's business to an extent
substantially consistent with your present business travel
obligations;
(D) the failure by the Company, without your consent,
to pay to you any portion of your current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and
all senior executives of any person in control of the
Company, or to pay to you any portion of an installment of
- 7 -<PAGE>
deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date
such compensation is due;
(E) the failure by the Company to continue in effect
any compensation plan, in which you participate immediately
prior to the change in control of the Company which is
material to your total compensation, including, but not
limited to, the Company's Retirement Plan, Employee Stock
Ownership Plan, Supplemental Executive Benefits Plan and
Excess Medical Expense Insurance Plan or any substitute
plans adopted prior to the change in control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan,
or the failure by the Company to continue your participation
therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your
participation relative to other participants, as existed at
the time of the change in control;
(F) the failure by the Company to continue to provide
you with benefits substantially similar to those enjoyed by
you under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which
you were participating at the time of the change in control
of the Company, the taking of any action by the Company
which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit
- 8 -<PAGE>
enjoyed by you at the time of the change in control of the
Company, or the failure by the Company to provide you with
the number of paid vacation days to which you are entitled
on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and
agree to perform this Agreement; or
(H) any purported termination of your employment which
is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and,
if applicable, the requirements of Subsection (ii) above);
for purposes of this Agreement, no such purported
termination shall be effective.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
- 9 -<PAGE>
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall
mean (A) if your employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and (B) if your
employment is terminated for any reason other than Disability,
thirty (30) days after Notice of Termination is given.
4. Compensation Upon Termination or During Disability.
Following a change in control of the Company, as defined by
Subsection 2(i), upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(i) During any period that you fail to perform your full-
time duties with the Company as a result of incapacity due to
physical or mental illness, you shall continue to receive your
base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under any
disability plan of the Company until this Agreement is terminated
pursuant to Subsection 3(i) hereof. Thereafter, or in the event
your employment shall be terminated by the Company or by you for
Retirement, or by reason of your death, your benefits shall be
determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the terms
of such programs.
(ii) If your employment shall be terminated by the Company
- 10 -<PAGE>
for Cause or by you other than for Good Reason, Disability, death
or Retirement, the Company shall pay you your full base salary,
and continue to provide you with life, disability, accident,
health insurance and other benefits, through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement, death or
Disability or (b) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you your full base salary,
and continue to provide you with life, disability, accident,
health insurance and other benefits, through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at
the time such payments are due, except as otherwise provided
below;
(B) in lieu of any further salary payments to you for
period subsequent to the Date of Termination, the Company
shall pay as severance pay to you a lump sum severance
payment (the "Severance Payment") equal to 2.99 times your
"Base Amount", as defined in Section 280G of the Internal
Revenue Code of 1986 as amended (the "Code").
- 11 -<PAGE>
(C) Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in
control of the Company (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement
with (i) the Company, (ii) any person whose actions result
in a change in control of the Company, or (iii) any person
affiliated with the Company or such person) (all such
payments and benefits including the Severance Payment, being
hereinafter called "Total Payments") would be subject (in
whole or part), to the excise tax imposed under Section 4999
of the Code (the "Excise Tax"), then the Severance Payment
shall be reduced to the extent necessary so that no portion
of the Total Payments is subject to the Excise Tax if, and
only in the event that, the amount of such Total Payments,
as so reduced, (and after deduction of the net amount of
federal, state and local income tax on such reduced Total
Payments) is greater than the excess of (i) the amount of
such Total Payments, without reduction (but after deduction
of the net amount of federal, state and local income tax on
such Total Payments), over (ii) the amount of Excise Tax to
which you would be subject in respect of such Total
Payments. For purposes of determining whether and the
extent to which the Total Payments will be subject to the
Excise Tax, (i) no portion of the Total Payments the
receipt or enjoyment of which you shall have effectively
waived in writing prior to the date of payment of the
- 12 -<PAGE>
Severance Payment shall be taken into account; (ii) no
portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the
Company's independent auditors does not constitute a
"parachute payment" within the meaning of section 280G(b)(2)
of the Code, (including by reason of section 280G(b)(4)(A)
of the Code); (iii) in calculating the Excise Tax, no
portion of such Total Payments shall be taken into account
which constitutes reasonable compensation for services
actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of your base amount (as
defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation; and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company in
accordance with the principles of sections 280G(d)(3) and
(4) of the Code; and
(D) the Company also shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided
hereunder) except to the extent that the payment of such
fees and expenses would not be, or would cause any other
- 13 -<PAGE>
portion of the Total Payments not to be, deductible by
reason of Section 280G of the Code.
(iv) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount
claimed to be owed by you to the Company, or otherwise except as
specifically provided in this Section 4.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to all rights and benefits
provided to you under the terms of any other plan or agreement
between you and the Company.
5. Letter of Credit Preceding Termination. In the event a
potential change in control of the Company shall have occurred,
the Company will promptly (and in no event more than seven (7)
days thereafter) establish an irrevocable letter of credit (the
"Letter of Credit") in your favor in an amount equal to the
amount which would be payable to you pursuant to Subsection
4(iii) hereof as if you were immediately entitled to payment
pursuant thereto, such Letter of Credit to be issued by a
commercial bank which is not an affiliate of the Company, but
which is a national banking association or established under the
laws of one of the states of the United States, and which has
equity in excess of $100 million (the "Bank"). The Letter of
Credit shall be in form and substance reasonably satisfactory to
- 14 -<PAGE>
you and the Company and will provide that the Bank shall pay you
the amount of your draft, at sight, on presentation to the Bank
of a statement, signed by you or your authorized representative,
setting forth (i) a statement that pursuant to Subsection 4(iii)
of this Agreement, you are entitled to payments of not less than
the amount of such draft, and (ii) the Date of Termination of
your employment. Each time you shall draw on the Letter of
Credit, you shall provide the Company with a copy of such draft
and the accompanying statement referred to above. The Company
shall maintain the Letter of Credit in effect for a period of two
years from the date on which it is issued; provided, however,
that (i) if during any such two-year period any event shall occur
which, pursuant to this Section 5, would have required the
Company to establish a Letter of Credit had none then existed,
then the Company shall maintain the Letter of Credit in effect
for a period of two years following such event, unless further
extended pursuant to this provision, and (ii) if a change in
control of the Company shall occur, then the Company shall
maintain the Letter of Credit in effect for a period of three
years following such change in control. During the period in
which a Letter of Credit is required to be maintained, the
Company shall, at six-month intervals commencing with the date
the Letter of Credit is established, calculate the amount which
would be payable to you pursuant to Subsection 4(iii) hereof as
if you were immediately entitled to payment pursuant thereto. If
the amount exceeds the amount available to be drawn upon under
the Letter of Credit then in effect, the Company shall promptly
- 15 -<PAGE>
(and in no event later than seven (7) days thereafter) cause the
amount payable under the Letter of Credit to be increased by the
amount of such excess.
The payment by the Bank of the amount of your draft in
accordance with the terms hereof and of the Letter of Credit
shall not constitute a waiver by the Company of, or in any way
preclude the Company from asserting, any claim against you that
you are not entitled to some or all of such payment. In
addition, your drawing upon the Letter of Credit shall not
constitute a waiver by you, or in any way preclude you from
asserting, any claim against the Company that you are entitled to
amounts pursuant to this Agreement which were not paid by amounts
received under the Letter of Credit.
6. Successors; Binding Agreement. (i) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason
following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any
- 16 -<PAGE>
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
7. Notice. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the
Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except
that a notice of change of address shall be effective only upon
receipt.
8. Miscellaneous. No provision of this Agreement may be
- 17 -<PAGE>
modified, waived, or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Texas. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company
under Section 4 shall survive the expiration of the term of this
Agreement.
9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
- 18 -<PAGE>
original but all of which together will constitute one and the
same instrument.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Dallas, Texas in accordance with the rules of
the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our agreement on
this subject.
Sincerely,
ATMOS ENERGY CORPORATION
By: /s/ Robert F. Stephens
------------------------
Robert F. Stephens
President and COO
Agreed to this 25th
------
day of May, 1995
/s/ Mary S. Lovell
-------------------------
Mary S. Lovell
- 19 - <PAGE>
EXHIBIT 10.3
------------
April 1, 1995
Mr. J. Charles Goodman
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265
Dear Mr. Goodman:
Atmos Energy Corporation (the "Company") considers it
essential to the best interests of its shareholders to foster the
continuous employment of key management personnel. In this
connection, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may exist
and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure
or distraction of management personnel to the detriment of the
Company and its shareholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including
yourself, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no
such change is now contemplated.<PAGE>
In order to induce you to remain in the employ of the
Company and in consideration of your agreement set forth in
Subsection 2(ii) hereof, the Company agrees that you shall
receive the severance benefits set forth in this letter agreement
("Agreement") in the event your employment with the Company
isterminated subsequent to a "change in control of the Company"
(as defined in Section 2 hereof) under the circumstances
described below.
1. Term of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect through December 31,
1995; provided, however, that commencing on January 1, 1996 and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless, not
later than July 1 of the preceding year, the Company shall have
given notice that it does not wish to extend this Agreement;
provided, further, if a change in control of the Company shall
have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period
of thirty-six (36) months beyond the month in which such change
in control occurred.
2. Change in Control. (i) No benefits shall be payable
hereunder unless there shall have been a change in control of the
Company, as set forth below. For purposes of this Agreement, a
"change in control of the Company" shall be deemed to have
occurred if (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other
- 2 -<PAGE>
fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 33 1/3% or more of the
combined voting power of the Company's then outstanding
securities; or (B) during any period of two consecutive years
(not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (A) or (C)
of this Subsection) whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or (C) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 60% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation, or the shareholders of the Company
approve a plan of complete liquidation of the Company or an
- 3 -<PAGE>
agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
(ii) For purposes of this Agreement, a "potential change in
control of the Company" shall be deemed to have occurred if (A)
the Company enters into an agreement, the consummation of which
would result in the occurrence of a change in control of the
Company, (B) any person (including the Company) publicly
announces an intention to take or to consider taking actions
which if consummated would constitute a change in control of the
Company; (C) any person, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
who is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing 9.5% or more of the
combined voting power of the Company's then outstanding
securities, increases his beneficial ownership of such securities
by 5% or more over the percentage so owned by such person on the
date hereof; or (D) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a potential change in
control of the Company has occurred. You agree that, subject to
the terms and conditions of this Agreement, in the event of a
potential change in control of the Company, you will remain in
the employ of the Company until the earliest of (i) a date which
is six (6) months after the occurrence of such potential change
in control of the Company, (ii) the termination by you of your
employment by reason of Disability or Retirement (at your normal
retirement age), as defined in Subsection 3(i), or (iii) the
occurrence of a change in control of the Company.
- 4 -<PAGE>
3. Termination Following Change in Control. If any of the
events described in Subsection 2(i) hereof constituting a change
of control shall have occurred, you shall be entitled to the
benefits provided in Subsection 4(iii) hereof upon the subsequent
termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Disability
or Retirement, (B) by the Company for Cause, or (C) by you other
than for Good Reason.
(i) Disability; Retirement. If, as a result of your
incapacity due to physical or mental illness, you shall have been
absent from the full-time performance of your duties with the
Company for twelve (12) consecutive months, and within thirty
(30) days after written Notice of Termination (as defined in
Subsection (iv) below) is given you shall not have returned to
the full-time performance of your duties, your employment may be
terminated for "Disability." Termination by the Company or you
of your employment based on "Retirement" shall mean termination
in accordance with the Company's retirement policy, including
early retirement, generally applicable to its salaried employees
or in accordance with any retirement arrangement established with
your consent with respect to you.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and
continued failure by you to substantially perform your duties
with the Company (other than any such failure resulting from your
incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of
- 5 -<PAGE>
Termination by you for Good Reason, as defined in Subsections
3(iv) and 3(iii), respectively) after a written demand for
substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
or (B) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes of this Subsection, no act, or
failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best
interest of the Company. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that in
the good faith opinion of the Board you were guilty of conduct
set forth above in clauses (A) or (B) of the first sentence of
this Subsection and specifying the particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent,
the occurrence after a change in control of the Company of any of
the following circumstances unless, in the case of Paragraphs
- 6 -<PAGE>
(A), (E), (F), (G), or (H), such circumstances are fully
corrected prior to the Date of Termination specified in the
Notice of Termination, as defined in Subsections 3(v) and 3(iv),
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent
with your status as a senior executive officer of the
Company or a substantial and adverse alteration in the
nature or status of your responsibilities from those in
effect immediately prior to the change in control of the
Company;
(B) a reduction by the Company in your annual base
salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board
salary reductions similarly affecting all senior executives
of the Company and all senior executives of any person in
control of the Company;
(C) the Company's requiring you to be based anywhere
other than the offices at which you were based immediately
prior to the change in control of the Company except for
required travel on the Company's business to an extent
substantially consistent with your present business travel
obligations;
(D) the failure by the Company, without your consent,
to pay to you any portion of your current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and
all senior executives of any person in control of the
- 7 -<PAGE>
Company, or to pay to you any portion of an installment of
deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date
such compensation is due;
(E) the failure by the Company to continue in effect
any compensation plan, in which you participate immediately
prior to the change in control of the Company which is
material to your total compensation, including, but not
limited to, the Company's Retirement Plan, Employee Stock
Ownership Plan, Incentive Stock Option Plan, Supplemental
Executive Benefits Plan and Excess Medical Expense Insurance
Plan or any substitute plans adopted prior to the change in
control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to
continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as existed at the time of the change in
control;
(F) the failure by the Company to continue to provide
you with benefits substantially similar to those enjoyed by
you under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which
you were participating at the time of the change in control
of the Company, the taking of any action by the Company
- 8 -<PAGE>
which would directly or indirectly materially reduce any of
such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the change in control of the
Company, or the failure by the Company to provide you with
the number of paid vacation days to which you are entitled
on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in
effect at the time of the change in control of the Company;
(G) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and
agree to perform this Agreement; or
(H) any purported termination of your employment which
is not effected pursuant to a Notice of Termination
satisfying the requirements of Subsection (iv) below (and,
if applicable, the requirements of Subsection (ii) above);
for purposes of this Agreement, no such purported
termination shall be effective.
Your right to terminate your employment pursuant to this
Subsection shall not be affected by your incapacity due to
physical or mental illness. Your continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of
your employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
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shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall
mean (A) if your employment is terminated for Disability, thirty
(30) days after Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and (B) if your
employment is terminated for any reason other than Disability,
thirty (30) days after Notice of Termination is given.
4. Compensation Upon Termination or During Disability.
Following a change in control of the Company, as defined by
Subsection 2(i), upon termination of your employment or during a
period of disability you shall be entitled to the following
benefits:
(i) During any period that you fail to perform your full-
time duties with the Company as a result of incapacity due to
physical or mental illness, you shall continue to receive your
base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under any
disability plan of the Company until this Agreement is terminated
pursuant to Subsection 3(i) hereof. Thereafter, or in the event
your employment shall be terminated by the Company or by you for
Retirement, or by reason of your death, your benefits shall be
determined under the Company's retirement, insurance and other
- 10 -<PAGE>
compensation programs then in effect in accordance with the terms
of such programs.
(ii) If your employment shall be terminated by the Company
for Cause or by you other than for Good Reason, Disability, death
or Retirement, the Company shall pay you your full base salary,
and continue to provide you with life, disability, accident,
health insurance and other benefits, through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are
entitled under any compensation plan of the Company at the time
such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Company shall be terminated
(a) by the Company other than for Cause, Retirement, death or
Disability or (b) by you for Good Reason, then you shall be
entitled to the benefits provided below:
(A) the Company shall pay you your full base salary,
and continue to provide you with life, disability, accident,
health insurance and other benefits, through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company, at
the time such payments are due, except as otherwise provided
below;
(B) in lieu of any further salary payments to you for
period subsequent to the Date of Termination, the Company
shall pay as severance pay to you a lump sum severance
- 11 -<PAGE>
payment (the "Severance Payment") equal to 2.99 times your
"Base Amount", as defined in Section 280G of the Internal
Revenue Code of 1986 as amended (the "Code").
(C) Notwithstanding any other provision of this
Agreement, in the event that any payment or benefit received
or to be received by you in connection with a change in
control of the Company (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement
with (i) the Company, (ii) any person whose actions result
in a change in control, or (iii) any person affiliated with
the Company or such person) (all such payments and benefits
including the Severance Payment, being hereinafter called
"Total Payments") would be subject (in whole or part), to
the excise tax imposed under Section 4999 of the Code (the
"Excise Tax"), then the Severance Payment shall be reduced
to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax if, and only in the
event that, the amount of such Total Payments, as so
reduced, (and after deduction of the net amount of federal,
state and local income tax on such reduced Total Payments)
is greater than the excess of (i) the amount of such Total
Payments, without reduction (but after deduction of the net
amount of federal, state and local income tax on such Total
Payments), over (ii) the amount of Excise Tax to which you
would be subject in respect of such Total Payments. For
purposes of determining whether and the extent to which the
Total Payments will be subject to the Excise Tax, (i) no
- 12 -<PAGE>
portion of the Total Payments the receipt or enjoyment of
which you shall have effectively waived in writing prior to
the date of payment of the Severance Payment shall be taken
into account; (ii) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel
selected by the Company's independent auditors does not
constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, (including by reason of
section 280G(b)(4)(A) of the Code); (iii) in calculating the
Excise Tax, no portion of such Total Payments shall be taken
into account which constitutes reasonable compensation for
services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of your base amount (as
defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation; and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company in
accordance with the principles of sections 280G(d)(3) and
(4) of the Code; and
(D) the Company also shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking
to obtain or enforce any right or benefit provided by this
Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided
- 13 -<PAGE>
hereunder) except to the extent that the payment of such
fees and expenses would not be, or would cause any other
portion of the Total Payments not to be, deductible by
reason of Section 280G of the Code.
(iv) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount
claimed to be owed by you to the Company, or otherwise except as
specifically provided in this Section 4.
(v) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to all rights and benefits
provided to you under the terms of any other plan or agreement
between you and the Company.
5. Letter of Credit Preceding Termination. In the event a
potential change in control of the Company shall have occurred,
the Company will promptly (and in no event more than seven (7)
days thereafter) establish an irrevocable letter of credit (the
"Letter of Credit") in your favor in an amount equal to the
amount which would be payable to you pursuant to Subsection
4(iii) hereof as if you were immediately entitled to payment
pursuant thereto, such Letter of Credit to be issued by a
commercial bank which is not an affiliate of the Company, but
which is a national banking association or established under the
laws of one of the states of the United States, and which has
- 14 -<PAGE>
equity in excess of $100 million (the "Bank"). The Letter of
Credit shall be in form and substance reasonably satisfactory to
you and the Company and will provide that the Bank shall pay you
the amount of your draft, at sight, on presentation to the Bank
of a statement, signed by you or your authorized representative,
setting forth (i) a statement that pursuant to Subsection 4(iii)
of this Agreement, you are entitled to payments of not less than
the amount of such draft, and (ii) the Date of Termination of
your employment. Each time you shall draw on the Letter of
Credit, you shall provide the Company with a copy of such draft
and the accompanying statement referred to above. The Company
shall maintain the Letter of Credit in effect for a period of two
years from the date on which it is issued; provided, however,
that (i) if during any such two-year period any event shall occur
which, pursuant to this Section 5, would have required the
Company to establish a Letter of Credit had none then existed,
then the Company shall maintain the Letter of Credit in effect
for a period of two years following such event, unless further
extended pursuant to this provision, and (ii) if a change in
control of the Company shall occur, then the Company shall
maintain the Letter of Credit in effect for a period of three
years following such change in control. During the period in
which a Letter of Credit is required to be maintained, the
Company shall, at six-month intervals commencing with the date
the Letter of Credit is established, calculate the amount which
would be payable to you pursuant to Subsection 4(iii) hereof as
if you were immediately entitled to payment pursuant thereto. If
- 15 -<PAGE>
the amount exceeds the amount available to be drawn upon under
the Letter of Credit then in effect, the Company shall promptly
(and in no event later than seven (7) days thereafter) cause the
amount payable under the Letter of Credit to be increased by the
amount of such excess.
The payment by the Bank of the amount of your draft in
accordance with the terms hereof and of the Letter of Credit
shall not constitute a waiver by the Company of, or in any way
preclude the Company from asserting, any claim against you that
you are not entitled to some or all of such payment. In
addition, your drawing upon the Letter of Credit shall not
constitute a waiver by you, or in any way preclude you from
asserting, any claim against the Company that you are entitled to
amounts pursuant to this Agreement which were not paid by amounts
received under the Letter of Credit.
6. Successors; Binding Agreement. (i) The Company will
require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Company in the same
amount and on the same terms as you would be entitled to
hereunder if you terminate your employment for Good Reason
- 16 -<PAGE>
following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as herein- before defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there is no such designee, to
your estate.
7. Notice. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention
of the Board with a copy to the Secretary of the Company, or to
such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
- 17 -<PAGE>
8. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by you and such
officer as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
the State of Texas. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company
under Section 4 shall survive the expiration of the term of this
Agreement.
9. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
10. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
- 18 -<PAGE>
original but all of which together will constitute one and the
same instrument.
11. Arbitration. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Dallas, Texas in accordance with the rules of
the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to
seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Company the enclosed
copy of this letter which will then constitute our agreement on
this subject.
Sincerely,
ATMOS ENERGY CORPORATION
By /s/ Robert F. Stephens
------------------------
Robert F. Stephens, President
& Chief Operating Officer
Agreed to this 23rd
------
day of May , 1995.
------
/s/ J. Charles Goodman
-------------------------
J. Charles Goodman
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