UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended September 30, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
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.)
Three Lincoln Centre, Suite 1800
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices (Zip code)
Registrant's telephone number, including area code:
(972) 934-9227
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ----------------------
Common stock, No Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 ___.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]<PAGE>
The aggregate market value of the voting stock held by non-
affiliates of the registrant was $347,049,393 as of November 1,
1996. On November 1, 1996 the registrant had 16,036,598 shares
of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant's definitive proxy statement filed
for the annual meeting of shareholders on February 12, 1997 are
incorporated by reference into Part III.<PAGE>
PART I
ITEM 1. BUSINESS
Atmos Energy Corporation (the "Company") was organized under
the laws of the State of Texas in 1983 as a subsidiary of Pioneer
Corporation ("Pioneer") for the purposes of owning and operating
Pioneer's natural gas distribution business in Texas. Immediate-
ly following the transfer of such business, which had been opera-
ted by Pioneer and its predecessors since 1906, Pioneer distrib-
uted the outstanding stock of the Company, then known as Energas
Company, to Pioneer shareholders. In September 1988, the Company
changed its name from Energas Company to Atmos Energy
Corporation.
The Company distributes and sells natural gas to
residential, commercial, industrial, agricultural, and other
customers in 419 cities, towns, and communities in service areas
located in Texas, Louisiana, Kentucky, Colorado, Kansas, and a
small portion of Missouri. The Company also transports gas for
others through parts of its distribution system. The Company has
helped promote the development of a market for natural gas as a
clean burning vehicular fuel by opening seven public refueling
facilities in its service areas.
The Company's Texas distribution system is operated through
its Energas Company division (the "Energas Division") and covers
an area having a population of approximately 950,000 people. The
economy of the area is based primarily on oil and gas production
and agriculture. The principal cities served by the Energas
Division include Amarillo, Lubbock, Midland, and Odessa. At
September 30, 1996, the Company had 311,754 gas meters in service
in Texas.
The Company's Louisiana distribution system is operated
through its Trans Louisiana Gas Company division (the "Trans La
Division") and covers an area having a population of
approximately 250,000 people. The economy of the area is based
primarily on oil and gas production, agriculture, and food
processing. The principal cities served by the Trans La Division
are Lafayette, Pineville, and Natchitoches. At September 30,
1996, the Company had 79,880 gas meters in service in Louisiana.
The Company's Kentucky distribution system is operated
through its Western Kentucky Gas Company division (the "Western
Kentucky Division") and covers an area having a population of
approximately 680,000 people. The economy of the area is based
primarily on industry and agriculture. The principal cities
served by the Western Kentucky Division include Bowling Green,
Owensboro, and Paducah. At September 30, 1996, the Company had
171,140 gas meters in service in Kentucky.
The Company's Colorado, Kansas and Missouri distribution
systems are operated through its Greeley Gas Company division
1<PAGE>
(the "Greeley Gas Division") and covers an area having a combined
population of approximately 228,000 people. The economies of the
areas served are based on oil and gas production, agriculture and
resort business. The principal cities served by the Greeley Gas
Division include Greeley, Durango and Lamar, Colorado and Bonner
Springs, Herington and Ulysses, Kansas. At September 30, 1996
the Greeley Gas Division had 111,284 meters in service.
The natural gas distribution industry is subject to a number
of factors, many of which affect the Company from time to time.
These include (i) the ongoing need to obtain adequate and timely
rate relief from regulatory authorities to recover costs of
service and earn a fair return on invested capital; (ii) inherent
seasonality of the business in local gas distribution service
areas; (iii) competition with alternate fuels; (iv) competition
with other gas sources for industrial customers, including the
ability of some customers to bypass the Company's facilities,
which could result in loss of revenues and reduction in the
Company's net income; and (v) possible volatility in the supply
and price of natural gas.
ACQUISITIONS AND MERGERS
Since its organization in 1983, the Company has sought to
expand its customer base and to diversify the weather patterns,
local economic conditions, and regulatory environments to which
its operations are subject. As part of this strategy, the
Company acquired Trans Louisiana Gas Company, Inc. ("TLG") in
January 1986, Western Kentucky Gas Utility Corporation in
December 1987, Greeley Gas Company ("GGC") in December 1993, and
Oceana Heights Gas Company of Thibodaux, Louisiana in November
1995. The Company continues to consider and pursue, where
appropriate, additional acquisitions of natural gas distribution
properties and other business opportunities. In July 1996, the
Company entered into a definitive agreement with United Cities
Gas Company of Brentwood, Tennessee providing for the merger of
United Cities with and into the Company. Completion of the
merger is dependent upon the approval of the shareholders and
regulators of both companies. For further information regarding
acquisitions, see Note 2 of notes to consolidated financial
statements.
FIVE-YEAR OPERATING STATISTICS
Certain information with respect to the Company's natural
gas operations for the past five years is shown on the following
page.
2 <PAGE>
<TABLE>
<CAPTION>
Year ended September 30,
---------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NUMBER OF ACCOUNTS, at end of year
Residential 565,474 551,269 549,129 539,309 534,762
Commercial 56,860 55,894 55,027 54,275 55,562
Industrial (including agricultural) 8,116 8,331 8,781 8,924 9,331
Public authority and other 3,451 3,377 3,351 3,267 1,745
------- ------- ------- ------- -------
Total 633,901 618,871 616,288 605,775 601,400
======= ======= ======= ======= =======
METERS IN SERVICE, at end of year 674,058 658,114 649,319 636,159 630,365
======= ======= ======= ======= =======
METERS IN SERVICE, average 672,517 656,259 646,165 635,074 631,130
======= ======= ======= ======= =======
HEATING DEGREE DAYS, system average (1)
Actual 3,925 3,579 3,953 4,046 3,676
Normal 3,983 3,983 3,983 3,983 3,983
Percent of normal 99% 90% 99% 102% 92%
SALES VOLUMES - MMcf (2)
Residential 51,543 46,765 51,209 51,763 48,223
Commercial 21,541 19,756 21,134 21,872 20,675
Industrial (including agricultural) 39,656 38,046 38,502 31,367 27,489
Public authority and other 5,182 4,779 5,242 4,403 3,333
------- ------- ------- ------- -------
Total 117,922 109,346 116,087 109,405 99,720
TRANSPORTATION VOLUMES - MMcf (2) 26,534 30,463 35,308 39,782 32,203
------- ------- ------- ------- -------
TOTAL VOLUMES HANDLED - MMcf (2) 144,456 139,809 151,395 149,187 131,923
======= ======= ======= ======= =======
OPERATING REVENUES (000's)
Gas Revenues
Residential $243,118 $210,165 $245,931 $237,914 $211,767
Commercial 90,349 79,982 92,507 91,250 82,311
Industrial (including agricultural) 114,892 110,815 119,722 92,455 77,218
Public authority and other 21,738 18,185 22,463 18,315 13,232
-------- -------- -------- -------- --------
Total gas revenues 470,097 419,147 480,623 439,934 384,528
Transportation Revenues 8,307 11,711 14,118 15,013 13,674
Other Revenue 5,340 4,962 5,067 4,694 5,151
-------- -------- -------- -------- --------
Total operating revenues $483,744 $435,820 $499,808 $459,641 $403,353
======== ======== ======== ======== ========
AVERAGE SALES PRICE/Mcf
Residential $4.72 $4.49 $4.80 $4.60 $4.39
Commercial 4.19 4.05 4.38 4.17 3.98
Industrial (including agricultural) 2.90 2.91 3.11 2.95 2.81
Public authority and other 4.19 3.81 4.29 4.16 3.97
Total 3.99 3.83 4.14 4.02 3.86
AVERAGE COST OF GAS/Mcf SOLD 2.60 2.46 2.86 2.71 2.58
<FN>
See footnotes on page 4.
</TABLE>
3 <PAGE>
<TABLE>
SALES AND STATISTICAL DATA BY STATE - 1996
<CAPTION>
Year ended September 30, 1996
---------------------------------------------------------------
Texas Louisiana Kentucky Colorado Kansas Mo. Total
------- ------ ------- ------ ------ --- -------
<S> <C> <C> <C> <C> <C> <C> <C>
METERS IN SERVICE, at end of year
Residential 266,805 73,414 151,798 72,469 24,663 521 589,670
Commercial 24,950 5,392 17,334 9,841 3,318 71 60,906
Industrial (including agricultural) 17,780 118 467 73 328 - 18,766
Public authority and other 2,219 956 1,541 - - - 4,716
------- ------ ------- ------ ------ --- -------
Total 311,754 79,880 171,140 82,383 28,309 592 674,058
======= ====== ======= ====== ====== === =======
HEATING DEGREE DAYS, system average (1)
Actual 3,331 1,980 4,610 5,990 5,651 5,658 3,925
Normal 3,528 1,760 4,376 6,556 5,158 5,028 3,983
Percent of normal 94% 113% 105% 91% 110% 113% 99%
SALES VOLUMES (2)
Residential 22,866 4,177 14,702 7,232 2,520 46 51,543
Commercial 7,407 1,507 6,345 4,995 1,274 13 21,541
Industrial (including agricultural) 24,977 1,707 10,726 707 1,539 - 39,656
Public authority and other 2,526 973 1,683 - - - 5,182
------ ----- ------ ----- ----- -- ------
Total 57,776 8,364 33,456 12,934 5,333 59 117,922
TRANSPORTATION VOLUMES (2) 5,694 562 16,936 3,244 98 - 26,534
------ ----- ------ ------ ----- -- -------
TOTAL VOLUMES HANDLED (2) 63,470 8,926 50,392 16,178 5,431 59 144,456
====== ===== ====== ====== ===== == =======
OTHER STATISTICS
Operating revenues (000's) $203,726 $ 52,970 $153,203 $49,017 $24,451 $377 $483,744
Gross plant (000's) $278,180 $103,809 $158,918 $81,438 $43,415 $678 $666,438
Net plant (000's) $168,014 $ 74,816 $ 96,252 $47,858 $26,151 $476 $413,567
Miles of pipe 13,163 2,090 3,570 2,454 1,331 32 22,640
Employees (3) 844 167 373 202 66 - 1,652
Communities served 92 41 163 62 59 2 419
Estimated population in service area 950,000 250,000 680,000 160,000 66,000 2,000 2,108,000
Estimated square miles in service
area 30,000 7,000 12,000 1,050 580 20 50,650
Vehicles in fleet 422 132 266 155 52 - 1,027
Franchises 72 58 63 35 43 2 273
<FN>
(1) A heating degree day is equivalent to each degree that the
average of the high and the low temperatures for a day is
below 65 degrees. The greater the number of heating degree
days, the colder the climate. Heating degree days are used
in the natural gas industry to measure the coldness of wea-
ther experienced and to compare relative temperatures be-
tween one geographic area and another.
(2) Volumes are reported as metered in million cubic feet
("MMcf").
(3) The Texas column includes 235 and 223 employees in the
Dallas general office in 1996 and 1995, respectively.
</TABLE>
6 <PAGE>
<TABLE>
SALES AND STATISTICAL DATA BY STATE - 1995
<CAPTION>
Year ended September 30, 1995
----------------------------------------------------------------
Texas Louisiana Kentucky Colorado Kansas Mo. Total
------- --------- -------- -------- ------ --- -------
<S> <C> <C> <C> <C> <C> <C> <C>
METERS IN SERVICE, at end of year
Residential 265,192 64,612 149,567 69,865 24,225 519 573,980
Commercial 24,893 4,937 16,989 9,862 3,284 71 60,036
Industrial (including agricultural) 18,130 115 447 98 326 - 19,116
Public authority and other 2,550 906 1,526 - - - 4,982
------- ------ ------- ------ ------ --- -------
Total 310,765 70,570 168,529 79,825 27,835 590 658,114
======= ====== ======= ====== ====== === =======
HEATING DEGREE DAYS, system average (1)
Actual 3,152 1,448 3,792 6,243 5,093 5,044 3,579
Normal 3,528 1,760 4,376 6,556 5,158 5,028 3,983
Percent of normal 89% 82% 87% 95% 99% 100% 90%
SALES VOLUMES (2)
Residential 22,338 3,163 11,949 7,007 2,265 43 46,765
Commercial 7,300 1,183 5,276 4,905 1,081 11 19,756
Industrial (including agricultural) 23,875 1,864 9,992 725 1,590 - 38,046
Public authority and other 2,547 789 1,443 - - - 4,779
------ ----- ------ ------ ----- -- ------
Total 56,060 6,999 28,660 12,637 4,936 54 109,346
TRANSPORTATION VOLUMES (2) 9,571 490 17,103 3,180 119 - 30,463
------ ----- ------ ------ ----- -- -------
TOTAL VOLUMES HANDLED (2) 65,631 7,489 45,763 15,817 5,055 54 139,809
====== ===== ====== ====== ===== == =======
OTHER STATISTICS
Operating revenues (000's) $207,149 $38,716 $117,154 $51,199 $21,254 $348 $435,820
Gross plant (000's) $245,173 $93,677 $142,699 $73,216 $40,000 $594 $595,359
Net plant (000's) $138,479 $70,899 $87,705 $41,995 $23,772 $402 $363,252
Miles of pipe 13,090 1,863 3,509 2,400 1,318 32 22,212
Employees (3) 833 161 383 204 65 - 1,646
Communities served 92 37 163 62 58 2 414
Estimated population in service area 950,000 250,000 680,000 160,000 66,000 2,000 2,108,000
Estimated square miles in service
area 30,000 7,000 12,000 1,050 580 20 50,650
Vehicles in fleet 452 144 295 169 53 - 1,113
Franchises 72 58 63 34 42 2 271
<FN>
See footnotes on page 4.
</TABLE>
7 <PAGE>
GAS SALES
The Company's natural gas distribution business is seasonal
and highly dependent on weather conditions in the Company's
service areas. Gas sales to residential and commercial customers
are greater during the winter months than during the remainder of
the year. The volumes of such sales during the winter months
will vary with the temperatures during such months. The seasonal
nature of the Company's sales to residential and commercial
customers is offset partially by the Company's sales in the
spring and summer months to its agricultural customers in Texas,
Colorado and Kansas who utilize natural gas to operate irrigation
equipment. The Company's management believes that the Company
has lessened its sensitivity to weather risk by diversifying its
operations into geographic areas having different weather
patterns.
In addition to weather, the Company's revenues are affected
by the cost of natural gas and economic conditions in the areas
that the Company serves. Higher gas costs, which the Company is
generally able to pass through to its customers under purchased
gas adjustment clauses, may cause customers to conserve, or, in
the case of industrial customers, to use alternative energy
sources.
In recent years, natural gas market conditions have changed.
Natural gas prices to distributors have become more volatile and
the number of competing marketers of natural gas has increased.
The Company's gas marketing subsidiaries purchase gas to address
these changing markets.
In certain instances, customers purchase gas directly from
others instead of from the Company and the Company transports
such gas through its distribution systems to the customers'
facilities for a fee. Although transportation of customer-owned
gas reduces the Company's operating revenues and corresponding
purchased gas cost, the transportation revenues received by the
Company may offset the loss to gas sales revenues.
The Company's distribution systems have experienced
aggregate peak day deliveries of approximately one billion cubic
feet ("Bcf") per day. The Company has the ability to curtail
deliveries to certain customers under the terms of interruptible
contracts and applicable state statutes or regulations which
enables it to maintain its deliveries to high priority customers.
The Company has not imposed curtailment in its Energas Division
since the Company began independent operations in 1983 or in its
Trans La Division since the Company acquired TLG in 1986. The
Western Kentucky Division curtailed deliveries to certain
interruptible customers during exceptionally cold periods in
December 1989, January 1994 and during the winter of 1996. GGC
has not curtailed deliveries to its sales customers since prior
to 1980.
8<PAGE>
GAS SUPPLY
The principal gas suppliers to the Company in 1996, 1995 and
1994 included Westar Transmission Company ("Westar") and KN Gas
Marketing, affiliates of KNEnergy; Mesa Operating Company
("Mesa"); Louisiana Intrastate Gas Corporation ("LIG"), an
affiliate of Equitable Resources Inc.; Natural Gas Clearinghouse;
Texaco Gas Marketing; Union Pacific Fuels; Vastar, an affiliate
of ARCO; PanEnergy, an affiliate of PanEnergy Corporation; Astra
Resources Marketing, Inc. ("Astra"), an affiliate of Western
Resources, Inc. and LG&E Natural, an affiliate of LG&E Energy.
The prices paid by the Company for natural gas delivered to it
are set by contracts with gas suppliers and/or ratemaking
proceedings before regulatory authorities. Charges for gas costs
are passed through to the Company's customers under approved or
negotiated tariffs or pursuant to contract.
9 <PAGE>
The following table sets forth volumes purchased from the
Company's principal gas suppliers for the years ended September
30, 1996, 1995, and 1994.
Volumes
purchased
(MMcf as metered)
1996:
Astra Resources Marketing, Inc. 3,047
LG&E Natural 5,256
LIG 3,790
Mesa 9,318
Natural Gas Clearinghouse 5,097
PanEnergy 5,988
Texaco Gas Marketing 4,571
Union Pacific Fuels 5,550
Vastar 5,778
Westar and KN Gas Marketing 42,660
1995:
Astra Resources Marketing, Inc. 2,565
LG&E Natural 2,902
LIG 2,698
Mesa 9,369
Natural Gas Clearinghouse 2,154
PanEnergy 7,077
Texaco Gas Marketing 8,427
Union Pacific Fuels 5,298
Vastar 3,490
Westar and KN Gas Marketing 43,950
1994:
Astra Resources Marketing, Inc. 2,210
LIG 4,254
Mesa 9,926
PanEnergy 3,283
Texaco Gas Marketing 5,453
Union Pacific Fuels 5,825
Vastar 6,881
Westar and KN Gas Marketing 47,842
Westar and KN Gas Marketing supply natural gas to most of
the Energas Division under multiple contracts. The Westar
contract was scheduled to expire in 1998. During fiscal 1996
Westar, KN Gas Marketing and the Company commenced negotiations
to restructure supply and transportation services provided to the
Company by KN Energy. The restructured supply and transportation
services agreements which became effective during fiscal 1996
replace prior service which had been provided on a Weighted
Average Cost of Gas ("WACOG") basis. Contract terms now extend
through 2001.
The principal gas supply for the Company's Amarillo, Texas
distribution system is furnished by Mesa under a long-term con-
tract that expires upon the depletion of the field from which the
gas is produced. Mesa owns the gas rights in certain specified
10<PAGE>
acreage in the West Panhandle field. Pursuant to a contract
between Colorado Interstate Gas Company ("CIG") and Mesa, CIG is
obligated to deliver to Mesa the volumes of gas required for sale
to customers in Amarillo and its environs, subject to certain
contractual volume limitations, so long as the gas reserves from
the West Panhandle field are commercially producible. The price
under the contract is determined each year pursuant to a formula
until December 1997. The contract also provides a mechanism for
price redetermination each two year period thereafter beginning
January 1, 1998.
On October 28, 1991, the Company and LIG entered into new
agreements which were approved by the Louisiana Public Service
Commission ("Louisiana Commission") on November 26, 1991, and
became effective June 1, 1992. These agreements provide
continued supply by LIG for most of the Trans La Division's gas
requirements for a term of ten years (but subject to cancellation
by either party after five years). The agreements provide for
market sensitive pricing and allow the Company to purchase
certain volumes of gas from other suppliers. LIG is required to
provide standby service to back up the purchases from the other
suppliers.
The Company's Louisiana industrial sales subsidiary, Trans
Louisiana Industrial Gas Company, Inc., purchases some gas
supplies for resale to certain of its Louisiana industrial
customers from suppliers other than LIG.
The Western Kentucky Division requirements are delivered by
Texas Gas and Tennessee Gas with the exception of a small
percentage of the requirements being purchased directly from
intrastate producers. The Western Kentucky Division purchases
its supply under staggered term contracts from major producers
and marketers including Texaco, Union Pacific, Vastar, PanEnergy,
LG&E Natural and Natural Gas Clearinghouse.
The Company's distribution system in the Western Kentucky
Division includes six underground storage facilities, which are
used to help meet customer requirements during peak demand per-
iods and to reduce the need to contract for additional pipeline
capacity to meet such peak demand periods. See "Item 2. Proper-
ties" for further information regarding the underground storage
facilities. The Company also contracted for storage service in
underground storage facilities of Tennessee Gas and Texas Gas
under FERC Order No. 636.
The Greeley Gas Division purchases or transports approximat-
ely 81% of its natural gas requirements on eight pipelines. Five
of these are regulated by the Federal Energy Regulatory
Commission ("FERC") and the remaining three are state regulated.
The FERC pipelines are Colorado Interstate Gas Company, Williams
Natural Gas Company, KNEnergy, Northwest Pipeline Corporation,
and NorAm. The state regulated pipelines are Public Service
Company of Colorado, Western Resources, Inc. and Kansas Pipeline
Partnership in Kansas. Approximately 19% of the Divisions's gas
11<PAGE>
supply is purchased from local sources. Several of the operating
areas are in or adjacent to natural gas producing fields.
PanEnergy is the main supplier to the Greeley Gas Division's
largest district, the Greeley District.
Astra is the principal gas supplier for the Kansas and
Missouri districts. Gas is transported through three different
pipeline systems (Williams Natural Gas, Western Resources, Inc.
and NorAm).
The Company has not experienced supply curtailment in its
Texas distribution system since it began independent operations
in 1983, in its Louisiana system since its acquisition, or in
Colorado, Kansas or Missouri since prior to 1980. A large
proportion of the Company's sales are made to high priority
residential and commercial consumers; therefore, any curtailment
of supply for these customers is unlikely.
REGULATION AND RATES
Regulation. In the Energas Division, the governing body of
each municipality served by the Company has original jurisdiction
over all utility rates, operations, and services within its city
limits except with respect to sales of natural gas for vehicle
fuel and agricultural use. The Company operates pursuant to non-
exclusive franchises granted by the municipalities it serves,
which franchises are subject to renewal from time to time. The
franchises granted to the Company permit it to conduct natural
gas distribution within the municipalities' incorporated limits.
The Railroad Commission of Texas ("Railroad Commission") has
exclusive appellate jurisdiction over all rate and regulatory
orders and ordinances of the municipalities and exclusive
original jurisdiction over rates and services to customers not
located within the limits of a municipality. In Texas, rates for
large industrial customers are routinely set by contract
negotiation between the Company and its customers pursuant to
statutory standards and are filed with and subject to the
governmental authority of the municipalities or the Railroad
Commission, depending on whether the customer is located inside
or outside the limits of a municipality. Historically, the
Company's rates for large industrial customers have been accepted
as filed. Agricultural sales in Texas are not regulated, except
that prices for agricultural sales cannot exceed the prices the
Company charges the majority of its commercial or other similar
large-volume users in Texas.
The Trans La Division is regulated by the Louisiana Commis-
sion, which regulates utility services, rates, and other matters.
In most of the parishes and incorporated areas in which the
Company operates in Louisiana, it does so pursuant to a non-
exclusive franchise granted by the governing authority of each
parish or incorporated area. The franchise gives the Company the
general privilege to operate its gas distribution business in, as
well as the right to install its distribution lines along the
12<PAGE>
roadways of, the parish or the incorporated area. Direct sales
of natural gas to industrial customers in Louisiana who utilize
the gas for fuel or in manufacturing processes and sales of
natural gas for vehicle fuel are exempt from regulation.
The Western Kentucky Division is regulated by the Kentucky
Public Service Commission ("Kentucky Commission"), which
regulates utility services, rates, issuances of securities, and
other matters. The Company operates in the various incorporated
cities served by it in Kentucky pursuant to non-exclusive
franchises granted by such cities. The franchises grant to the
Company the right to operate its gas distribution business in the
city and to install its distribution lines and related equipment
in and along the city's public rights-of-way. Sales of natural
gas for use as vehicle fuel in Kentucky are not subject to
regulation.
The Greeley Gas Division is regulated by the Colorado Public
Utilities Commission ("Colorado Commission"), the Kansas
Corporation Commission, and the Missouri Public Service Commis-
sion with respect to accounting, rates and charges, operating
matters, and the issuance of securities. The Company operates in
the various incorporated cities served by it in the states of
Colorado, Kansas and Missouri under terms of non-exclusive
franchises granted by the various cities. The franchises grant
to the Company, among other things, the right to install and
operate its gas distribution system within the city limits. Most
of the Greeley Gas Division's wholesale gas suppliers are
regulated by various federal and state commissions.
The Company is also subject to regulation by the United
States Department of Transportation with respect to safety
requirements in the operation and maintenance of its gas
distribution facilities. The Company's distribution operations
are also subject to various state and federal laws regulating
environmental matters. From time to time the Company receives
inquiries regarding various environmental matters. The Company
believes that its properties and operations substantially comply
with and are operated in substantial conformity with applicable
safety and environmental statutes and regulations. There are no
administrative or judicial proceedings arising under
environmental quality statutes pending or known to be
contemplated by governmental agencies which, if adversely
determined, would have a material adverse effect on the Company.
Rates. Approximately 89% of the Company's revenues in fis-
cal 1996 was derived from sales at rates set by or subject to
approval by local or state authorities. The method of determin-
ing regulated rates varies among the six states in which the
Company operates. As a general rule, the regulatory authority
reviews the Company's rate request and establishes a rate
structure intended to generate revenue sufficient to cover the
Company's costs of doing business and provide a reasonable return
on invested capital.
13 <PAGE>
Substantially all of the sales rates charged by the Company
to its customers fluctuate with the cost of gas purchased by the
Company. Base rates established by regulatory authorities are
adjusted for increases and decreases in the Company's purchased
gas cost through automatic purchased gas adjustment mechanisms.
Therefore, while the Company's operating revenues may fluctuate,
gross profit (which is defined as operating revenues less
purchased gas cost) is generally not eroded or enhanced because
of gas cost increases or decreases.
The following table sets forth the major rate requests made
by the Company during the most recent five years and the action
taken on such requests:
Effective Amount Amount
Jurisdiction Date Requested Received
------------ --------- --------- --------
Texas
West Texas System 11/18/94 2,581,000 1,702,000 (a)
11/01/96 7,676,000 5,300,000
Amarillo 11/25/92 4,398,000 2,130,000
Louisiana 03/01/93 (b) 730,000 (b)
03/01/94 (b) 1,058,000 (b)
03/01/95 (b) 1,071,000 (b)
Kentucky 11/01/95 7,665,000 2,300,000 (c)
03/01/96 1,000,000 (c)
Colorado 05/01/94 4,527,000 3,246,000
Kansas 01/06/92 1,495,000 505,000
12/01/93 2,604,000 2,088,000
(a) The increase includes $200,000 applicable to areas outside
the city limits which became effective in January 1995.
(b) A September 1992 rate order approved a Rate Stabilization
Clause ("RSC") for three years which provided for an annual
adjustment of rates to reflect changes in expenses and
investment. The RSC provided the Company the opportunity to
earn a return on common equity between 11.75% and 12.25%.
(c) The Kentucky rate order provided an increase of $2,300,000,
lowered depreciation rates effective November 1, 1995 and
provided an additional $1,000,000 beginning March 1, 1996.
The order also included a provision for a pilot demand side
management program which could cost up to $450,000 annually.
14 <PAGE>
COMPETITION
The Company is not currently in significant direct
competition with any other distributors of natural gas to
residential and commercial customers within its service areas.
However, the Company does compete with other natural gas
suppliers and suppliers of alternate fuels for sales to
industrial and agricultural customers.
The Company competes in all aspects of its business with
alternative energy sources, including, in particular, electrici-
ty. Competition for the residential and commercial customers is
increasing. Promotional incentives, improved equipment efficien-
cies, and promotional rates all contribute to the acceptability
of electric equipment.
Beginning in 1985, changes in the federal regulatory
environment through FERC orders and conditions related to markets
and gas supply in the United States have brought increased
competition into the natural gas industry. In 1993, FERC Order
636 was implemented by the interstate pipelines in the Company's
service territories. The FERC policies apply only to interstate
pipelines and have not had a direct impact upon the Company's
operations which are primarily supplied by intrastate pipelines.
However, the Company has felt the impact of increased
competitiveness in the large volume market in some areas result-
ing from these changes. The Company has sought regulatory
approvals for competitive pricing on a case by case basis.
The Company has opened seven public refueling facilities for
the sale of compressed natural gas ("CNG") for vehicular use.
The most recent of these were opened in Greeley, Colorado in
September 1996, at West Texas A&M University in Canyon, Texas in
August 1995, and in Owensboro, Kentucky in April 1995. Prior to
that time, the Company provided CNG for vehicular use only in
limited situations (such as for school buses in certain school
districts and for the fleet vehicles of certain businesses).
With the opening of these public refueling stations the Company
began competing with gasoline for vehicular fuel sales. All of
these facilities, except those in Greeley, Colorado and at West
Texas A&M, are located at existing local gasoline stations.
Also during fiscal 1996, the Company formed a power
marketing subsidiary, Atmos Energy Services, Inc., to conduct
electric power purchases and sales. The Company expects to
market these services to industrial customers in addition to
natural gas.
15 <PAGE>
Employees
At September 30, 1996, the Company employed 1,652 persons.
See "Sales and Statistical Data by State - 1996" for the number
of employees by state.
ITEM 2. PROPERTIES
The Company owns an aggregate of 22,640 miles of underground
pipelines throughout its gas distribution systems. These pipe-
lines are located on easements or right-of-ways granted to the
Company, which generally provide for perpetual use. The Company
maintains its pipelines through a program of continuous
inspection and repair and believes that its pipeline system is in
good condition. The Company also owns or operates six under-
ground gas storage facilities in Kentucky that have a total
storage capacity of approximately 10.7 Bcf. However,
approximately 6.5 Bcf of gas in the storage facilities must be
retained as cushion gas. The maximum daily delivery capability
of the storage facilities is approximately 109 MMcf.
Substantially all of the Company's properties in its Greeley
Gas Division with a recorded value of approximately $74.5 million
are subject to a lien under First Mortgage Bonds assumed by the
Company in the acquisition of GGC. At September 30, 1996, the
lien secured approximately $17.0 million of outstanding 9.4%
Series J First Mortgage Bonds due May 1, 2021.
In 1996 the Company consolidated its administrative offices
in Dallas, Texas under one lease. The Company also maintains
field offices throughout its distribution system, substantially
all of which are located in leased premises.
The Company holds franchises granted by the incorporated
cities and towns that it serves. At September 30, 1996, the
Company held 273 such franchises having terms generally ranging
from five to 25 years. The Company believes that each of its
franchises will be renewed.
ITEM 3. LEGAL PROCEEDINGS
See Note 10 of notes to consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of fiscal 1996.
16 <PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of
September 30, 1996, regarding the executive officers of the
Company. It is followed by a brief description of the business
experience of each executive officer during the past five years.
Name Age Office Currently Held
---- --- ---------------------
Robert F. Stephens 48 President and Chief Operating
Officer, Director
James F. Purser 46 Executive Vice President and
Chief Financial Officer,
Director
J. Charles Goodman 35 Executive Vice President of
Operations
H.F. Harber 54 Senior Vice President of
Corporate Services
Donald E. James 49 Senior Vice President of
Public Affairs
Mary S. Lovell 45 Senior Vice President of
Utility Services
Glen A. Blanscet 39 Vice President, General
Counsel and Corporate
Secretary
Robert F. Stephens was named President and Chief Operating
Officer and was appointed to the Board of Directors in February
1995. He previously served as Executive Vice President -
Corporate Operations from May 1989 through February 1995.
James F. Purser was appointed to the Board of Directors in
February 1995. He was named Executive Vice President and Chief
Financial Officer in May 1989.
J. Charles Goodman was named Executive Vice President,
Operations in April 1995. He previously served as President of
the Company's Trans La Gas Division from February 1993 until
April 1995 and as Chief Engineer from February 1989 until
February 1993.
H.F. Harber was named Senior Vice President - Corporate
Services in August 1993. He previously served as Vice President,
Human Resources and Administration from July 1991 to August 1993.
Donald E. James was named Senior Vice President - Public
Affairs in May 1995. He previously served as Senior Vice
President and General Counsel from January 1994 to May 1995, as
Senior Vice President - General Counsel and Corporate Secretary
from May 1993 until August 1993, and as Senior Vice President and
General Counsel from May 1989 until May 1993.
17 <PAGE>
Mary S. Lovell was named Senior Vice President, Utility
Services in May 1995. She previously served as Vice President,
Rates and Regulatory Affairs from August 1990 to May 1995.
Glen A. Blanscet was named Vice President, General Counsel
and Corporate Secretary in May 1995. He previously served as
Assistant General Counsel and Corporate Secretary from January
1994 to May 1995, and as Assistant General Counsel from July 1988
to December 1993.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's stock trades on the New York Stock Exchange
under the trading symbol "ATO". The high and low sale prices and
dividends paid per share of the Company's common stock for fiscal
1996 and 1995 are listed below.
<TABLE>
<CAPTION>
1996 1995
---------------------------------- ----------------------------------
Dividends Dividends
High Low paid High Low paid
Quarter ended: --------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
December 31 $23 $18 $ .24 $18 $15 7/8 $ .23
March 31 23 21 .24 18 1/2 16 1/8 .23
June 30 31 22 3/4 .24 20 1/4 17 1/2 .23
September 30 30 5/8 20 7/8 .24 20 5/8 19 .23
----- ------
$ .96 $ .92
===== ======
</TABLE>
See Note 3 of notes to consolidated financial statements for
restriction on payment of dividends. The number of record holders
of the Company's common stock on September 30, 1996 was 28,624.
18 <PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data with
respect to the Company and should be read in conjunction with the
consolidated financial statements included herein.
Year ended September 30,
--------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(In thousands, except per share data)
Operating revenues $483,744 $435,820 $499,808 $459,641 $403,353
======== ======== ======== ======== ========
Net income $ 23,949 $ 18,873 $ 14,679 $ 17,544 $ 10,998
======== ======== ======== ======== ========
Net income per
share $ 1.51 $ 1.22 $ .97 $ 1.22 $ .80
======== ======== ======== ======== ========
Cash dividends
per share $ .96 $ .92 $ .88 $ .85 $ .83
======== ======== ======== ======== ========
Total assets at
end of year $501,861 $445,783 $416,678 $391,618 $358,363
======== ======== ======== ======== ========
Long-term debt at
end of year $122,303 $131,303 $138,303 $105,853 $112,153
======== ======== ======== ======== ========
Supplemental net
income (1) $ 18,132 $ 10,570
======== ========
Supplemental net
income per
share (1) $ 1.26 $ .77
======== ========
(1) Supplemental net income reflects results if GGC had not made
an S Corporation election in 1987.
19 <PAGE>
ITEM 7. 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 federal and state
regulation and/or regulation by local authorities in each of the
states in which the Company operates. In addition, the Company's
business is affected by seasonal weather patterns, competitive
factors within the energy industry, and economic conditions in
the areas that the Company serves.
RATE ACTIVITY
In May 1996, the Company filed to increase revenues by
approximately $7.7 million for a portion of its Energas Company
service area, which includes approximately 200,000 customers
inside the city limits of 67 cities in West Texas. All cities
either approved, or took no action to reject, a settlement
allowing a $5.3 million increase in annual revenues to be
effective for bills rendered on or after November 1, 1996. In
October 1996, the Company filed to increase revenues by
approximately $.5 million for the remaining rural customers in
West Texas.
In February 1995, the Company filed with the Kentucky
Commission for a rate increase for its Western Kentucky Division.
In October 1995, the Kentucky Commission issued an order
authorizing the Company to increase its rates by $2.3 million
annually effective November 1, 1995, and by an additional $1.0
million annually beginning in March 1996. The settlement
included a decrease in depreciation rates, recovery of expenses
related to adoption of SFAS No. 106 and included a provision for
the Company to begin a three-year demand-side management pilot
program for the 1996-97 heating season, which could cost up to
$450,000 annually, resulting in a total annual operating income
increase of approximately $4.0 million. The Company provides
natural gas service to approximately 171,000 customers in
Kentucky.
In September 1994, the Company filed to increase revenues by
approximately $2.6 million for a portion of its Energas Company
service area, which includes approximately 217,000 customers both
inside and outside of 67 cities in West Texas. The Company
requested recovery of accrual accounting for postretirement
benefits in accordance with SFAS No. 106. See Note 8 of the
accompanying notes to consolidated financial statements for SFAS
No. 106 information. 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 by the Railroad Commission of Texas in January 1995, the
20<PAGE>
Company implemented an annual increase of approximately $.2
million relating to the 22,000 remaining rural customers.
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 recovery of SFAS No. 106
expenses with external funding and a moratorium on rate requests
in Kansas until December 1, 1996.
GGC filed a request for an increase in annual revenues of
$4.5 million with the Colorado Public Utility Commission in
September, 1993. On May 1, 1994, the Company implemented an
annual increase of $3.2 million or an increase in revenues of
6.9% in Phase I of this proceeding. The Phase I rates reflect
recovery of SFAS No. 106 expenses with external funding,
consistent with the recommended decision of the presiding
administrative law judge. In October 1994, the Colorado
Commission issued its order affirming the increase as set forth
in Phase I. In March 1995, the Greeley Gas Division filed Phase
II in the rate proceeding, which addressed rate structure. In
September 1995 all parties to the proceeding entered into a
stipulation and agreement which became final in November 1995
upon the recommendation by an administrative law judge of the
Colorado Commission.
In September 1992, the Louisiana Commission issued a rate
order for the Company's Louisiana service area, which included a
rate stabilization clause ("RSC") for three years that provided
for an annual adjustment to the Company's rates to reflect
changes in expenses, revenues and invested capital following an
annual review. The RSC provided 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 $1.1 million annually or
2.0% went into effect on March 6, 1995. In April 1996, the
Company filed a request with the Louisiana Commission to extend
the rate stabilization mechanism.
ACQUISITIONS AND MERGERS
The Company has expanded its customer base and sought to
diversify the regulations, weather patterns and local economic
conditions to which it is subject through acquisitions in fiscal
years 1995, 1994, 1987, and 1986. The Company continues to
consider and pursue, where appropriate, additional acquisitions
of natural gas distribution properties and other business
opportunities.
In July 1996, the Company entered into a definitive
agreement with United Cities Gas Company of Brentwood, Tennessee
providing for the merger of United Cities with and into the
Company. Completion of the merger is dependent upon the approval
of the shareholders and regulators of both companies, as well as
21<PAGE>
other conditions precedent to closing. Shareholder approvals
were obtained on November 12, 1996.
In November 1995, the Company acquired privately held Oceana
Heights Gas Company ("Oceana") of Thibodaux, Louisiana. Oceana
provides natural gas service to approximately 9,200 customers and
is located adjacent to a system in LaFourche Parish that was
acquired by Atmos in 1994. The transaction was accounted for as
a pooling of interests. The outstanding shares of Oceana's
capital stock were converted into shares of Atmos common stock
having a market value equal to the $6.4 million purchase price.
Oceana was merged into the Trans La Division, bringing Trans La
to nearly 80,000 customers.
In December 1993, the Company acquired Greeley Gas Company
("GGC") of Denver, Colorado in a merger transaction accounted for
as a pooling of interests; therefore, all historical financial
statements and notes thereto have been restated to retroactively
reflect this merger. At that time, GGC was a privately held
company providing natural gas service to nearly 100,000 customers
in 122 communities in Colorado, Kansas and a small service area
in Missouri. The transaction was structured to be a tax-free
reorganization. The Company exchanged 2,329,330 shares of its
common stock before the 3-for-2 stock split (3,493,995 shares on
a post-split basis) for all of the outstanding stock of GGC. For
further information regarding acquisition activity, see Note 2 of
notes to consolidated financial statements.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996 COMPARED WITH YEAR ENDED SEPTEMBER
30, 1995
Operating revenues increased 11% to $483.7 million in 1996
from $435.8 million in 1995 due to weather that was 10% colder
than in 1995 and a 6% increase in the average cost of gas per
thousand cubic feet ("Mcf") sold. Average gas sales revenues per
Mcf increased from 1995 by $.16 to $3.99 in 1996, while the
average cost of gas per Mcf sold increased $.14 to $2.60 in 1996.
The number of meters in service increased to 674,058 at September
30, 1996 compared with 658,114 at September 30, 1995. Sales to
weather sensitive residential, commercial and public authority
customers increased approximately 7.0 billion cubic feet ("Bcf")
in 1996 while sales to industrial and agricultural customers
increased approximately 1.6 Bcf. Total sales volumes increased
8% to 117.9 Bcf in 1996, as compared with 109.3 Bcf in 1995.
Revenues from gas transported for others decreased $3.4 million
to approximately $8.3 million in fiscal 1996 due to a decrease in
volumes transported of 3.9 Bcf to 26.5 Bcf in 1996.
Gross profit increased by approximately 6% to $177.0 million
in 1996 from $167.0 million in 1995. The primary factor
contributing to the higher gross profit was higher volumes sold
due to colder weather. Operating expenses, excluding income
taxes, decreased slightly to $124.7 million in 1996 from $125.1
22 <PAGE>
million in 1995, due primarily to decreased operation expense.
The Company also adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS No. 106") in 1994. It has
been successful in seeking recovery of SFAS No. 106 expenses in
the majority of its service areas and will continue to seek
recovery in its remaining service areas. See Note 8 of the
accompanying notes to consolidated financial statements. Income
taxes increased to $13.3 million for 1996 from $9.6 million for
1995. The primary reason for the increase was higher pre-tax
profits. The effective tax rate increased to 35.7% in 1996 from
33.7% in 1995. This was primarily due to the decreased impact of
permanent differences on the higher pre-tax profits in 1996.
Operating income increased in 1996 by approximately 20% to $38.9
million from $32.4 million in 1995. The increase in operating
income resulted primarily from the increase in 1996 gross profit,
partially offset by increases in taxes, as discussed above.
Net income increased in 1996 by approximately 27% to $23.9
million from $18.9 million in the prior year. This increase in
net income resulted primarily from the increase in operating
income, which was partially offset by a $1.0 million increase in
interest expense. Net income per share increased to $1.51 for
1996 from $1.22 for 1995. Average shares outstanding increased
3% to 15,892,000 in 1996 from 1995.
23 <PAGE>
YEAR ENDED SEPTEMBER 30, 1995 COMPARED WITH YEAR ENDED SEPTEMBER
30, 1994
Operating revenues decreased approximately 13% to $435.8
million in 1995 from $499.8 million in 1994 due to weather that
was 9% warmer than in 1994 and a 14% decrease in the average cost
of gas per Mcf sold. Average gas sales revenues per Mcf
decreased from 1994 by $.31 to $3.83 in 1995, while the average
cost of gas per Mcf sold decreased $.40 to $2.46 in 1995. The
number of meters in service increased to 658,114 at September 30,
1995 compared with 649,319 at September 30, 1994. Sales to
weather sensitive residential, commercial and public authority
customers decreased approximately 6.3 Bcf in 1995 while sales to
industrial and agricultural customers decreased approximately .5
Bcf. Total sales volumes decreased 5.8% to 109.3 Bcf in 1995, as
compared with 1994. Revenues from gas transported for others
decreased $2.4 million to approximately $11.7 million in fiscal
1995 due to a decrease in volumes transported of 4.8 Bcf to 30.5
Bcf in 1995.
Gross profit decreased by approximately 1% to $167.0 million
in 1995 from $168.2 million in 1994. The primary factor
contributing to the lower gross profit was lower volumes sold and
transported due to warmer weather. The effect of warmer weather
on gross profit was substantially reduced by implementing rate
increases totaling $2.8 million and $6.4 million in 1995 and
1994, respectively. Operating expenses, excluding income taxes,
decreased 6% to $125.1 million in 1995 from $133.7 million in
1994, due primarily to decreased operation and maintenance
expense. Operation and maintenance expense decreased $10.3
million due to decreased distribution expense, customer accounts
expenses, employee welfare and pension expenses, rent expense,
and outside services expense. In 1994 the GGC acquisition and
assimilation costs were approximately $1.5 million and the cost
of an early retirement program was approximately $1.3 million.
The acquisition and assimilation costs as well as the early
retirement program were one-time costs associated with the GGC
acquisition. Income taxes increased to $9.6 million for 1995
from $8.1 million for 1994. The primary reason for the increase
was higher pre-tax profits. The effective tax rate decreased to
33.7% in 1995 from 35.6% in 1994. This was primarily due to the
impact of increased permanent differences on the higher pre-tax
profits in 1995. Operating income increased in 1995 by
approximately 22% to $32.4 million from $26.5 million in 1994.
The increase in operating income resulted primarily from
decreases in 1995 operating expenses as discussed above.
Net income increased in 1995 by approximately 29% to $18.9
million from $14.7 million in the prior year. This increase in
net income resulted primarily from an increase in operating
income, which was partially offset by a $1.4 million increase in
interest expense. Net income per share increased to $1.22 for
1995 from $.97 for 1994. Average shares outstanding increased 1%
to 15,416,000 in 1995 from 1994.
24 <PAGE>
The Company estimates that the impact of the weather being
10% warmer than normal for 1995 caused net income to be
approximately $4.0 million less than it would have been had the
Company experienced normal temperatures in its respective service
areas. Weather was approximately 1% warmer than normal for 1994.
CAPITAL RESOURCES AND LIQUIDITY (See "Consolidated Statements of
Cash Flows")
Cash Flows from Operating Activities
Cash flows from operating activities totaled $64.5 million
for 1996 compared with $58.5 million for 1995 and $41.2 million
for 1994. In 1996 the Company experienced an increase in net
income as compared with 1995 and 1994. Depreciation and deferred
income taxes increased in 1996 and 1995 because of increasing
capital expenditures. Gas stored underground increased in 1996
because of higher gas cost, but decreased in 1995 and 1994
because of substantially lower gas prices during the summers of
1995 and 1994 when the storage reservoirs were being refilled.
See "Consolidated Statements of Cash Flows" for other changes in
assets and liabilities.
Cash Flows from Investing Activities
Net cash used in investing activities totaled $73.8 million
in 1996 compared with $60.2 million in 1995 and $48.4 million in
1994. Capital expenditures in fiscal 1996 amounted to $77.6
million compared with $62.9 million in 1995 and $50.4 million in
1994. Currently budgeted capital expenditures for 1997 total
$63.8 million and include major expenditures for mains, services,
meters and vehicles. The Board of Directors in November 1996,
also approved an additional $24.0 million in capital expenditures
in 1997 for a Customer Information System ("CIS") project. The
CIS project includes application software, related technology
infrastructure and business process changes. Capital
expenditures will be financed from internally generated funds and
financing activities, as discussed below.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled $10.8
million for 1996 compared with $1.2 million for 1995 and $7.7
million for 1994. Financing activities during these periods
included issuance of common stock, dividend payments, borrowings
from banks, and issuance and repayments of long-term debt.
Cash dividends and distributions paid. The Company paid
$15.2 million in cash dividends during 1996 compared with $14.2
million in 1995 and $12.7 million in 1994. The $1.0 million
increase over 1995 primarily reflects an increase in the
Company's quarterly dividend rate and an increase in the number
of shares of common stock outstanding in 1996. Including fiscal
25<PAGE>
1997, the Company has increased its dividend rate for nine
consecutive years.
Short-term financing activities. At September 30, 1996, the
Company had committed lines of credit totaling $90.0 million,
$80.0 million of which was unused, in order to provide for short-
term cash requirements. These credit facilities are negotiated
at least annually. At September 30, 1996, the Company also had
uncommitted short-term credit lines of $165.0 million, of which
$112.2 million was unused. During 1996, notes payable increased
$29.3 million compared with a decrease of $24.6 million during
1995 and an increase of $22.4 million in 1994. The decrease in
fiscal 1995 was primarily due to repayment of short-term debt
with the proceeds from the issuance of long-term debt in November
1994.
Long-term financing activities. During the first quarter of
fiscal 1997 the Company has been in the process of arranging to
borrow $40.0 million under a loan agreement with a bank and has
been seeking the necessary regulatory approvals. The term of the
loan will be one day less than two years and the rate will be set
at current market rates. The proceeds will be used to refinance
short-term debt. Pending regulatory approval, the Company
expects to complete the transaction in November 1996. Long-term
debt payments increased $3.0 million to $7.0 million for the year
ended September 30, 1996 compared with the year ended September
30, 1995. Payments of long-term debt in 1996 consisted of a $2.0
million installment on the Company's 9.75% Senior Notes due in
December 1996, a $2.0 million installment on the 11.2% Senior
Notes and a $3.0 million installment on the 9.76% Senior Notes.
Payments of long-term debt in 1995 consisted of a $2.0 million
installment on the Company's 9.75% Senior Notes and a $2.0
million installment on the 11.2% Senior Notes. In November 1994,
the Company entered into note purchase agreements totaling $40.0
million with two insurance companies and issued $20.0 million of
unsecured Senior Notes at 8.07% payable in annual installments of
$4.0 million beginning October 31, 2002 through October 31, 2006
with semiannual interest payments and $20.0 million 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. No long-term debt was issued
in 1996 or 1994. Payments of long-term debt during 1994
consisted of a $3.0 million installment on the Company's 9.75%
Senior Notes due in 1996, a $2.0 million installment on the 11.2%
Senior Notes, the balance of $3.25 million on the 13.75% Series I
First Mortgage Bonds and the balance of $1.6 million on the 13%
Series G First Mortgage Bonds. The loan agreements pursuant to
which all the Company's Senior Notes have been issued contain
covenants by the Company with respect to the maintenance of
certain debt-to-equity ratios and cash flows, and restrictions on
the payment of dividends. Also see Note 3 of the accompanying
notes to consolidated financial statements.
Issuance of common stock. The Company issued 502,209,
221,946 and 428,264 shares of common stock in 1996, 1995 and
26 <PAGE>
1994, respectively, for its Direct Stock Purchase Plan ("DSPP"),
Employee Stock Ownership Plan, Restricted Stock Grant Plan,
Outside Directors Stock-for-Fee Plan and Oceana Heights
acquisition. See the Consolidated Statements of Shareholders'
Equity for the number of shares issued under each of the plans
and for the Oceana Heights acquisition. No new shares were
issued under the DSPP in 1996 or 1995. Shares purchased by
participants in the DSPP in 1996 and 1995 were purchased by the
plan on the open market. In 1994, 173,801 shares were issued
under the plan, generating proceeds of $3.0 million. At
September 30, 1996, 712,596 shares were available for future
issuance under the DSPP.
The Company believes that internally generated funds, its
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 1997.
Seasonality
The Company's natural gas distribution business is seasonal
due to weather conditions in the Company's service areas. Gas
sales are affected by winter heating season requirements. Sales
to agricultural customers (who use natural gas as fuel in the
operation of irrigation pumps) during the period from April
through September may be affected by rainfall amounts. These
factors generally result in higher operating revenues and net
income during the period from October through March of each year
and lower operating revenues and either net losses or lower net
income during the period from April through September of each
year.
The following table sets forth, on an unaudited basis, the
Company's quarterly operating revenues, quarterly operating
revenues as a percentage of annual operating revenues, quarterly
net income (loss) and quarterly net income (loss) as a percentage
of annual net income for its past two fiscal years.
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------
December 31 March 31 June 30 September 30 Total
------------ --------- -------- ------------ ----------
(In thousands, except for percentages)
<S> <C> <C> <C> <C> <C>
1996
- ----
Operating revenues $130,468 $191,104 $93,571 $68,601 $483,744
27% 40% 19% 14% 100%
Net income (loss) $ 9,233 $ 18,383 $ 316 $(3,983) $ 23,949
39% 77% 1% (17)% 100%
1995
- ----
Operating revenues $117,848 $157,294 $84,685 $75,993 $435,820
27% 36% 19% 18% 100%
Net income (loss) $ 6,476 $ 13,945 $ 82 $(1,630) $ 18,873
34% 74% 1% (9)% 100%
</TABLE>
27 <PAGE>
Inflation
The Company believes that inflation has caused and will
continue to cause increases in certain operating expenses and has
required and will continue to require assets to be replaced at
higher costs. The Company continually reviews the adequacy of
its gas rates in relation to the increasing cost of providing
service and the inherent regulatory lag in adjusting those gas
rates.
Environmental Matters
From time to time, the Company receives inquiries regarding
various environmental matters. The Company believes that its
properties and operations substantially comply with and are oper-
ated in substantial conformity with all applicable environmental
statutes and regulations. There are no administrative or judi-
cial proceedings arising under environmental quality statutes
pending or known to be contemplated by governmental agencies
which, if adversely determined, would have a material adverse
effect on the Company.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995
The matters discussed or incorporated by reference in this
Report on Form 10-K statements. The forward-looking statements
involve risks and uncertainties that affect the Company's
operations, markets, services, rates, recovery of costs,
availability of gas supply, and other factors as discussed in the
Company's filings with the Securities and Exchange Commission.
These risks and uncertainties include, but are not limited to,
economic, competitive, governmental, weather, and technological
factors.
28 <PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page no.
Report of independent auditors 28
Consolidated balance sheets 29
Consolidated statements of income 30
Consolidated statements of shareholders' equity 31
Consolidated statements of cash flows 32
Notes to consolidated financial statements 34
Supplementary data (unaudited) 54
29 <PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors
Atmos Energy Corporation
We have audited the accompanying consolidated balance sheets
of Atmos Energy Corporation at September 30, 1996 and 1995, and
the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period
ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Atmos Energy Corporation at September 30,
1996 and 1995, and its consolidated results of operations and its
cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Dallas, Texas
November 4, 1996
30 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS September 30,
1996 1995
-------- --------
ASSETS (In thousands, except share data)
Property, plant and equipment $654,571 $589,801
Construction in progress 11,867 5,558
-------- --------
666,438 595,359
Less accumulated depreciation and amort. 252,871 232,107
-------- --------
Net property, plant and equipment 413,567 363,252
Current assets
Cash and cash equivalents 3,726 2,294
Accounts receivable, less allowance
for doubtful accounts of $716 in
1996 and $916 in 1995 25,284 25,690
Inventories 7,174 6,747
Gas stored underground 14,652 10,758
Prepayments 1,489 2,747
-------- --------
Total current assets 52,325 48,236
Deferred charges and other assets 35,969 34,295
-------- --------
$501,861 $445,783
CAPITALIZATION AND LIABILITIES ======== ========
Shareholders' equity
Common stock, no par value (stated at $.005
per share); authorized 75,000,000 shares;
issued and outstanding 1996 - 16,021,321
shares, 1995 - 15,519,112 shares $ 80 $ 78
Additional paid-in capital 111,206 106,496
Retained earnings 61,012 51,704
-------- --------
Total shareholders' equity 172,298 158,278
Long-term debt 122,303 131,303
-------- --------
Total capitalization 294,601 289,581
Current liabilities
Current maturities of long-term debt 9,000 7,000
Notes payable to banks 62,800 33,500
Accounts payable 31,640 24,945
Taxes payable 3,584 1,926
Customers' deposits 9,858 9,343
Other current liabilities 10,674 10,641
-------- --------
Total current liabilities 127,556 87,355
Deferred income taxes 39,056 33,120
Deferred credits and other liabilities 40,648 35,727
-------- --------
$501,861 $445,783
======== ========
See accompanying notes to consolidated financial statements.
31 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year ended September 30,
--------------------------------
1996 1995 1994
-------- -------- --------
(In thousands, except per share data)
Operating revenues $483,744 $435,820 $499,808
Purchased gas cost 306,744 268,810 331,571
-------- -------- --------
Gross profit 177,000 167,010 168,237
Operating expenses
Operation 82,807 83,431 92,132
Maintenance 4,212 4,276 5,888
Depreciation and amortization 20,849 20,741 18,841
Taxes, other than income 16,879 16,611 16,808
Income taxes 13,310 9,574 8,102
-------- -------- --------
Total operating expenses 138,057 134,633 141,771
-------- -------- --------
Operating income 38,943 32,377 26,466
Other income (expense)
Interest income 113 459 168
Other, net (409) (242) 335
-------- -------- --------
Total other income
(expense) (296) 217 503
Interest charges 14,698 13,721 12,290
-------- -------- --------
Net income $ 23,949 $ 18,873 $ 14,679
======== ======== ========
Net income per share $ 1.51 $ 1.22 $ .97
======== ======== ========
Cash dividends per share $ .96 $ .92 $ .88
======== ======== ========
Average shares outstanding 15,892 15,416 15,195
======== ======== ========
See accompanying notes to consolidated financial statements.
32 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
Common stock
----------------- Additional
Number of Stated paid-in Retained
shares value capital earnings
----------- ------ --------- --------
(In thousands, except share data)
Balance, September 30, 1993 14,868,902 $74 $94,279 $45,076
Net income - - - 14,679
Cash dividends ($.88 per
share) - - - (12,612)
GGC distributions - - - (120)
Common stock issued
Restricted stock
grant plan 105,000 1 2,134 -
Direct stock purchase
plan 173,801 1 3,037 -
Employee stock ownership
plan 149,463 1 2,713 -
Other - - 293 -
---------- --- ------- -------
Balance, September 30, 1994 15,297,166 77 102,456 47,023
Net income - - - 18,873
Cash dividends ($.92
per share) - - - (14,192)
Common stock issued
Restricted stock
grant plan 7,000 - 119 -
Employee stock
ownership plan 214,946 1 3,876 -
Other - - 45 -
---------- --- -------- -------
Balance, September 30, 1995 15,519,112 78 106,496 51,704
Net income - - - 23,949
Cash dividends ($.96 per
share) - - - (15,235)
Common stock issued
Restricted stock grant
plan 24,800 - 493 -
Outside directors stock-
for-fee plan 2,521 - 60 -
Employee stock ownership
plan 161,477 1 3,641 -
Oceana Heights acquisition 313,411 1 304 594
Other - - 212 -
---------- --- -------- -------
Balance, September 30, 1996 16,021,321 $80 $111,206 $61,012
========== === ======== =======
See accompanying notes to consolidated financial statements.
33 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended September 30,
-------------------------
1996 1995 1994
------- -------- -------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $23,949 $18,873 $14,679
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 20,849 20,741 18,841
Charged to other accounts 3,568 3,592 1,476
Deferred income taxes 5,944 2,809 244
Other 493 2,011 2,101
------- ------- -------
54,803 48,026 37,341
Change in assets and liabilities
(Increase) decrease in accounts
receivable 406 3,988 (478)
(Increase) decrease in inventories (427) (859) 176
(Increase) decrease in gas stored
underground (3,894) 1,899 4,946
(Increase) decrease in prepayments 1,258 (438) 1,931
Decrease in deferred charges and
other assets (1,674) (333) (3,824)
Increase (decrease) in accounts
payable 6,695 2,970 (7,128)
Increase (decrease) in taxes
payable 1,862 (2,766) (1,314)
Increase in customers' deposits 515 1,086 395
Increase in other current
liabilities 33 3,603 583
Increase in deferred credits and
other liabilities 4,921 1,326 8,596
------- ------- -------
Net cash provided by operating
activities 64,498 58,502 41,224
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (77,597)(62,927) (50,355)
Retirements of property, plant and
equipment 3,764 2,749 1,906
------- ------- -------
Net cash used in investing
activities (73,833)(60,178) (48,449)
- Continued -
34 <PAGE>
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year ended September 30,
1996 1995 1994
-------- -------- --------
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in notes
payable $29,300 $(24,600) $22,400
Proceeds from issuance of
long-term debt - 40,000 -
Repayment of long-term debt (7,000) (4,000) (9,850)
Cash dividends and distributions
paid (15,235) (14,192) (12,732)
Issuance of common stock 3,702 3,996 7,887
------- ------- -------
Net cash provided by financing
activities 10,767 1,204 7,705
------- ------- -------
Net increase (decrease) in cash and
cash equivalents 1,432 (472) 480
Cash and cash equivalents at
beginning of year 2,294 2,766 2,286
------- ------- -------
Cash and cash equivalents at end
of year $ 3,726 $ 2,294 $ 2,766
======= ======= =======
See accompanying notes to consolidated financial statements.
35 <PAGE>
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Description of business - Atmos Energy Corporation and its
subsidiaries ("Atmos" or the "Company") are in the business of
distributing natural gas to residential, commercial, industrial
and agricultural customers within service areas located in Texas,
Louisiana, Kentucky, Colorado, Kansas and a small portion of
Missouri. Such business is subject to federal and state
regulation and/or regulation by local authorities in each of the
six states in which the Company operates. The Company has no
other material business segments.
Principles of consolidation - The accompanying consolidated
financial statements include the accounts of Atmos Energy
Corporation and its subsidiaries. Each subsidiary is wholly-
owned and all material intercompany items have been eliminated.
Revenue recognition - Sales of natural gas are billed on a
monthly cycle basis; however, the billing cycle periods for
certain classes of customers do not necessarily coincide with ac-
counting periods used for financial reporting purposes. The
Company follows the revenue accrual method of accounting for
natural gas revenues whereby revenues applicable to gas delivered
to customers but not yet billed under the cycle billing method
are estimated and accrued and the related costs are charged to
expense. Estimated losses due to credit risk are reserved at the
time revenue is recognized.
Property, plant and equipment - Property, plant and
equipment is stated at original cost net of contributions in aid
of construction. The cost of additions includes an allowance for
funds used during construction and applicable overhead charges.
Major renewals and betterments are capitalized, while the costs
of maintenance and repairs are charged to expense as incurred.
Property, plant and equipment is depreciated at various rates on
a straight-line basis over the estimated useful lives of the
assets. The composite rates were 3.8% and 4.1% for the years
ended September 30, 1996 and 1995, respectively. The decrease in
the composite rate in 1996 resulted from the decrease in Kentucky
depreciation rates ordered by the Kentucky Public Service
Commission as part of the rate case settlement in October 1995.
At the time property, plant and equipment is retired, the cost,
plus removal expenses and less salvage, is charged to accumulated
depreciation.
Inventories - Inventories consist of materials and supplies
and merchandise held for resale. Inventories are stated at the
lower of average cost or market.
Gas stored underground - Net additions of inventory gas to
underground storage and withdrawals of inventory gas from storage
are priced using the average cost method. Non-current gas in
36 <PAGE>
storage is classified as property, plant and equipment and is
priced at cost.
Income taxes - The Company provides deferred income taxes
for significant temporary differences in the recognition of
revenues and expenses for tax and financial reporting purposes.
Cash and cash equivalents - The Company considers all highly
liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Deferred charges and other assets - Deferred charges and
other assets at September 30, 1996 and 1995 include assets of the
Company's qualified defined benefit retirement plans in excess of
the plans' obligations in the amounts of $9,970,000 and
$9,962,000, respectively, and Company assets related to the
nonqualified retirement plans at September 30, 1996 and 1995 of
$17,808,000 and $16,510,000, respectively.
Deferred credits and other liabilities - Deferred credits
and other liabilities include customer advances for construction
of $8,458,000 and $8,212,000 at September 30, 1996 and 1995,
respectively; obligations under capital leases of $2,769,000 and
$2,882,000 at September 30, 1996 and 1995, respectively; and
obligations under the Company's nonqualified retirement plans of
$18,759,000 and $16,125,000 at September 30, 1996 and 1995,
respectively.
Earnings per share - The calculation of primary earnings per
share is based on reported net income divided by weighted average
common shares outstanding. The Company does not have other
classes of stock or dilutive common stock equivalents.
Use of estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Business combination activity
Agreement to merge with United Cities Gas Company
In July 1996, the Company announced that it had reached a
definitive agreement to merge with United Cities Gas Company
("United Cities") of Brentwood, Tennessee, by means of a tax-free
reorganization. The Company will exchange approximately 13.1
million shares of its stock for all of the outstanding stock of
United Cities. Atmos will be the surviving corporation. Atmos
has agreed to increase the indicated annual dividend to not less
than $1.02 per share, for no less than four quarters, at the
first Board meeting following the closing of the transaction.
The transaction is expected to be accounted for by the pooling of
37 <PAGE>
interests method. The transaction is subject to approval by the
United Cities and Atmos shareholders, which approvals were
obtained on November 12, 1996. Approval by appropriate
regulatory bodies will also be required among other conditions
precedent to closing.
United Cities is a natural gas utility engaged in the
distribution and sale of natural gas to approximately 310,000
customers in Tennessee, Illinois, Virginia, Kansas, Missouri,
South Carolina, Georgia, and Iowa, and in the sale of propane to
approximately 27,000 customers in Tennessee, Virginia and North
Carolina. United Cities' assets consist principally of the
property, plant and equipment used in its natural gas and propane
sales and distribution businesses. Following consummation of the
merger, Atmos intends to continue to operate the United Cities
business as a division of Atmos, along with Atmos' Energas, Trans
La, Western Kentucky, and Greeley divisions. The accompanying
consolidated financial statements of the Company do not include
the assets, liabilities, or operating results of United Cities.
On August 1, 1996, Southern Union Company filed a Schedule
13D with the Securities and Exchange Commission reporting that it
owns 6.5% of United Cities' outstanding common stock.
Subsequently, various lawsuits and complaints were filed by
Atmos, United Cities, and Southern Union relating to the
purported ownership of the stock by Southern Union, the actions
of the United Cities board of directors in approving the merger
with Atmos, and certain other matters. On November 2, 1996, all
of the parties entered into a settlement agreement that resolved
the disputes and requires, among other things, the dismissal of
all such lawsuits and complaints.
Acquisition of Greeley Gas Company
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. GGC is a natural gas
utility engaged in the distribution and sale of natural gas to
residential, commercial, industrial, agricultural, and other
customers throughout Colorado, Kansas, and a small portion of
Missouri. All of the shares of GGC's common stock were exchanged
for a total of 3,493,995 shares of Atmos common stock as adjusted
for a 3-for-2 stock split (2,329,330 shares on a pre-split
basis). See Note 5 for information regarding the stock split in
May 1994. This merger transaction was accounted for as a pooling
of interests; therefore, all historical financial statements and
notes thereto have been restated. Subsequent to the merger, the
business of GGC has been operated through the Company's Greeley
Gas Company division (the "Greeley Gas Division").
38 <PAGE>
Results of operations and net income for the previously
separate companies for the period prior to the merger are as
follows:
Quarter ended
December 31, 1993
-----------------
(In thousands)
Operating revenues
Atmos $119,223
GGC 26,278
--------
$145,501
========
Net income
Atmos $ 5,458
GGC 1,630
--------
$ 7,088
========
The dividends per share presentation on the consolidated
statements of income reflects Atmos dividends declared per share
as adjusted for the 3-for-2 stock split in May 1994. The cash
dividends per share reflect the per share dividend declared by
Atmos Energy Corporation for the year ended September 30, 1994.
The restated cash dividends and distributions per share reflect
the total amounts paid by Atmos and GGC to their shareholders,
divided by the total amount of weighted average shares
outstanding as restated for the shares issued to effect the
merger between Atmos and GGC and the 3-for-2 stock split in May
1994.
Year ended
September 30, 1994
------------------
Cash dividends per share $.88
====
Restated cash dividends and
distributions per share,
including GGC $.84
====
39 <PAGE>
3. Long-term debt and notes payable
Long-term debt at September 30, 1996 and 1995 consisted of
the following:
1996 1995
--------- --------
(In thousands)
Unsecured 7.95% Senior Notes, payable
in annual installments of $1,000
beginning August 31, 1997 through
August 31, 2006 with semiannual
interest payments $ 10,000 $ 10,000
Unsecured 9.57% Senior Notes, payable
in annual installments of $2,000
beginning September 30, 1997 through
September 30, 2006 with semiannual
interest payments 20,000 20,000
Unsecured 9.76% Senior Notes, payable
in annual installments of $3,000
beginning December 30, 1995 through
December 30, 2004 with semiannual
interest payments 27,000 30,000
Unsecured 9.75% Senior Notes, payable
in varying annual installments
through December 30, 1996 1,000 3,000
Unsecured 11.2% Senior Notes, payable
in annual installments of $2,000
beginning December 30, 1993 through
December 30, 2002 with semiannual
interest payments 14,000 16,000
First Mortgage Bonds, 9.4% Series J,
due May 1, 2021 17,000 17,000
Unsecured 10% Notes, due December 31,
2011 2,303 2,303
Unsecured 8.07% Senior Notes, payable
in annual installments of $4,000
beginning October 31, 2002 through
October 31, 2006 with semiannual
interest payments 20,000 20,000
Unsecured 8.26% Senior Notes, payable
in annual installments of $1,818
beginning October 31, 2004 through
October 31, 2014 with semiannual
interest payments 20,000 20,000
-------- --------
131,303 138,303
Less amounts classified as current (9,000) (7,000)
-------- --------
$122,303 $131,303
======== ========
40 <PAGE>
The Company may prepay any of the Senior Notes in whole at
any time, subject to a prepayment premium. The note agreements
provide for certain cash flow requirements and restrictions on
additional indebtedness, sale of assets and payment of dividends.
Under the most restrictive of such covenants, cumulative cash
dividends paid after September 30, 1988 may not exceed the sum of
75% of accumulated net income for periods after September 30,
1988 plus $12,000,000 plus the proceeds from the sale of common
stock after September 30, 1988. At September 30, 1996,
approximately $52,626,000 of shareholders' equity was not so
restricted.
As of September 30, 1996, all of the Company's utility plant
assets in Colorado, Kansas and Missouri with a net book value of
approximately $74,486,000 are subject to a lien under the 9.4%
Series J First Mortgage Bonds assumed by the Company in the
acquisition of GGC.
Based on the borrowing rates currently available to the
Company for debt with similar terms and remaining average
maturities, the fair value of long-term debt at September 30,
1996 and 1995 is estimated using discounted cash flow analysis to
be $140,678,000 and $153,049,000, respectively. It is not
currently advantageous for the Company to refinance its long-term
debt because of prepayment costs set forth in the various debt
agreements.
Maturities of long-term debt are as follows (in thousands):
1997 $ 9,000
1998 8,000
1999 8,000
2000 8,000
2001 8,000
Thereafter 90,303
--------
$131,303
========
Notes payable to banks
The Company has committed short-term, unsecured bank credit
facilities totaling $90,000,000, $80,000,000 of which was unused
at September 30, 1996. One facility of $80,000,000 requires a
commitment fee of 0.09% on the unused portion. A second facility
for $10,000,000 requires a commitment fee of 3/16 of 1% on the
unused portion. The committed lines are renewed or renegotiated
at least annually.
The Company also had aggregate uncommitted credit lines of
$165,000,000, of which $112,200,000 was unused as of September
30, 1996. The uncommitted lines have varying terms and the
Company pays no fee for the availability of the lines.
41 <PAGE>
Borrowings under these lines are made on a when and as-available
basis at the discretion of the banks.
The weighted average interest rates on short-term borrowings
outstanding at September 30, 1996 and 1995 were 6.2% and 7.0%,
respectively.
4. Income taxes
The components of income tax expense for 1996, 1995 and 1994
are as follows:
1996 1995 1994
------- ------ ------
(In thousands)
Current $ 7,366 $6,765 $7,858
Deferred 5,944 2,809 244
------- ------ ------
$13,310 $9,574 $8,102
======= ====== ======
Included in the provision for income taxes are state income
taxes of $1,134,000, $506,000, and $328,000 for 1996, 1995, and
1994, respectively.
42 <PAGE>
Deferred income taxes reflect the tax effect of differences
between the basis of assets and liabilities for book and tax
purposes. The tax effect of temporary differences that give rise
to significant components of the deferred tax liabilities and
deferred tax assets at September 30, 1996 and 1995 are presented
below:
1996 1995
------- -------
(In thousands)
Deferred tax assets
Costs expensed for book purposes
and capitalized for tax purposes $ 863 $ 872
Accruals not currently deductible
for tax purposes 1,403 1,045
Customer advances 2,629 2,020
Nonqualified benefit plans 7,616 7,107
Postretirement benefits 3,184 2,187
Other, net 1,348 2,902
------- -------
Total deferred tax assets 17,043 16,133
Deferred tax liabilities
Difference in net book value
and net tax value of assets 50,799 43,549
Prepaid pensions 3,929 4,528
Other, net 1,371 1,176
------- -------
Total deferred tax liabilities 56,099 49,253
------- -------
Net deferred tax liabilities $39,056 $33,120
======= =======
SFAS No. 109 deferred accounts for
rate regulated entities (included
in other deferred credits):
Liabilities $ 2,536 $ 2,580
======= =======
43 <PAGE>
Reconciliations of the provisions for income taxes computed
at the statutory rate to the reported provisions for income taxes
for 1996, 1995 and 1994 are set forth below:
Liability Method
--------------------------
1996 1995 1994
------- ------- -------
(In thousands)
Tax at statutory rate of 35% $13,041 $9,956 $ 7,992
Financial expenses, not deductible
for tax reporting 63 35 503
Common stock dividends deductible
for tax reporting (684) (619) (573)
State taxes 900 261 328
Other, net (10) (59) (148)
------- ------- -------
Provision for income taxes $13,310 $9,574 $ 8,102
======= ======= =======
5. Stock split
On February 9, 1994, the Board of Directors of Atmos ap-
proved a 3-for-2 split of its common stock implemented in the
form of a stock dividend, which resulted in shareholders
receiving one new share for every two shares held. Fractional
shares were not issued but were paid in cash or credited to the
accounts of participants of the Dividend Reinvestment and Stock
Purchase Plan ("DRSPP") and Employee Stock Ownership Plan
("ESOP"). The record date for the split was May 4, 1994 and the
payment date for mailing the new shares and cash for fractional
shares to shareholders was May 16, 1994. All share and per share
amounts in the financial statements and notes thereto have been
restated to reflect this split, unless otherwise noted.
6. Common stock and stock options
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.
The Company issued 24,800 shares of its common stock in
fiscal 1996 in connection with its Restricted Stock Grant Plan.
The Company has an Employee Stock Ownership Plan as dis-
cussed in Note 7. It issued 161,477 shares under the plan in
1996. The Company has registered 1,600,000 shares for issuance
under the plan, of which 713,353 shares were available for future
issuance on September 30, 1996.
In August 1992, the Company announced a Direct Stock
Purchase Plan ("DSPP") which was the successor to and replacement
for the Dividend Reinvestment Plan ("DRP"). Members of the DRP
were automatically enrolled in the DSPP. In November 1993, the
Company amended the DSPP to remove the direct stock purchase
44 <PAGE>
feature of the plan and to rename the plan the Atmos Energy
Corporation Dividend Reinvestment and Stock Purchase Plan. In
January 1995, the direct stock purchase feature was reinstated
and the name was changed back to the Direct Stock Purchase Plan.
Participants in the DSPP may have all or part of their dividends
reinvested at a 3% discount from market prices. DSPP
participants may purchase additional shares of Company common
stock as often as weekly with voluntary cash payments of at least
$25, up to an annual maximum of $100,000. At September 30, 1996,
712,596 shares were available for future issuance under the plan.
On April 27, 1988, the Company adopted a Shareholders'
Rights Plan and declared a dividend of one right (a "Right") for
each outstanding pre-split share of common stock of the Company,
payable to shareholders of record as of May 10, 1988. Each Right
will entitle the holder thereof, until the earlier of May 10,
1998 or the date of redemption of the Rights, to buy one share of
common stock of the Company at an exercise price of $30 per
share, subject to adjustment by the Board of Directors upon the
occurrence of certain events. The Rights will be represented by
the common stock certificates and are not exercisable or
transferable apart from the common stock until a "Distribution
Date" (which is defined in the Rights Agreement between the
Company and the Rights Agent as the date upon which the Rights
become separate from the common stock).
At no time will the Rights have any voting rights. The
exercise price payable and the number of shares of common stock
or other securities or property issuable upon exercise of the
Rights are subject to adjustment from time to time to prevent
dilution. Until the Distribution Date, the Company will issue
one Right with each share of common stock that becomes
outstanding so that all shares of common stock will have attached
Rights. After a Distribution Date, the Company may issue Rights
when it issues common stock if the Board deems such issuance to
be necessary or appropriate.
The Rights have certain anti-takeover effects and may cause
substantial dilution to a person or entity that attempts to
acquire the Company on terms not approved by the Board of
Directors except pursuant to an offer conditioned upon a
substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination
approved by the Board of Directors because, prior to the time the
Rights become exercisable or transferable, the Rights may be
redeemed by the Company at $.05 per Right.
The Company's Restricted Stock Grant Plan for management and
key employees of the Company, which became effective October 1,
1987, provides for awards of common stock that are subject to
certain restrictions. The plan is administered by the Board of
Directors. The members of the Board who are not employees of the
Company make the final determinations regarding participation in
the plan, awards under the plan, and restrictions on the re-
stricted stock awarded. The restricted stock may consist of
45 <PAGE>
previously issued shares purchased on the open market or shares
issued directly from the Company. The Company registered 600,000
shares (900,000 post-split shares) for issuance under the plan.
Compensation expense of $795,000, $1,015,000 and $1,164,000 was
recognized in 1996, 1995 and 1994, respectively, in connection
with the issuance of shares under the plan. At September 30,
1996, 352,500 shares were available for future award under the
plan.
In November 1994, the Board adopted the Outside Directors
Stock-for-Fee Plan, which plan was approved by the shareholders
of the Company in February 1995. The plan permits non-employee
directors to receive all or part of their annual retainer and
meeting fees in stock rather than in cash. The Company has
registered 50,000 shares, 47,479 of which were available for
future issuance under the plan as of September 30, 1996.
7. Employee retirement and stock ownership plans
At September 30, 1996, the Company had three defined benefit
pension plans. One covers the Western Kentucky Division employ-
ees, one covers the Greeley Gas Division employees, and the third
covers all other Atmos employees. The plans provide essentially
the same benefits to all employees. Benefits are based on years
of service and the employee's compensation during the highest
paid five consecutive calendar years within the last 10 years of
employment. The Company's funding policy is to contribute
annually an amount in accordance with the requirements of the Em-
ployee Retirement Income Security Act of 1974. Contributions are
intended to provide not only for benefits attributed to service
to date but also for those expected to be earned in the future.
46 <PAGE>
The following table sets forth the Atmos plan's funded
status at September 30, 1996 and 1995:
1996 1995
-------- --------
(In thousands)
Actuarial present value of benefit
obligations
Accumulated benefit obligation,
including vested benefits of
$77,089 and $74,967 in 1996
and 1995, respectively $(77,513) $(75,529)
======== ========
Projected benefit obligation $(86,571) $(84,182)
Plan assets at fair value 90,157 82,464
-------- --------
Funded status 3,586 (1,718)
Unrecognized net asset being
recognized over 15 years (198) (416)
Unrecognized prior service cost (1,359) (1,812)
Unrecognized net (gain) loss (3,086) 3,514
-------- --------
Accrued pension cost $ (1,057) $ (432)
======== ========
Net periodic pension cost for the Atmos plan for 1996, 1995
and 1994 included the following components:
1996 1995 1994
------- ------ ------
(In thousands)
Service cost $ 2,235 $ 1,862 $1,846
Interest cost on projected
benefit obligation 6,434 6,060 5,614
Actual return on plan assets (11,342) (12,200) (955)
Net amortization and deferral 3,298 5,007 (5,778)
------- ------ ------
Net periodic pension cost $ 625 $ 729 $ 727
======= ====== ======
47 <PAGE>
The following table sets forth the Western Kentucky Gas
Division plan's funded status at September 30, 1996 and 1995:
1996 1995
--------- ---------
(In thousands)
Actuarial present value of benefit
obligations
Accumulated benefit obligation,
including vested benefits of
$30,934 and $27,236 in 1996
and 1995, respectively $(30,983) $(27,262)
======== ========
Projected benefit obligation $(35,673) $(31,642)
Plan assets at fair value 46,478 42,216
-------- --------
Funded status 10,805 10,574
Unrecognized prior service cost 4,829 2,855
Unrecognized net gain (4,361) (2,468)
-------- --------
Prepaid pension cost $ 11,273 $ 10,961
======== ========
Net periodic pension cost for 1996, 1995 and 1994 included
the following components:
1996 1995 1994
-------- -------- --------
(In thousands)
Service cost $ 672 $ 706 $ 729
Interest cost 2,431 2,306 2,160
Actual return on plan assets (5,771) (6,355) 324
Net amortization and deferral 2,356 3,399 (3,097)
-------- -------- --------
Net periodic pension cost
(benefit) $ (312) $ 56 $ 116
======== ======== ========
The weighted-average discount rates used in determining the
actuarial present value of the projected benefit obligations of
the Atmos and WKG retirement plans was 7.5% at June 30, 1996 and
1995. The rate of increase in future compensation levels
reflected in such determination was 4.0% for the years ended
September 30, 1996 and 1995. The expected long-term rate of
return on plan assets was 9.5%, 10.0% and 9.5% for the years
ended September 30, 1996, 1995 and 1994, respectively. The plan
assets consist primarily of investments in common stocks,
interest bearing securities and interests in commingled pension
trust funds. Prepaid pension cost is included in deferred
charges and other assets.
48 <PAGE>
The following table sets forth the Greeley Gas Division
plan's funded status at September 30, 1996 and 1995:
1996 1995
-------- --------
(In thousands)
Actuarial present value of benefit
obligations
Accumulated benefit obligation,
including vested benefits of
$15,110 and $13,134 in 1996
and 1995, respectively $(15,252) $(13,385)
======== ========
Projected benefit obligation $(17,666) $(15,148)
Plan assets at fair value 16,086 14,607
-------- --------
Funded status (1,580) (541)
Unrecognized net asset being
recognized over 15 years (1,521) (1,810)
Unrecognized prior service cost 1,480 419
Unrecognized net loss 1,375 1,370
-------- --------
Accrued pension cost $ (246) $ (562)
======== ========
Net periodic pension cost (credit) for the Greeley Gas
Division plan for 1996, 1995 and 1994 included the following
components:
1996 1995 1994
------ ------- -------
(In thousands)
Service cost $ 453 $ 328 $ 486
Interest cost on projected
benefit obligation 1,185 1,208 1,039
Actual return on plan assets (2,390) (2,530) 441
Net amortization and deferral 810 1,217 (1,795)
------ ------- -------
Net periodic pension cost $ 58 $ 223 $ 171
====== ======= =======
Accumulated plan benefits were computed using the Projected
Unit Credit funding method. The discount rate and rate of in-
crease in future compensation levels used in determining the
actuarial present value of the projected benefit obligations were
7.5% and 4.0% in both 1996 and 1995. The expected long-term rate
of return on plan assets was 9.5%, 10.0% and 9.5% in 1996, 1995
and 1994, respectively. Plan assets consist primarily of
corporate bonds, equity securities, mutual funds, partnership
interests, and other miscellaneous investments. The actual
return on plan assets in 1994 resulted in a loss of $441,000 due
to writedowns of certain plan assets to reflect current market
value.
49 <PAGE>
Effective October 1, 1987, the Company adopted a nonquali-
fied Supplemental Executive Benefits Plan ("Supplemental Plan")
which provides additional pension, disability and death benefits
to the officers and certain other employees of the Company.
Expense recognized in connection with the Supplemental Plan
during fiscal 1996, 1995 and 1994 was $2,708,000, $2,158,000 and
$2,062,000, respectively.
The Company sponsors an Employee Stock Ownership Plan. Full
time employees who have completed one year of service, as defined
in the plan, are eligible to participate. Each participant
enters into a salary reduction agreement with the Company
pursuant to which the participant's salary is reduced by an
amount not less than 2% nor more than 10%. Taxes on the amount
by which the participant's salary is reduced are deferred
pursuant to Section 401(k) of the Internal Revenue Code. The
amount of the salary reduction is contributed by the Company to
the ESOP for the account of the participant. The Company may
make a matching contribution for the account of the participant
in an amount determined each year by the Board of Directors,
which amount must be at least equal to 25% of all or a portion of
the participant's salary reduction. For the 1996 plan year, the
Board of Directors elected to match 100% of each participant's
salary reduction contribution up to 4% of the participant's
salary. Matching contributions to the ESOP amounted to
$1,944,000, $1,977,000, and $1,780,000 for 1996, 1995 and 1994,
respectively. The Directors may also approve discretionary
contributions, subject to the provisions of the Internal Revenue
Code of 1986 and applicable regulations of the Internal Revenue
Service. The Company recorded a charge of $1,500,000 for a
discretionary contribution in the year ended September 30, 1996.
Company contributions to the plan are expensed as incurred.
Effective January 1, 1988, the Greeley Gas Division adopted
a 401(k) plan that covered substantially all the Greeley Gas
Division employees. Total employer contributions to the 401(k)
plan were $141,000 for the period ended September 30, 1994.
Contributions to the plan were discontinued on March 31, 1994 and
participants were enrolled in the Atmos ESOP on April 1, 1994.
8. Other postretirement benefits
In addition to providing pension benefits, the Company
provides certain other postretirement benefits for retired
employees, the major benefit being health care. Prior to 1994,
the cost of other postretirement benefits was recognized by
expensing claims and annual insurance premiums as incurred.
Effective October 1, 1993, the Company adopted Financial
Accounting Standards No. 106 ("SFAS No. 106"), "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
SFAS No. 106 focuses principally on postretirement health care
benefits and significantly changed the practice of accounting for
postretirement benefits on a pay-as-you-go basis by requiring
accrual of such benefit costs on an actuarial basis from the date
50 <PAGE>
each employee reaches age 45 until the date of full eligibility
for such benefits. The Company is amortizing on a straight line
basis the initial transition obligation of $33,354,000 over 20
years. The effect of adopting the new rules increased net
periodic postretirement benefits cost for the year ended
September 30, 1994 by $3,789,000 and decreased net income by
$2,440,000. Approximately $746,000 of this increased cost was
recovered through rates during 1994.
Atmos sponsors two defined benefit postretirement plans
other than pensions. One plan provides medical, dental, and
vision benefits to retired employees of Greeley Gas Company. The
other offers medical benefits to all other retired Atmos
employees. Substantially all of the Company's employees may
become eligible for these benefits if they reach retirement age
while working for the Company and attain 10 consecutive years of
service after age 45. Participant contributions are required
under these plans. Prior to June 1994, the plans were not
funded. In June 1994, the Company made its first quarterly
payment to the external trust set up to fund SFAS No. 106 costs
in excess of the pay-as-you-go cost in Kansas in accordance with
an order of the Kansas Corporation Commission. In April, 1995 it
began external funding in Colorado in accordance with an order of
the Colorado Public Utility Commission. The amount of funding
will ultimately depend upon the ratemaking treatment allowed in
the Company's various rate jurisdictions.
The components of net periodic postretirement benefits cost
for each of the years ended September 30, 1996, 1995 and 1994 are
as follows:
1996 1995 1994
------ ------ ------
(In thousands)
Service cost $1,469 $1,497 $1,817
Interest cost 2,224 2,322 2,269
Actual return on plan assets (39) (18) -
Amortization of transition
obligation 1,550 1,549 1,668
Net amortization and deferral (80) (150) -
------ ------ ------
Net periodic postretirement
benefits cost $5,124 $5,200 $5,754
====== ====== ======
51 <PAGE>
The following is a reconciliation of the funded status of
the plans to the net postretirement benefits liability on the
balance sheet as of September 30, 1996 and 1995:
1996 1995
-------- --------
(In thousands)
Accumulated postretirement
benefits obligation
Retirees $(19,849) $(20,402)
Fully eligible employees (6,426) (5,906)
Other employees (4,644) (4,468)
-------- --------
(30,919) (30,776)
Plan assets 927 594
-------- --------
Accumulated postretirement benefits
obligation in excess of plan assets (29,992) (30,182)
Unrecognized net gain (4,775) (3,807)
Unrecognized transition obligation 26,342 27,892
-------- --------
Accrued postretirement benefits liability $ (8,425) $ (6,097)
======== ========
In the latest actuarial calculation of the accrued postre-
tirement benefits liability, the assumed health care cost trend
rate used to estimate the cost of postretirement benefits was
8.0% for 1996, 7.5% for 1997 and is assumed to decrease gradually
to 5.0% by 2000 and remain at that level thereafter. Similarly,
the dental trend rate was 7.0% for 1996 at which time dental
benefits were discontinued. The trend for vision benefits is
assumed to remain level for all years at 4.5%. The effect of a
1% increase in the assumed health care cost trend rate for each
future year is $344,000 and $353,000 on the annual aggregate of
the service and interest cost components of net periodic postret-
irement benefit costs and $2,377,000 and $2,355,000 on the
accumulated postretirement benefits obligation as of September
30, 1996 and 1995, respectively. The assumed discount rate, the
rate at which liabilities could be settled, was 7.5% as of
September 30, 1996 and 1995.
The Company is currently recovering other postretirement
benefits ("OPEB") costs through its regulated rates under SFAS
No. 106 accrual accounting in Colorado, Kansas, the majority of
its Texas service area and in Kentucky (effective November 1,
1995). It receives rate treatment as a cost of service item for
OPEB costs on the pay-as-you-go basis in Louisiana. Management
believes that accrual accounting in accordance with SFAS No. 106
is appropriate and will continue to seek rate recovery of
accrual-based expenses in its ratemaking jurisdictions that have
not yet approved the recovery of these expenses.
52 <PAGE>
9. Postemployment benefits
The Company also provides postemployment benefits, primarily
workers' compensation, to former or inactive employees after
employment but before retirement. 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, such
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 in
1996 and 1995, were not material.
10. 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
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.
53 <PAGE>
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 totaling approximately $1,016,000, which includes
interest calculated through October 1, 1995, began in September
1995 and will be credited to customer bills along with interest
that accrues after October 1, 1995. The Company refunded
$533,000 under the settlement for the twelve months ended
September 30, 1996. 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. On January 12,
1996, the jury awarded the plaintiffs approximately $2.5 million
in compensatory damages and approximately $2.5 million in
punitive damages. The jury assessed the Company with liability
for all of the damages awarded. The Company has filed a Notice
of Appeal with the Colorado Court of Appeals with respect to this
case. The Company has adequate insurance to cover the
compensatory damages awarded. The Company's insurance carrier
informed the Company that, based upon a recent Colorado Court
ruling, the punitive damages awarded against the Company cannot
be covered by the Company's insurance policy. The Company is
reviewing the position of the insurance carrier with respect to
coverage of punitive damages. The Company believes it has
meritorious issues for an appeal but cannot assess, at this time,
the likelihood of success in the appeal.
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, adequately reserved for by the Company or
would not have a material adverse effect on the financial
condition of the Company.
54 <PAGE>
11. Statement of cash flows
Supplemental disclosures of cash flow information for 1996,
1995 and 1994 are presented below:
1996 1995 1994
------- ------- -------
(In thousands)
Cash paid for
Interest $15,717 $11,503 $12,756
Income taxes 6,679 10,123 6,352
12. Leases
The Company has entered into noncancelable leases involving
office space and warehouse space. The remaining lease terms
range from one to 20 years and generally provide for the payment
of taxes, insurance and maintenance by the lessee. Net property,
plant and equipment included amounts for capital leases of
$2,511,000 and $2,694,000 at September 30, 1996 and 1995,
respectively.
The related future minimum lease payments at September 30,
1996 were as follows:
Capital Operating
leases leases
-------- --------
(In thousands)
1997 $ 568 $ 7,725
1998 568 7,216
1999 568 7,190
2000 568 7,178
2001 568 7,050
Thereafter 2,847 52,314
------ -------
Total minimum lease payments 5,687 $88,673
=======
Less amount representing interest (2,918)
------
Present value of net minimum
lease payments $2,769
======
Consolidated rent expense amounted to $7,448,000, $6,643,000
and $6,490,000 for fiscal 1996, 1995 and 1994, respectively.
Rents for the regulated business are expensed and the Company
receives rate treatment as a cost of service on a pay-as-you-go
basis.
55 <PAGE>
SUPPLEMENTARY DATA
Quarterly Financial Data (Unaudited)
Summarized unaudited quarterly financial data are presented
below. The sum of net income per share by quarter may not equal
the net income per share for the year due to variations in the
weighted average shares outstanding used in computing such
amounts.
<TABLE>
<CAPTION>
Quarter ended
---------------------------------------------------------------------------------
December 31, March 31, June 30, September 30,
----------------- ----------------- ----------------- ----------------
1995 1994 1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Operating revenues $130,468 $117,848 $191,104 $157,294 $93,571 $84,685 $68,601 $75,993
Gross profit 50,725 43,482 65,394 59,577 33,776 34,069 27,105 29,882
Operating income (loss) 12,945 9,786 22,172 17,689 4,059 2,987 (233) 1,915
Net income (loss) 9,233 6,476 18,383 13,945 316 82 (3,983) (1,630)
Net income (loss) per
share .59 .42 1.15 .91 .02 .01 (.25) (.11)
</TABLE>
56 <PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT
Information regarding directors is incorporated herein by
reference from the Company's definitive proxy statement for the
annual meeting of shareholders on February 12, 1997.
Information regarding executive officers is included in Part
I.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's
definitive proxy statement for the annual meeting of shareholders
on February 12, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference from the Company's
definitive proxy statement for the annual meeting of shareholders
on February 12, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's
definitive proxy statement for the annual meeting of shareholders
on February 12, 1997.
57 <PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1 and 2. Financial statements and financial statement
schedules.
The financial statements listed in the accompanying Index to
Financial Statements are filed as part of this annual report. No
financial statement schedules are required in this filing.
3. Exhibits
The exhibits listed in the accompanying Exhibits Index are
filed as part of this annual report. The exhibits numbered
10.18(a) through 10.25(c) and 10.27 are management contracts or
compensatory plans or arrangements.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report on July 24, 1996
reporting under Item 5, Other Events, that on July 19, 1996 it
had entered into a definitive Agreement and Plan of
Reorganization with United Cities Gas Company ("United Cities")
whereby United Cities would merge with and into Atmos. Financial
statements were not filed at that time.
58 <PAGE>
INDEX TO FINANCIAL STATEMENTS
(Item 8, 14(a) 1 and 2)
Page
Number
Independent auditors' report 28
Financial statements:
Consolidated balance sheets at September 30,
1996 and 1995 29
Consolidated statements of income for the
years ended September 30, 1996, 1995 and 1994 30
Consolidated statements of shareholders'
equity for the years ended September 30,
1996, 1995 and 1994 31
Consolidated statements of cash flows for the years
ended September 30, 1996, 1995 and 1994 32
Notes to consolidated financial statements 34-53
All financial statement schedules are omitted because the
required information is not present, or not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the financial statements and
accompanying notes thereto.
59 <PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By /s/ James F. Purser
----------------------
James F. Purser
Executive Vice President and
Chief Financial Officer
Date: November 13, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints James F.
Purser, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and
all amendments to this Form 10-K, and to file the same, with all
exhibits thereto, and all other documents in connection there-
with, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date
indicated:
/s/ Charles K. Vaughan Chairman of November 13, 1996
- ------------------------- the Board
Charles K. Vaughan
/s/ Robert F. Stephens President and November 13, 1996
- ------------------------- Chief Operating
Robert F. Stephens Officer, Director
60 <PAGE>
/s/ James F. Purser Executive Vice November 13, 1996
- ------------------------- President and
James F. Purser Chief Financial
Officer, Director
/s/ David L. Bickerstaff Vice President November 13, 1996
- ------------------------- and Controller
David L. Bickerstaff (Principal
accounting officer)
/s/ Travis W. Bain, II Director November 13, 1996
- -------------------------
Travis W. Bain, II
/s/ Dan Busbee Director November 13, 1996
- -------------------------
Dan Busbee
/s/ Thomas C. Meredith Director November 13, 1996
- -------------------------
Thomas C. Meredith
/s/ Phillip E. Nichol Director November 13, 1996
- -------------------------
Phillip E. Nichol
/s/ John W. Norris, Jr. Director November 13, 1996
- -------------------------
John W. Norris, Jr.
/s/ Carl S. Quinn Director November 13, 1996
- -------------------------
Carl S. Quinn
61 <PAGE>
/s/ Lee E. Schlessman Director November 13, 1996
- -------------------------
Lee E. Schlessman
/s/ Richard Ware II Director November 13, 1996
- -------------------------
Richard Ware II
62 <PAGE>
EXHIBITS INDEX
Item 14. (a) (3)
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
3.1 Restated Articles of Incorporation, Exhibit 3.1 of Form 10-K
as amended as of February 9, 1995 for fiscal year ended
September 30, 1995
(File No. 1-10042)
3.2 By-Laws of Atmos Energy Corporation Exhibit 3.2 of Form 10-K
(As amended as of November 9, 1994) for fiscal year ended
September 30, 1995
(File No. 1-10042)
4.1 Specimen Common Stock Certificate Exhibit (4) of the
(Energas Company) October 28, 1983 Form 10
(File No. 0-11249)
4.2 Specimen Common Stock Certificate Exhibit (4) (b) of Form
(Atmos Energy Corporation) 10-K for fiscal year
ended September 30, 1988
(File No. 1-10042)
4.3(a) Rights Agreement, dated as of April Exhibit (1) of Form 8-K
27, 1988, between the Company and filed May 10, 1988 (File
Morgan Shareholder Services Trust No. 0-11249)
Company
4.3(b) Amendment No. 1 to Rights Agreement, Exhibit 4.3(b) of Form
dated August 10, 1994 10-K for fiscal year
ended September 30, 1994
(File No. 1-10042)
4.3(c) Certificate of Adjusted Price, dated Exhibit 4.3(c) of Form
August 15, 1994 10-K for fiscal year
ended September 30, 1994
(File No. 1-10042)
9 Not applicable
10.1(a) Note Purchase Agreement, dated Exhibit (10)(a)(i) of
December 30, 1986, by and between Form 10-K for fiscal year
the Company and John Hancock Mutual ended September 30, 1991
Life Insurance Company (File No. 1-10042)
Note Purchase Agreement, dated
December 30, 1986, by and between
the Company and Mellon Bank, N.A.,
Trustee under Master Trust Agreement
of NYNEX Corporation dated January
1, 1984 for Employee Pension Plans -
NYNEX - John Hancock - Private
Placement. (Agreement is identical
to the Hancock Agreement listed
above except as to the parties
thereto.)
63 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.1(b) Letter, dated November 13, 1987, Exhibit 28(a) of Form 8-K
from John Hancock Mutual Life filed January 7, 1988
Insurance Company to the Company (File No. 0-11249)
Letter, dated November 13, 1987,
from Mellon Bank, N.A., Trustee
under Master Trust Agreement of
NYNEX Corporation dated January 1,
1984 for Employee Pension Plans -
NYNEX - John Hancock - Private
Placement to the Company (Mellon
letter is identical to the Hancock
letter listed above except as to the
parties thereto.)
10.1(c) Amendment to Note Purchase Exhibit (10)(a)(iii) of
Agreement, dated October 11, 1989, Form 10-K for fiscal year
by and between the Company and John ended September 30, 1989
Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated December 30, 1986
Amendment to Note Purchase
Agreement, dated October 11, 1989,
by and between the Company and
Mellon Bank, N.A., Trustee under
Master Trust Agreement of NYNEX
Corporation dated January 1, 1984
for Employee Pension Plans - NYNEX -
John Hancock - Private Placement
revising Note Purchase Agreement
dated December 30, 1986. (This
amendment is identical to the
Hancock amendment listed above
except as to the parties thereto.)
10.1(d) Amendment to Note Purchase Exhibit (10)(a)(iv) of
Agreement, dated November 12, 1991, Form 10-K for fiscal year
by and between the Company and John ended September 30, 1991
Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated December 30, 1986.
64 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Amendment to Note Purchase
Agreement, dated November 12, 1991,
by and between the Company and
Mellon Bank, N.A., Trustee under
Master Trust Agreement of NYNEX
Corporation dated January 1, 1984
for Employee Pension Plans - NYNEX -
John Hancock - Private Placement
revising Note Purchase Agreement
dated December 30, 1986. (This
amendment is identical to the
Hancock amendment listed above
except as to the parties thereto.)
10.2(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 8-K
December 21, 1987, by and between filed January 7, 1988
the Company and John Hancock Mutual (File No. 0-11249)
Life Insurance Company
Note Purchase Agreement, dated as of
December 21, 1987, by and between
the Company and John Hancock
Charitable Trust I (Agreement is
identical to Hancock Agreement
listed above except as to the
parties thereto.)
Note Purchase Agreement dated as of
December 21, 1987, by and between
the Company and Mellon Bank, N.A.,
Trustee under Master Trust Agreement
of AT&T Corporation, dated January
1, 1984, for Employee Pension Plans
- AT&T - John Hancock - Private
Placement (Agreement is identical to
Hancock Agreement listed above
except as to the parties thereto.)
10.2(b) Amendment to Note Purchase Exhibit (10)(b)(ii) of
Agreement, dated October 11, 1989, Form 10-K for fiscal year
by and between the Company and John ended September 30, 1989
Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated December 21, 1987
65<PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Amendment to Note Purchase
Agreement, dated October 11, 1989,
by and between the Company and John
Hancock Charitable Trust I revising
Note Purchase Agreement dated
December 21, 1987. (Amendment is
identical to Hancock amendment
listed above except as to the
parties thereto.)
Amendment to Note Purchase
Agreement, dated October 11, 1989,
by and between the Company and
Mellon Bank, N.A., Trustee under
Master Trust Agreement of AT&T
Corporation, dated January 1, 1984,
for Employee Pension Plans - AT&T -
John Hancock - Private Placement
revising Note Purchase Agreement
dated December 21, 1987 (Amendment
is identical to Hancock amendment
listed above except as to the
parties thereto.)
10.2(c) Amendment to Note Purchase Exhibit 10(b)(iii) of
Agreement, dated November 12, 1991, Form 10-K for fiscal year
by and between the Company and John ended September 30, 1991
Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated December 21, 1987
Amendment to Note Purchase
Agreement, dated November 12, 1991,
by and between the Company and John
Hancock Charitable Trust I revising
Note Purchase Agreement dated
December 21, 1987. (Amendment is
identical to Hancock amendment
listed above except as to the
parties thereto.)
66 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
Amendment to Note Purchase
Agreement, dated November 12, 1991,
by and between the Company and
Mellon Bank, N.A., Trustee under
Master Trust Agreement of AT&T
Corporation, dated January 1, 1984,
for Employee Pension Plans - AT&T -
John Hancock - Private Placement
revising Note Purchase Agreement
dated December 21, 1987. (Amendment
is identical to Hancock amendment
above except as to the parties
thereto.)
10.3(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 10-
October 11, 1989, by and between the K for fiscal year ended
Company and John Hancock Mutual Life September 30, 1989 (File
Insurance Company No. 1-10042)
10.3(b) Amendment to Note Purchase Exhibit 10(c)(ii) of Form
Agreement, dated as of November 12, 10-K for fiscal year
1991, by and between the Company and ended September 30, 1991
John Hancock Mutual Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated October 11, 1989
10.4(a) Note Purchase Agreement, dated as of Exhibit 10(f)(i) of Form
August 29, 1991, by and between the 10-K for fiscal year
Company and The Variable Annuity ended September 30, 1991
Life Insurance Company (File No. 1-10042)
10.4(b) Amendment to Note Purchase Exhibit 10(f)(ii) of Form
Agreement, dated November 26, 1991, 10-K for fiscal year
by and between the Company and The ended September 30, 1991
Variable Annuity Life Insurance (File No. 1-10042)
Company revising Note Purchase
Agreement dated August 29, 1991
10.5 Note Purchase Agreement, dated as of Exhibit (10)(f) of Form
August 31, 1992, by and between the 10-K for fiscal year
Company and The Variable Annuity ended September 30, 1992
Life Insurance Company (File No. 1-10042)
67 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.6 Note Purchase Agreement, dated Exhibit 10.1 of Form 10-Q
November 14, 1994, by and among the for quarter ended
Company and New York Life Insurance December 31, 1994 (File
Company, New York Life Insurance and No. 1-10042)
Annuity Corporation, The Variable
Annuity Life Insurance Company,
American General Life Insurance
Company, and Merit Life Insurance
Company
10.7(a) Service Agreement No. 50772 between Exhibit 10.6(a) of Form
Greeley Gas Company and Public 10-K for fiscal year
Service Company of Colorado (West ended September 30, 1994
Gas Supply Co. prior to merger with (File No. 1-10042)
PSCO) dated August 1, 1992
10.7(b) Transportation Storage Service Exhibit 10.6(b) of Form
Agreement No. TA-0544 between 10-K for fiscal year
Greeley Gas Company and Williams ended September 30, 1994
Natural Gas Company dated October 1, (File No. 1-10042)
1993
10.7(c) No-Notice Transportation Service Exhibit 10.6(c) of Form
Agreement No. 31013, Rate Schedule 10-K for fiscal year
NNT-1, between Greeley Gas Company ended September 30, 1994
and Colorado Interstate Gas Company, (File No. 1-10042)
as amended, dated October 1, 1993
10.7(d) Firm Transportation Service Exhibit 10.6(d) of Form
Agreement No. 35009, Rate Schedule 10-K for fiscal year
TF2, between Greeley Gas Company and ended September 30, 1994
Colorado Interstate Gas Company, as (File No. 1-10042)
amended, dated October 1, 1993
10.8(a) Amarillo Supply Agreement dated Exhibit 10.7(a) of Form
January 2, 1993 between the Company 10-K for fiscal year
and Mesa Operating Company ended September 30, 1994
(File No. 1-10042)
10.8(b) Interruptible Gas Transportation and Exhibit (10)(g)(iv) of
Sales Agreement dated January 1, Form 10-K for fiscal year
1991, between Mesa Operating Limited ended September 30, 1992
Partnership and Energas Company (File No. 1-10042)
regarding transportation charges to
Mesa
10.8(c) Letter agreement between the Company Exhibit (10)(h)(vi) of
and Mesa Operating Limited Form 10-K for fiscal year
Partnership dated March 21, 1989, ended September 30, 1989
regarding transportation rates (File No. 1-10042)
68 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.9(a) Gas Sales Agreement between the Exhibit (10)(i)(i) of
Company and Westar Transmission Form 10-K for fiscal year
Company dated January 1, 1986, as ended September 30, 1989
amended by Letter Agreement dated (File No. 1-10042)
November 21, 1986, and Agreement
dated December 9, 1988, revising the
pricing formula for city gate sales
10.9(b) Amendment to Gas Sales Agreement, Exhibit (10)(h)(ii) of
dated February 27, 1987, between the Form 10-K for fiscal year
Company and Westar Transmission ended September 30, 1992
Company (File No. 1-10042)
10.9(c) Amendment to Gas Sales Agreement, Exhibit (10)(h)(iii) of
dated January 1, 1988, between Cabot Form 10-K for fiscal year
Gas Supply Corporation ("CGSC") and ended September 30, 1992
the Company (File No. 1-10042)
10.10(a) Gas Transportation Agreement between Exhibit 10(i)(i) of Form
the Company and Westar Transmission 10-K for fiscal year
Company dated January 1, 1986, as ended September 30, 1991
amended by letter agreement dated (File No. 1-10042)
November 21, 1986
10.10(b) Amendment to Gas Transportation Exhibit (10)(i)(ii) of
Agreement, dated January 1, 1988, Form 10-K for fiscal year
between CGSC and the Company ended September 30, 1992
(File No. 1-10042)
10.11 Supplemental Gas Sales Agreement, Exhibit (10)(j) of Form
dated January 1, 1988, between CGSC 10-K for fiscal year
and the Company ended September 30, 1992
(File No. 1-10042)
10.12 Gas Purchase and Sales Agreement, Exhibit (10)(k) of Form
dated January 1, 1988, between Cabot 10-K for fiscal year
Energy Marketing Corporation and ended September 30, 1992
EnerMart, Inc. (File No. 1-10042)
10.13 Gas Sales Agreement, dated January Exhibit (10)(l) of Form
1, 1988, between the Company and Gas 10-K for fiscal year
Marketing, Inc. ("GMI"), relating to ended September 30, 1992
Amarillo supplemental supplies (File No. 1-10042)
10.14 Gas Sales Agreement, dated January Exhibit (10)(m) of Form
1, 1988, between the Company and 10-K for fiscal year
GMI, relating to West Texas ended September 30, 1992
supplemental supplies (File No. 1-10042)
69 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.15(a) Agreement for Natural Gas Service Exhibit 10(o)(ii) of Form
for Distribution and Resale between 10-K for fiscal year
Trans La and LIG dated October 28, ended September 30, 1991
1991 (File No. 1-10042)
10.15(b) Agreement for Intrastate Exhibit 10(o)(iii) of
Transportation of Natural Gas Form 10-K for fiscal year
between Trans La and LIG dated ended September 30, 1991
October 28, 1991 (File No. 1-10042)
10.16(a) Gas Transportation Agreement between Exhibit 10.1 of Form 10-Q
Texas Gas Transmission Corporation for quarter ended
("Texas Gas") and Western Kentucky December 31, 1993 (File
Gas Company, a division of Atmos No. 1-10042)
Energy Corporation ("Western Ken-
tucky") dated November 1, 1993
(Contract no. T3817, zone 2)
10.16(b) Gas Transportation Agreement between Exhibit 10.2 of Form 10-Q
Texas Gas and Western Kentucky dated for quarter ended
November 1, 1993 (Contract no. December 31, 1993 (File
T3770, zone 2) No. 1-10042)
10.16(c) Gas Transportation Agreement between Exhibit 10.3 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended
dated November 1, 1993 (Contract no. December 31, 1993 (File
T3355, zone 3) No. 1-10042)
10.16(d) Gas Transportation Agreement between Exhibit 10.4 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended
dated November 1, 1993 (Contract no. December 31, 1993 (File
T3819, zone 4) No. 1-10042)
10.16(e) Gas Transportation Agreement between Exhibit 10.5 of Form 10-Q
Texas Gas and Western Kentucky Gas for quarter ended
dated November 1, 1993 (Contract no. December 31, 1993 (File
N0210, zone 2, Contract no. N0340, No. 1-10042)
zone 3, Contract no. N0435, zone 4)
10.17(a) Gas Transportation Agreement, Exhibit 10.17(a) of Form
Contract No. 2550, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas ended September 30, 1993
Pipeline Company, a division of (File No. 1-10042)
Tenneco, Inc. ("Tennessee Gas"), and
Western Kentucky, Campbellsville
Service Area
70 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.17(b) Gas Transportation Agreement, Exhibit 10.17(b) of Form
Contract No. 2546, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Danville Service (File No. 1-10042)
Area
10.17(c) Gas Transportation Agreement, Exhibit 10.17(c) of Form
Contract No. 2385, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Greensburg et al (File No. 1-10042)
Service Area
10.17(d) Gas Transportation Agreement, Exhibit 10.17(d) of Form
Contract No. 2551, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Harrodsburg (File No. 1-10042)
Service Area
10.17(e) Gas Transportation Agreement, Exhibit 10.17(e) of Form
Contract No. 2548, dated September 10-K for fiscal year
1, 1993, between Tennessee Gas and ended September 30, 1993
Western Kentucky, Lebanon Service (File No. 1-10042)
Area
10.18(a) *Severance Agreement dated April 1, Exhibit 10.3 of Form 10-Q
1995 between the Company and J. for quarter ended June
Charles 30, 1995 (File No. 1-
Goodman 10042)
10.18(b) *Severance Agreement amended and Exhibit 10(r)(ii) of Form
(i) restated as of August 8, 1991, 10-K for fiscal year
between the Company and Robert F. ended September 30, 1991
Stephens (File No. 1-10042)
10.18(b) *Letter dated May 3, 1995 amending Exhibit 10.1 of Form 10-Q
(ii) the severance agreement between the for quarter ended June
Company and Robert F. Stephens 30, 1995 (File No. 1-
10042)
10.18(c) *Severance Agreement amended and Exhibit 10(r)(iii) of
restated as of August 8, 1991, Form 10-K for fiscal year
between the Company and Don E. James ended September 30, 1991
(File No. 1-10042)
10.18(d) *Severance Agreement amended and Exhibit 10(r)(iv) of Form
restated as of August 8, 1991, 10-K for fiscal year
between the Company and James F. ended September 30, 1991
Purser (File No. 1-10042)
71 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.18(e) *Severance Agreement dated August Exhibit 10.18(g) of Form
11, 1993, between the Company and 10-K for fiscal year
H.F. Harber ended September 30, 1993
(File No. 1-10042)
10.18(f) *Severance Agreement dated May 3, Exhibit 10.2 of Form 10-Q
1995 between the Company and Mary S. for quarter ended June
Lovell 30, 1995 (File No. 1-
10042)
10.18(g) *Severance Agreement dated August
14, 1996, between the Company and
Glen A. Blanscet
10.19(a) *The Atmos Energy Corporation Exhibit (10)(t) of Form
Supplemental Executive Benefits 10-K for fiscal year
Plan, effective October 1, 1987, ended September 30, 1992
Restated as of November 11, 1992 (File No. 1-10042)
10.19(b) *Amendment No. 1 to the Atmos Energy Exhibit 10.3 of Form 10-Q
Corporation Supplemental Executive for quarter ended
Benefits Plan (Restated as of December 31, 1996 (File
November 11, 1992) No. 1-10042)
10.19(c) *Amendment No. 2 to the Atmos Energy Exhibit 10.2 of Form 10-Q
Corporation Supplemental Executive for quarter ended June
Benefits Plan (Restated as of 30, 1996 (File No. 1-
November 11, 1992) 10042)
10.20(a) *Atmos Energy Corporation Restricted Exhibit 10.1 of Form 10-Q
Stock Grant Plan (Restated as of for the quarter ended
November 9, 1994) December 31, 1995 (File
No. 1-10042)
10.20(b) *Amendment No. 1 to the Atmos Energy Exhibit 10.1 of Form 10-Q
Corporation Restricted Stock Grant for the quarter ended
Plan (Restated as of November 9, December 31, 1995 (File
1994) No. 1-10042)
10.21 *Atmos Energy Corporation Annual Exhibit 10(x) of Form 10-
Performance Bonus Plan for Corporate K for fiscal year ended
Officers, restated as of November 8, September 30, 1990 (File
1989 No. 1-10042)
10.22 *Atmos Energy Corporation Mini-Med
Plan, as restated effective July 1,
1996
10.23 *Atmos Energy Corporation Deferred Exhibit 10(x) of Form 10-
Compensation Plan for Outside K for fiscal year ended
Directors September 30, 1992 (File
No. 1-10042)
72 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.24 *Atmos Energy Corporation Retirement Exhibit 10(y) of Form 10-
Plan for Outside Directors K for fiscal year ended
September 30, 1992 (File
No. 1-10042)
10.25(a) *Description of Car Allowance Exhibit 10.26(a) of Form
Payments 10-K for fiscal year
ended September 30, 1993
(File No. 1-10042)
10.25(b) *Description of Financial and Estate Exhibit 10.26(b) of Form
Planning Program 10-K for fiscal year
ended September 30, 1993
(File No. 1-10042)
10.25(c) *Description of Sporting Events Exhibit 10.26(c) of Form
Program 10-K for fiscal year
ended September 30, 1993
(File No. 1-10042)
10.26(a) Seventh Supplemental Indenture, Exhibit 10.1 of Form 10-Q
dated as of October 1, 1983 between for quarter ended June
Greeley Gas Company ("The Greeley 30, 1994 (File No. 1-
Gas Division") and the Central Bank 10042)
of Denver, N.A. ("Central Bank")
10.26(b) Ninth Supplemental Indenture, dated Exhibit 10.2 of Form 10-Q
as of April 1, 1991, between The for quarter ended June
Greeley Gas Division and Central 30, 1994 (File No. 1-
Bank 10042)
10.26(c) Bond Purchase Agreement, dated as of Exhibit 10.3 of Form 10-Q
April 1, 1991, between The Greeley for quarter ended June
Gas Division and Central Bank 30, 1994 (File No. 1-
10042)
10.26(d) Tenth Supplemental Indenture, dated Exhibit 10.4 of Form 10-Q
as of December 1, 1993, between the for quarter ended June
Company and Colorado National Bank, 30, 1994 (File No. 1-
formerly Central Bank 10042)
10.27 *The Atmos Energy Corporation Exhibit 4.5 of Form S-8
Outside Directors Stock-for-Fee Plan for Atmos' Outside
Directors Stock-for-Fee
Plan filed February 14,
1995 (Registration No.
33-57695)
73 <PAGE>
Page Number or
Exhibit Incorporation by
Number Description Reference to
-------- ------------------------------------ -------------------------
10.28(a) Agreement and Plan of Reorganization Exhibit 2.1 of Form S-4
dated July 19, 1996, by and between filed October 4, 1996
the Registrant and United Cities Gas
Company
10.28(b) Amendment No. 1 to Agreement and Exhibit 2.1(a) of Form S-
Plan of Reorganization dated October 4 filed October 4, 1996
3, 1996
11 Not applicable
12 Not applicable
13 Not applicable
16 Not applicable
18 Not applicable
21 Subsidiaries of the registrant
22 Not applicable
23 Consent of independent auditors
24 Power of Attorney Signature page of Form
10-K for fiscal year
ended September 30, 1996
27 Financial Data Schedule for Atmos
for year ended September 30, 1996
28 Not applicable
99.1 Standstill Agreement, dated as of Exhibit 99.1 of Form 8-K
July 13, 1996, between Atmos Energy dated July 19, 1996
Corporation and United Cities Gas
Company
99.2 Agreement between Atmos Energy Exhibit 99.2 of Form 8-K
Corporation, United Cities Gas dated November 2, 1996
Company and Southern Union Company
dated November 2, 1996
--------------------------
* This exhibit constitutes a "management contract or
compensatory plan, contract, or arrangement."
74 <PAGE>
EXHIBIT 21
----------
LIST OF SUBSIDIARIES
OF THE COMPANY
Names Under Which
Name of State of Subsidiary Does
Subsidiary Incorporation Business
----------- ------------- ------------------
Atmos Energy Services, Delaware Atmos Energy
Inc. Services, Inc.
EGASCO, Inc. Texas EGASCO, Inc.
EnerMart, Inc. Delaware EnerMart, Inc.
Enermart Trust Pennsylvania Enermart Trust
(a subsidiary of (a business
EnerMart, Inc.) trust)
Trans Louisiana Louisiana Trans Louisiana
Industrial Gas Industrial Gas
Company, Inc. Company, Inc.
Western Kentucky Gas Delaware Western Kentucky Gas
Resources Company Resources Company
NRG Corp.
Exhibit 23
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in the Registration
Statements (Form S-3 No. 33-58220, Form S-3 No. 33-56915, Form S-
3 No. 333-03339, Form S-4 No. 333-13429, Form S-8 No. 33-57687,
Form S-8 No. 33-68852, and Form S-8 No. 33-57695) of Atmos Energy
Corporation and in the related Prospectuses of our report dated
November 4, 1996, with respect to the consolidated financial
statements of Atmos Energy Corporation included in this Annual
Report (Form 10-K) for the year ended September 30, 1996.
ERNST & YOUNG LLP
Dallas, Texas
November 13, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE
YEAR ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 413,567
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 52,325
<TOTAL-DEFERRED-CHARGES> 35,969
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 501,861
<COMMON> 80
<CAPITAL-SURPLUS-PAID-IN> 111,206
<RETAINED-EARNINGS> 61,012
<TOTAL-COMMON-STOCKHOLDERS-EQ> 172,298
0
0
<LONG-TERM-DEBT-NET> 122,303
<SHORT-TERM-NOTES> 62,800
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 9,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,492
<LEASES-CURRENT> 277
<OTHER-ITEMS-CAPITAL-AND-LIAB> 132,691
<TOT-CAPITALIZATION-AND-LIAB> 501,861
<GROSS-OPERATING-REVENUE> 483,744
<INCOME-TAX-EXPENSE> 13,310
<OTHER-OPERATING-EXPENSES> 431,491
<TOTAL-OPERATING-EXPENSES> 444,801
<OPERATING-INCOME-LOSS> 38,943
<OTHER-INCOME-NET> (296)
<INCOME-BEFORE-INTEREST-EXPEN> 38,647
<TOTAL-INTEREST-EXPENSE> 14,698
<NET-INCOME> 23,949
0
<EARNINGS-AVAILABLE-FOR-COMM> 23,949
<COMMON-STOCK-DIVIDENDS> 15,235
<TOTAL-INTEREST-ON-BONDS> 1,621
<CASH-FLOW-OPERATIONS> 64,498
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
</TABLE>
August 14, 1996
Mr. Glen Blanscet
Atmos Energy Corporation
P.O. Box 650205
Dallas, Texas 75265
Dear Mr. Blanscet:
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.
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<PAGE>
("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,
1997; provided, however, that commencing on January 1, 1998 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.
1.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
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 <PAGE>
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
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<PAGE>
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.
(iii) Notwithstanding any other provision of this
Agreement, the definitions set forth in Sections 2(i) and (ii)
above regarding change in control of the Company and potential <PAGE>
change in control of the Company do not include, and shall not
be deemed to include or be applicable to, the merger, or approval
by the Company s shareholders of the merger, contemplated by the
Agreement and Plan of Reorganization dated July 19, 1996,
executed by and between the Company and United Cities Gas
Company.
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. <PAGE>
(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 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<PAGE>
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 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<PAGE>
travel obligations; 8
(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 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 <PAGE>
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 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.<PAGE>
(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
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<PAGE>
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 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<PAGE>
below; 12
(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").
(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 <PAGE>
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 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<PAGE>
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 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<PAGE>
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
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 <PAGE>
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
(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<PAGE>
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
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 notice to the Company shall be directed to the attention <PAGE>
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.
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 <PAGE>
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
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
Chief Operating Officer
Agreed to this 14th
day of August, 1996. <PAGE>
_/s/Glen A. Blanscet___ 20
Glen A. Blanscet <PAGE>
ATMOS ENERGY CORPORATION
MINI-MED PLAN
(as restated effective July 1, 1995)
ARTICLE I
Purpose
On this _4th__ day of December, 1995, Atmos Energy
Corporation, a corporation organized and existing under the laws
of the State of Texas (hereinafter the "Company"), hereby
restates the Atmos Energy Corporation Mini-Med Plan (hereinafter
the "Plan"), effective as of July 1, 1995.
W I T N E S S E T H:
WHEREAS, the Company wishes to provide certain of its
employees with medical and other benefits in excess of those
provided by other welfare plans; and
WHEREAS, the Company has previously maintained the Atmos
Energy Corporation Mini-Med Plan (as restated effective April 1,
1989), as amended by Amendments Nos. 1-5, to provide these
benefits, and now wishes to restate that plan;
NOW, THEREFORE, the Company hereby agrees as follows:
ARTICLE II
Definitions, Construction and Adoption
2.1 Definitions: Where the following words and phrases
appear in this Plan, they shall have the respective meanings set
forth below, unless their context clearly indicates to the
contrary:
(a) Code: The Internal Revenue Code of 1986, as
amended from time to time. Reference to any
section or subsection of the Code includes<PAGE>
reference to any comparable or succeeding
provisions of any legislation which amends,
supplements or replaces such section or
subsection.
(b) Company: Atmos Energy Corporation, a corporation
organized and existing under the laws of the State
of Texas, or its successor or successors.
(c) Covered Person: Each Employee or former Employee
who is covered by the Group Plan and who is
designated as a participant by the President or
Chief Executive Officer of the Company, and his
dependents who are covered by the Group Plan. An
Employee or former Employee may be designated as a
participant in the Plan or removed from the list
of those so designated at any time by the
President or Chief Executive Officer. A dependent
shall cease to be a Covered Person if he ceases to
be an eligible dependent under, or otherwise
covered by, the Group Plan or if the Employee or
former Employee on whom his eligibility is based
ceases to be a Covered Person. An Employee or
former Employee ceases to be a Covered Person when
he ceases to be covered by the Group Plan or is
removed from the list of Employees designated as
participants in the Plan.
(d) Effective Date: July 1, 1995.
(e) Employee: Any person who is receiving
remuneration for personal services rendered to an
Employer in a capacity other than that of an
independent contractor.
(f) Employer or Participating Employer: The Company
and any other affiliate of the Company which
adopts this Plan in accordance with the provisions
of Section 2.3 hereof.
(g) ERISA: Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended
from time to time.
(h) Group Plan: The Atmos Energy Corporation Group
Medical/Dental Plan.
(i) Plan: The Atmos Energy Corporation Mini-Med Plan,
as set forth herein and amended from time to time.
(j) Plan Administrator: The Vice President of Human
Resources of the Company.
-2-<PAGE>
(k) Plan Year: The twelve (12)-month period beginning
on April 1 and ending on March 31.
2.2 Construction: The masculine gender, where appearing in
the Plan, shall be deemed to include the feminine gender, and the
singular shall be deemed to include the plural, unless the
context clearly indicates to the contrary. The words "hereof",
"herein," "hereunder" and other similar compounds of the word
"here" shall mean and refer to the entire Plan and not to any
particular provision or Section.
2.3 Adoption By Others: Any affiliate of the Company may
adopt this Plan and thereby become a Participating Employer;
provided, however, that the President or Chief Executive Officer
of the Company approves such adoption. The Company's
administrative powers under, and control of, the Plan shall not
be diminished in any way by the adoption of the Plan by any other
Participating Employer. Each Employer shall be responsible for
making payments on behalf of its own Covered Persons, and no
other Employer shall have such responsibility.
ARTICLE III
Eligibility and Benefits
3.1 Benefits: (a) The Plan will pay the expenses incurred
by a Covered Person for medical and dental services and supplies
described in Section 3.1(b) below to the extent that such
expenses are not paid under the Group Plan, other welfare plans
or programs of any other employer or organization, individual
health insurance policies, Workers' Compensation or, to the
-3-<PAGE>
extent permitted by law, Medicare. The Plan is secondary payor
to any other such plans.
(b) Specific expenses that are reimbursable under the Plan
are:
(i) Amounts not reimbursed under the Group Plan
constituting payment by the Covered Person of a
deductible or coinsurance payment and amounts in
excess of any annual or plan maximum benefit
payable under the Group Plan (regardless of whether
such maximum benefit is stated in terms of a dollar
maximum or a limitation on the frequency of
service) or usual and customary charges;
(ii) Reasonable transportation charges for the patient
and one family member travelling together to and
from the nearest place for specialized treatment of
an illness covered under the Coverage Provisions of
the Group Plan or in this Section 3.1(b), which
specialized treatment is not available locally.
Covered expenses include lodging and meals while in
transit to obtain such specialized treatment.
Charges will be considered only for the required
length of specialized treatment. If a personal
vehicle is used for transportation, reimbursement
will be for actual fuel cost which would be
incurred in taking the most direct route to obtain
the specialized treatment;
(iii) Expenses for services and supplies related to pre-
existing conditions that would have been covered
under the Group Plan or this Section 3.1(b) had
such expenses not been related to any pre-existing
conditions;
(iv) Private room and board charges relating to an
illness covered under the Coverage Provisions of
the Group Plan or in this Section 3.1(b);
(v) Private duty nursing expenses relating to an
illness covered under the Coverage Provisions of
the Group Plan or in this Section 3.1(b);
(vi) Routine medical examinations;
(vii) Routine medical care of a newborn infant;
-4-<PAGE>
(viii) Medical and dental care, treatment, services or
supplies in an extended care facility, hospice,
convalescent nursing home, or through home health
care when due to an illness or injury covered under
the Coverage Provisions of the Group Plan or in
this Section 3.1(b);
(ix) Orthopedic shoes or other supportive devices for
the feet;
(x) Eye exams, eye refractions, eye glasses, and
contact lenses;
(xi) Hearing exams, hearing aids, and other special
equipment for the hearing impaired;
(xii) Immunizations;
(xiii) Rental or purchase, as determined by the Plan
Administrator in his sole discretion, of
rehabilitative equipment if prescribed by a
licensed physician for rehabilitative purposes
subsequent to an illness or injury covered under
the Coverage Provisions of the Group Plan or in
this Section 3.1(b);
(xiv) Service and supplies for the administration of
intravenous anesthesia associated with dental
services;
(xv) Dental sealants and plaque control programs; and
(xvi) Charges for facings, veneers, or similar material
placed on molar crowns or pontics.
(c) The Plan will not cover expenses unless they meet the
definition of a covered expense (medical or dental) under the
Group Plan or are specifically listed above. Except as
specifically set out above, the limitations and exclusions set
forth in the Group Plan shall also apply to this Plan.
3.2 Maximum Benefit: The maximum annual benefit for each
Covered Person is $15,000 in any calendar year. The maximum
benefit while insured under the Plan is $100,000 per Covered
Person. Any exception to these maximum benefit levels requires
the President's or Chief Executive Officer's approval.
-5-<PAGE>
3.3 Eligibility: Individuals are eligible for
reimbursement under the Plan only for expenses incurred while
they are Covered Persons.
ARTICLE IV
Contributions
4.1 Employer Contributions: Each Employer shall be
responsible for insuring that payments to its Covered Persons are
made under the Plan and shall make funds available to the Plan as
necessary to permit the Plan Administrator to cause payments to
be made to Covered Persons as specified in the Plan. The Plan
Administrator shall cause reimbursements under the Plan to be
made as soon as administratively feasible after the amounts
claimed are determined to be payable under the Plan.
4.2 Employee Contributions: Employees shall not be
required to pay any amount for coverage under the Plan.
ARTICLE V
Administration of the Plan
5.1 Administrator: (a) The Plan will be administered by
the Plan Administrator.
(b) All usual and reasonable expenses of the Plan
Administrator (including the premiums payable with respect to any
bond under which the Plan Administrator may be required by law to
serve) shall be paid by the Employers. The Plan Administrator
shall not receive extra compensation for his services for the
Plan.
-6-<PAGE>
5.2 Claims Procedure: The right of any person to a benefit
shall be determined in accordance with this Plan. Notice of
denial of a claim for benefits under the Plan shall be stated in
writing and delivered or mailed to the Covered Person. Such
notice shall set forth the specific reasons for the denial and be
written in a manner that may be understood without legal or
actuarial counsel. A Covered Person whose claim for benefits has
been denied shall be given a reasonable opportunity for a review
of the decision denying the claim. The denial of a claim for
benefits and/or the review of the decision denying such claim
shall be the sole responsibility of the Plan Administrator and
the Employee, his dependents and the Employer shall be bound by
any such determinations. In the event that a determination must
be made with regard to any other plan or program in order to
resolve a claim under this Plan, the administrative powers and
duties with regard to that determination, or any review thereof,
shall be as specified in such other plan or program, and such
determination shall be binding on the Plan Administrator in
resolving the claim under this Plan.
5.3 Records and Reports: The Plan Administrator shall
exercise such authority and responsibility as he deems
appropriate in order to comply with the Code, ERISA and any
governmental regulations issued thereunder relating to annual or
other reports required by the Department of the Treasury or the
Department of Labor, or to produce, maintain or cause to be
produced or maintained any other records or reports required by
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law to be made.
5.4 Other Administrative Powers and Duties: The Plan
Administrator shall have such duties and powers as may be
necessary to discharge his duties hereunder, including, but not
by way of limitation, the following:
(a) to inform Employees who are Covered Persons of
procedures to be followed in filing applications
for benefits;
(b) to prepare and distribute to Employees who are
Covered Persons in such manner as the Plan
Administrator determines to be required by law or
otherwise appropriate, information explaining the
Plan;
(c) to receive from the Employers and the Covered
Persons such information as shall be necessary for
the proper administration of the Plan;
(d) to furnish each Covered Person, upon request, such
annual reports with respect to the administration
of the Plan as are reasonable and appropriate; and
(e) to appoint or employ, directly or indirectly,
individuals to assist in the administration of the
Plan and any other agents it deems advisable,
including but not limited to a third party
administrator and any legal or actuarial counsel.
The Plan Administrator shall have no power to add to, subtract
from, or modify any of the terms of the Plan. Determination of
all matters regarding Plan interpretation and the manner and time
of payment of any benefits hereunder shall be within the
discretion of the Plan Administrator and his determinations with
respect to such matters shall be conclusive on all parties.
Notwithstanding the preceding sentence, determination of all
matters regarding the interpretation of any plan or program to
which the Plan is secondarily liable, or the eligibility, amount,
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manner and time of payment of any benefits thereunder, and the
review of any such determination, shall be within the discretion
of the individual or entity with responsibility for making such
determinations under that plan or program, and such
determinations shall be binding on the Plan Administrator.
5.5 Rules and Decisions: The Plan Administrator shall have
the authority to make such rules and regulations and to take such
action as may be necessary to carry out the provisions of the
Plan. The Plan Administrator may delegate any part of his
authority and duties as he deems expedient. All rules and
decisions of the Plan Administrator shall be uniformly and
consistently applied to all Covered Persons in similar
circumstances. When making a decision, the Plan Administrator
shall be entitled to rely upon information furnished by a Covered
Person, the Employers, the legal counsel of an Employer, and/or
the party responsible for making binding determinations under any
other plan or program to which the Plan is secondarily liable.
5.6 Application and Forms for Benefits: The Plan
Administrator, either directly or indirectly, may require a
Covered Person to complete and file an application for benefits
and other forms as deemed appropriate by the Plan Administrator,
and to furnish all pertinent information requested. The Plan
Administrator may rely upon all information so furnished him,
including the Covered Person's current mailing address. All
claims under the Plan should be filed as directed by the Plan
Administrator using the claim forms provided. The only expense
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which need not be filed as directed by the Plan Administrator is
the fee for the required annual Executive Physical Examination,
which is to be billed directly to the Human Resources Department
of the Company.
5.7 Indemnification: The Employers shall indemnify and
hold the Plan Administrator harmless against all loss, cost,
expenses or damages, including attorney's fees and court costs:
(a) occasioned by an act or omission to act in connection with
the responsibility of the Plan Administrator for the
administration of this Plan; or (b) arising under or by virtue of
the provisions of Part 4, Subtitle B, Title I of ERISA; provided,
however, that the Employers shall not indemnify and hold harmless
the Plan Administrator against any loss, cost, expense or damages
occasioned by his gross negligence or willful misconduct.
ARTICLE VI
Amendment or Termination
6.1 Amendment: The Plan may be amended by the Company at
any time and from time to time.
6.2 Termination: The Plan is intended at this time to be
permanent. However, the Plan may be terminated at any time by
the Company.
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ARTICLE VII
Miscellaneous
7.1 Benefits and/or Premiums Payable Solely From General
Assets: Nothing herein shall be construed to require the Company
or the Plan Administrator to maintain any fund or segregate any
amount for the benefit of any Covered Person, and no Covered
Person or other person shall have any claim against, right to, or
security or other interest in, any fund, account or asset of the
Company from which any premium or benefit payment may be made.
7.2 Non-Assignability of Rights: The right of any Covered
Person to receive any benefit or payment under the Plan is not in
any way subject to the debts or other obligations of the Covered
Person or any other person and may not be voluntarily or
involuntarily sold, transferred or assigned, and any attempt to
cause such right to be so subjected, sold, transferred, assigned
or otherwise alienated shall be null and void.
7.3 No Guarantee of Tax Consequences: Neither the Plan
Administrator nor the Company makes any commitment or guarantee
that any amounts paid to or for a Covered Person under this Plan
will be excludible from the Covered Person's gross income for
federal or state income tax purposes, or that any other federal
or state tax treatment will apply to or be available to any
Covered Person.
7.4 Applicable Law: This Plan, as amended from time to
time, shall be administered, construed and enforced according to
federal law, and, to the extent applicable, the laws of the State
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of Texas, and any related litigation shall be prosecuted in the
federal or state courts in Texas.
7.5 Employment Rights: The employment rights of a Covered
Person shall not be deemed to be enlarged or diminished by reason
of the establishment of this Plan, nor shall any provision of
this Plan be deemed to confer any right upon any Covered Person
to be retained in the service of any Employer.
7.6 Terms Legally Enforceable: The terms of the Plan,
including those relating to coverage and benefits, are legally
enforceable.
7.7 Exclusive Benefit: The Plan shall be maintained
exclusively for the benefit of the Employees and former Employees
of the Employers and their dependents.
7.8 Health Care Continuation Requirements: Covered Persons
shall be entitled to elect continuation of medical care coverage
under the Plan as required by Section 4980B of the Code.
IN WITNESS WHEREOF, and as conclusive evidence of the
adoption of the above restatement of the Atmos Energy Corporation
Mini-Med Plan, the Company has caused its corporate seal to be
affixed hereto and these presents to be duly executed in its name
and on its behalf by its proper officers thereunto authorized
this _4th_ day of December, 1995, to be effective as of July 1,
1995.
ATMOS ENERGY CORPORATION
By:_/s/Robert F. Stephens________
Robert F. Stephens,
President and Chief Operating
Officer
