UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1800 Three Lincoln Centre
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
(214) 934-9227
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X .No .
Number of shares outstanding of each of the issuer's classes of
common stock, as of July 30, 1996.
Class Shares Outstanding
------------ ------------------
No Par Value 15,990,905
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, September 30,
1996 1995
------------ ------------
ASSETS (Unaudited)
Property, plant and equipment $650,995 $595,359
Less accum. depreciation and amort. 252,300 232,107
-------- --------
Net property, plant and equipment 398,695 363,252
Current assets
Cash and cash equivalents 2,153 2,294
Accounts receivable, net 34,027 25,690
Inventories 7,410 6,747
Gas stored underground 8,307 10,758
Prepayments 2,175 2,747
-------- --------
Total current assets 54,072 48,236
Deferred charges and other assets 35,518 34,295
-------- --------
$488,285 $445,783
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock outstanding:
15,982,304 shares at 6/30/96 and
15,519,112 shares at 9/30/95 $ 80 $ 78
Additional paid-in capital 110,139 106,496
Retained earnings 68,837 51,704
-------- --------
Total shareholders' equity 179,056 158,278
Long-term debt 125,303 131,303
-------- --------
Total capitalization 304,359 289,581
Current liabilities
Current maturities of long-term debt 6,000 7,000
Notes payable to banks 36,100 33,500
Accounts payable 30,196 24,945
Taxes payable 11,137 1,926
Customers' deposits 9,758 9,343
Other current liabilities 16,287 10,641
-------- --------
Total current liabilities 109,478 87,355
Deferred income taxes 35,427 33,120
Deferred credits and other liabilities 39,021 35,727
-------- --------
$488,285 $445,783
======== ========
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
June 30,
-------------------
1996 1995
------- -------
Operating revenues $93,571 $84,685
Purchased gas cost 59,795 50,616
------- -------
Gross profit 33,776 34,069
Operating expenses
Operation 19,354 20,976
Maintenance 1,013 1,072
Depreciation and amortization 5,456 5,177
Taxes, other than income 3,742 3,825
Income taxes 152 32
------- -------
Total operating expenses 29,717 31,082
------- -------
Operating income 4,059 2,987
Other income (expense) (303) 473
Interest charges 3,440 3,378
------- -------
Net income $ 316 $ 82
======= =======
Net income per share $ .02 $ .01
======= =======
Cash dividends per share $ .24 $ .23
======= =======
Average shares outstanding 15,965 15,450
======= =======
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Nine months ended
June 30,
--------------------
1996 1995
-------- --------
Operating revenues $415,143 $359,827
Purchased gas cost 265,248 222,699
-------- --------
Gross profit 149,895 137,128
Operating expenses
Operation 62,022 63,119
Maintenance 3,154 3,224
Depreciation and amortization 16,382 15,500
Taxes, other than income 13,446 13,290
Income taxes 15,715 11,533
-------- --------
Total operating expenses 110,719 106,666
-------- --------
Operating income 39,176 30,462
Other income (expense) (288) 387
Interest charges 10,956 10,346
-------- --------
Net income $ 27,932 $ 20,503
======== ========
Net income per share $ 1.76 $ 1.33
======== ========
Cash dividends per share $ .72 $ .69
======== ========
Average shares outstanding 15,855 15,386
======== ========
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Twelve months ended
June 30,
---------------------
1996 1995
-------- --------
Operating revenues $491,136 $437,177
Purchased gas cost 311,359 271,389
-------- --------
Gross profit 179,777 165,788
Operating expenses
Operation 82,334 87,436
Maintenance 4,206 4,482
Depreciation and amortization 21,623 20,061
Taxes, other than income 16,767 16,078
Income taxes 13,756 8,883
-------- --------
Total operating expenses 138,686 136,940
-------- --------
Operating income 41,091 28,848
Other income (expense) (458) 602
Interest charges 14,331 13,374
-------- --------
Net income $ 26,302 $ 16,076
======== ========
Net income per share $ 1.67 $ 1.05
======== ========
Cash dividends per share $ .95 $ .91
======== ========
Average shares outstanding 15,767 15,358
======== ========
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended
June 30,
--------------------
1996 1995
-------- --------
Cash Flows From Operating Activities
Net income $ 27,932 $ 20,503
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 16,382 15,500
Charged to other accounts 2,705 2,732
Deferred income taxes (benefit) 2,307 (1,179)
Other 219 1,838
-------- --------
49,545 39,394
Net change in operating assets and
liabilities 16,398 28,597
-------- --------
Net cash provided by operating
activities 65,943 67,991
Cash Flows From Investing Activities
Capital expenditures (57,874) (44,796)
Retirements of property, plant and
equipment 3,344 2,519
-------- --------
Net cash used in investing activities (54,530) (42,277)
Cash Flows From Financing Activities
Net increase (decrease) in notes
payable to banks 2,600 (54,600)
Issuance of long-term debt - 40,000
Cash dividends paid (11,393) (10,625)
Repayment of long-term debt (7,000) (4,000)
Issuance of common stock 4,239 3,166
-------- --------
Net cash used in financing activities (11,554) (26,059)
-------- --------
Net decrease in cash and cash equivalents (141) (345)
Cash and cash equivalents at beginning
of period 2,294 2,766
-------- --------
Cash and cash equivalents at end
of period $ 2,153 $ 2,421
======== ========
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1996
1. Unaudited interim financial information
In the opinion of management, all material adjustments necessary
for a fair presentation have been made to the unaudited interim
period financial statements. Such adjustments consisted only of
normal recurring accruals. Because of seasonal and other
factors, the results of operations for the nine month period
ended June 30, 1996 are not indicative of expected results of
operations for the year ending September 30, 1996. These interim
financial statements and notes are condensed as permitted by the
instructions to Form 10-Q, and should be read in conjunction with
the audited consolidated financial statements in the 1995 annual
report to shareholders of Atmos Energy Corporation ("Atmos" or
the "Company"). The condensed consolidated balance sheet of
Atmos Energy Corporation, as of June 30, 1996, and the related
condensed consolidated statements of income for the three-month,
nine-month, and twelve-month periods ended June 30, 1996 and
1995, and the condensed consolidated statements of cash flows for
the nine-month periods ended June 30, 1996 and 1995, included
herein have been subjected to a review by Ernst & Young LLP, the
Company's independent accountants, whose report is included
herein.
Common stock - As of June 30, 1996, the Company had 75,000,000
shares of common stock, no par value (stated at $.005 per share),
authorized and 15,982,304 shares outstanding.
2. Business combination activity
Agreement to acquire United Cities Gas Company
In July 1996, the Company announced that it had reached a
definitive agreement to acquire by merger 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 will be accounted for by the pooling of interests
method. The transaction is subject to approval by the United
Cities and Atmos shareholders. Approval by appropriate
regulatory bodies will also be required among other conditions
precedent to closing. The closing of the transaction is not
expected to be in the Company's 1996 fiscal year.
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
about 25,000 customers in the states of Tennessee, Virginia and
North Carolina. United Cities' assets consist 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 Company, Trans
Louisiana Gas Company, Western Kentucky Gas Company, and Greeley
Gas Company 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
owned 6.5% of United Cities' outstanding common stock. Southern
Union stated in its press releases related to the announcement
that it opposes the merger of United Cities and Atmos and may
provide alternatives to the merger. On August 6, 1996, United
Cities and Atmos filed a joint complaint with the Missouri Public
Service Commission against Southern Union alleging that Southern
Union's purchases of United Cities common stock violated a
Missouri statute which requires prior approval of the Missouri
Public Service Commission for any public utility in Missouri to
acquire the stock of another public utility in Missouri. The
complaint asks for a declaration, among other things, that the
purchases of United Cities' stock by Southern Union be declared
null and void and that Southern Union be prohibited from further
purchases of United Cities' stock.
Acquisition of Oceana Heights Gas Company
In November 1995, Atmos acquired by means of a merger, all of the
assets and liabilities of Oceana Heights Gas Company ("Oceana")
of Thibodaux, Louisiana. The transaction was accounted for as a
pooling of interests. The outstanding shares of Oceana capital
stock were converted into 313,411 shares of Atmos common stock
having a market value of $6.4 million. Subsequent to the merger,
the business of Oceana has been operated through the Company's
Trans Louisiana Gas Company division ("Trans La Division"). The
acquisition increased the Trans La Division's customer base by
approximately 9,200 customers, or 13 percent, to over 79,000
customers. Although significant for the Trans La Division's
operations, the acquisition did not have a material impact on the
Company's financial condition and results of operations. The
acquisition transaction and Oceana's operating results for the
nine months ended June 30, 1996 are reflected in the Company's
financial statements for the nine months ended June 30, 1996.
3. 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.
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 in the nine months ended June 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 was named 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 claimed 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 recently informed the Company that, based upon a recent
Colorado Court ruling, it no longer believes that the punitive
damages awarded against the Company can be covered by the
Company's insurance policy. The Company is currently reviewing
the position of the insurance carrier with respect to coverage of
punitive damages.
From time to time, claims are made and lawsuits are filed against
the Company arising out of the ordinary business of the Company.
In the opinion of the Company's management, liabilities, if any,
arising from these actions are either covered by insurance, ade
quately reserved for by the Company or would not have a material
adverse effect on the financial condition of the Company.
4. Long-term and short-term debt
During the nine months ended June 30, 1996, the Company paid
installments due of $2,000,000 on its 9.75% Senior Notes,
$3,000,000 on its 9.76% Senior Notes and $2,000,000 on its 11.2%
Senior Notes.
At June 30, 1996, the Company had committed, short-term,
unsecured bank credit facilities totaling $90,000,000, of which
$80,000,000 was unused. The Company also had aggregate
uncommitted lines of $150,000,000, of which $123,900,000 was
unused.
5. Statements of cash flows
Supplemental disclosures of cash flow information for the nine
month periods ended June 30, 1996 and 1995 are presented below.
Nine months ended
June 30,
-------------------
1996 1995
------- -------
(In thousands)
Cash paid for
Interest $11,477 $10,983
Income taxes 3,840 7,184
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Atmos Energy Corporation
We have reviewed the accompanying condensed consolidated balance
sheet of Atmos Energy Corporation as of June 30, 1996, and the
related condensed consolidated statements of income for the three-
month, nine-month, and twelve-month periods ended June 30, 1996
and 1995 and the statements of cash flows for the nine-month
periods ended June 30, 1996 and 1995. These financial statements
are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Atmos
Energy Corporation as of September 30, 1995, and the related
consolidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein) and in our
report dated November 8, 1995, we expressed an unqualified
opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of September 30, 1995, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
August 7, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company distributes and sells natural gas to residential,
commercial, industrial and agricultural customers in six states.
Such business is subject to regulation by state and/or local
authorities in each of the states in which the Company operates.
In addition, the Company's business is affected by seasonal
weather patterns, competition within the energy industry, and
economic conditions in the areas that the Company serves.
Revenues and sales volume statistics for the three-month, nine-
month, and twelve-month periods ended June 30, 1996 and 1995
appear on pages 19-21. Average meters in service are as follows:
Nine months ended
June 30,
-------------------
1996 1995
------- -------
Average Meters in Service
Residential 586,888 571,219
Commercial 61,385 60,383
Industrial (including agricultural) 18,985 19,432
Public authority and other 5,044 4,972
------- -------
Total 672,302 656,006
======= =======
Agreement to Acquire United Cities Gas Company through Merger
In July 1996, the Company announced that it has reached a
definitive agreement to acquire by merger United Cities Gas
Company ("United Cities") of Brentwood, Tennessee by means of a
tax-free reorganization. Under the terms of the agreement, one
share of Atmos stock will be exchanged for each share of United
Cities stock. 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. On
June 30, 1996, there were 15,982,304 shares of Atmos common stock
outstanding and 13,102,913 common shares of United Cities
outstanding. The transaction will be accounted for as a pooling
of interests.
The Board of Directors of the combined company will consist of
all 11 current members of the Atmos board and four current
members from the United Cities board. Charles K. Vaughan will
remain chairman of the board of Atmos. Gene C. Koonce, currently
United Cities chairman of the board, president and chief
executive officer, will become vice chairman of the Atmos board.
United Cities, a publicly held company, provides natural gas
service to approximately 310,000 customers in Tennessee,
Illinois, Missouri, Kansas, Iowa, Georgia, South Carolina and
Virginia, and has gas storage facilities in Kentucky and Kansas.
United Cities also serves about 25,000 propane customers in
Tennessee, North Carolina and Virginia.
The transaction is subject to the completion of a series of
significant events which include approval by the United Cities
shareholders, approval by the Atmos shareholders and approval by
appropriate regulatory bodies. For further information, please
refer to Note 2 in the notes to consolidated financial
statements.
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 ("Energas Division"). The proposed rates would
produce an overall increase of approximately 7.6% of current
annual revenue generated from approximately 200,000 customers in
Texas. Pending hearings and decisions by the cities, the cities
suspended the effective date of the increase for a period not to
exceed October 3, 1996. If a final determination has not been
made by the cities by that date, the rate increase could be made
effective.
In February 1995, the Company filed with the Kentucky Commission
for a rate increase for its Western Kentucky Gas Company
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 1992, the Louisiana Public Service Commission
("Louisiana Commission") issued a rate order to the Company's
Trans La Division which included a rate stabilization clause
("RSC") for three years that 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%. An 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 continue
the RSC.
Also during the quarter, 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.
FINANCIAL CONDITION
For the nine months ended June 30, 1996, net cash provided by
operating activities totaled $65.9 million compared with $68.0
million for the nine months ended June 30, 1995. The net change
in operating assets and liabilities was $16.4 million for the
nine months ended June 30, 1996 compared with $28.6 million for
the nine months ended June 30, 1995. Due to the seasonal nature
of the natural gas distribution business, large swings in
accounts receivable, accounts payable and inventories of gas in
underground storage will occur when entering and leaving the
winter or heating season.
Major cash flows used for investing activities for the nine
months ended June 30, 1996 included capital expenditures of $57.9
million compared with $44.8 million for the nine months ended
June 30, 1995. The capital expenditures budget for fiscal year
1996 is currently $67.6 million, as compared with actual capital
expenditures of $62.9 million in fiscal 1995. Capital projects
planned for 1996 include major expenditures for mains, services,
meters, vehicles, and computer equipment. These expenditures
will be financed from internally generated funds and financing
activities.
For the nine months ended June 30, 1996, cash used in financing
activities amounted to $11.6 million compared with $26.1 million
for the nine months ended June 30, 1995. During the nine months
ended June 30, 1996, notes payable to banks increased $2.6
million, as compared with a decrease of $54.6 million for the
nine months ended June 30, 1995. Payments of long-term debt
increased $3.0 million to $7.0 million for the nine months ended
June 30, 1996. Payments of long-term debt consisted of a $2.0
million installment on the Company's 9.75% Senior Notes due in
1996, a $3.0 million installment on its 9.76% Senior Notes and a
$2.0 million installment on its 11.2% Senior Notes. The Company
paid $11.4 million in cash dividends during the nine months ended
June 30, 1996, compared with $10.6 million in cash dividends paid
during the nine months ended June 30, 1995. This reflects a $.01
per share increase in the quarterly dividend rate and an increase
in the number of shares outstanding. In the nine month period
ended June 30, 1996, the Company issued 463,192 shares of stock,
including 313,411 for the Oceana Heights acquisition and the
remainder under the ESOP, the Restricted Stock Grant Plan and the
Directors' Stock for Fee Plan compared with 183,749 shares issued
during the nine months ended June 30, 1995.
The Company believes that internally generated funds, its short-
term credit facilities and access to the debt and equity capital
markets will provide necessary working capital and liquidity for
capital expenditures and other cash needs for the remainder of
fiscal 1996. At June 30, 1996 the Company had $90.0 million of
committed, short-term credit facilities, $80.0 million of which
was available for additional borrowing. The committed lines are
renewed or renegotiated at least annually. At June 30, 1996, the
Company also had $150.0 million of uncommitted short-term lines,
$123.9 million of which was unused.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996, COMPARED WITH THREE MONTHS
ENDED JUNE 30, 1995
Operating revenues increased by approximately 10% to $93.6
million for the three months ended June 30, 1996 from $84.7
million for the three months ended June 30, 1995. The primary
factors contributing to the increase in operating revenues were
increased sales to industrial (including agricultural) customers
and higher cost of gas, which is reflected in sales price.
During the quarter ended June 30, 1996, temperatures averaged 20%
warmer than in the corresponding quarter of the prior year, and
11% warmer than normal. However, the revenue impact of warmer
weather in the quarter ended June 30, 1996 was more than offset
by increased industrial (including agricultural) sales and higher
gas costs. The total volume of gas sold and transported for the
three months ended June 30, 1996 was 29.2 billion cubic feet
("Bcf") compared with 27.7 Bcf for the three months ended June
30, 1995. The primary reason for the increased volumes is
increased sales to industrial (including agricultural) customers
as noted above. The average sales price per Mcf sold increased
$.03 to $3.93 as a result of an increase in the average cost of
gas, the mix of sales and rate increases in Kentucky and
Louisiana.
Gross profit decreased by approximately 1% to $33.8 million for
the three months ended June 30, 1996, from $34.1 million for the
three months ended June 30, 1995. Contributing to the decreased
margins was an increase in sales to lower margin industrial
(including agricultural) customers. Operating expenses,
excluding income taxes, decreased 5% from $31.1 million for the
three months ended June 30, 1995 to $29.6 million for the three
months ended June 30, 1996 primarily due to lower employee
benefit costs. Operating income increased for the three months
ended June 30, 1996 to $4.1 million from $3.0 million for the
three months ended June 30, 1995. The increase in operating
income primarily resulted from decreased operating expenses.
Net income increased from $.1 million for the three months ended
June 30, 1995 to $.3 million for the three months ended June 30,
1996. This increase in net income primarily resulted from the
increase in operating income.
NINE MONTHS ENDED JUNE 30, 1996, COMPARED WITH NINE MONTHS ENDED
JUNE 30, 1995
Operating revenues increased by approximately 15% to $415.1
million for the nine months ended June 30, 1996 from $359.8
million for the nine months ended June 30, 1995. Factors
contributing to the higher operating revenues were increased
sales volumes due to colder weather, increased demand in the
industrial (including agricultural) market and higher average
cost of gas, which is reflected in the sales price. Weather in
the Company's service areas was 2% warmer than normal but 10%
colder than weather in the corresponding nine-month period of the
prior fiscal year. Volumes sold to industrial (including
agricultural) customers increased from the corresponding period
of the prior year by 19%. The average sales price per Mcf
increased from $3.87 for the nine months ended June 30, 1995 to
$3.98 for the nine months ended June 30, 1996. The increase in
the average sales price reflects increased cost of gas and rate
increases. The average cost of gas per Mcf sold increased from
$2.49 for the nine months ended June 30, 1995 to $2.61 for the
nine months ended June 30, 1996.
Gross profit increased to $149.9 million for the nine months
ended June 30, 1996, compared with $137.1 million for the nine
months ended June 30, 1995. The increase in gross profit was due
to a 14% increase in sales volumes which resulted from colder
weather than experienced in the nine months ended June 30, 1995
and rate increases implemented in Texas, Louisiana, and Kentucky
subsequent to October 1, 1994. Operating expenses, excluding
income taxes, decreased $.1 million to $95.0 million for the nine
months ended June 30, 1996, compared with the nine months ended
June 30, 1995.
Operating income increased for the nine months ended June 30,
1996 to $39.2 million from $30.5 million for the nine months
ended June 30, 1995. The increase in operating income primarily
resulted from increased gross profit.
Interest expense increased approximately $0.6 million or 6% for
the nine months ended June 30, 1996 compared with the nine months
ended June 30, 1995.
Net income increased for the nine months ended June 30, 1996, by
approximately 36% to $27.9 million from $20.5 million for the
nine months ended June 30, 1995. The increase in net income
resulted from the increase in operating income. Earnings per
share increased to $1.76 for the nine months ended June 30, 1996
from $1.33 for the nine months ended June 30, 1995, while average
shares outstanding increased approximately 3%. Dividends per
share increased 4% to $.72 for the nine months ended June 30,
1996.
TWELVE MONTHS ENDED JUNE 30, 1996, COMPARED WITH TWELVE MONTHS
ENDED JUNE 30, 1995
Operating revenues increased by approximately 12% to $491.1
million for the 12 months ended June 30, 1996 from $437.2 million
for the 12 months ended June 30, 1995. The increased revenues
for the 12 months ended June 30, 1996 were caused by increased
sales volumes and higher gas costs as a result of 11% colder
winter weather and increased demand. Sales and transportation
volumes increased to 147.6 Bcf for the 12 months ended June 30,
1996 compared with 143.3 Bcf for the corresponding prior 12-month
period. The average sales price per Mcf increased from $3.87 to
$3.93. The average cost of gas per Mcf sold increased from $2.50
to $2.56 for the 12 months ended June 30, 1996. The average
sales price reflects the increased cost of gas and rate increases
implemented in Texas, Louisiana, and Kentucky subsequent to
July 1, 1994.
Gross profit increased by approximately 8% to $179.8 million for
the 12 months ended June 30, 1996, from $165.8 million for the 12
months ended June 30, 1995. Operating expenses, excluding income
taxes, decreased from $128.1 million for the 12 months ended June
30, 1995, to $124.9 million for the 12 months ended June 30,
1996. Factors contributing to the decrease in operating expenses
included decreases in operation and maintenance expenses. Income
taxes increased $4.9 million for the 12 months ended June 30,
1996, as compared with the 12 months ended June 30, 1995.
Operating income increased in the 12 months ended June 30, 1996
by approximately 42% to $41.1 million. The primary reason for
the increase in operating income was the increase in gross profit
discussed above.
Net income for the 12 months ended June 30, 1996 was $26.3
million compared with $16.1 million for the 12 months ended June
30, 1995. The increase in net income resulted primarily from the
increase in operating income discussed above. Earnings per share
increased by 59% to $1.67. Average shares outstanding increased
approximately 3% as compared with the prior year. Dividends per
share increased approximately 4% to $.95.
"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-Q contain both historical and forward-looking
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.
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Three months ended June 30,
1996 1995
------- -------
Sales Volumes -- MMcf (1)
Residential 6,568 6,885
Commercial 2,882 3,037
Industrial (including agricultural) 12,870 10,143
Public authority and other 549 582
------- -------
Total 22,869 20,647
Transportation Volumes -- MMcf (1) 6,335 7,026
------- -------
Total Volumes Handled - MMcf (1) 29,204 27,673
======= =======
Operating Revenues (000's)
Gas Sales Revenues
Residential $38,050 $35,552
Commercial 13,648 13,373
Industrial (including agricultural) 35,492 29,188
Public authority and other 2,781 2,433
------- --------
Total Gas Revenues 89,971 80,546
Transportation Revenues 2,169 2,773
Other Revenues 1,431 1,366
------- --------
Total Operating Revenues $93,571 $84,685
======= ========
Average Gas Sales Revenues per Mcf $ 3.93 $ 3.90
Average Transportation Revenue per Mcf $ .34 $ .39
Cost of Gas per Mcf Sold $ 2.61 $ 2.45
HEATING DEGREE DAYS
Weather Three months ended June 30,
Service Sensitive ---------------------------
Area Customers % 1996 1995 Normal
- -------------- ----------- ---- ---- ------
Texas 47% 192 288 237
Kentucky 26% 363 266 349
Louisiana 11% 91 51 37
Colorado, Kansas
and Missouri 16% 607 978 768
----
System Average 100% 291 365 328
Percent of Normal 89% 111%
1. Volumes are reported as metered in million cubic feet("MMcf").
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Nine months ended June 30,
1996 1995
-------- --------
Sales Volumes -- MMcf (1)
Residential 47,700 42,641
Commercial 19,413 17,544
Industrial (including agricultural) 29,930 25,059
Public authority and other 4,759 4,343
-------- --------
Total 101,802 89,587
Transportation Volumes -- MMcf (1) 20,018 24,449
-------- --------
Total Volumes Handled - MMcf (1) 121,820 114,036
======== ========
Operating Revenues (000's)
Gas Sales Revenues
Residential $217,603 $185,361
Commercial 79,891 69,785
Industrial (including agricultural) 87,570 75,071
Public authority and other 19,754 16,353
-------- --------
Total Gas Revenues 404,818 346,570
Transportation Revenues 6,167 9,444
Other Revenues 4,158 3,813
-------- --------
Total Operating Revenues $415,143 $359,827
======== ========
Average Gas Sales Revenues per Mcf $ 3.98 $ 3.87
Average Transportation Revenue per Mcf $ .31 $ .39
Cost of Gas per Mcf Sold $ 2.61 $ 2.49
HEATING DEGREE DAYS
Weather Nine months ended June 30,
Service Sensitive -----------------------------
Area Customers % 1996 1995 Normal
- -------------- ----------- ------ ------ ------
Texas 47% 3,286 3,090 3,512
Kentucky 26% 4,574 3,738 4,341
Louisiana 11% 1,989 1,443 1,760
Colorado, Kansas
and Missouri 16% 5,752 5,800 6,060
----
System Average 100% 3,870 3,507 3,939
Percent of Normal 98% 89%
See footnote on page 19.
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Twelve months ended June 30,
1996 1995
-------- --------
Sales Volumes -- MMcf (1)
Residential 51,824 46,298
Commercial 21,625 19,576
Industrial (including agricultural) 42,917 37,860
Public authority and other 5,195 4,732
-------- --------
Total 121,561 108,466
Transportation Volumes -- MMcf (1) 26,032 34,813
-------- --------
Total Volumes Handled - MMcf (1) 147,593 143,279
======== ========
Operating Revenues (000's)
Gas Sales Revenues
Residential $242,407 $208,861
Commercial 90,088 79,691
Industrial (including agricultural) 123,314 112,818
Public authority and other 21,586 18,070
-------- --------
Total Gas Sales Revenues 477,395 419,440
Transportation Revenues 8,434 12,708
Other Revenues 5,307 5,029
-------- --------
Total Operating Revenues $491,136 $437,177
======== ========
Average Gas Sales Revenues per Mcf $ 3.93 $ 3.87
Average Transportation Revenue per Mcf $ .32 $ .37
Cost of Gas per Mcf Sold $ 2.56 $ 2.50
HEATING DEGREE DAYS
Weather Twelve months ended June 30,
Service Sensitive ----------------------------
Area Customers % 1996 1995 Normal
- -------------- ----------- ------ ------ ------
Texas 47% 3,348 3,105 3,528
Kentucky 26% 4,628 3,790 4,376
Louisiana 11% 1,994 1,443 1,760
Colorado, Kansas
and Missouri 16% 5,931 5,890 6,234
----
System Average 100% 3,942 3,543 3,983
Percent of Normal 99% 89%
See footnote on page 19.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of notes to consolidated financial statements on pages
8, 9 and 10 herein for a description of legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required by Item 601 of Regulation
S-K and filed as part of this report is set forth in the
Exhibits Index, which immediately precedes such exhibits.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ATMOS ENERGY CORPORATION
(Registrant)
Date: August 14, 1996 By: /s/ James F. Purser
------------------------------
James F. Purser
Executive Vice President
and Chief Financial Officer
Date: August 14, 1996 By: /s/ David L. Bickerstaff
------------------------------
David L. Bickerstaff
Vice President and Controller
(Principal Accounting Officer)
EXHIBITS INDEX
Item 6. (a)
Page Number or
Exhibit Incorporation
Number Description by Reference to
- ------- -------------------------------------- ---------------
10.1 Amendment No. 1 to the Atmos Energy
Corporation Supplemental Benefits Plan
for Key Management Employees (Restated
as of November 6, 1995)
10.2 Amendment No. 2 to the Atmos Energy
Corporation Supplemental Executive
Benefits Plan (Restated as of November
11, 1992)
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos
Energy Corporation for the nine months
ended June 30, 1996
EXHIBIT 15
----------
Board of Directors
Atmos Energy Corporation
We are aware of the incorporation by reference in the Registra
tion Statements (Form S-3 No. 33-58220, Form S-3 No. 33-56915,
Form S-3 No. 333-03339, Form S-8 No. 33-57687, Form S-8 No. 33-
68852, and Form S-8 No. 33-57695) of Atmos Energy Corporation of
our report dated August 7, 1996, relating to the unaudited
condensed consolidated interim financial statements of Atmos
Energy Corporation which are included in its Form 10-Q for the
quarter ended June 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report
is not a part of the registration statement prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
ERNST & YOUNG LLP
August 14, 1996
Dallas, Texas
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE
NINE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 398,695
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 54,072
<TOTAL-DEFERRED-CHARGES> 35,518
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 488,285
<COMMON> 80
<CAPITAL-SURPLUS-PAID-IN> 110,139
<RETAINED-EARNINGS> 68,837
<TOTAL-COMMON-STOCKHOLDERS-EQ> 179,056
0
0
<LONG-TERM-DEBT-NET> 125,303
<SHORT-TERM-NOTES> 36,100
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 6,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,557
<LEASES-CURRENT> 242
<OTHER-ITEMS-CAPITAL-AND-LIAB> 139,027
<TOT-CAPITALIZATION-AND-LIAB> 488,285
<GROSS-OPERATING-REVENUE> 415,143
<INCOME-TAX-EXPENSE> 15,715
<OTHER-OPERATING-EXPENSES> 360,252
<TOTAL-OPERATING-EXPENSES> 375,967
<OPERATING-INCOME-LOSS> 39,176
<OTHER-INCOME-NET> (288)
<INCOME-BEFORE-INTEREST-EXPEN> 38,888
<TOTAL-INTEREST-EXPENSE> 10,956
<NET-INCOME> 27,932
0
<EARNINGS-AVAILABLE-FOR-COMM> 27,932
<COMMON-STOCK-DIVIDENDS> 11,393
<TOTAL-INTEREST-ON-BONDS> 1,215
<CASH-FLOW-OPERATIONS> 65,943
<EPS-PRIMARY> 1.76
<EPS-DILUTED> 1.76
</TABLE>
AMENDMENT NO. 1 TO
THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL BENEFITS PLAN
FOR KEY MANAGEMENT EMPLOYEES
(Restated as of November 6, 1995)
WHEREAS, effective November 11, 1992, ATMOS ENERGY
CORPORATION (the "Employer") adopted THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL BENEFITS PLAN FOR KEY MANAGEMENT EMPLOYEES (the
"Plan"); and
WHEREAS, the Employer restated the Plan in its entirety as
of November 6, 1995; and
WHEREAS, pursuant to Section 9.1(a) of the Plan, the
Employer desires to amend the Plan as hereinafter set forth;
NOW, THEREFORE, the Plan shall be, and hereby is, amended,
effective as of the date this Amendment is executed, in the
following respects:
1. Section 5.2(a)(i) of the Plan shall be, and hereby is,
amended and revised to read in its entirety as follows:
"(i) One-twelfth (1/12th) of seventy-five percent
(75%) of the Participant's Compensation, reduced if the
Participant has fewer than ten (10) years of vesting
service under the Pension Plan by one-tenth (1/10th)
for each year of his vesting service less than ten
(10)."
2. Section 9.1(b) of the Plan shall be, and hereby is,
amended by changing all references to the numeral "20" therein to
be and read "10."
3. Paragraph 10 of Exhibit B shall be, and hereby is,
amended by changing all references to the numeral "20" therein to
be and read "10."<PAGE>
IN WITNESS WHEREOF, the Employer has executed this Amendment
No. 1 to The Atmos Energy Corporation Supplemental Benefits Plan
for Key Management Employees this 8th day of May, 1996 to be
effective as of this date.
ATMOS ENERGY CORPORATION
By: /s/ Robert F. Stephens
____________________________
Robert F. Stephens
President and Chief Operating
Officer
-2-<PAGE>
AMENDMENT NO. 2 TO
THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN
(Restated as of November 11, 1992)
WHEREAS, effective October 1, 1987, ATMOS ENERGY CORPORATION
(the "Employer") adopted THE ATMOS ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE BENEFITS PLAN (the "Plan"); and
WHEREAS, the Employer restated the Plan in its entirety as
of November 11, 1992 and subsequently amended the Plan by
Amendment No. 1 dated November 8, 1995; and
WHEREAS, pursuant to Section 9.1 of the Plan, the Employer
desires to amend the Plan as hereinafter set forth;
NOW, THEREFORE, the Plan shall be, and hereby is, amended,
effective as of the date this Amendment is executed, in the
following respects:
1. The second paragraph of Section 9.1 of the Plan shall
be, and hereby is, amended by changing all references to the
numeral "20" therein to be and read "10."
2. Paragraph a of Exhibit A-1 shall be, and hereby is,
amended and revised to read in its entirety as follows:
"(a) One-twelfth (1/12th) of an amount equal to ninety
percent (90%) of Compensation with respect to C.K.
Vaughan and seventy-five percent (75%) of Compensation
with respect to all other Participants; provided,
however, that if the Participant has fewer than ten
(10) years of vesting service under the Pension Plan,
the above amount shall be reduced by one-tenth (1/10th)
for each year by which his vesting service is fewer
than ten (10)."
3. Paragraph 1(a) of Exhibit C-1 shall be, and hereby is,
amended by changing all references to the numeral "20" therein to
be and read "10."<PAGE>
IN WITNESS WHEREOF, the Employer has executed this Amendment
No. 2 to The Atmos Energy Corporation Supplemental Executive
Benefits Plan this 8th day of May, 1996 to be effective as of
this date.
ATMOS ENERGY CORPORATION
By: /s/Robert F. Stephens
____________________________
Robert F. Stephens
President and Chief Operating
Officer
-2-<PAGE>
