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, 1999
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 AND VIRGINIA 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)
(972) 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 31, 1999.
Class Shares Outstanding
----- ------------------
No Par Value 31,073,040
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
June 30, September 30,
1999 1998
----------- -------------
ASSETS
Property, plant and equipment $1,516,909 $1,446,420
Less accum. depreciation and amort. 567,949 528,560
---------- ----------
Net property, plant and equipment 948,960 917,860
Current assets
Cash and cash equivalents 14,441 4,735
Accounts receivable, net 54,359 34,887
Inventories of supplies and mdse. 14,362 15,219
Gas stored underground 19,795 48,909
Prepayments 2,514 3,630
---------- ----------
Total current assets 105,471 107,380
Deferred charges and other assets 123,573 116,150
---------- ----------
$1,178,004 $1,141,390
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock $ 155 $ 152
Additional paid-in capital 288,392 271,637
Retained earnings 112,922 99,369
Treasury stock (91) -
---------- ----------
Total shareholders' equity 401,378 371,158
Long-term debt 381,389 398,548
---------- ----------
Total capitalization 782,767 769,706
Current liabilities
Current maturities of long-term debt 18,218 57,783
Notes payable 110,228 66,400
Accounts payable 50,251 44,742
Taxes payable 12,781 12,736
Customers' deposits 10,289 12,029
Other current liabilities 30,973 30,369
---------- ----------
Total current liabilities 232,740 224,059
Deferred income taxes 86,483 80,213
Deferred credits and other liabilities 76,014 67,412
---------- ----------
$1,178,004 $1,141,390
========== ==========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
June 30,
-------------------------
1999 1998
-------- --------
Operating revenues $109,590 $137,311
Purchased gas cost 56,214 79,945
-------- --------
Gross profit 53,376 57,366
Operating expenses
Operation 29,796 27,280
Maintenance 2,342 2,660
Depreciation and amortization 14,043 12,332
Taxes, other than income 6,783 7,212
-------- --------
Total operating expenses 52,964 49,484
-------- --------
Operating income 412 7,882
Other income 1,126 2,536
Interest charges, net 9,689 7,791
-------- --------
Income (loss) before income taxes (8,151) 2,627
Income taxes (benefit) (2,856) 951
-------- --------
Net income (loss) $ (5,295) $ 1,676
======== ========
Basic net income (loss) per share $ (.17) $ .06
======== ========
Diluted net income (loss) per share $ (.17) $ .06
======== ========
Cash dividends per share $ .275 $ .265
======== ========
Weighted average
shares outstanding:
Basic 30,669 29,910
======== ========
Diluted 30,920 29,941
======== ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Nine months ended
June 30,
------------------------
1999 1998
-------- --------
Operating revenues $581,243 $721,192
Purchased gas cost 324,264 440,254
-------- --------
Gross profit 256,979 280,938
Operating expenses
Operation 99,986 96,548
Maintenance 6,169 7,429
Litigation settlement 3,250 -
Depreciation and amortization 41,443 36,116
Taxes, other than income 23,188 24,808
-------- --------
Total operating expenses 174,036 164,901
-------- --------
Operating income 82,943 116,037
Other income 5,201 5,540
Interest charges, net 26,928 26,436
-------- --------
Income before income taxes 61,216 95,141
Income taxes 22,336 35,945
-------- --------
Net income $ 38,880 $ 59,196
======== ========
Basic net income per share $ 1.28 $ 1.99
======== ========
Diluted net income per share $ 1.27 $ 1.98
======== ========
Cash dividends per share $ .825 $ .795
======== ========
Weighted average
shares outstanding:
Basic 30,464 29,739
======== ========
Diluted 30,710 29,948
======== ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended
June 30,
-----------------------
1999 1998
------- -------
Cash Flows From Operating Activities
Net income $38,880 $59,196
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 41,443 36,116
Charged to other accounts 3,024 4,327
Deferred income taxes (benefit) 6,270 (192)
Net change in operating assets and
liabilities 17,134 (671)
------- --------
Net cash provided by
operating activities 106,751 98,776
Cash Flows From Investing Activities
Capital expenditures (79,782) (82,533)
Retirements of property, plant and
equipment 4,215 2,937
------- --------
Net cash used in investing activities (75,567) (79,596)
Cash Flows From Financing Activities
Net increase in notes payable 43,828 1,950
Cash dividends paid (25,327) (23,810)
Issuance of long-term debt - 1,000
Repayment of long-term debt (56,724) (11,796)
Issuance of common stock 16,745 15,748
------- --------
Net cash used in financing activities (21,478) (16,908)
------- --------
Net increase in cash and cash equivalents 9,706 2,272
Cash and cash equivalents at beginning
of period 4,735 6,016
------- --------
Cash and cash equivalents at end
of period $14,441 $ 8,288
======= ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 1999
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, 1999 are not indicative of expected results of operations
for the year ending September 30, 1999. 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 of Atmos Energy
Corporation ("Atmos" or the "Company") in its 1998 Annual Report
on Form 10-K. The condensed consolidated balance sheet of Atmos
as of June 30, 1999, the related condensed consolidated statements
of income for the three-month and nine-month periods ended June
30, 1999 and 1998, and the condensed consolidated statements of
cash flows for the nine-month periods ended June 30, 1999 and
1998, included herein have been subjected to a review by Ernst &
Young LLP, the Company's independent accountants, whose review
report is included herein. During fiscal 1998 and 1999 management
has evaluated and restructured the organization and operation of
certain segments of the Company. As a result, certain prior year
balances have been reclassified to be consistent with the current
presentation.
Common stock - As of June 30, 1999, the Company had
100,000,000 shares of common stock, no par value (stated at $.005
per share), authorized and 31,039,292 shares outstanding. At
September 30, 1998, the Company had 30,398,319 shares outstanding.
2. Rates
The Company's ratemaking activity over the three-year period
ended September 30, 1998 was discussed in Note 3 of notes to
consolidated financial statements in the Company's Form 10-K for
the year ended September 30, 1998. The Trans La Division appeared
before the Louisiana Public Service Commission in June 1999 for a
rate investigation and to redesign rates to mitigate the effects
of warm weather. A decision is expected from the Louisiana
Commission later in 1999. The Western Kentucky Division requested
an increase in rates of approximately $14.1 million from the
Kentucky Public Service Commission in May 1999. A decision is
expected later in 1999, with any new rates being placed in effect
in early 2000. Subsequent to June 30, 1999, the Energas Division
filed rate cases in its West Texas System cities and Amarillo,
Texas, requesting rate increases totaling approximately $13.2
million and recovery of costs related to certain distribution
system replacement projects. Later in 1999 or early 2000 the
Company plans to request a rate increase of approximately $1.1
million in the environs areas outside the city limits of the West
Texas System cities and Amarillo, Texas for total increases of
$14.3 million being sought in Texas. Rates in areas outside the
city limits in Texas are subject to the jurisdiction of the
Railroad Commission of Texas.
3. Contingencies
For a review of the status of the Company's litigation and
environmental matters as of September 30, 1998, please refer to
Note 5 of notes to consolidated financial statements in the
Company's Form 10-K for the year ended September 30, 1998.
Material contingencies and new developments since September 30,
1998 are discussed below.
Litigation
In November 1997, a jury in Plaquemine, Louisiana awarded
Brian L. Heard General Contractor, Inc., ("Heard") a total of
$177,929 in actual damages and $15 million in punitive damages
resulting from a lawsuit by Heard against the Trans La Division,
the successor in interest to Oceana Heights Gas Company, which the
Company acquired in November 1995. The trial judge also awarded
interest on the total judgment amount. The claims were for events
that occurred prior to the time Atmos acquired Oceana Heights Gas
Company. Heard filed the suit against the Trans La Division and
two other defendants, alleging that gas leaks had caused delays in
Heard's completion of a sewer project, resulting in lost business
opportunities for the contractor during 1994. The Company
immediately appealed the verdict. However, on March 24, 1999, the
Company announced that it had reached a settlement of the case as
a result of mediation discussions. The parties agreed to settle
the case for $3.5 million. In the settlement, neither Atmos nor
the Trans La Division conceded liability. Atmos paid $3.25
million and the remaining $.25 million was paid by Oceana Heights
Gas Company's insurers. In exchange, the Company obtained a full
release from Heard of all claims against Atmos and the Trans La
Division.
In Colorado, the Greeley Division 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 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 appealed the judgment to the Colorado Court
of Appeals, which reversed the trial court verdict and ordered a
new trial. The Colorado Supreme Court upheld the Court of Appeals
reversal and order for a new trial. As a result of mediation, a
settlement was reached with five of the claimants, leaving only
three remaining claimants with aggregate claims of approximately
$2.0 million. The Company does not expect the final outcome of
this case to have a material adverse effect on the financial
condition, the results of operations or the cash flows of the
Company because the Company believes it has adequate insurance and
reserves to cover any damages that may ultimately be awarded.
From time to time, other 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 other claims and lawsuits
are either covered by insurance, adequately reserved for by the
Company or would not have a material adverse effect on the
financial condition, results of operations, or cash flows of the
Company.
Guarantees
The Company's wholly-owned subsidiary, Atmos Energy Marketing,
LLC ("AEM"), and Woodward Marketing, Inc. ("WMI"), sole members of
Woodward Marketing, LLC ("WMLLC"), act as guarantors of up to
$12.5 million of balances outstanding under a $30.0 million bank
credit facility for WMLLC. AEM guarantees the payment of up to
$5.6 million of borrowings under this facility. A balance of
approximately $.7 million was outstanding under this credit
facility at June 30, 1999. AEM and WMI also act as joint and
several guarantors on certain accounts payable for gas purchases.
AEM has agreed to guarantee payables of WMLLC up to $40.0 million
of natural gas purchases and transportation services from
suppliers. WMLLC payable balances outstanding that were subject
to these guarantees amounted to $8.3 million at June 30, 1999.
Environmental Matters
Atmos is the owner or previous owner of manufactured gas plant
sites which were used to supply gas prior to availability of
natural gas. The gas manufacturing process resulted in certain by-
products and residual materials including coal tar. The
manufacturing process used by the Company was an acceptable and
satisfactory process at the time such operations were being
conducted. Under current environmental protection laws and
regulations, the Company may be responsible for response actions
with respect to such materials, if response actions are necessary.
The United Cities Division owns or owned former manufactured
gas plant sites in Keokuk, Iowa, Johnson City and Bristol,
Tennessee, Hannibal, Missouri, and Americus, Georgia. In June
1995, United Cities Gas Company ("UCGC") entered into an agreement
to pay $1,787,000 to Union Electric Company whereby Union Electric
agreed to assume responsibility for UCGC's continuing
investigation and environmental response action obligations for
soil contamination as outlined in the feasibility study for the
former manufactured gas plant in Keokuk. The $1,787,000 was paid
in five annual installments. The last installment was paid in July
1999.
UCGC and the Tennessee Department of Environment and
Conservation entered into a consent order effective January 23,
1997, for the purpose of facilitating the investigation, removal
and remediation of the Johnson City site. UCGC began the
implementation of the consent order in the first quarter of 1997.
The Company is unaware of any information which suggests that
the Bristol site gives rise to a present health or environmental
risk as a result of the manufactured gas process or that any
response action will be necessary. The Tennessee Regulatory
Authority granted UCGC permission to defer, until its next rate
case, all costs incurred in Tennessee in connection with state and
federally mandated environmental control requirements.
On July 22, 1998, Atmos entered into an Abatement Order on
Consent with the Missouri Department of Natural Resources
addressing the former manufactured gas plant located in Hannibal,
Missouri. Atmos, through its United Cities Division, agreed in
the order to perform a removal action, a subsequent site
evaluation and to reimburse the response costs incurred by the
state of Missouri in connection with the property. The removal
action was conducted and completed in August 1998 and the site
evaluation will be conducted in 1999. On February 25, 1999, the
Missouri Public Service Commission issued an Order authorizing
Atmos to defer the costs associated with this site. The Order is
effective for two years.
As of June 30, 1999, the Company had incurred and deferred for
recovery $1.1 million, including $258,000 related to an insurance
recoverability study, and accrued and deferred for recovery an
additional $750,000 associated with the preliminary survey and
invasive study of the Johnson City, Hannibal and Bristol sites.
Atmos is currently conducting an investigation pursuant to a
Consent Order between the Kansas Department of Health and
Environment ("KDHE") and UCGC. The Order provides for the
investigation of mercury contamination at gas pipeline sites which
utilize or formerly utilized mercury meter equipment in Kansas.
Atmos is currently in the process of finalizing a Consent Order
with the KDHE for remediation of certain of these sites. As of
June 30, 1999, the Company had identified approximately 720 sites
where mercury may have been used and had incurred and deferred
$100,000 for recovery. In addition, based upon available current
information, the Company accrued and deferred for recovery an
additional $280,000 for the investigation of these sites. The
Kansas Corporation Commission has authorized the Company to defer
these costs and seek recovery in a future rate case.
The Company addresses other environmental matters from time to
time in the regular and ordinary course of its business.
Management expects that future expenditures related to response
action at any site will be recovered through rates or insurance,
or shared among other potentially responsible parties. Therefore,
the costs of responding to these sites are not expected to
materially affect the results of operations, financial condition
or cash flows of the Company.
4. Short-term debt
At June 30, 1999, the Company had committed, short-term,
unsecured bank credit facilities totaling $262.0 million, of which
$250.9 million was unused. The Company also had aggregate
uncommitted lines of credit totaling $73.0 million, of which $63.7
million was unused.
The Company implemented a $250.0 million commercial paper
program in October 1998. It is supported by a $250.0 million
short-term, unsecured credit facility. The Company's commercial
paper is rated A-2 by Standard and Poor's and P-2 by Moody's. At
June 30, 1999, the Company had $89.8 million of commercial paper
outstanding.
5. Statements of cash flows
Supplemental disclosures of cash flow information for the nine-
month periods ended June 30, 1999 and 1998 are presented below.
Nine months ended
June 30,
----------------------
1999 1998
------- ------
(In thousands)
Cash paid for
Interest $32,019 $31,491
Income taxes 14,324 14,880
6. Earnings per share
Basic earnings per share has been computed by dividing net
income available to common stockholders for the period by the
weighted average number of common shares outstanding during the
period. Diluted earnings per share has been computed by dividing
net income available to common stockholders for the period by the
weighted average number of common shares outstanding during the
period adjusted for the assumed exercise of restricted stock and
other contingently issuable shares of common stock. Net income
for basic and diluted earnings per share are the same, as there
are no contingently issuable shares of stock whose issuance would
have impacted net income. A reconciliation between basic and
diluted weighted average common shares outstanding follows:
For the three months ended
June 30,
--------------------------
1999 1998
------ ------
Weighted average common
shares - basic 30,669 29,910
Effect of dilutive securities:
Restricted stock 243 24
Stock options 8 7
------ ------
Weighted average common
shares - assuming dilution 30,920 29,941
====== ======
For the nine months ended
June 30,
--------------------------
1999 1998
------ ------
Weighted average common
shares - basic 30,464 29,739
Effect of dilutive securities:
Restricted stock 236 195
Stock options 10 14
------ ------
Weighted average common
shares - assuming dilution 30,710 29,948
====== ======
7. Related party transactions
Atmos owns a 45% interest through its ownership of Atmos
Energy Marketing, LLC, in Woodward Marketing, LLC, a limited
liability company headquartered in Houston, Texas, which is
engaged in gas marketing and energy services. Included in
purchased gas cost were purchases from WMLLC of approximately
$24.8 million and $25.2 million for the three-month periods ended
June 30, 1999 and 1998, respectively, and approximately $76.7
million and $105.2 million for the nine-month periods ended June
30, 1999 and 1998, respectively.
8. Recently issued accounting standards not yet adopted
The Company has not yet adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income."
The Statement will be effective for the Company's 1999 fiscal year
beginning with its 1999 annual report. It established standards
for reporting an display of comprehensive income and its
components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. Reclassification of
financial statements for earlier periods provided for comparative
purposes is required.
The Company has not yet adopted Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information." The Statement will be
effective for the Company's 1999 fiscal year beginning with its
1999 annual report. It establishes standards for the way that
public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments
in interim financial reports issued to shareholders. In the
initial year of application, comparative information for earlier
years is to be restated.
In addition, the Company has not yet adopted Statement of
Financial Accounting Standards No. 133 " Accounting for Derivative
Instruments and Hedging Activities." The Statement will be
effective for the Company's fiscal year 2001. It establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. The Statement does not
allow retroactive application to financial statements of prior
periods.
The Company believes that adoption of these Statements will
not have a material impact on its reported financial condition,
results of operations, or cash flows.
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, 1999, and
the related condensed consolidated statements of income and cash
flows for the three-month and nine-month periods ended June 30,
1999 and 1998. 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 state
ments taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements at June 30, 1999, and for the
three-month and nine-month periods ended June 30, 1999 and 1998
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, 1998, 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 10, 1998, 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, 1998, 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 11, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion should be read in conjunction with
the condensed consolidated financial statements contained in this
Quarterly Report on Form 10-Q and Management's Discussion and
Analysis contained in the Company's 1998 Annual Report to
Shareholders and the Company's Annual Report on Form 10-K for the
year ended September 30, 1998.
The Company distributes and sells natural gas and propane to
residential, commercial, industrial and agricultural customers in
thirteen 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, competitive factors within the
energy industry, and economic conditions in the areas that the
Company serves.
Cautionary Statement under the Private Securities Litigation
Reform Act of 1995
The matters discussed or incorporated by reference in this
Quarterly Report on Form 10-Q may contain "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of
historical facts included in this Quarterly Report including, but
not limited to, those contained in the following sections, Item 2,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations", and Note 3 of notes to condensed
consolidated financial statements, regarding the Company's
financial position, business strategy and plans and objectives of
management of the Company for future operations, are forward-
looking statements made in good faith by the Company and are
intended to qualify for the safe harbor from liability established
by the Private Securities Litigation Reform Act of 1995. When
used in this Report or in any of the Company's other documents or
oral presentations, the words "anticipate," "report," "objective,"
"forecast," "goal" or similar words are intended to identify
forward-looking statements. Such forward-looking statements are
subject to risks and uncertainties that could cause actual results
to differ materially from those expressed or implied in the
statements relating to the Company's operations, markets,
services, rates, recovery of costs, availability of gas supply,
and other factors. These risks and uncertainties include, but are
not limited to, national, regional and local economic competitive
conditions, regulatory and business trends and decisions,
technological developments, Year 2000 issues, inflation rates,
weather conditions, and other uncertainties, all of which are
difficult to predict and many of which are beyond the control of
the Company. Accordingly, while the Company believes that the
expectations reflected in the forward-looking statements are
reasonable, there can be no assurance that such expectations will
be realized or will approximate actual results.
Ratemaking Activity
As of June 30, 1999, the Company had several rate proceedings
pending. In May 1999, the Western Kentucky Division requested a
rate increase of $14.1 million from the Kentucky Public Service
Commission. In June 1999, the Trans La Division appeared before
the Louisiana Public Service Commission for a rate investigation
and to redesign rates to mitigate the effects of warm weather.
Decisions in both cases are expected later in 1999. However, new
rates will not likely be placed in effect before late 1999 or
early 2000. Subsequent to June 30, 1999, the Energas Division
filed two rate cases in Texas, requesting rate increases totaling
approximately $13.2 million and recovery of costs related to
certain distribution system replacement projects. In late 1999 or
early 2000 the Company plans to file an additional rate request
for approximately $1.1 million with the Railroad Commission of
Texas for the environs areas outside the city limits of the West
Texas System cities and Amarillo, Texas for total increases sought
by the Energas Division of $14.3 million. For additional
information regarding ratemaking activity see Note 2 under notes
to condensed consolidated financial statements.
Year 2000 issues
The Year 2000 issues arose because many computer systems and
software applications as well as embedded computer chips in plant
and equipment currently in use were constructed using an
abbreviated date field that eliminates the first two digits of the
year. On January 1, 2000, these systems, applications and
embedded computer chips may incorrectly recognize the date as
January 1, 1900. Accordingly, many computer systems and software
applications, as well as embedded chips, may incorrectly process
financial and operating information or fail to process such
information completely. The Company has been aware of these
issues and is addressing their potential effects on its computer
systems, software applications and plant and equipment.
State of readiness
In October 1996, the Company established its Year 2000 Project
Team with the mission of ensuring that all critical systems,
facilities and processes are identified, analyzed for Year 2000
readiness, corrected if necessary, and tested if changes are
necessary. The Year 2000 Project Team is headed by an officer of
the Company and consists of representatives from all business
units and shared services units of the Company. The Company,
including all of its departments and business units, has a Year
2000 strategy in place and is continuing to implement the Year
2000 plan to manage and minimize risks associated with the Year
2000 issues.
The Company also received comprehensive assessments in April
and July 1999, updating an earlier assessment completed in June
1998, by an independent consulting firm, which specializes in such
matters, of the risks posed for the Company and its business units
by the Year 2000 issues, including assessments of the risks in
each area of the Company involving the use of computer technology
and assessments of the business and legal risks created for the
Company by the Year 2000 issues. Such assessments also addressed
the risks associated with the Company's embedded technologies such
as micro-controllers or microchips embedded in non-information
technology-related equipment. The results of the latest
assessment demonstrate that the Company is on track toward meeting
its goal of completing all Year 2000 readiness related tasks by
September 30, 1999.
With respect to information technology ("IT") systems, the
Company has conducted an inventory and review of its application
software on all platforms such as the mainframe, local area
network and personal computers and is in the process of
remediating all Year 2000 issues relating to such systems.
Concerning non-IT systems, including embedded technology, the
Company has conducted an inventory of and is continuing to review
and evaluate all of its telecommunications, security access and
building control systems, forms, reports and other business
processes and activities as well as the equipment and facilities
utilized in the Company's gas distribution and storage systems.
In addition, several members of the Year 2000 Project Team have
completed training on an American Gas Association-sponsored
database relating to testing of embedded technology. This
database has helped to expedite the review and compliance efforts
related to embedded technology.
The Company's Year 2000 plan includes specific timetables for
the following categories of tasks for each of its shared services
units and business units with respect to both IT systems and
embedded technology as follows:
- - Identification of Year 2000 issues--completed;
- - Prioritization of Year 2000 issues--completed;
- - Estimation of total Year 2000-related costs--completed;
- - Implementation of Year 2000 solutions--in process and to be
completed by September 30, 1999;
- - Testing of Year 2000 solutions--in process and to be
completed by September 30, 1999;
- - Certification of Year 2000 readiness by third party vendors
and suppliers--in process and to be completed by September 30,
1999;
- - Monitoring of all systems for changes in current systems that
would require changes in Year 2000 plan--in process and to be
completed by September 30, 1999;
- - Development of Year 2000 contingency plans--substantially
completed;
- - Final Year 2000 tests--to be conducted starting September 30,
1999.
The Company is also continuing to conduct an inventory and
review of mission critical computer systems provided by outside
vendors. The Year 2000 Project Team is continuing to contact all
major vendors to coordinate their Year 2000 readiness schedules
with those of the Company. The Company is requiring vendors who
provide mission critical goods or services to submit to the
Company their readiness plans and to certify readiness in order to
continue to do business with the Company. As discussed above, the
Company is also in the process of testing vendor products that
provide mission critical goods or services to ensure their Year
2000 readiness. In addition, the Company has identified its key
suppliers, including gas suppliers and gas pipelines, and is
communicating with them, including conducting on-site visits, for
the purpose of evaluating the status of their solutions to their
respective Year 2000 issues. The expected date of completion of
these procedures is September 30, 1999.
Costs to address Year 2000 issues
As of June 30, 1999, the Company had incurred a total of
approximately $450,000 in direct fees and expenses (excluding any
internal labor charges) in connection with its Year 2000 efforts.
The Company currently expects to spend approximately $1.0 million
in direct fees and expenses on its Year 2000 efforts by December
31, 1999. In addition, as part of its normal systems upgrade in
the ordinary course of business, the Company is in the process of
replacing its customer information system, and has replaced its
accounting and financial reporting system, and human resources
system with systems that happen to be Year 2000 ready. Although
these systems, when fully installed, will be Year 2000 ready, the
replacement of these systems was not accelerated to 1999 solely in
an attempt to address Year 2000 issues.
Risks of Year 2000 issues and contingency plans
The Company has identified what it believes are its most
reasonably likely worst case Year 2000 scenarios. These scenarios
are (i) interference with the Company's ability to receive and
deliver gas to customers; (ii) interference with the Company's
ability to communicate with customers; and (iii) the temporary
inability to send invoices to and receive payments from customers.
The most reasonably likely worst case scenario associated with
the Year 2000 issues would be the Company's inability to continue
to transport and distribute gas to its customers without
interruption. In the event the Company and/or its suppliers and
vendors are unable to remediate critical Year 2000 issues prior to
January 1, 2000, the ability of the Company to deliver gas to its
customers without interruption could be impacted. In order to
address this worst case scenario, the Company has developed
contingency plans to continue to deliver gas primarily through
manual intervention and other procedures should it become
necessary to do so. Such procedures include back-up power supply
for its critical distribution and storage operations and, if
necessary, curtailment of supply. The Company's storage capacity
would be used to supplement system supply in the event its
suppliers or gas pipelines are unable to make deliveries.
With respect to communications with customers, which is
heavily reliant on services provided by third parties, the Company
is continuing to evaluate Year 2000 readiness by such third
parties and will continue to refine its contingency plans to
address any worst case scenarios that may be determined after such
evaluations are complete. Concerning the billing and payment
systems, as previously discussed, the Company is in the process of
replacing its customer information system, and has replaced its
accounting and financial reporting system, and human resources
system with systems that are Year 2000 ready, which should
substantially diminish the risk of Year 2000 issues.
Nevertheless, the Company has developed contingency plans and will
continue to refine such plans in case the billing and payment
systems prove not to be Year 2000 ready.
Despite the Company's efforts, there can be no assurance that
all material risks associated with Year 2000 issues relating to
systems within its control will have been adequately identified
and corrected before the end of 1999. However, as the result of
its Year 2000 plan and the replacement of the customer information
system, accounting and financial reporting system, and human
resources system in 1999, the Company does not believe that in the
aggregate, Year 2000 issues with respect to both its own IT and
non-IT systems will be material to its business, operations or
financial condition. On the other hand, while the Company is in
the process of researching the Year 2000 readiness of its
suppliers and vendors, the Company can make no representations
regarding the Year 2000 readiness status of systems or parties
outside its control, and currently cannot assess the effect on it
of any non-readiness by such systems or parties.
All statements concerning Year 2000 issues other than
historical statements, including, without limitation, estimated
costs and the projected timetable of Year 2000 readiness,
constitute "forward-looking statements," as defined in the Private
Securities Litigation Reform Act of 1995. Any forward-looking
statements were made in good faith by the Company and are intended
to qualify for the safe harbor from liability established by that
Act.
Weather and Seasonality
The Company's natural gas and propane distribution businesses
are seasonal due to weather conditions in the Company's service
areas. 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 are 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.
Weather for the nine months ended June 30, 1999 was 16% warmer
than normal and 12% warmer than weather in the corresponding
period of the prior year. Rainfall in the Company's primary
irrigation market located around Lubbock, Texas totaled 17.5
inches for the nine months ended June 30, 1999 as compared with
8.4 inches for the corresponding period of the prior year. These
factors decreased sales volumes to weather sensitive customers and
caused net income to decrease approximately $23.5 million or $.76
per share. The Company has weather normalization adjustments
("WNAs") in Georgia and Tennessee, where it serves approximately
170,000 customers or approximately 17% of the Company's total
customers and revenues. The WNAs increase the base rate when
weather is warmer than normal and decrease it when weather is
colder than normal. The effect of the WNAs was to increase
revenues approximately $4.4 million for the nine months ended June
30, 1999, as compared with an increase of approximately $.7
million for the nine months ended June 30, 1998. The Company does
not have WNAs in its other service areas.
FINANCIAL CONDITION
For the nine months ended June 30, 1999 net cash provided by
operating activities totaled $106.8 million compared with $98.8
million for the nine months ended June 30, 1998. Net income
decreased $20.3 million to $38.9 million for the nine months ended
June 30, 1999 from $59.2 million for the nine months ended June
30, 1998. Depreciation and amortization increased $4.0 million in
1999 because of utility property additions, primarily Customer
Service Initiative investment, placed in service during the past
year. Net operating assets and liabilities decreased $17.1 million
for the nine months ended June 30, 1999 compared with an increase
of $.7 million for the nine months ended June 30, 1998. This
decrease in net operating assets and liabilities resulted
primarily from large fluctuations in accounts receivable, accounts
payable and inventories of gas in underground storage that occur
when entering and leaving the winter or heating season. It also
reflected an increase of $7.4 million in deferred charges and
other assets related primarily to increased deferred retirement
cost and pension assets. Deferred income taxes increased $6.3
million for the nine months ended June 30, 1999 due to costs
expensed for tax purposes but capitalized for financial reporting
purposes. Deferred credits increased $8.6 million due to
increased retiree medical obligations and deferred retirement
liabilities.
Major cash flows used in investing activities for the nine
months ended June 30, 1999 included capital expenditures of $79.8
million compared with $82.5 million for the nine months ended June
30, 1998. The capital expenditures budget for fiscal 1999 is
currently $86.8 million, as compared with actual capital
expenditures of $135.0 million in fiscal 1998. Budgeted capital
projects include major expenditures for mains, services, meters,
vehicles and computer software and equipment. These expenditures
will be financed from internally generated funds and financing
activities.
For the nine months ended June 30, 1999, cash flows used in
financing activities amounted to $21.5 million as compared with
$16.9 million for the nine months ended June 30, 1998. During the
nine month period, notes payable increased $43.8 million, as
compared with an increase of $2.0 million in the nine months ended
June 30, 1998, due to seasonal factors, project costs of CSI and
Oracle enterprise systems implementation. Payments of long-term
debt totaled $56.7 million for the nine months ended June 30, 1999
as compared with $11.8 million for the nine months ended June 30,
1998. The Company paid $25.3 million in cash dividends during the
nine months ended June 30, 1999, compared with dividends of $23.8
million paid during the nine months ended June 30, 1998. This
reflects increases in the quarterly dividend rate and in the
number of shares outstanding. In the nine months ended June 30,
1999, the Company issued 640,973 shares of common stock.
The following table presents the number of shares issued under
the various plans for the nine-month periods ended June 30, 1999
and 1998.
Nine months ended
June 30,
---------------------
1999 1998
------- -------
Shares issued:
Restricted Stock Grant Plan 56,850 111,250
Employee Stock Ownership Plan 52,738 32,235
Direct Stock Purchase Plan 524,494 373,401
Outside Directors Stock-for-Fee Plan 1,341 1,736
United Cities Long-term Stock Plan 5,550 55,500
------- -------
Total shares issued 640,973 574,122
======= =======
The Company believes that internally generated funds, its
short-term credit facilities, commercial paper program 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 1999. At June 30, 1999 the
Company had $262.0 million in committed short-term credit
facilities, $250.9 million of which was unused. The committed
lines of credit are renewed or renegotiated at least annually. At
June 30, 1999, the Company also had $73.0 million of uncommitted
short-term lines of credit, of which $63.7 million was unused. In
addition, the Company had a $250.0 million commercial paper
program, of which $160.2 million was unused. The program is
supported by a $250.0 million line of credit.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999, COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1998
Operating revenues decreased by 20% to $109.6 million for the
three months ended June 30, 1999 from $137.3 million for the three
months ended June 30, 1998. The most significant factor
contributing to the decrease in operating revenues was a 10%
decrease in total throughput. Nonutility sales volumes decreased
4.0 billion cubic feet ("Bcf") primarily because of an unusually
wet spring in the farming area surrounding Lubbock, Texas.
Rainfall for the quarter ended June 30, 1999 was 11.46 inches
compared with 1.75 inches for the quarter ended June 30, 1998. The
total volume of gas sold and transported for the three months
ended June 30, 1999 was 34.5 Bcf compared with 38.3 Bcf for the
three months ended June 30, 1998. The average sales price per Mcf
sold decreased $.47 to $4.54 primarily due to a decrease in the
average cost of gas. The average cost of gas per Mcf sold
decreased 21% to $2.57 for the three months ended June 30, 1999
from $3.24 for the three months ended June 30, 1998 due to
increased supply availability in the current market.
Gross profit decreased by 7% to $53.4 million for the three
months ended June 30, 1999, from $57.4 million for the three
months ended June 30, 1998. Most of the decrease in gross profit
was due to the decrease in volumes sold to agricultural customers
and decreased transportation revenues. Changes in cost of gas do
not directly affect gross profit.
Operating expense increased 7% to $53.0 million for the three
months ended June 30, 1999 from $49.5 million for the three months
ended June 30, 1998. Operation expense in the 1999 quarter was
comparable to the 1998 quarter, except for one-time savings from
the merger and integration of United Cities that were realized in
1998. Third quarter results were also affected by the regulatory
lag of depreciation and interest expense related to assets placed
in service but not yet included in rates. The decrease in taxes
other than income taxes was related to taxes on decreased revenues
and payroll taxes related to the reduced labor force. Operating
income decreased $7.5 million for the three months ended June 30,
1999 to $.4 million from $7.9 million for the three months ended
June 30, 1998. The decrease in operating income resulted from
decreased gross profit and increased operating expenses, as
mentioned above.
United Cities Propane sold 1.7 million gallons of propane for
the quarter ended June 30, 1999, as compared with 2.2 million
gallons for the quarter ended June 30, 1998. The decrease of $.9
million in propane revenues for the quarter ended June 30, 1999
compared with the same period last year was the result of lower
sales volumes due to warmer weather and a lower average sales
price due to comparatively lower cost of supply.
Other income decreased $1.4 million for the three months ended
June 30, 1999 compared with the three months ended June 30, 1998
primarily due to a decrease in the earnings from the Company's 45
percent interest in Woodward Marketing LLC, and a $.5 million gain
that was realized on the sale of an airplane in the prior year.
Interest expense increased $1.9 million, or 24%, for the three
months ended June 30, 1999 compared with the three months ended
June 30, 1998 due to increased average debt outstanding, higher
interest rates and a significant reduction in interest capitalized
in 1999. Approximately $1.0 million of interest was capitalized
in connection with the CSI project that was in process in the
quarter ended June 30, 1998.
Income taxes decreased $3.8 million in the quarter ended June
30, 1999 compared with the corresponding quarter of the prior year
due primarily to decreased pre-tax income.
Net income decreased for the three months ended June 30, 1999
by $7.0 million from $1.7 million for the three months ended June
30, 1998. This decrease in net income resulted primarily from the
decrease in operating income discussed above.
NINE MONTHS ENDED JUNE 30, 1999, COMPARED WITH NINE MONTHS ENDED
JUNE 30, 1998
Operating revenues decreased by 19% to $581.2 million for the
nine months ended June 30, 1999 from $721.2 million for the nine
months ended June 30, 1998. Factors contributing to the lower
operating revenues were 9% decrease in total throughput and a 9%
decrease in gas sales revenues per Mcf. Sales volumes to weather
sensitive customers decreased 9.8 Bcf for the nine months ended
June 30, 1999 compared with the corresponding period of the prior
year due to 12% warmer weather. Weather was 16% warmer than 30-
year normals. Sales volumes to nonutility industrial and
agricultural customers were reduced 35% by increased rainfall in
the Company's primary irrigation service area around Lubbock,
Texas. The average sales price per Mcf decreased to $4.48 for the
nine months ended June 30, 1999 from $4.91 for the nine months
ended June 30, 1998. The decrease in the average sales price
reflects a decrease in the average cost of gas. The average cost
of gas per Mcf sold decreased to $2.73 for the nine months ended
June 30, 1999 from $3.28 for the nine months ended June 30, 1998
because of generally lower gas supply costs as a result of
increased supply availability in the current market. Decreased
cost of gas does not directly affect gross profit.
Gross profit decreased 8.5% to $257.0 million for the nine
months ended June 30, 1999, compared with $280.9 million for the
nine months ended June 30, 1998. The decrease in gross profit was
due to reduced sales to weather-sensitive customers, decreased
sales to agricultural customers, decreased transportation volumes,
and a decrease of $.07 for the average transportation revenue per
Mcf.
United Cities Propane sold 18.4 million gallons of propane for
the nine-month period ended June 30, 1999, as compared with 19.6
million gallons for the nine-month period ended June 30, 1998.
The decrease of $5.4 million in propane revenues for the nine-
month period ended June 30, 1999 compared with the same period
last year was the result of lower sales volumes due to warmer
winter weather and a lower average sales price due to
comparatively lower cost of supply.
Operating expenses increased to $174.0 million in the nine
months ended June 30, 1999, from $164.9 million in the nine months
ended June 30, 1998. The increase included $3.4 million in
operation expense, $3.3 million in a litigation settlement and
$5.3 million in depreciation and amortization. The principal
factor contributing to the increase in operation expense was a one-
time savings realized in the prior year in connection with
integration and reorganization initiatives for United Cities Gas
Company. The litigation settlement in 1999 is discussed in Note 3
of notes to consolidated financial statements. The increase in
depreciation related to utility plant additions, including much of
the Company's investment in CSI, placed in service during the past
year. Regulatory lag has affected earnings as a result of
significant capital investments which have been made but not yet
included in rates. The primary factor in the $1.6 million
decrease in taxes other than income taxes was lower taxes on
decreased revenues. Operating income decreased for the nine months
ended June 30, 1999 to $82.9 million from $116.0 million for the
nine months ended June 30, 1998. The decrease in operating income
resulted from decreased gross profit and increased operating
expenses, as discussed above.
Other income decreased $.3 million for the nine months ended
June 30, 1999 compared with the nine months ended June 30, 1998,
due primarily to a $.5 million gain that was realized on the sale
of an airplane in the prior year.
Interest charges increased $.5 million, or 2%, due to an
increased amount of debt outstanding and higher rates during the
nine months ended June 30, 1999 compared with the corresponding
nine-month period of the prior year. Net income decreased 34% for
the nine months ended June 30, 1999, to $38.9 million from $59.2
million for the nine months ended June 30, 1998. The decrease in
net income resulted primarily from the decrease in operating
income. The Company estimates that the impact of the weather being
12% warmer than for the nine months ended June 30, 1998 caused net
income to be approximately $23.5 million less than it would have
been had the Company experienced comparable temperatures and
rainfall in its respective service areas in the nine months ended
June 30, 1999. Dividends per share increased approximately 4% to
$.825 for the nine months ended June 30, 1999. Diluted average
shares outstanding increased 2.5% primarily due to shares issued
under the Direct Stock Purchase Plan, the Restricted Stock Grant
Plan and the Employee Stock Ownership Plan.
The provision for income taxes for the nine months ended June
30, 1999 decreased $13.6 million from the provision for the corres
ponding period of the prior year due to decreased pre-tax income.
Total customers of the Company at June 30, 1999 increased
23,978, or 2%, compared with June 30, 1998.
June 30,
--------------------------
1999 1998
---------- ----------
Meters-in-service at end of period
Residential 903,081 888,015
Commercial 94,590 95,355
Public authority and other 6,405 4,841
Industrial (including agricultural) 15,702 16,399
--------- ----------
Total natural gas meters 1,019,778 1,004,610
Propane customers 39,429 30,619
--------- ----------
Total 1,059,207 1,035,229
========= ==========
UTILITY, NONUTILITY AND PROPANE OPERATING DATA
Atmos' Utility business is conducted by the Company's
regulated utility divisions: Energas Division, Greeley Gas
Division, Trans La Division, United Cities Division, Western
Kentucky Division and Shared Services. The Nonutility business
includes nonregulated irrigation sales, energy services to large
volume customers, nonregulated underground storage operations, a
45% interest in Woodward Marketing LLC, leasing of real estate,
vehicles and appliances and nonregulated shared services. The
propane business is conducted through United Cities Propane and
includes wholesale and retail propane sales to 39,429 customers in
four states. The following tables summarize operating statistics,
of the utility, nonutility and propane businesses of the Company
for the three-month and nine-month periods ended June 30, 1999 and
1998. Certain prior year volumes and revenues have been restated
accordingly.
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Three months ended June 30,
1999 1998
Utility sales volumes -- MMcf(1) -------- --------
Residential 9,379 8,206
Commercial 4,423 4,608
Public authority and other 836 438
Industrial 4,023 4,206
------- ------
Total 18,661 17,458
Transportation volumes -- MMcf(1) 12,631 13,644
------- ------
Total utility volumes 31,292 31,102
Nonutility sales volumes 3,229 7,237
------- ------
TOTAL THROUGHPUT - MMcf (1) 34,521 38,339
======= ======
Propane - Gallons (000's) 1,681 2,189
======= ======
OPERATING REVENUES (000's)
Gas sales revenues
Residential $52,452 $56,643
Commercial 20,853 26,110
Public authority and other 3,066 2,669
Industrial 13,409 16,363
-------- --------
Total gas sales revenues 89,780 101,785
Transportation revenues 5,149 7,507
Other gas revenues 1,054 1,249
-------- --------
Total utility revenues 95,983 110,541
Propane revenues 1,776 2,720
Nonutility revenues 11,831 24,050
-------- --------
Total operating revenues $109,590 $137,311
======== ========
Average gas sales revenues per Mcf $ 4.54 $ 5.01
Average transportation revenue per Mcf $ .41 $ .55
Cost of gas per Mcf sold $ 2.57 $ 3.24
HEATING DEGREE DAYS
Weighting by Three months ended June 30,
Service Area Customers 1999 1998 Normal
- ---------------- ----------- ----- ----- ------
Energas 29% 279 271 227
Trans La 8% 26 74 42
Western Kentucky 18% 165 259 336
Greeley Gas 20% 606 567 613
United Cities 25% 189 256 288
----
System Average 100% 277 304 318
(1) Volumes are reported as metered in million cubic feet
("MMcf").
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Nine months ended June 30,
1999 1998
Utility sales volumes -- MMcf(1) -------- --------
Residential 61,872 68,077
Commercial 27,618 32,060
Public authority and other 5,304 4,504
Industrial 16,366 17,679
-------- -------
Total 111,160 122,320
Transportation volumes -- MMcf(1) 42,334 42,733
-------- -------
Total utility volumes 153,494 165,053
Nonutility sales volumes 7,817 12,083
-------- -------
TOTAL THROUGHPUT - MMcf (1) 161,311 177,136
======== =======
Propane - Gallons (000's) 18,387 19,614
======== =======
OPERATING REVENUES (000's)
Gas sales revenues
Residential $309,508 $367,208
Commercial 124,523 162,192
Public authority and other 20,087 18,275
Industrial 55,888 74,819
-------- --------
Total gas sales revenues 510,006 622,494
Transportation revenues 17,599 20,763
Other gas revenues 3,757 6,705
-------- --------
Total utility revenues 531,362 649,962
Propane revenues 19,097 24,538
Nonutility revenues 30,784 46,692
-------- --------
Total operating revenues $581,243 $721,192
======== ========
Average gas sales revenues per Mcf $ 4.48 $ 4.91
Average transportation revenue per Mcf $ .42 $ .49
Cost of gas per Mcf sold $ 2.73 $ 3.28
HEATING DEGREE DAYS
Weighting by Nine months ended June 30,
Service Area Customers 1999 1998 Normal
- ---------------- ----------- ----- ----- ------
Energas 29% 3,028 3,665 3,513
Trans La 8% 1,263 1,725 1,771
Western Kentucky 18% 3,446 3,768 4,304
Greeley Gas 20% 4,856 5,294 5,571
United Cities 25% 3,136 3,539 3,760
----
System Average 100% 3,319 3,790 3,949
(1) Volumes are reported as metered in million cubic feet
("MMcf").
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
All of the Company's long-term debt is fixed-rate and,
therefore, does not expose the Company to the risk of earnings or
cash flow loss due to changes in market interest rates. At June
30, 1999, the Company is not engaged in other contracts which
would cause exposure to the risk of material earnings or cash flow
loss due to changes in market commodity prices, foreign currency
exchange rates, or interest rates.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of notes to consolidated financial statements
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 13, 1999 By: /s/ Donald P. Burman
-------------------------------
Donald P. Burman
Assistant Controller
(Chief Accounting Officer
and duly authorized signatory)
EXHIBITS INDEX
Item 6(a)
Exhibit Page
Number Description Number
- ------- ----------- -------
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos Energy
Corporation for the nine months ended
June 30, 1999
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. 33-37869, Form S-3 No. 33-70212,
Form S-3 D/A No. 33-58220, Form S-3 No. 33-56915, Form S-3/A No.
333-03339, Form S-3/A No. 333-32475, Form S-3/A No. 333-50477,
Form S-4 No. 333-13429, Form S-8 No. 33-57687, Form S-8 No. 33-
68852, Form S-8 No. 33-57695, Form S-8 No. 333-32343, Form S-8
No. 333-46337, Form S-8 No. 333-73143, and Form S-8 No. 333-
73145) of Atmos Energy Corporation of our report dated August 11,
1999, relating to the unaudited condensed consolidated interim
financial statements of Atmos Energy Corporation which are in-
cluded in its Form 10-Q for the quarter ended June 30, 1999.
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 13, 1999
Dallas, Texas
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