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, 2000
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, 2000.
Class Shares Outstanding
----- ------------------
No Par Value 31,794,899
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
June 30, September 30,
2000 1999
----------- -------------
ASSETS
Property, plant and equipment $1,585,824 $1,549,258
Less accum. depreciation and amort. 585,350 583,476
---------- ----------
Net property, plant and equipment 1,000,474 965,782
Current assets
Cash and cash equivalents 8,148 8,585
Accounts receivable, net 83,657 70,564
Inventories of supplies and mdse. 8,509 8,209
Gas stored underground 30,576 44,653
Prepayments 2,304 3,142
---------- ----------
Total current assets 133,194 135,153
Deferred charges and other assets 143,561 129,602
---------- ----------
$1,277,229 $1,230,537
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock $ 159 $ 156
Additional paid-in capital 302,833 293,359
Retained earnings 95,801 83,231
Accumulated other comprehensive
income 1,946 917
---------- ----------
Shareholders' equity 400,739 377,663
Long-term debt 368,781 377,483
---------- ----------
Total capitalization 769,520 755,146
Current liabilities
Current maturities of long-term debt 15,688 17,848
Short-term debt 163,882 168,304
Accounts payable 65,998 64,167
Taxes payable 17,275 848
Customers' deposits 8,471 9,657
Other current liabilities 33,742 25,951
---------- ----------
Total current liabilities 305,056 286,775
Deferred income taxes 123,741 112,610
Deferred credits and other liabilities 78,912 76,006
---------- ----------
$1,277,229 $1,230,537
========== ==========
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,
-------------------------
2000 1999
-------- --------
Operating revenues $152,362 $109,590
Purchased gas cost 92,332 56,214
-------- --------
Gross profit 60,030 53,376
Operating expenses
Operation 38,511 29,796
Maintenance 1,611 2,342
Depreciation and amortization 15,138 14,043
Taxes, other than income 7,114 6,783
-------- --------
Total operating expenses 62,374 52,964
-------- --------
Operating income (loss) (2,344) 412
Other income 4,794 1,126
Interest charges, net 10,164 9,689
-------- --------
Loss before income taxes (7,714) (8,151)
Income tax benefit (3,318) (2,856)
-------- --------
Net loss $ (4,396) $ (5,295)
======== ========
Basic and diluted net loss per share $ (.14) $ (.17)
======== ========
Cash dividends per share $ .285 $ .275
======== ========
Weighted average shares outstanding -
Basic and diluted 31,501 30,669
======== ========
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,
------------------------
2000 1999
-------- --------
Operating revenues $691,017 $581,243
Purchased gas cost 423,310 324,264
-------- --------
Gross profit 267,707 256,979
Operating expenses
Operation 106,202 103,236
Maintenance 5,798 6,169
Depreciation and amortization 48,128 41,443
Taxes, other than income 23,795 23,188
-------- --------
Total operating expenses 183,923 174,036
-------- --------
Operating income 83,784 82,943
Other income 10,440 5,201
Interest charges, net 32,408 26,928
-------- --------
Income before income taxes 61,816 61,216
Income taxes 22,315 22,336
-------- --------
Net income $ 39,501 $ 38,880
======== ========
Basic net income per share $ 1.26 $ 1.28
======== ========
Diluted net income per share $ 1.25 $ 1.27
======== ========
Cash dividends per share $ .855 $ .825
======== ========
Weighted average
shares outstanding:
Basic 31,363 30,464
======== ========
Diluted 31,510 30,710
======== ========
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,
-----------------------
2000 1999
------- -------
Cash Flows From Operating Activities
Net income $39,501 $38,880
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization:
Charged to depreciation and
amortization 48,128 41,443
Charged to other accounts 2,296 3,024
Deferred income taxes 10,545 6,270
Net change in operating assets and
liabilities 16,947 17,134
------- --------
Net cash provided by
operating activities 117,417 106,751
Cash Flows From Investing Activities
Acquisition of Missouri assets of ANG (32,000) -
Capital expenditures (54,347) (79,782)
Retirements of property, plant and
equipment 1,231 4,215
------- --------
Net cash used in investing activities (85,116) (75,567)
Cash Flows From Financing Activities
Net increase (decrease) in
short-term debt (4,422) 43,828
Cash dividends paid (26,931) (25,327)
Repayment of long-term debt (10,862) (56,724)
Issuance of common stock 9,477 16,745
------- --------
Net cash used in financing activities (32,738) (21,478)
------- --------
Net increase (decrease) in cash and
cash equivalents (437) 9,706
Cash and cash equivalents at beginning
of period 8,585 4,735
------- --------
Cash and cash equivalents at end
of period $ 8,148 $14,441
======= ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2000
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, 2000 are not indicative of expected results of operations
for the year ending September 30, 2000. 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 1999 Annual Report
on Form 10-K.
Common stock - As of June 30, 2000, the Company had
100,000,000 shares of common stock, no par value (stated at $.005
per share), authorized and 31,744,953 shares outstanding. At
September 30, 1999, the Company had 31,247,800 shares outstanding.
Comprehensive income - The following table presents the
components of comprehensive income, net of related tax, for the
three-month and nine-month periods ended June 30, 2000.
Three months ended Nine months ended
June 30, 2000 June 30, 2000
------------------ ----------------
(In thousands)
Net income (loss) $(4,396) $39,501
Unrealized holding gains
(losses) on investments (807) 1,029
------- -------
Comprehensive income (loss) $(5,203) $40,530
======= =======
The only component of accumulated other comprehensive income,
net of related tax, at June 30, 2000, relates to unrealized gains
and losses associated with certain available for sale investments.
Reclassifications - Certain prior year amounts have been
reclassified to conform with the current year presentation.
2. Rates
The Company's ratemaking activity over the three-year period
ended September 30, 1999 was discussed in Note 3 of notes to
consolidated financial statements in the Company's Form 10-K for
the year ended September 30, 1999. New developments in ratemaking
activity since September 30, 1999 are discussed below.
In December 1999, the Kentucky Public Service Commission
("KPSC") granted an increase in annual revenues of approximately
$9.9 million to the Western Kentucky Division. The new rates were
effective for services rendered on or after December 21, 1999. In
addition, the KPSC approved a five-year pilot program for weather
normalization beginning in November 2000.
In August 1999, the Energas Division filed rate cases in its
West Texas System cities and Amarillo, Texas, requesting rate
increases of approximately $9.8 million and $4.4 million,
respectively. The Energas Division received an increase in annual
revenues of approximately $2.1 million in base rates plus an
increase of $.1 million in service charges in Amarillo, Texas,
effective for bills rendered on or after January 1, 2000. The
agreement also provided for changes in rate structure to reduce
the impact of warmer than normal weather and to improve the
recovery of the actual cost of service calls. The Energas
Division's request for an annual increase of approximately $9.8
million from the 67 cities served by its West Texas System could
not be settled. In March 2000, it was appealed to the Railroad
Commission of Texas. Subsequently, 59 cities representing
approximately 58% of Energas' customers ratified a non-binding
Settlement Agreement. Eight cities, including Lubbock, Texas,
declined and a hearing date with the Railroad Commission of Texas
has been set for August 28, 2000. The hearing is expected to
conclude in September with a final resolution expected in December
2000. The Settlement Agreement caps the rate increase at $3.0
million and entitles the ratifying cities to accept a rate
increase below $3.0 million in the event the Commission adopts a
lesser increase for the non-ratifying cities. At this time,
management cannot predict the outcome of this rate proceeding.
In February 2000, the United Cities Gas Division filed a rate
case in Illinois with the Illinois Commerce Commission requesting
an increase in revenues of approximately $3.1 million. After
review by the Illinois Commerce Commission of the original rate
increase, the amount requested was revised to approximately $2.1
million. In July 2000, the Staff of the Illinois Commerce
Commission entered into a settlement which would grant an increase
in annual revenues of approximately $1.4 million. The Commission
will address the settlement in September 2000 and, if approved,
the new rates would be effective in October 2000. The new rates
would be collected primarily through an increase in customer
charges.
In March 2000, the Company filed a rate case in Virginia with
the State Corporation Commission of the Commonweath of Virginia
requesting an increase in revenues of approximately $2.3 million.
The State Corporation Commission of Virginia has reviewed the
filing to determine if it meets the appropriate rules and
regulations. In July 2000, the Company refiled the case
requesting an increase in revenues of approximately $2.1 million.
The Commission accepted the revised filing and will have five
months to make the final decision. The Company expects the new
rates to be effective in December 2000. At this time, management
cannot predict the outcome of this rate proceeding.
3. Contingencies
Litigation
Greeley Division
In Colorado, the Greeley Division has been 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 previously
reported, as a result of mediation, a settlement had been reached
with five of the claimants, leaving only three remaining claimants
with aggregate claims of approximately $2.0 million. On April 7,
2000, as a result of mediation, the Company agreed to settle with
the three remaining claimants for an aggregate total of $1.5
million, which amounts have been paid by the Company's insurance
carrier, thus effectively concluding this litigation against the
Company.
On September 23, 1999, a suit was filed in the District Court
of Stevens County, Kansas, by Quinque Operating Company, Tom Boles
and Robert Ditto, against more than 200 companies in the natural
gas industry, including the Company and the Greeley Gas Division.
The plaintiffs, who purport to represent a class consisting of gas
producers, royalty owners, overriding royalty owners, working
interest owners and state taxing authorities, accuse the
defendants of underpaying royalties on gas taken from wells
situated on non-federal and non-Indian lands throughout the United
States and offshore waters predicated upon allegations that the
defendants' gas measurements are simply inaccurate and that the
defendants failed to comply with applicable regulations and
industry standards over the last 25 years. Although the plaintiffs
do not specifically allege an amount of damages, they contend that
this suit is brought to recover billions of dollars in revenues
that the defendants have allegedly unlawfully diverted from the
plaintiffs to themselves.
On April 10, 2000, this case was consolidated for pre-trial
proceedings with other similar pending litigation in federal court
in Wyoming in which the Company is also a defendant along with
over 200 other defendants in the case of In Re Natural Gas
Royalties Quitam Litigation. The Company believes that the
plaintiffs' claims are lacking in merit and intends to vigorously
defend this action. However, the Company cannot assess, at this
time, the likelihood of whether or not the plaintiffs may prevail
on any one or more of their asserted claims. In any event, 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 net cash flows of the Company because the
Company believes that it has adequate reserves to cover any
damages that may ultimately be awarded.
United Cities Propane Gas, Inc.
United Cities Propane Gas, Inc., a wholly-owned subsidiary of
the Company, is a party to an action filed June 19, 2000, styled
Michael and Joan Szirovecz vs. Randall E. Ussery d/b/a Ussery
Construction Company, et al., pending in the Circuit Court of
Sevier County, Tennessee. The Plaintiffs' claims arise out of
injuries sustained in September 1999 during the collapse of a
cabin down the side of a mountain near Sevierville, Tennessee,
that is alleged to have been caused by a low-level propane
explosion. The Plaintiffs seek to recover damages of $13.0
million. The Company denies any wrongdoing and intends to
vigorously defend against the Plaintiffs' claims. 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 net cash flows of the Company because the
Company believes that it has adequate insurance coverage for any
damages that may be ultimately awarded.
The Company is a party to other litigation matters and claims
that arise out of the ordinary business of the Company. While the
results of these litigation matters and claims cannot be predicted
with certainty, the Company does not believe the final outcome of
such litigation and claims will have a material adverse effect on
the financial condition, the results of operations or the cash
flows of the Company because the Company believes that it has
adequate insurance and reserves to cover any damages that may
ultimately be awarded.
Environmental Matters
The United Cities Division is the owner or previous owner of
manufactured gas plant sites in Keokuk, Iowa; Johnson City and
Bristol, Tennessee; and Hannibal, Missouri, 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.
As of June 30, 2000, the Company had accrued and deferred for
recovery $1.1 million, including $258,000 that was incurred for an
insurance recoverability study, and $750,000 for the
investigations of the Johnson City and Bristol, Tennessee and
Hannibal, Missouri sites. As of June 30, 2000, the Company has
incurred costs of approximately $631,000 for these sites.
Tennessee sites
United Cities Gas Company ("UCGC") and the Tennessee
Department of Environment and Conservation ("TDEC") 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, which continued through June
30, 2000. The investigative phase of the work at the site has
been completed.
The Company is unaware of any information that suggests the
Bristol site would give 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.
The Company is a party to other environmental matters and
claims that arise out of the ordinary business of the Company.
While the ultimate results of response actions to these
environmental matters and claims cannot be predicted with
certainty, the Company does not believe the final outcome of such
response actions will have a material adverse effect on the
financial condition, the results of operations or the cash flows
of the Company because the Company believes that the expenditures
related to such response actions will either be recovered through
rates, shared with other parties, or covered by adequate insurance
or reserves.
4. Short-term debt
At June 30, 2000, short-term debt was composed of $148.3
million of commercial paper and $15.6 million outstanding under
bank credit facilities.
The Company has two short-term committed credit facilities.
One short-term unsecured credit facility, which serves as a backup
liquidity facility for the Company's commercial paper program, is
for $250.0 million. No amounts were outstanding under this
facility at June 30, 2000. A second facility is for $15.0 million
with $15.0 million outstanding at June 30, 2000.
The Company also has unsecured short-term uncommitted credit
lines totaling $70.0 million. The Company had $.6 million
outstanding under these lines at June 30, 2000.
The Company has a $250.0 million commercial paper program that
is supported by the $250.0 million committed line of credit as
described above.
On August 3, 2000, the Company entered into a $485.0 million
short-term unsecured credit facility with interest starting at
LIBOR plus 75 basis points which will provide $385.0 million of
bridge financing for the Louisiana acquisition and $100.0 million
for refinancing certain existing debt. On the same date, the
Company entered into a $300.0 million credit facility which
replaces its $250.0 million short-term unsecured credit facility.
5. Statements of cash flows
Supplemental disclosures of cash flow information for the nine-
month periods ended June 30, 2000 and 1999 are presented below.
Nine months ended
June 30,
----------------------
2000 1999
------- ------
(In thousands)
Cash paid (received) for
Interest $35,902 $32,019
Income taxes (6,240) 14,324
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
(loss) 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,
--------------------------
2000 1999
------ ------
(Thousands of shares)
Weighted average common
shares - basic 31,501 30,669
Effect of dilutive securities:
Restricted stock - -
Stock options - -
------ ------
Weighted average common
shares - assuming dilution 31,501 30,669
====== ======
For the nine months ended
June 30,
--------------------------
2000 1999
------ ------
(Thousands of shares)
Weighted average common
shares - basic 31,363 30,464
Effect of dilutive securities:
Restricted stock 138 236
Stock options 9 10
------ ------
Weighted average common
shares - assuming dilution 31,510 30,710
====== ======
7. Segment Information
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information", the Company has identified the following
three segments: Utility, Propane and Energy Services. For a more
complete description of these segments, please refer to Note 1 of
notes to consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended September 30, 1999.
Summarized financial information concerning the Company's
reportable segments for the three months and nine months ended
June 30, 2000 and 1999 is shown in the following table:
Energy
Utility Propane Services Total
---------- ------- -------- --------
(In thousands)
For the three
months ended
June 30, 2000:
-------------------
Operating revenues $ 127,142 $ 1,954 $25,310 $ 154,406
Intersegment revenues 1,158 - 886 2,044
Net income (loss) (7,023) (1,714) 4,341 (4,396)
Energy
Utility Propane Services Total
---------- ------- -------- --------
(In thousands)
For the three
months ended
June 30, 1999:
-------------------
Operating revenues $ 96,668 $ 1,775 $11,988 $ 110,431
Intersegment revenues 841 - - 841
Net income (loss) (5,074) (1,706) 1,485 (5,295)
Energy
Utility Propane Services Total
---------- ------- -------- --------
(In thousands)
As of and for the
nine months ended
June 30 2000:
-------------------
Operating revenues $ 620,360 $21,395 $54,377 $ 696,132
Intersegment revenues 2,462 - 2,653 5,115
Net income (loss) 30,566 (325) 9,260 39,501
Total assets 1,179,329 14,030 100,429 1,293,788
Energy
Utility Propane Services Total
---------- ------- -------- --------
(In thousands)
As of and for the
nine months ended
June 30, 1999:
-------------------
Operating revenues $ 533,152 $19,096 $31,084 $ 583,332
Intersegment revenues 2,089 - - 2,089
Net income 34,215 11 4,654 38,880
Total assets 1,098,589 16,592 79,391 1,194,572
The following tables present a reconciliation of the operating
revenues by segment to total consolidated revenues for the three
months and nine months ended June 30, 2000 and 1999.
Three months ended
June 30,
--------------------
2000 1999
-------- --------
(In thousands)
Total revenues for
reportable segments $154,406 $110,431
Elimination of
intersegment revenues (2,044) (841)
-------- --------
Total consolidated operating revenues $152,362 $109,590
======== ========
Nine months ended
June 30,
--------------------
2000 1999
-------- --------
(In thousands)
Total revenues for
reportable segments $696,132 $583,332
Elimination of
intersegment revenues (5,115) (2,089)
-------- --------
Total consolidated operating revenues $691,017 $581,243
======== ========
A reconciliation of total assets for the reportable segments
to total consolidated assets for June 30, 2000 and 1999 is
presented below.
June 30,
----------------------
2000 1999
---------- ----------
(In thousands)
Total assets for
reportable segments $1,293,788 $1,194,572
Elimination of
intercompany receivables (16,559) (16,568)
---------- ----------
Total consolidated
assets $1,277,229 $1,178,004
========== ==========
8. Related party transactions
Atmos owns a 45% interest in Woodward Marketing, LLC, a
limited liability company headquartered in Houston, Texas, which
is engaged in gas marketing and energy services. The Company
holds its interest in WMLLC through its ownership of Atmos Energy
Marketing, LLC. Included in purchased gas cost were purchases
from WMLLC of approximately $55.9 million and $24.8 million for
the three-month periods ended June 30, 2000 and 1999,
respectively, and approximately $154.6 million and $76.7 million
for the nine-month periods ended June 30, 2000 and 1999,
respectively. In addition, WMLLC has a revolving credit facility
with Atmos Energy Marketing, LLC whereby WMLLC may borrow up to
$15.0 million on a revolving credit basis. At June 30, 2000, $1.5
million was outstanding under the credit facility.
9. Acquisition of Missouri assets
On May 31, 2000, the Company completed the acquisition of the
Missouri natural gas distribution assets of Associated Natural
Gas, a division of Arkansas Western Gas, a wholly owned subsidiary
of Southwestern Energy Company. The Company paid $32.0 million in
cash to acquire this distribution system, which serves
approximately 48,000 customers.
10. Subsequent events
Subsequent to June 30, 2000, the Company entered into an
agreement to purchase weather hedges for its Texas and Louisiana
operations effective for the 2000-2001 heating season. The hedges
provide protection against weather that is at least seven percent
warmer than normal in both Texas and Louisiana while preserving
any upside. The hedges also allow for an adjustment in weighting
between Louisiana and Texas related to the timing of the closing
of the Louisiana acquisition.
Subsequent to June 30, 2000, the Company announced that it
will acquire from Woodward Marketing, Inc., the remaining 55%
interest in Woodward Marketing, LLC in exchange for 1,423,193
shares of the Company's stock, valued at approximately $33.3
million. Of the 1,423,193 shares to be issued, 960,000 shares are
subject to adjustment if the Company's share price does not reach
$25 per share for any 30 consecutive trading days over a five-year
period from the date of closing. This acquisition will require
approval in six of the 13 states in which the Company operates.
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, 2000, and
the related condensed consolidated statements of income and cash
flows for the three-month and nine-month periods ended June 30,
2000 and 1999. 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 auditing standards generally
accepted in the United States, 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 reviews, 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 accounting principles generally accepted in the
United States.
We have previously audited, in accordance with auditing
standards generally accepted in the United States, the
consolidated balance sheet of Atmos Energy Corporation as of
September 30, 1999, 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 9,
1999, 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, 1999, 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
July 27, 2000
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 1999 Annual Report to
Shareholders and the Company's Annual Report on Form 10-K for the
year ended September 30, 1999.
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 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," "expect," "estimate," "plans," "believes,"
"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, 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
During the nine months ended June 30, 2000, the Western
Kentucky Division received a rate increase in Kentucky of
approximately $9.9 million in annual revenues, effective
December 21, 1999, and a five-year weather normalization pilot
program beginning in November 2000. The Energas Division received
an increase in annual revenues of approximately $2.1 million in
base rates plus an increase of $.1 million in service charges in
Amarillo, Texas, effective for bills rendered on or after January
1, 2000. The agreement also provided for changes in rate
structure to reduce the impact of warmer than normal weather and
to improve the recovery of the actual cost of service calls. The
Energas Division's request for an annual increase of approximately
$9.8 million from the 67 cities served by its West Texas System
could not be settled. In March 2000, it was appealed to the
Railroad Commission of Texas. Subsequently, 59 cities
representing approximately 58% of Energas' customers ratified a
non-binding Settlement Agreement. Eight cities, including
Lubbock, Texas, declined and a hearing date with the Railroad
Commission of Texas has been set for August 28, 2000. The hearing
is expected to conclude in September with a final resolution
expected in December 2000. The Settlement Agreement caps the rate
increase at $3.0 million and entitles the ratifying cities to
accept a rate increase below $3.0 million in the event the
Commission adopts a lesser increase for the non-ratifying cities.
In February 2000, the United Cities Gas Division filed a rate case
in Illinois for approximately $3.1 million. It was subsequently
lowered to approximately $2.1 million and final approval of a
settlement with the Commission Staff for $1.4 million is expected
in September 2000. It would be collected primarily through an
increased customer charge and is expected to be effective October
1, 2000. In March 2000, the Company filed a rate case in Virginia
for approximately $2.3 million. Upon completion of review by the
Virginia Commission, the Company revised its case to approximately
$2.1 million. It was accepted by the Commission in July 2000 and
a decision is required within five months. For further
information regarding rate activity, see Note 2 of notes to
condensed consolidated financial statements. The Company
continues to monitor rates in all its service areas for recovery
of its service costs and an adequate return on its investment.
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.
This generally results 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.
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. Weather for
the nine months ended June 30, 2000 was 19% warmer than normal and
3% warmer than weather in the corresponding period of the prior
year. The Company estimates that the decreased sales to weather
sensitive customers reduced net income for the nine months ended
June 30, 2000 by approximately $28.4 million or $.90 per diluted
share less than it would have been had the Company experienced
normal temperatures and rainfall in its respective service areas.
The Company has weather normalization adjustments ("WNAs") in
Georgia and Tennessee, where it serves approximately 186,000
customers or approximately 18% of the Company's total customers
and revenues. The WNAs increase the base rate when weather is
warmer than normal and decrease the base rate when weather is
colder than normal. The effect of the WNAs was to increase
revenues by approximately $4.1 million for the nine months ended
June 30, 2000, as compared with an increase of approximately $4.4
million for the nine months ended June 30, 1999. The Company did
not have WNAs in its other service areas during the nine months
ended June 30, 2000.
In July 2000, the Company entered into an agreement to
purchase weather hedges for its Texas and Louisiana operations
effective for the 2000-2001 heating season. The hedges provide
protection against weather that is at least seven percent warmer
than normal in both Texas and Louisiana while preserving any
upside. The hedges also allow for an adjustment in weighting
between Louisiana and Texas related to the timing of the closing
of the Louisiana acquisition.
Status of Pending Acquisitions and Joint Venture
On April 13, 2000, the Company announced a definitive
agreement to acquire the gas operations of Louisiana Gas Service
Company, a division of Citizens Communications Company
("Citizens") and LGS Natural Gas Company, a subsidiary of
Citizens, for $375.0 million. This acquisition will add
approximately 279,000 customers and will be accounted for as a
purchase. The transaction is anticipated to be accretive to
earnings in the first full year of operations, excluding one-time
charges. The acquisition is anticipated to be completed by early
2001, subject to approval by the Louisiana Public Service
Commission and compliance with the Hart-Scott-Rodino Antitrust
Improvements Act. Upon closing, Atmos will become the largest
natural gas distributor in the state of Louisiana.
In February 2000, the Company announced that it had entered
into an agreement to form a joint venture which combined its
United Cities Propane Gas operations with the propane operations
of AGL Resources, Inc., Atlanta, Georgia; Piedmont Natural Gas
Company, Inc., Charlotte, North Carolina; and TECO Energy, Tampa,
Florida. The combined entity, named US Propane, L.P., is among
the 10 largest propane retailers in the nation with nearly 200,000
customers. On May 31, 2000, US Propane, L.P., in which Atmos is a
partner, announced that it will combine operations with Heritage
Holdings, Inc. to create the fourth largest retail propane
distributor in the United States. US Propane will own all of the
general partnership interest and approximately 34% of the limited
partnership interest in Heritage Propane Partners, the master
limited partnership. Shares of the general partner will be held
proportionately among Atmos and its three US Propane partners.
The transaction is expected to close later this summer.
On May 31, 2000, the Company completed the acquisition of the
Missouri natural gas distribution assets of Associated Natural
Gas, a division of Arkansas Western Gas, a wholly owned subsidiary
of Southwestern Energy Company. Atmos paid $32.0 million in cash
to acquire approximately 48,000 customers at a cost of
approximately $667 per customer.
FINANCIAL CONDITION
For the nine months ended June 30, 2000 net cash provided by
operating activities totaled $117.4 million compared with $106.8
million for the nine months ended June 30, 1999. Net income
increased $.6 million to $39.5 million for the nine months ended
June 30, 2000 from $38.9 million for the nine months ended June
30, 1999. The $10.6 million increase in cash provided by
operating activities is due primarily to increased revenues,
partially offset by an increase in operating expenses. The higher
revenues reflect new rate designs and revenue increases discussed
in Note 2 of notes to condensed consolidated financial statements.
Net operating assets and liabilities decreased $16.9 million for
the nine months ended June 30, 2000 compared with a decrease of
$17.1 million for the nine months ended June 30, 1999. 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 and when
refilling underground storage inventories. It also reflected an
increase of $16.4 million in taxes payable related to a large tax
refund due at September 30, 1999, and an increase of $7.8 million
in other current liabilities related to storage gas inventories.
It was partially offset by an increase of $12.3 million in
deferred charges related primarily to increases in pension plan
assets.
Major cash flows used in investing activities for the nine
months ended June 30, 2000 included capital expenditures of $54.3
million and the acquisition of ANG's Missouri distribution system
for $32.0 million compared with $79.8 million for the nine months
ended June 30, 1999. The capital expenditures budget for fiscal
2000, excluding acquisitions, is approximately $75.0 million, as
compared with actual capital expenditures of $110.4 million in
fiscal 1999. The capital budget and capital expenditures,
excluding acquisitions, are lower for 2000 than for 1999 because
the Company's major technology projects were completed in 1999.
Also, non-essential capital expenditures are being postponed in
fiscal 2000 under the Company's warm winter weather plan.
Budgeted capital projects for fiscal 2000 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, 2000, cash flows used by
financing activities amounted to $32.7 million as compared with
$21.5 million for the nine months ended June 30, 1999. During the
nine-month period ended June 30, 2000, commercial paper and short-
term debt outstanding decreased $4.4 million, as compared with an
increase of $43.8 million for the nine months ended June 30, 1999,
due to seasonal factors, project costs of the Customer Service
Initiative and the implementation of Oracle financials in fiscal
1999. Payments of long-term debt totaled $10.9 million for the
nine months ended June 30, 2000, as compared with $56.7 million
for the nine months ended June 30, 1999. The Company paid $26.9
million in cash dividends during the nine months ended June 30,
2000, compared with dividends of $25.3 million paid during the
nine months ended June 30, 1999. This reflects increases in the
quarterly dividend rate and in the number of shares outstanding.
In the nine months ended June 30, 2000, the Company issued 497,153
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, 2000
and 1999.
Nine months ended
June 30,
---------------------
2000 1999
------- -------
Shares issued:
Restricted Stock Grant Plan - 56,850
Employee Stock Ownership Plan 191,285 52,738
Direct Stock Purchase Plan 303,979 524,494
Outside Directors Stock-for-Fee Plan 1,889 1,341
United Cities Long-term Stock Plan - 5,550
------- -------
Total shares issued 497,153 640,973
======= =======
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 2000. At June 30, 2000 the
Company had $265.0 million in committed short-term credit
facilities, of which $15.0 million was outstanding and $148.3
million supported commercial paper outstanding. The committed
lines of credit are renewed or renegotiated at least annually. At
June 30, 2000, the Company also had $70.0 million of uncommitted
short-term lines of credit, of which $.6 million was outstanding.
The Company financed the $32.0 million Missouri acquisition, which
closed on May 31, 2000, from its commercial paper program. On
August 3, 2000, the Company entered into a $485.0 million short-
term unsecured credit facility with interest starting at LIBOR
plus 75 basis points which will provide $385.0 million of bridge
financing for the Louisiana acquisition and $100.0 million for
refinancing certain existing debt. On the same date, the Company
entered into a $300.0 million credit facility which replaces its
$250.0 million short-term unsecured credit facility.
In December 1999, the Company filed a universal shelf
registration statement with the Securities and Exchange Commission
("SEC") to issue, from time to time, up to $500 million in new
common stock and/or debt. The Company also filed applications for
approval to issue securities with six state utility commissions.
The Company has received approvals from five of the six required
states and expects to receive the final state approval by
September 2000. Once the shelf filing is declared effective by
the SEC and is approved by the various state utility commissions,
the Company will be authorized to "take securities off the shelf"
and issue them to investors and lenders. The proceeds are planned
to be used for general corporate purposes, including acquisitions,
debt repayment, and other business-related matters. The universal
shelf should provide the Company with greater flexibility in its
financing options.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000, COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1999
Operating revenues increased by 39% to $152.4 million for the
three months ended June 30, 2000 from $109.6 million for the three
months ended June 30, 1999. The most significant factor
contributing to the increase in operating revenues was a higher
average sales price due to rate increases and the pass through of
higher gas cost. Rate increases were implemented in Kentucky in
December 1999 and in Amarillo, Texas in January 2000. Sales to
West Texas irrigation customers also increased, with 3.7 billion
cubic feet ("Bcf") sold in the third quarter compared with 2.1 Bcf
sold during the same period in 1999. The total volume of gas sold
and transported for the three months ended June 30, 2000 increased
7% to 36.8 Bcf compared with 34.5 Bcf for the three months ended
June 30, 1999. During the quarter ended June 30, 2000,
temperatures were 1% cooler than in the corresponding quarter of
the prior year, and were 12% warmer than the 30-year normal
weather for the quarter. The average sales price per Mcf sold
increased $1.45 to $5.99 due to an increase in the average cost of
gas and the rate increases. The average cost of gas per Mcf sold
increased 52% to $3.78 for the three months ended June 30, 2000
from $2.48 for the three months ended June 30, 1999 due to
generally higher gas supply costs. Changes in cost of gas do not
directly affect the Company's gross profit.
Gross profit increased 12% to $60.0 million for the three
months ended June 30, 2000, from $53.4 million for the three
months ended June 30, 1999. The increase in gross profit was
primarily due to the positive impact of new rate designs and
revenue increases approved in recent regulatory proceedings, as
well as the addition of approximately 48,000 customers upon the
closing of the acquisition of the ANG Missouri assets in May.
Also, transportation revenues increased $.7 million due to an
increase of 1.3 Bcf in transportation volumes and an increase of
$.01 in average transportation revenue per Mcf.
Operating expense increased 18% to $62.4 million for the three
months ended June 30, 2000 from $53.0 million for the three months
ended June 30, 1999. The major factors contributing to the
increase were the $8.7 million increase in operation expense and
the $1.1 million increase in depreciation and amortization. The
increase in operation expense was due to management separation
costs, an increase in the reserve for accounts receivable and
expenses associated with the additional Missouri customers. The
Company increased its reserves in the third quarter for aged
accounts and rising gas costs but believes that its aggressive
collection practices and the onset of the winter heating season
will result in collecting accounts that have been slow to pay.
The increase in depreciation and amortization was due to
technology improvements placed in service in 1999.
Operating income (loss) decreased to a loss of $2.3 million
for the three months ended June 30, 2000 from income of $.4
million for the three months ended June 30, 1999. The decrease in
operating income resulted from increased operating expenses, as
discussed above.
Other income increased $3.7 million for the three months ended
June 30, 2000 compared with the three months ended June 30, 1999
primarily due to an increase in the earnings recorded from the
Company's 45 percent interest in Woodward Marketing, LLC.
Propane statistics for the three months ended June 30, 2000
and 1999 are included in the "Operating Statistics" tables which
appear at the end of Management's Discussion and Analysis.
Propane sales for the third quarter were unchanged from the
corresponding quarter of the prior year at 1.7 million gallons.
Likewise, the propane business incurred a loss of $1.7 million for
the three months ended June 30, 2000, the same as the loss for the
corresponding period of the prior year. The loss for the quarter
ended June 30, 2000 was primarily the result of higher propane
costs and secondarily due to warmer than normal winter weather.
Propane customers at June 30, 2000 increased to 40,564, or 3%, as
compared with June 30, 1999. The propane business has entered
into agreements to participate in a joint venture with other
propane companies, which will be merged into a master limited
partnership as discussed above in the "Status of Pending
Acquisitions and Joint Venture" section.
Interest expense increased $.5 million, or 5%, for the three
months ended June 30, 2000 compared with the three months ended
June 30, 1999. The increase was primarily due to higher interest
rates and average short-term balances outstanding during the three
months ended June 30, 2000.
The Company reported a loss of $4.4 million, or $.14 per
diluted share for the three months ended June 30, 2000 compared
with a loss of $5.3 million or $.17 per diluted share for the
three months ended June 30, 1999. This improvement resulted
primarily from the increase in gross profit discussed above.
NINE MONTHS ENDED JUNE 30, 2000, COMPARED WITH NINE MONTHS ENDED
JUNE 30, 1999
Operating revenues increased by 19% to $691.0 million for the
nine months ended June 30, 2000 from $581.2 million for the nine
months ended June 30, 1999. The primary factor contributing to
the higher operating revenues was a 22% increase in the average
gas sales revenue per Mcf. The higher sales price reflects the
new rate designs and revenue increases discussed in Note 2 of
notes to condensed consolidated financial statements and a 32%
increase in the average cost of gas per Mcf sold. Cost of gas is
passed through to the customer and does not affect the Company's
gross profit. The increase in revenues due to increased average
sales price was partially offset by lower throughput due to warmer
winter weather. Total volumes delivered decreased .7 Bcf or .5%
for the nine months ended June 30, 2000, as compared with the nine
months ended June 30, 1999. The volume transported increased 2.3
Bcf compared with the nine months ended June 30, 1999 due to
switching from sales to transportation service by some industrial
customers. Sales volumes decreased 3.1 Bcf for the nine months
ended June 30, 2000 compared with the corresponding period of the
prior year due to warmer weather. Weather in the Company's
service areas was 3% warmer than weather in the corresponding nine-
month period of the prior fiscal year, and 19% warmer than 30-year
normal weather. Sales revenues from all customer classes
increased due to higher sales prices. The average sales price per
Mcf increased to $5.45 for the nine months ended June 30, 2000
from $4.48 for the nine months ended June 30, 1999. The increase
in the average sales price reflects an increase in the average
cost of gas and a margin increase due to rate increases. The
average cost of gas per Mcf sold increased to $3.45 for the nine
months ended June 30, 2000 from $2.62 for the nine months ended
June 30, 1999 because of generally higher gas supply costs. The
increased cost of gas did not directly affect the Company's gross
profit.
Gross profit increased 4% to $267.7 million for the nine
months ended June 30, 2000, compared with $257.0 million for the
nine months ended June 30, 1999. This increase was primarily due
to rate increases implemented in Kentucky and Amarillo, Texas.
Operating expenses increased 6% to $183.9 million in the nine
months ended June 30, 2000, from $174.0 million in the nine months
ended June 30, 1999. The increase was primarily due to an
increase of $6.7 million in depreciation and amortization and an
increase of $3.0 million in operation expense for the nine months
ended June 30, 2000. The increase in depreciation related to
utility plant additions placed in service during fiscal 1999. The
$3.0 million increase in operation expense resulted from an
increase in the reserve for doubtful accounts and management
severance expenses incurred for the nine months ended June 30,
2000.
Operating income increased for the nine months ended June 30,
2000 to $83.8 million from $82.9 million for the nine months ended
June 30, 1999. The increase in operating income was primarily
related to the increased operating revenues and related gross
profit, as discussed above.
Other income increased $5.2 million for the nine months ended
June 30, 2000 compared with the nine months ended June 30, 1999
primarily due to an increase of $5.5 million in the earnings from
the Company's 45 percent interest in Woodward Marketing, LLC
("WMLLC"). This improvement is a result of growth in WMLLC's core
pre-tax earnings and net unrealized gains of approximately $2.6
million calculated in accordance with Emerging Issues Task Force
98-10.
The propane operation sold 18.2 million gallons of propane for
the nine months ended June 30, 2000, as compared with 18.4 million
gallons for the nine months ended June 30, 1999. Propane gross
profit decreased $.7 million for the nine months ended June 30,
2000 compared with the same period last year due to a combination
of factors including a lower average profit margin due to
comparatively higher cost of supply.
Interest charges increased $5.5 million, or 20%, due to higher
average interest rates for the nine months ended June 30, 2000, as
well as capitalized interest of $3.7 million recorded on
technology projects in process for the nine months ended June 30,
1999.
For the nine months ended June 30, 2000, the Company reported
net income of $39.5 million or $1.25 per diluted share, compared
with $38.9 million or $1.27 per diluted share for the nine months
ended June 30, 1999. Net income for the nine months ended June 30,
2000, was above the same period a year ago in spite of lower gas
sales volumes resulting from warmer weather and regulatory lag.
Earnings per share for the nine months ended decreased slightly
due to the increase in the number of shares outstanding.
The Company estimates that the impact of the weather being
19% warmer than normal for the nine months ended June 30, 2000
caused net income to be approximately $28.4 million less than it
would have been had the Company experienced normal temperatures
and rainfall in its respective service areas. Dividends per share
increased approximately 4% to $.855 for the nine months ended June
30, 2000. Diluted average shares outstanding increased 3% due
primarily to shares issued under the Employee Stock Ownership Plan
and the Direct Stock Purchase Plan.
Total natural gas meters and propane customers at June 30,
2000 increased 75,486, or 7%, compared with June 30, 1999.
June 30,
--------------------------
2000 1999
---------- ----------
Meters-in-service at end of period
Residential 968,308 903,081
Commercial 104,007 94,590
Public authority and other 7,413 6,405
Industrial (including agricultural) 14,401 15,702
--------- ----------
Total meters 1,094,129 1,019,778
Propane customers 40,564 39,429
--------- ----------
Total 1,134,693 1,059,207
========= ==========
UTILITY, PROPANE AND ENERGY SERVICES 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, and Western
Kentucky Division as well as Shared Services. The Propane
business is conducted through United Cities Propane and includes
wholesale and retail propane sales to approximately 41,000
customers in four states. As discussed under "Status of Pending
Acquisitions and Joint Venture," Atmos has entered into an
agreement with three other companies to form a joint venture to
combine United Cities Propane Gas with the propane operations of
the other companies. The combined entity will be named US
Propane, L.P. Subsequently, US Propane is to combine operations
with Heritage Holdings, Inc. The transactions are expected to be
completed in 2000. The Energy Services business includes non-
regulated irrigation sales, energy services to large volume
customers, non-regulated underground storage operations, a 45%
interest in Woodward Marketing, LLC, leasing of real estate,
vehicles and appliances and non-regulated shared services. The
following tables of operating statistics by segment summarizes
data of the utility, propane, and energy services segments of the
Company for the three-month and nine-month periods ended June 30,
2000 and 1999. For further information regarding operating
results of the segments, see Note 7 of notes to condensed
consolidated financial statements.
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Three months ended June 30,
2000 1999
Sales volumes -- MMcf(1) -------- --------
Residential 8,608 9,379
Commercial 4,380 4,423
Public authority and other 712 836
Industrial (including agricultural) 9,162 7,252
------- ------
Total 22,862 21,890
Transportation volumes -- MMcf(1) 13,932 12,631
------- ------
TOTAL THROUGHPUT - MMcf (1) 36,794 34,521
======= ======
Propane - Gallons (000's) 1,749 1,681
======= ======
OPERATING REVENUES (000's)
Gas sales revenues
Residential $ 66,464 $ 52,452
Commercial 28,525 20,853
Public authority and other 3,809 3,066
Industrial (including agricultural) 38,254 22,962
-------- --------
Total gas sales revenues 137,052 99,333
Transportation revenues 5,831 5,149
Propane revenues 1,954 1,775
Other revenues 7,525 3,333
-------- --------
Total operating revenues $152,362 $109,590
======== ========
Cost of gas (excluding propane and other) $ 86,312 $ 54,202
======== ========
Average gas sales revenues per Mcf $ 5.99 $ 4.54
Average transportation revenue per Mcf $ .42 $ .41
Average cost of gas per Mcf sold $ 3.78 $ 2.48
(1) Volumes are reported as metered in million cubic feet ("MMcf").
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Nine months ended June 30,
2000 1999
Sales volumes -- MMcf(1) -------- --------
Residential 58,149 61,872
Commercial 27,048 27,618
Public authority and other 5,007 5,304
Industrial (including agricultural) 25,717 24,183
-------- -------
Total 115,921 118,977
Transportation volumes -- MMcf(1) 44,653 42,334
-------- -------
TOTAL THROUGHPUT - MMcf (1) 160,574 161,311
======== =======
Propane - Gallons (000's) 18,215 18,387
======== =======
OPERATING REVENUES (000's)
Gas sales revenues
Residential $352,403 $309,508
Commercial 148,262 124,523
Public authority and other 23,662 20,087
Industrial (including agricultural) 107,269 79,422
-------- --------
Total gas sales revenues 631,596 533,540
Transportation revenues 18,038 17,599
Propane revenues 21,395 19,096
Other revenues 19,988 11,008
-------- --------
Total operating revenues $691,017 $581,243
======== ========
Cost of gas (excluding propane and other) $399,444 $311,663
======== ========
Average gas sales revenues per Mcf $ 5.45 $ 4.48
Average transportation revenue per Mcf $ .40 $ .42
Average cost of gas per Mcf sold $ 3.45 $ 2.62
(1) Volumes are reported as metered in million cubic feet ("MMcf").
ATMOS ENERGY CORPORATION
OPERATING STATISTICS BY SEGMENT
Three months ended
June 30,
-----------------------
2000 1999
--------- ---------
UTILITY
Operating revenues (000's) $ 125,984 $ 95,827
Sales volumes (MMcf) 17,948 18,661
Transportation volumes (MMcf) 13,932 12,631
------- -------
Total throughput 31,880 31,292
======= =======
Heating degree days
Actual 281 277
30-year normal 318 318
Percent of normal 88% 87%
Meters, end of period 1,094,129 1,019,778
PROPANE
Operating revenues (000's) $1,954 $1,775
Sales volumes (000 gallons):
Retail 1,545 1,507
Wholesale 204 174
------- -------
Total 1,749 1,681
======= =======
Propane degree days 320 198
Percent of normal 96% 59%
Customers, end of period 40,564 39,429
ENERGY SERVICES
Operating revenues (000's) $24,424 $11,988
Gas revenues (000's) $18,120 $ 9,551
Gas sales volumes (MMcf):
Irrigation 3,671 2,115
Industrial 1,243 1,114
------- -------
Total 4,914 3,229
======= =======
Atmos equity in earnings of WMLLC (000's) $ 4,740 $ 938
NOTE: Segment operating revenues and volumes are net of inter-
segment eliminations. See Note 7 for intersegment revenues.
ATMOS ENERGY CORPORATION
OPERATING STATISTICS BY SEGMENT
Nine months ended
June 30,
-----------------------
2000 1999
--------- ---------
UTILITY
Operating revenues (000's) $ 617,898 $ 531,063
Sales volumes (MMcf) 105,951 111,160
Transportation volumes (MMcf) 44,653 42,334
------- -------
Total throughput 150,604 153,494
======= =======
Heating degree days
Actual 3,228 3,319
30-year normal 3,965 3,965
Percent of normal 81% 84%
Meters, end of period 1,094,129 1,019,778
PROPANE
Operating revenues (000's) $21,395 $19,096
Sales volumes (000 gallons):
Retail 16,378 16,154
Wholesale 1,837 2,233
------- -------
Total 18,215 18,387
======= =======
Propane degree days 3,421 3,408
Percent of normal 86% 85%
Customers, end of period 40,564 39,429
ENERGY SERVICES
Operating revenues (000's) $51,724 $31,084
Gas revenues (000's) $34,598 $23,533
Gas sales volumes (MMcf):
Irrigation 5,689 3,791
Industrial 4,281 4,026
------- -------
Total 9,970 7,817
======= =======
Atmos equity in earnings of WMLLC (000's) $ 9,127 $ 3,599
NOTE: Segment operating revenues and volumes are net of inter-
segment eliminations. See Note 7 for intersegment revenues.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
There have been no material changes from the information
provided in Item 7A of the Company's Annual Report on Form 10-K
for the year ended September 30, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of notes to condensed consolidated financial
statements herein for a description of legal proceedings.
Item 5. Other Information
In July 2000, Fred E. Meisenheimer was named Vice President
and Controller. Mr. Meisenheimer joined the Company from Vartec
Telecom, Inc. where he was controller and responsible for all
accounting and treasury operations. Prior to that, Mr.
Meisenheimer served as assistant controller and general auditor
for Oryx Energy Company from 1988 to 1999 and as assistant
controller for Sun Exploration and Production Company from 1979 to
1988. Mr. Meisenheimer also served as audit manager at Deloitte &
Touche LLP from 1970 to 1979.
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
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated April 13, 2000, announcing that it had entered
into a definitive agreement to acquire the Louisiana gas
operations of Louisiana Gas Service Company, a division of
Citizens Communications Company, and LGS Natural Gas Company,
a subsidiary of Citizens Communications Company. The purchase
price for the transaction is $375 million, which is being
initially financed through a fully underwritten committed bank
facility.
Under Item 7, Financial Statements and Exhibits, an exhibit
was attached: a copy of a related press release dated April
13, 2000.
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated April 13, 2000, announcing that J. Charles
Goodman had resigned as Executive Vice President, Utility
Operations, effective April 28, 2000. In addition, on April
25, 2000, the Company announced that Larry J. Dagley had been
named Chief Operating Officer of US Propane, L.P. and had
resigned as Executive Vice President and Chief Financial
Officer of Atmos Energy Corporation. The Company also
announced in the release that J. Patrick Reddy had been
appointed Senior Vice President, Chief Financial Officer and
Treasurer, all effective immediately.
Under Item 7, Financial Statements and Exhibits, an exhibit
was attached: a copy of a related press release dated April
13, 2000 and a copy of a related press release dated April 25,
2000.
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated May 31, 2000, announcing that it had completed
the acquisition of the Missouri natural gas distribution
assets of Associated Natural Gas, a division of Arkansas
Western Gas Company, which is a wholly-owned subsidiary of
Southwestern Energy Company.
Under Item 7, Financial Statements and Exhibits, an exhibit
was attached: a copy of a related press release dated May 31,
2000 and a copy of the Asset Sale and Purchase Agreement.
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated June 15, 2000, announcing that US Propane, L.P.
will combine with Heritage Holdings, Inc. the general partner
of Heritage Propane Partners, L.P., to create the fourth
largest retail propane distributor in the United States.
Through a series of transactions, US Propane will be the
general partner in a master limited partnership that will
distribute propane to over 480,000 customers in 28 states.
Under Item 7, Financial Statements and Exhibits, an exhibit
was attached: a copy of a related press release dated June
15, 2000.
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 10, 2000 By: /s/ FRED E. MEISENHEIMER
--------------------------------
Fred E. Meisenheimer
Vice President and Controller
(Chief Accounting Officer
and duly authorized signatory)
EXHIBITS INDEX
Item 6(a)
Exhibit Page
Number Description Number
------- ----------- -------
10.1 Term Credit Agreement, dated as of August
3, 2000, among the Company, Bank of
America, N.A., BankOne, NA, and Societe
Generale New York Branch
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos Energy
Corporation for the nine months ended
June 30, 2000
