QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1800 Three Lincoln Centre
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
(214) 934-9227
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X .No .
Number of shares outstanding of each of the issuer's classes of
common stock, as of May 2, 1994, as adjusted for the 3-for-2
stock split to be paid May 16, 1994. See Note 1 to the
consolidated financial statements.
Class Shares Outstanding
------------ ------------------
No Par Value 15,224,201
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
March 31, September 30,
1994 1993
------------ -------------
ASSETS
Property, plant and equipment $523,779 $501,512
Less accumulated depreciation and
amortization 212,954 202,237
-------- --------
Net property, plant and equipment 310,825 299,275
Current assets
Cash and cash equivalents 2,667 2,286
Accounts receivable, net 66,502 29,200
Inventories 6,037 6,064
Gas stored underground 4,931 17,603
Other current assets 3,035 4,240
-------- --------
Total current assets 83,172 59,393
Deferred charges and other assets 37,675 32,950
-------- --------
$431,672 $391,618
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock outstanding: 15,224,201
shares at 3/31/94 and 14,868,902
shares at 9/30/93 $ 76 $ 74
Additional paid-in capital 101,026 94,279
Retained earnings 59,387 45,076
-------- --------
Total shareholders' equity 160,489 139,429
Long-term debt 98,303 105,853
-------- --------
Total capitalization 258,792 245,282
Current liabilities
Current maturities of long-term debt 4,000 6,300
Notes payable to banks 27,800 35,700
Accounts payable 46,595 27,803
Taxes payable 11,455 3,797
Customers' deposits 8,324 7,862
Other current liabilities 13,394 6,455
-------- --------
Total current liabilities 111,568 87,917
Deferred income taxes 30,128 32,614
Deferred credits and other liabilities 31,184 25,805
-------- --------
$431,672 $391,618
======== ========
See accompanying notes to consolidated financial statements.
2
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
March 31,
-----------------------
1994 1993
-------- --------
Operating revenues $186,944 $166,238
Purchased gas cost 127,578 107,632
-------- --------
Gross profit 59,366 58,606
Operating expenses
Operation 23,620 22,640
Maintenance 1,466 1,552
Depreciation and amortization 4,672 4,415
Taxes, other than income 5,810 5,660
Income taxes 7,453 7,462
------- --------
Total operating expenses 43,021 41,729
------- --------
Operating income 16,345 16,877
Other expense (3) (63)
Interest charges 3,100 3,054
------- --------
Net income $13,242 $13,760
======= =======
Net income per share $ .87 $ .97
======= =======
Cash dividends per share
(See Note 2) $ .22 $ .21
======= =======
Average shares outstanding 15,224 14,209
======= =======
See accompanying notes to consolidated financial statements.
3
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Six months ended
March 31,
-----------------------
1994 1993
-------- --------
Operating revenues $332,445 $296,938
Purchased gas cost 224,658 195,694
-------- --------
Gross profit 107,787 101,244
Operating expenses
Operation 47,019 42,026
Maintenance 2,996 2,969
Depreciation and amortization 9,339 8,899
Taxes, other than income 10,347 9,992
Income taxes 11,439 10,751
-------- --------
Total operating expenses 81,140 74,637
-------- --------
Operating income 26,647 26,607
Other income 85 516
Interest charges 6,402 6,598
-------- --------
Net income $ 20,330 $ 20,525
======== ========
Net income per share $ 1.34 $ 1.45
======== ========
Cash dividends per share
(See Note 2) $ .44 $ .43
======== ========
Average shares outstanding 15,135 14,129
======== ========
See accompanying notes to consolidated financial statements.
4
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Twelve months ended
March 31,
-----------------------
1994 1993
-------- --------
Operating revenues $495,148 $434,907
Purchased gas cost 325,496 279,991
-------- --------
Gross profit 169,652 154,916
Operating expenses
Operation 87,772 80,111
Maintenance 6,362 5,726
Depreciation and amortization 17,759 17,236
Taxes, other than income 17,161 16,548
Income taxes 10,761 7,702
-------- --------
Total operating expenses 139,815 127,323
-------- --------
Operating income 29,837 27,593
Other income 119 900
Interest charges 12,606 13,120
-------- --------
Net income $ 17,350 $ 15,373
======== ========
Net income per share $ 1.17 $ 1.10
======== ========
Cash dividends per share
(See Note 2) $ .87 $ .84
======== ========
Average shares outstanding 14,840 13,993
======== ========
See accompanying notes to consolidated financial statements.
5
ATMOS ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Six months ended
March 31,
-----------------------
1994 1993
-------- --------
Cash Flows From Operating Activities
Net income $ 20,330 $ 20,525
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 9,339 8,951
Charged to other accounts 1,768 2,020
Deferred income taxes (2,486) 467
Other 403 390
-------- --------
29,354 32,353
Net change in operating assets and
liabilities 10,704 (472)
-------- --------
Net cash provided by operating
activities 40,058 31,881
Cash Flows From Investing Activities
Retirements of property, plant and
equipment 319 (93)
Capital expenditures (22,976) (18,691)
-------- --------
Net cash used in investing activities (22,657) (18,784)
Cash Flows From Financing Activities
Net decrease in notes payable to banks (7,900) (9,453)
Cash dividends and distributions paid (6,019) (4,545)
Repayment of long-term debt (9,850) (4,800)
Issuance of common stock 6,749 5,193
-------- --------
Net cash used in financing
activities (17,020) (13,605)
-------- --------
Net increase (decrease) in cash and cash
equivalents 381 (508)
Cash and cash equivalents at beginning
of period 2,286 3,144
-------- --------
Cash and cash equivalents at end
of period $ 2,667 $ 2,636
======== ========
See accompanying notes to consolidated financial statements.
6
ATMOS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1994
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 six month period ended
March 31, 1994 are not indicative of expected results of
operations for the year ending September 30, 1994. These interim
financial statements and notes are condensed as permitted by the
instructions to Form 10-Q, and should be read in conjunction with
the audited consolidated financial statements in the 1993 annual
report to shareholders of Atmos Energy Corporation ("Atmos" or
the "Company").
Deferred charges and other assets - Deferred charges and other
assets at March 31, 1994 and September 30, 1993 include assets of
the Company's qualified defined benefit retirement plans in
excess of the plans' recorded obligations in the amounts of
$12,782,000 and $13,289,000, respectively, and Company assets
related to the Company's nonqualified retirement plans at March
31, 1994 and September 30, 1993 of $16,215,000 and $12,758,000,
respectively.
Common stock - As of March 31, 1994, the Company had 50,000,000
shares of common stock, no par value (stated at $.005 per share),
authorized. On February 9, 1994, the Board of Directors of Atmos
approved a three-for-two split of its common stock implemented in
the form of a stock dividend, which will result in shareholders
receiving one new share for every two shares currently held.
Fractional shares will not be issued but will be paid in cash or
may be credited to the accounts of participants of the Dividend
Reinvestment and Stock Purchase Plan ("DRSPP") and ESOP. The
record date for the split is May 4, 1994 and the payment date for
mailing the new shares and cash for fractional shares to
shareholders is May 16, 1994. Shares outstanding will increase
from approximately 10 million to slightly more than 15 million.
All share information in this report is adjusted for the 3-for-2
stock split.
Reclassifications - Certain prior period balances have been
reclassified to be consistent between Atmos and Greeley (see Note
2) and to make classification of prior year amounts consistent
with the 1994 presentation.
2. Business combination
On December 22, 1993, Atmos acquired by means of a merger all of
the assets and liabilities of Greeley Gas Company ("GGC") in
accordance with the terms and provisions of an Agreement and Plan
7
of Reorganization dated July 2, 1993. All the shares of GGC's
common stock were exchanged for a total of 2,329,330 shares of
Atmos common stock before the 3-for-2 stock split (3,493,995
shares on a post-split basis).
GGC was a privately owned natural gas utility and is engaged in
the distribution and sale of natural gas to residential,
commercial, industrial, agricultural, and other customers
throughout Colorado, Kansas, and a small portion of Missouri.
This transaction was accounted for as a pooling of interests;
therefore, prior year financial statements have been restated to
reflect this merger. GGC prepared its financial statements on a
December 31 fiscal year end. GGC's fiscal year has been changed
to September 30 to conform to the Company's year end. The
unaudited September 30, 1993 balances, as presented, are the
combined balances of Atmos and GGC reflecting the pooling of
interests of the companies that occurred on December 22, 1993.
The restated consolidated statements of income and cash flows
presented herein for the three-month, six-month and twelve-month
periods ended March 31, 1994 and 1993 include GGC's operating
results for the full period presented. Results of operations for
the previously separate enterprises for the three months ended
March 31, 1994 and 1993 are summarized as follows:
Three months ended March 31,
-----------------------
1994 1993
-------- --------
(In thousands)
Operating revenue:
Atmos $157,636 $136,194
GGC 29,308 30,044
-------- --------
$186,944 $166,238
======== ========
Net income:
Atmos $ 9,735 $ 10,945
GGC 3,507 2,815
-------- --------
$ 13,242 $ 13,760
======== ========
8
Operating revenue and net income included in the Company's
consolidated statements of income for the six months ended March
31, 1994 and 1993 are as follows:
Six months ended March 31,
-----------------------
1994 1993
-------- --------
(In thousands)
Operating revenue:
Atmos $276,859 $248,571
GGC 55,586 48,367
-------- --------
$332,445 $296,938
======== ========
Net income:
Atmos $ 15,193 $ 16,760
GGC 5,137 3,765
-------- --------
$ 20,330 $ 20,525
======== ========
Operating revenue and net income included in the Company's
consolidated statements of income for the twelve months ended
March 31, 1994 and 1993 are as follows:
Twelve months ended March 31,
-----------------------
1994 1993
-------- --------
(In thousands)
Operating revenue:
Atmos $416,783 $365,865
GGC 78,365 69,042
-------- --------
$495,148 $434,907
======== ========
Net income:
Atmos $ 13,212 $ 13,689
GGC 4,138 1,684
-------- --------
$ 17,350 $ 15,373
======== ========
9
The dividends per share presentation on the consolidated
statement of income reflects historical Atmos dividends per share
and has not been restated under the pooling of interests method
of accounting for the merger. The historical and restated cash
dividends and distributions per share of Atmos are as follows:
Three months ended March 31,
-----------------------
1994 1993
-------- --------
Historical Atmos cash
dividends per share $.22 $.21
Restated cash dividends and
distributions per share,
including GGC $.22 $.16
Six months ended March 31,
-----------------------
1994 1993
-------- --------
Historical Atmos cash
dividends per share $.44 $.43
Restated cash dividends and
distributions per share,
including GGC $.40 $.32
Twelve months ended March 31,
-----------------------
1994 1993
-------- --------
Historical Atmos cash
dividends per share $.87 $.84
Restated cash dividends and
distributions per share,
including GGC $.76 $.66
3. Accounting for income taxes
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109") and, as permitted under the new rules,
prior years' financial statements have not been restated. A
regulatory liability reflecting the expected future rate treat-
ment of approximately $2,673,000 in deferred tax deductions has
been recorded in accordance with SFAS No. 109 and is included in
other deferred credits. It primarily represents the impact of
adjusting deferred taxes to reflect the decrease in the federal
tax rate from 46% to 35%. The effect of applying the new
standard in the first six months of fiscal 1994 had no
significant effect on net income.
This standard changes the Company's method of accounting for
10
income taxes from the deferred method (APB 11) to the liability
method. Previously the Company deferred the past tax effects of
timing differences between financial reporting and taxable
income. Under the liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the estimated future
tax effects of differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases.
4. Other postretirement benefits
Effective October 1, 1993, the Company adopted Financial Account-
ing Standards No. 106 ("SFAS No. 106"), the "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
SFAS No. 106 focuses principally on postretirement health care
benefits and will significantly change the current practice of
accounting for postretirement benefits on a pay-as-you-go basis
by requiring accrual of such benefit costs on an actuarial basis
over the active service period of employees to the date of full
eligibility for such benefits. The Company is amortizing on a
straight line basis the initial transition obligation of
$33,354,000 over 20 years. The effect of adopting the new rules
increased net periodic postretirement benefit cost for the six
months ended March 31, 1994 by $1,461,000 and decreased net
income for the period by $934,000.
Atmos sponsors two defined benefit postretirement plans. One
plan provides medical, dental, vision and life insurance benefits
to retired employees of Greeley Gas Company. The other offers
medical benefits to all other Atmos employees. Substantially all
of the Company's employees may become eligible for these benefits
if they reach retirement age while working for the Company and
attain 10 consecutive years of service. Both the plan
participant and the participant's spouse are required to
contribute under these plans. Neither plan is currently funded.
The Company anticipates establishing a funding policy regarding
the amounts and timing of possible contributions in fiscal 1994.
The amount of funding will ultimately depend upon the ratemaking
treatment allowed in the Company's various rate jurisdictions.
The following is a reconciliation of the funded status of the
plans to the net postretirement benefits liability on the balance
sheet as of September 30, 1993 (in thousands):
Accumulated postretirement benefit obligation
Retirees $(18,237)
Fully eligible employees (8,596)
Other employees (6,521)
--------
$(33,354)
========
11
Accumulated postretirement benefit obligation
in excess of plan assets $(33,354)
Unrecognized transition obligation 33,354
--------
Accrued postretirement benefits liability $ -
========
In the latest actuarial calculation of the accrued postretirement
benefits liability, the assumed health care cost trend rate used
to estimate the cost of postretirement benefits was 10.5% for the
1993-1994 year and is assumed to decrease gradually to 5.0% for
1999-2000 and remain at that level thereafter. Similarly, the
dental trend rate is 8.0% for the 1993-1994 year and gradually
decreases to 5.0% for 1999-2000 and remains level thereafter.
The trend for vision benefits is assumed to remain level for all
years at 4.5%. The effect of a 1% increase in the assumed health
care cost trend rate for each future year is $410,000 on the
annual aggregate of the service and interest cost components of
net periodic postretirement benefit costs and $2,793,000 on the
accumulated postretirement benefit obligation as of September 30,
1993. Other assumptions used in postretirement benefit
accounting are as follows:
Discount rate - rate at which liabilities
could be settled 7.0%
Rate of increase in compensation levels 5.0%
The Company is currently allowed to recover other postretirement
benefit ("OPEB") costs through its regulated rates on a pay-as-
you-go basis in a majority of its service areas. It is allowed
to recover OPEB costs in its remaining service areas under SFAS
No. 106 accrual accounting. The rate recovery of SFAS No. 106
cost by jurisdiction is discussed below. Management believes
that accrual accounting in accordance with SFAS No. 106 is
appropriate and will seek rate recovery of accrual-based expenses
in all of its ratemaking jurisdictions. The portion of the
additional expense in excess of the pay-as-you-go amount that
will immediately or ultimately be allowed in rates cannot
presently be determined. The difference of $1,461,000 between
the level of expense using SFAS No. 106 and that using the prior
accounting method for the six months ended March 31, 1994 was
expensed and no regulatory asset was recorded.
In May 1993, the Louisiana Commission issued an order for all
utilities under its jurisdiction to continue to use the pay-as-
you-go accounting method for rate treatment of SFAS No. 106
costs. Utilities may apply to the Louisiana Commission for
authority to recognize a regulatory asset to be amortized on a
pay-as-you-go basis to bridge the gap between ratemaking and
accounting. The Louisiana Commission retains the flexibility to
examine individual companies' accounting for SFAS No. 106 costs
to determine if special exceptions to this order are warranted.
Recovery of SFAS No. 106 costs were not allowed in the Company's
12
Rate Stabilization Clause increase implemented March 1, 1994.
In June 1992, the Kentucky Public Service Commission ("Kentucky
Commission") declined a request by a group of utilities to grant
a blanket commitment for the future recovery of SFAS No. 106
costs in excess of pay-as-you-go costs for all utilities. The
Kentucky Commission's order stated that each utility could file
an individual application to seek recovery of such costs. At a
rehearing held in December 1992, the Kentucky Commission affirmed
its initial order.
In May 1993, the Company filed rate requests which included SFAS
No. 106 costs in Fritch and Sanford, Texas and for the
surrounding environs. The rates for the environs are subject to
the jurisdiction of the Railroad Commission of Texas ("Railroad
Commission"). In its order of August 30, 1993, the Railroad
Commission approved recovery of SFAS No. 106 costs and internal
funding.
In September 1993, GGC filed a rate request for its Colorado
service area which included SFAS No. 106 costs. In May 1994, the
Company began implementing new rates in its Colorado service
area. The new rates will increase annual revenues by $3,200,000
and include recovery of accrual-based SFAS No. 106 costs.
In its December 1993, rate order to GGC, the Kansas Corporation
Commission approved recovery of SFAS No. 106 expenses with the
agreement that the difference between amounts computed as SFAS
No. 106 expense and pay-as-you-go expense shall be remitted
quarterly to an external trust fund.
The ultimate impact of the adoption of SFAS No. 106 on the
Company's financial position and results of operations will not
be known with certainty until the regulatory treatment that will
be allowed in each of the Company's ratemaking jurisdictions is
determined.
5. Postemployment benefits
The Company also provides postemployment benefits, primarily
workers' compensation and long-term disability insurance, to
former or inactive employees after employment but before
retirement. The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" ("SFAS No. 112"), which
applies to such benefits and will be effective for the Company's
1995 fiscal year. Under SFAS No. 112, employers are required to
recognize the obligation to provide postemployment benefits if
certain conditions are met. Postemployment benefit costs are
currently recorded and recovered in rates on the pay-as-you-go
basis. The rate treatment of SFAS No. 112 accrual based costs
has not been determined at this time. The reduction in future
earnings, if any, that would result from this accrual would be
offset to the extent that it is approved to be recovered in
rates. Based on a preliminary actuarial study, the Company
13
currently estimates the cumulative effect of implementation of
SFAS No. 112 and the increase in future annual costs to be
minimal.
6. Contingencies
On March 15, 1991, suit was filed in the 15th Judicial District
Court of Lafayette Parish, Louisiana, by the Lafayette Daily
Advertiser and others against the Trans La Division, Trans
Louisiana Industrial Gas Company, Inc. ("TLIG"), a wholly owned
subsidiary of the Company, and Louisiana Intrastate Gas
Corporation and certain of its affiliates ("LIG"). LIG is the
Company's primary supplier of natural gas in Louisiana and is not
otherwise affiliated with the Company.
The plaintiffs purported to represent a class consisting of all
residential and commercial gas customers in the Trans La
Division's service area. Among other things, the lawsuit alleged
that the defendants violated antitrust laws of the state of
Louisiana by manipulating the cost-of-gas component of the Trans
La Division's gas rate to the purported customer class, thereby
causing such purported class members to pay a higher rate. The
plaintiffs made no specific allegation of an amount of damages.
The defendants brought an appeal to the Louisiana Supreme Court
of rulings by the trial court and the Third Circuit Court of
Appeal which denied defendants' exceptions to the jurisdiction of
the trial court. It was the position of the defendants that the
plaintiffs' claims amount to complaints about the level of gas
rates and should be within the exclusive jurisdiction of the
Louisiana Commission.
On January 19, 1993, the Louisiana Supreme Court issued a
decision reversing in part the lower courts' rulings, dismissing
all of plaintiffs' claims against the defendants which seek
damages due to alleged overcharges and further ruling that all
such claims are within the exclusive jurisdiction of the
Louisiana Commission. Any claims which seek damages other than
overcharges were remanded to the trial court but were stayed
pending the completion of the Louisiana Commission proceeding
referred to below.
The Louisiana Commission has instituted a docketed proceeding for
the purpose of investigating the costs included in the Trans La
Division's purchased gas adjustment component of its rates. Both
the Trans La Division and LIG are parties to the proceeding.
Discovery has commenced in this proceeding and a procedural
schedule has been established. The Company believes the
allegations as they relate to the Company, whether brought in
court or at the Louisiana Commission, are without merit, and that
the chances of a material adverse outcome are remote. The
Company will continue to vigorously protect its interest in this
matter.
From time to time, claims are made and lawsuits are filed against
14
the Company arising out of the ordinary business of the Company.
In the opinion of the Company's management, liabilities, if any,
arising from these actions are either covered by insurance,
adequately reserved for by the Company or would not have a
material adverse effect on the financial condition of the
Company.
7. Long-term and short-term debt
During the six months ended March 31, 1994, the Company paid
installments due of $3,000,000 on its 9.75% Senior Notes,
$2,000,000 on its 11.2% Senior Notes, and paid the balance of
$3,250,000 on its 13.75% Series I, First Mortgage Bonds, and
$1,600,000 on its 13% Series G, First Mortgage Bonds.
At March 31, 1994, the Company had committed, short-term,
unsecured bank credit facilities totaling $72,000,000, all of
which was unused. The Company also had aggregate uncommitted
lines of $130,000,000, of which $102,200,000 was unused at March
31, 1994.
8. Statements of cash flows
Supplemental disclosures of cash flow information for the six-
month periods ended March 31, 1994 and 1993 are presented below.
Six months ended
March 31,
-------------------
1994 1993
------ ------
(In thousands)
Cash paid for
Interest $6,930 $7,123
Income taxes 5,263 5,713
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company distributes and sells natural gas to residential,
commercial, industrial and agricultural customers in six states.
Such business is subject to regulation by state and/or local
authorities in each of the states in which the Company operates.
In addition, the Company's business is affected by seasonal
weather patterns, competitive factors within the energy industry,
and economic conditions in the areas that the Company serves.
Revenues and sales volume statistics for the three-month, six-
month and twelve-month periods ended March 31, 1994 and 1993
appear on pages 22-24. Meters in service are as follows:
1994 1993
------- -------
Meters in Service at March 31
Residential 562,246 551,758
Commercial 59,881 58,408
Industrial (including agricultural) 19,812 20,146
Public authority and other 4,935 4,788
------- -------
Total 646,874 635,100
Rate Activity
Rate activity through September 1993 was discussed in the
Company's 1993 Annual Report to Shareholders. Changes in pending
rate matters and new developments since September 1993 are
discussed below.
There has been no change in status of the Company's appeal
regarding the effective date of its last rate increase in
Kentucky. The Company lost the issue at the trial court level.
If the Company is successful, it could recover approximately $1.0
million in additional revenue; if it is unsuccessful, there would
be no impact on its revenue.
In December 1993, the Company received an order from the Kentucky
Commission approving a large volume sales program and a revised
gas cost adjustment method. Also in December 1993, the Kentucky
Commission issued an order in a generic proceeding relating to
the implications of FERC Order 636 on local distribution
companies ("LDCs"). The order permitted the LDCs to flow through
Order 636 transition costs incurred from their pipeline
suppliers.
As a result of the Company's first annual filing under its three-
year rate stabilization clause in Louisiana, an increase of
$730,000 annually or 2% went into effect on March 1, 1993. On
March 1, 1994, the Company implemented an increase of $1.1
million or 2.7% under its second annual rate stabilization clause
16
filing.
In February 1993, the city of Amarillo, Texas appealed the
Railroad Commission's November 1992 rate order to the District
Court of Travis County, Texas. In January 1994, the District
Court denied the city's appeal. The city has appealed to the
Court of Appeals.
GGC filed a request for an increase in annual revenues of $4.5
million with the Colorado Public Utility Commission ("Colorado
Commission") in September, 1993. On May 1, 1994, the Company
implemented an annual increase of $3.2 million or 6.9%. The new
rates reflect settlement of all issues and recovery of accrual
accounting of postretirement benefits in accordance with SFAS No.
106. Following implementation of the new rates, Phase 2 of the
rate proceeding will commence, which will address rate redesign
issues.
Effective December 1, 1993, GGC received an annual rate increase
of approximately $2.1 million or 10.6% in its Kansas service
area. The settlement included recovery of SFAS No. 106 costs
with external funding and a moratorium on rate requests in Kansas
until December 1, 1996.
In 1992 the Federal Energy Regulatory Commission (FERC) issued an
order ("Order 636") which continues past FERC initiatives to
substantially restructure the interstate natural gas pipeline
industry by unbundling the availability and pricing of interstate
pipeline services. The Company intervened in the restructuring
proceedings of the interstate pipelines that serve its various
service areas and actively participated in the proceedings of its
major suppliers. New service agreements for its Western Kentucky
Division became effective in September and November 1993 with
Tennessee Gas and Texas Gas, respectively. Prior to October
1993, GGC purchased a portion of its natural gas supplies from
interstate pipeline companies. It now has term commitments for
the transportation of natural gas with the interstate pipelines
but must secure that portion of its natural gas supplies
previously purchased from them from other parties. The Company
believes it has restructured its portfolio of natural gas
supplies and pipeline services under Order 636 to replace the
traditional pipeline sales service and enable it to continue to
provide adequate and reliable service to its customers in 1994.
Recently Issued Accounting Standards Not Yet Adopted
The Company has not adopted Statement of Financial Accounting
Standards No. 112 "Employers' Accounting for Postemployment
Benefits" which is discussed in Note 5 of notes to consolidated
financial statements. The rate treatment of SFAS No. 112 costs
has not been determined at this time. Such costs are currently
recorded and recovered on the pay-as-you-go basis.
17
FINANCIAL CONDITION
For the six months ended March 31, 1994, net cash provided by
operating activities totaled $40.1 million compared with $31.9
million for the six months ended March 31, 1993. Net operating
assets and liabilities decreased $10.7 million for the six months
ended March 31, 1994 compared with an increase of $.5 million for
the six months ended March 31, 1993. Due to the seasonal nature
of the natural gas distribution business, large swings in
accounts receivable, accounts payable and inventories of gas in
underground storage will occur when entering and leaving the
winter or heating season.
Major cash flows from investing activities for the six months
ended March 31, 1994 included capital expenditures of $23.0
million compared with $18.7 million for the six months ended
March 31, 1993. The capital expenditures budget for fiscal year
1994 is currently $52.6 million, as compared with actual capital
expenditures of $44.8 million in fiscal 1993. Capital projects
planned for 1994 include major expenditures for mains, services,
meters, vehicles and computer software. These expenditures will
be financed from internally generated funds and financing
activities.
For the six months ended March 31, 1994, cash used in financing
activities amounted to $17.0 million compared with $13.6 million
for the six months ended March 31, 1993. During the six months
ended March 31, 1994, notes payable to banks was reduced $7.9
million, as compared with $9.5 million for the six months ended
March 31, 1993. Payments of long-term debt increased $5.1
million to $9.9 million for the six months ended March 31, 1994.
Payments of long-term debt consisted of a $3.0 million
installment on the Company's 9.75% Senior Notes due in 1996, a
$2.0 million installment on the 11.2% Senior Notes, the balance
of $3.25 million on the 13.75% Series I First Mortgage Bonds and
the balance of $1.6 million on the 13% Series G First Mortgage
Bonds. The Company paid $6.0 million in cash dividends and
distributions during the six months ended March 31, 1994,
compared with $4.5 million paid during the six months ended March
31, 1993. This reflects a $.01 per share increase in the
quarterly dividend rate and an increase in the number of shares
outstanding. In the quarter ended December 31, 1993, the Company
issued 2,566,196 shares of common stock before the 3-for-2 stock
split approved February 4, 1994 (3,849,294 shares as adjusted for
the 3-for-2 split). This included shares issued in connection
with the merger, shares issued under its Employee Stock Ownership
Plan ("ESOP"), its Restricted Stock Grant Plan and its Dividend
Reinvestment and Stock Purchase Plan ("DRSPP"). In the quarter
ended December 31, 1993, the Company also registered an
additional 700,000 shares of common stock with the Securities and
Exchange Commission for future issuance under the DRSPP.
On February 9, 1994, the Board of Directors of Atmos approved a
3-for-2 split of its common stock implemented in the form of a
stock dividend, which will result in shareholders receiving one
18
new share for every two shares currently held. Fractional shares
will not be issued but will be paid in cash or may be credited to
the accounts of participants of the DRSPP and ESOP. The record
date for the split is May 4, 1994 and the payment date for
mailing the new shares and cash for fractional shares to
shareholders is May 16, 1994. Shares outstanding will increase
from approximately 10 million to slightly more than 15 million.
The Company believes that internally generated funds, its short-
term credit facilities and access to the debt and equity capital
markets will provide necessary working capital and liquidity for
capital expenditures and other cash needs for the remainder of
fiscal 1994. At March 31, 1994 the Company had $72.0 million of
committed short-term credit facilities, all of which was avail-
able for additional borrowing. The committed lines are renewed
or renegotiated at least annually. At March 31, 1994, the
Company also had $130.0 million of uncommitted short-term lines,
of which $102.2 million was unused.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994, COMPARED WITH THREE MONTHS
ENDED MARCH 31, 1993
Operating revenues increased by approximately 12% to $186.9
million for the three months ended March 31, 1994 from $166.2
million for the three months ended March 31, 1993. Factors
contributing to the increase in operating revenues were increased
sales to irrigation customers and increased cost of gas. During
the quarter ended March 31, 1994, temperatures averaged 4% warmer
than in the corresponding quarter of the prior year, and
approximately 5% warmer than normal. The total volume of gas
sold and transported for the three months ended March 31, 1994
was 49.7 billion cubic feet ("Bcf") compared with 50.2 Bcf for
the three months ended March 31, 1993. The primary reasons for
the decreased volumes were decreased weather sensitive sales due
to warmer weather in the Energas and GGC service areas. The
average sales price per Mcf sold increased $.29 to $4.29 as a
result of a $.31 increase in the average cost of gas and rate
increases in Kansas and in the Trans La Division implemented
since the corresponding quarter of the prior year.
Gross profit (defined as operating revenues less purchased gas
cost) increased by approximately 1% to $59.4 million for the
three months ended March 31, 1994, from $58.6 million for the
three months ended March 31, 1993. The primary factors
contributing to the increase were the increased sales and the
increased average sales price as discussed above. Operating
expenses, excluding income taxes, increased from $34.3 million
for the three months ended March 31, 1993 to $35.6 million for
the three months ended March 31, 1994. Factors contributing to
the increase in operating expenses were operation expense and
adoption of SFAS No. 106 as discussed in Note 4 of notes to
consolidated financial statements. Operating income decreased
for the three months ended March 31, 1994 to $16.3 million from
19
$16.9 million for the three months ended March 31, 1993. The
decrease in operating income primarily resulted from increased
operating expenses.
Net income decreased for the three months ended March 31, 1994 by
approximately 4% to $13.2 million from $13.8 million for the
three months ended March 31, 1993. This decrease in net income
primarily resulted from the decrease in operating income.
SIX MONTHS ENDED MARCH 31, 1994, COMPARED WITH SIX MONTHS ENDED
MARCH 31, 1993
Operating revenues increased by approximately 12% to $332.4
million for the six months ended March 31, 1994 from $296.9
million for the six months ended March 31, 1993. Factors
contributing to the higher operating revenues were colder weather
in Kentucky and Louisiana, drier weather in the West Texas
irrigation market, and rate increases implemented in Kansas and
the Trans La Division. Volumes sold to irrigation customers
increased from the corresponding period of the prior year. The
average sales price per Mcf increased from $4.07 for the six
months ended March 31, 1993 to $4.28 for the six months ended
March 31, 1994. The increase in the average sales price reflects
increased cost of gas and rate increases in the Trans La Division
and in Kansas implemented since March 31, 1993. The average cost
of gas per Mcf sold increased from $2.78 for the six months ended
March 31, 1993 to $2.99 for the six months ended March 31, 1994.
Gross profit increased to $107.8 million for the six months ended
March 31, 1994, compared with $101.2 million for the six months
ended March 31, 1993. Operating expenses, excluding income taxes,
increased from $63.9 million in the six months ended March 31,
1993, to $69.7 million in the six months ended March 31, 1994.
The principal factors contributing to the increase in operating
expenses were increases in operation expense, employee welfare
expenses including adoption of SFAS No. 106, acquisition costs,
and outside services. Income taxes increased to $11.4 million
for the six months ended March 31, 1994, from $10.8 million for
the six months ended March 31, 1993. The primary reason for the
increase was higher pre-tax profits.
Net income decreased for the six months ended March 31, 1994, by
approximately 1% to $20.3 million from $20.5 million for the six
months ended March 31, 1993. Earnings per share decreased to
$1.34 for the six months ended March 31, 1994 from $1.45 for the
six months ended March 31, 1993, while average shares outstanding
increased approximately 7%. Dividends per share increased 2% to
$.44 for the six months ended March 31, 1994. All per share
information is adjusted for the 3-for-2 stock split.
20
TWELVE MONTHS ENDED MARCH 31, 1994, COMPARED WITH TWELVE MONTHS
ENDED MARCH 31, 1993
Operating revenues increased by approximately 14% to $495.1
million for the 12 months ended March 31, 1994 from $434.9
million for the 12 months ended March 31, 1993. The increased
revenues resulted from increased sales volumes and increased
sales prices for the 12 months ended March 31, 1994. Sales and
transportation volumes increased to 152.3 Bcf for the 12 months
ended March 31, 1994 compared with 139.7 Bcf for the
corresponding prior period. The average sales price per Mcf
increased from $3.96 to $4.16. The average cost of gas per Mcf
sold increased from $2.66 to $2.85. The increase in the average
sales price reflects the increased cost of gas and rate increases
in the Trans La Division and in Kansas implemented since March
31, 1993.
Gross profit increased by approximately 10% to $169.7 million
from $154.9 million in the 12 months ended March 31, 1993.
Operating expenses, excluding income taxes, increased from $119.6
million in the 12 months ended March 31, 1993, to $129.1 million
in the 12 months ended March 31, 1994. Factors contributing to
the increase in operating expenses were increased wages and
benefits expenses, GGC acquisition costs and the adoption of SFAS
No. 106, as discussed in Note 4 of notes to consolidated
financial statements. Income taxes increased $3.1 million for
the 12 months ended March 31, 1994, compared with the 12 months
ended March 31, 1993. The primary reason was increased pre-tax
income. Operating income increased in the 12 months ended March
31, 1994 by approximately 8% to $29.8 million from $27.6 million
in the 12 months ended March 31, 1993. The primary reason for
the increase in operating income was increased operating revenues
resulting from slightly colder and drier weather and increased
average sales prices.
Interest charges decreased $.5 million to $12.6 million, compared
with $13.1 million for the prior year. Net income for the 12
months ended March 31, 1994 was $17.4 million compared with $15.4
million for the 12 months ended March 31, 1993. The increase in
net income resulted from the increase in operating income
discussed above. Earnings per share increased by 6% to $1.17.
Average shares outstanding increased approximately 6% as compared
with the prior year. Dividends per share increased approximately
4% to $.87. All per share information is adjusted for the 3-for-
2 stock split.
21
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS (1)
Quarter ended March 31,
1994 1993
------- -------
Sales Volumes -- MMcf (2)
Residential 22,549 23,746
Commercial 8,647 9,592
Industrial (including agricultural) 9,009 4,701
Public authority and other 2,306 2,008
------- -------
Total 42,511 40,047
Transportation Volumes -- MMcf (2) 7,150 10,132
------- -------
Total Volumes Handled - MMcf (2) 49,661 50,179
======= =======
Operating Revenues (000's)
Gas Sales Revenues
Residential $104,481 $ 99,731
Commercial 38,372 37,768
Industrial (including agricultural) 29,670 14,921
Public authority and other 9,837 7,896
-------- --------
Total Gas Revenues 182,360 160,316
Transportation Revenues 3,132 4,575
Other Revenues 1,452 1,347
-------- --------
Total Operating Revenues $186,944 $166,238
======== ========
Average Gas Sales Revenues per Mcf $ 4.29 $ 4.00
Average Transportation Revenue per Mcf $ .44 $ .45
Cost of Gas per Mcf Sold $ 3.00 $ 2.69
HEATING DEGREE DAYS
Weather
Service Sensitive Quarter ended March 31,
Area Customers % 1994 1993 Normal
- -------------- ----------- ----- ----- ------
Texas 47% 1,765 1,923 1,893
Kentucky 26% 2,359 2,231 2,416
Louisiana 11% 1,046 1,014 1,047
Colorado, Kansas
and Missouri 16% 2,751 3,023 2,953
----
System Average 100% 1,997 2,077 2,104
(1) Consolidated operating statistics have been restated to
include Greeley operations for all periods presented.
(2) Volumes are reported as metered in million cubic feet
("MMcf").
22
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS (1)
Six months ended March 31,
1994 1993
------- -------
Sales Volumes -- MMcf (2)
Residential 40,894 40,023
Commercial 16,031 16,579
Industrial (including agricultural) 13,882 10,449
Public authority and other 4,331 3,383
------- -------
Total 75,138 70,434
Transportation Volumes --
MMcf (2) 17,113 18,669
------- -------
Total Volumes Handled - MMcf (2) 92,251 89,103
======= =======
Operating Revenues (000's)
Gas Sales Revenues
Residential $187,722 $173,398
Commercial 69,603 66,924
Industrial (including agricultural) 46,270 32,778
Public authority and other 18,344 13,681
-------- --------
Total Gas Revenues 321,939 286,781
Transportation Revenues 7,995 7,782
Other Revenues 2,511 2,375
-------- --------
Total Operating Revenues $332,445 $296,938
======== ========
Average Gas Sales Revenues per Mcf $ 4.28 $ 4.07
Average Transportation Revenue per Mcf $ .47 $ .42
Cost of Gas per Mcf Sold $ 2.99 $ 2.78
HEATING DEGREE DAYS
Weather
Service Sensitive Six months ended March 31,
Area Customers % 1994 1993 Normal
- -------------- ----------- ----- ----- ------
Texas 47% 3,296 3,380 3,275
Kentucky 26% 4,003 3,781 3,992
Louisiana 11% 1,851 1,688 1,723
Colorado, Kansas
and Missouri 16% 5,194 5,601 5,292
----
System Average 100% 3,622 3,650 3,611
See footnotes on page 22.
23
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS (1)
Twelve months ended March 31,
1994 1993
------- -------
Sales Volumes -- MMcf (2)
Residential 52,634 50,895
Commercial 21,324 21,764
Industrial (including agricultural) 34,800 28,626
Public authority and other 5,351 3,984
------- -------
Total 114,109 105,269
Transportation Volumes --
MMcf (2) 38,226 34,399
------- -------
Total Volumes Handled - MMcf (2) 152,335 139,668
======= =======
Operating Revenues (000's)
Gas Sales Revenues
Residential $252,239 $230,097
Commercial 93,929 89,354
Industrial (including agricultural) 105,946 81,452
Public authority and other 22,978 16,363
-------- --------
Total Gas Sales Revenues 475,092 417,266
Transportation Revenues 15,226 13,157
Other Revenues 4,830 4,484
-------- --------
Total Operating Revenues $495,148 $434,907
======== ========
Average Gas Sales Revenues per Mcf $ 4.16 $ 3.96
Average Transportation Revenue per Mcf $ .40 $ .38
Cost of Gas per Mcf Sold $ 2.85 $ 2.66
HEATING DEGREE DAYS
Weather
Service Sensitive Twelve months ended March 31,
Area Customers % 1994 1993 Normal
- -------------- ----------- ----- ----- ------
Texas 47% 3,577 3,604 3,528
Kentucky 26% 4,358 4,174 4,376
Louisiana 11% 1,975 1,772 1,760
Colorado, Kansas
and Missouri 16% 6,185 6,398 6,234
----
System Average 100% 4,018 3,993 3,983
See footnotes on page 22.
24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 6 of notes to consolidated financial statements on pages
14 and 15 herein for a description of legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of Atmos Energy Corporation
on February 9, 1994, 7,002,972 votes were cast as follows:
VOTES BROKER
VOTES FOR WITHHELD NON-VOTE
Election of Class II
Directors:
Carl S. Quinn 6,907,719 95,253 0
Richard Ware II 6,911,149 91,823 0
Dewey G. Williams 6,882,741 120,231 0
The other directors will continue to serve in their positions for
the remainder of their current terms. The term of the class III
directors, Charles K. Vaughan and Phillip E. Nichol, will expire
in 1995. The term of the class I directors, Travis W. Bain II,
Dan Busbee and John W. Norris, Jr., will expire in 1996.
Following the annual meeting on February 9, 1994, the Board of
Directors increased the number of directors to 10 and appointed
Lee E. Schlessman of Denver, Colorado to the Board to fill the
seat created by the increase. Mr. Schlessman is the former
Chairman of GGC and will stand for election at the Company's 1995
annual meeting.
Item 5. Other Information
On May 11, 1994 Charles K. Vaughan, Chairman and Chief Executive
Officer, announced that he has elected to retire October 1, 1994,
although he will remain as chairman of the Board of Directors.
In anticiption of his retirement, Atmos President and Chief
Operating Officer Ron Fancher will become president and chief
executive officer on June 1, 1994.
Director Paul L. Bell of Dallas died on April 5, 1994. Mr. Bell,
49, had served on the Atmos Energy Corporation Board of Directors
since 1989. He was president and co-owner of Bell and Hocker
Inc., a commercial real estate company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
25
(b) Reports on Form 8-K
On January 5, 1994, the Company filed a current report
on Form 8-K, Items 2 and 7, reporting the acquisition
of Greeley Gas Company ("GGC") on December 22, 1993.
Historical financial statements of Greeley Gas Company
for 1991 and 1992 were incorporated by reference to
Atmos' Amendment No. 2 to Form S-4 (Reg. No. 33-67098)
filed October 8, 1993. Unaudited pro forma condensed
statements of income, combining Atmos and GGC operating
results for 1991 and 1992 were also incorporated by
reference to Atmos' Amendment No. 2 to Form S-4 (Reg.
No. 33-67098) filed October 8, 1993.
On January 31, 1994, the Company filed Form 8-K/A No.
1, completing Item 7 Financial Statements and Exhibits.
It incorporated by reference the same historical and
pro forma financial information listed above. It also
included current interim financial statements of GGC
for the nine months ended September 30, 1992 and 1993
and an unaudited pro forma combined income statement
for Atmos and GGC for the twelve months ended September
30, 1993 and an unaudited pro forma balance sheet as of
September 30, 1993.
26
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: May 12, 1994 By: /s/ JAMES F. PURSER
------------------------------
James F. Purser
Executive Vice President
and Chief Financial Officer
Date: May 12, 1994 By: /s/ DAVID L. BICKERSTAFF
------------------------------
David L. Bickerstaff
Vice President and Controller
(Principal Accounting Officer)
27