-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QikYWOJUSfDGoQW2s0QldO6QFtphEc/k7QaMTVhKvIFSxauqi6syswIayLk8AB0i b69umQ894Pc1pE7b+66AlQ== 0000731802-96-000002.txt : 19960216 0000731802-96-000002.hdr.sgml : 19960216 ACCESSION NUMBER: 0000731802-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATMOS ENERGY CORP CENTRAL INDEX KEY: 0000731802 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 751743247 STATE OF INCORPORATION: TX FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10042 FILM NUMBER: 96518445 BUSINESS ADDRESS: STREET 1: 1800 THREE LINCOLN CTR STREET 2: 5430 LBJ FREEWAY CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2149349227 MAIL ADDRESS: STREET 1: 1800 THREE LINCOLN CTR STREET 2: 5430 LBJ FREEWAY CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: ENERGAS CO DATE OF NAME CHANGE: 19881024 10-Q 1 ATMOS 10-Q FOR QE 12/31/95 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 December 31, 1995 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 February 1, 1996. Class Shares Outstanding ----- ------------------ No Par Value 15,921,562 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements ATMOS ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) December 31, September 30, 1995 1995 ------------ ------------ ASSETS (Unaudited) Property, plant and equipment $615,366 $595,359 Less accum. depreciation and amort. 242,728 232,107 -------- -------- Net property, plant and equipment 372,638 363,252 Current assets Cash and cash equivalents 4,624 2,294 Accounts receivable, net 68,802 25,690 Inventories 6,910 6,747 Gas stored underground 8,280 10,758 Prepayments 2,278 2,747 -------- -------- Total current assets 90,894 48,236 Deferred charges and other assets 35,961 34,295 -------- -------- $499,493 $445,783 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders' equity Common stock outstanding: 15,905,570 shares at 12/31/95 and 15,519,112 shares at 9/30/95 $ 80 $ 78 Additional paid-in capital 108,252 106,496 Retained earnings 57,792 51,704 -------- -------- Total shareholders' equity 166,124 158,278 Long-term debt 125,303 131,303 -------- -------- Total capitalization 291,427 289,581 Current liabilities Current maturities of long-term debt 13,000 7,000 Notes payable to banks 40,700 33,500 Accounts payable 53,955 24,945 Taxes payable 5,605 1,926 Customers' deposits 10,011 9,343 Other current liabilities 12,744 10,641 -------- -------- Total current liabilities 136,015 87,355 Deferred income taxes 33,913 33,120 Deferred credits and other liabilities 38,138 35,727 -------- -------- $499,493 $445,783 ======== ======== 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 Twelve months ended December 31, December 31, ----------------- ------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Operating revenues $130,468 $117,848 $448,440 $472,155 Purchased gas cost 79,743 74,366 274,187 308,857 -------- -------- -------- ------- Gross profit 50,725 43,482 174,253 163,298 Operating expenses Operation 21,721 19,808 85,344 88,541 Maintenance 1,075 1,004 4,347 5,362 Depreciation and amortization 5,591 5,160 21,172 19,334 Taxes, other than income 4,198 4,078 16,731 16,349 Income taxes 5,195 3,646 11,123 7,762 -------- -------- -------- -------- Total operating expenses 37,780 33,696 138,717 137,348 -------- ------- -------- -------- Operating income 12,945 9,786 35,536 25,950 Other income 160 139 238 554 Interest charges, net 3,872 3,449 14,144 12,437 -------- -------- -------- -------- Net income $ 9,233 $ 6,476 $ 21,630 $ 14,067 ======== ======== ======== ======== Net income per share $ .59 $ .42 $ 1.40 $ .92 ======== ======== ======== ======== Cash dividends per share $ .24 $ .23 $ .93 $ .89 ======== ======== ======== ======== Average shares outstanding 15,674 15,331 15,503 15,266 ======== ======== ======== ======== See accompanying notes to consolidated financial statements. - 3 - ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Three months ended December 31, 1995 1994 -------- -------- Cash Flows From Operating Activities Net income $ 9,233 $ 6,476 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Charged to depreciation and amortization 5,591 5,160 Charged to other accounts 120 904 Deferred income taxes (benefit) 793 (393) Other 98 1,488 -------- -------- 15,835 13,635 Net change in operating assets and liabilities (4,221) 2,622 -------- -------- Net cash provided by operating activities 11,614 16,257 Cash Flows From Investing Activities Retirements of property, plant and equipment 4,064 (34) Capital expenditures (19,161) (13,464) -------- -------- Net cash used in investing activities (15,097) (13,498) Cash Flows From Financing Activities Net increase (decrease) in notes payable to banks 7,200 (35,100) Cash dividends paid (3,739) (3,528) Issuance of long-term debt - 40,000 Repayment of long-term debt - (4,000) Issuance of common stock 2,352 823 -------- -------- Net cash provided (used) by financing activities 5,813 (1,805) -------- -------- Net increase in cash and cash equivalents 2,330 954 Cash and cash equivalents at beginning of period 2,294 2,766 -------- -------- Cash and cash equivalents at end of period $ 4,624 $ 3,720 ======== ======== See accompanying notes to consolidated financial statements. - 4 - ATMOS ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) December 31, 1995 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 fac- tors, the results of operations for the three month period ended December 31, 1995 are not indicative of expected results of operations for the year ending September 30, 1996. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q, and should be read in conjunction with the audited consolidated financial statements in the 1995 annual report to shareholders of Atmos Energy Corporation ("Atmos" or the "Company"). The condensed consolidated balance sheet of Atmos Energy Corporation, as of December 31, 1995, and the related condensed consolidated statements of income for the three-month and twelve-month periods ended December 31, 1995 and 1994, and consolidated statements of cash flows for the three- month periods ended December 31, 1995 and 1994, included herein have been subjected to a review by Ernst & Young LLP, the Company's independent accountants, whose report is included herein. Common stock - As of December 31, 1995, the Company had 75,000,000 shares of common stock, no par value (stated at $.005 per share), authorized and 15,905,570 shares outstanding. 2. Business Combination In November 1995, Atmos acquired by means of a merger, all of the assets and liabilities of Oceana Heights Gas Company ("Oceana") of Thibodaux, Louisiana. The transaction was accounted for as a pooling of interests. The outstanding shares of Oceana capital stock were converted into 313,411 shares of Atmos common stock having a market value of $6.4 million. Subsequent to the merger, the business of Oceana has been operated through the Company's Trans Louisiana Gas Company division ("Trans La Division"). The acquisition increased the Trans La Division's customer base by approximately 9,200 customers, or 13 percent, to over 79,000 customers. Although significant for the Trans La Division's operations, the acquisition did not have a material impact on the Company's financial condition and results of operations. The acquisition transaction and Oceana's operating results for the quarter ended December 31, 1995 are reflected in the Company's financial statements for the quarter ended December 31, 1995. - 5 - 3. Contingencies On March 15, 1991, suit was filed in the 15th Judicial District Court of Lafayette Parish, Louisiana, by the "Lafayette Daily Advertiser" and others against the Trans La Division, Trans Louisiana Industrial Gas Company, Inc. ("TLIG"), a wholly owned subsidiary of the Company, and Louisiana Intrastate Gas Corporation and certain of its affiliates ("LIG"). LIG is the Company's primary supplier of natural gas in Louisiana and is not otherwise affiliated with the Company. The plaintiffs purported to represent a class consisting of all residential and commercial gas customers in the Trans La Division's service area. Among other things, the lawsuit alleged that the defendants violated antitrust laws of the state of Louisiana by manipulating the cost-of-gas component of the Trans La Division's gas rate to the purported customer class, thereby causing such purported class members to pay a higher rate. The plaintiffs made no specific allegation of an amount of damages. The defendants brought an appeal to the Louisiana Supreme Court of rulings by the trial court and the Third Circuit Court of Appeal which denied defendants' exceptions to the jurisdiction of the trial court. It was the position of the defendants that the plaintiffs' claims amount to complaints about the level of gas rates and should be within the exclusive jurisdiction of the Louisiana Commission. On January 19, 1993, the Louisiana Supreme Court issued a decision reversing in part the lower courts' rulings, dismissing all of plaintiffs' claims against the defendants which seek damages due to alleged overcharges and further ruling that all such claims are within the exclusive jurisdiction of the Louisiana Commission. Any claims which seek damages other than overcharges were remanded to the trial court but were stayed pending the completion of the Louisiana Commission proceeding referred to below. The Company has reached a tentative settlement with the plaintiffs in the context of the Louisiana Commission proceeding referred to below, which settlement will resolve all outstanding issues relating to the Company, subject to certain procedural conditions. On July 14, 1995, the Louisiana Commission entered an order approving a settlement with the Company and TLIG in connection with its investigation of the costs included in the Trans La Division's purchased gas adjustment component in its rates. The order exonerated the Company of any wrongdoing or manipulation of the cost of gas component of its gas rate to residential and commercial customers. In the settlement, the Company agreed to refund approximately $541,000 plus interest to the Trans La Division's customers over a two-year period due to certain issues related to the calculation of the weighted average cost of gas. The refund totaling approximately $1,016,000, which includes - 6 - interest calculated through October 1, 1995, began in September 1995 and will be credited to customer bills along with interest that accrues after October 1, 1995. Most of the issues that generated the refunds arose before Trans Louisiana Gas Company was acquired by the Company in 1986. The Greeley Gas Company Division of the Company was named a defendant in several lawsuits filed as a result of a fire in a building in Steamboat Springs, Colorado on February 3, 1994. The plaintiffs claimed that the fire resulted from a leak in a severed gas service line owned by the Greeley Division. On January 12, 1996, the jury awarded the plaintiffs an amount totalling approximately $4.9 million, which amount included both compensatory and punitive damages. The jury assessed the Company with liability for all of the damages awarded. The Company has adequate insurance to cover the damages awarded against the Company in this matter. The Company is considering an appeal of the case. From time to time, claims are made and lawsuits are filed against the Company arising out of the ordinary business of the Company. In the opinion of the Company's management, liabilities, if any, arising from these actions are either covered by insurance, adequately reserved for by the Company or would not have a material adverse effect on the financial condition of the Company. 4. Long-term and short-term debt At December 31, 1995, the Company had committed, short-term, unsecured bank credit facilities totaling $90,000,000, all of which was unused. The Company also had aggregate uncommitted lines of $140,000,000, of which $99,300,000 was unused at December 31, 1995. 5. Statements of cash flows Supplemental disclosures of cash flow information for the three month periods ended December 31, 1995 and 1994 are presented below. Three months ended December 31, 1995 1994 ------ ------ (In thousands) Cash paid for Interest $3,987 $4,096 Income taxes 98 - - 7 - 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 December 31, 1995, and the related condensed consolidated statements of income for the three-month and twelve-month periods ended December 31, 1995 and 1994 and the statements of cash flows for the three-month periods ended December 31, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial state- ments taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements at December 31, 1995, and for the three-month and twelve-month periods ended December 31, 1995 and 1994 for them to be in conformity with generally accepted ac- counting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Atmos Energy Corporation as of September 30, 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated November 8, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP Dallas, Texas February 7, 1996 - 8 - 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 and twelve-month periods ended December 31, 1995 and 1994 appear on pages 14 and 15. Rate Activity On February 10, 1995, the Company filed with the Kentucky Commission for a rate increase for its Western Kentucky Gas Company Division. The filing requested an annual revenue increase of approximately $7.7 million, or 5.5 percent, to be effective March 12, 1995. In July 1995 a settlement agreement was filed with the Kentucky Commission. The Company withdrew from the settlement on August 31, 1995, after the Kentucky Commission issued an order that made modifications which the Company found unacceptable. The Company and all intervenors filed a revised settlement, which was approved by the Kentucky Commission without modifications on October 20, 1995, effective November 1, 1995. The order issued by the Kentucky Commission authorizes the Company to increase its rates by $2.3 million annually, and by an additional $1.0 million annually beginning in March 1996. The settlement includes a decrease in depreciation rates, recovery of expenses related to adoption of SFAS No. 106 and includes a provision for the Company to begin a three-year demand-side management pilot program for the 1996-97 heating season, which could cost up to $450,000 annually, resulting in a total annual operating income increase of approximately $4.0 million. The Company provides natural gas service to approximately 168,000 customers in Kentucky. In September 1994, the Company filed to increase revenues by approximately $2.6 million for a portion of its Energas Company service area ("Energas Division"), which affects approximately 217,000 customers and reflects recovery of accrual accounting of postretirement benefits in accordance with SFAS No. 106. In November 1994, the Company implemented an annual revenue increase of approximately $1.5 million affecting approximately 195,000 customers located inside the city limits of towns in this portion of its Energas Division. Upon approval of the Railroad Commission of Texas in January 1995, the Company implemented an annual increase of approximately $.2 million relating to the 22,000 remaining rural customers. - 9 - Greeley Gas Company ("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% in Phase I of this proceeding. The Phase I rates reflect recovery of SFAS No. 106 expenses with external funding, consistent with the recommended decision of the presiding administrative law judge. In October 1994, the Colorado Commission issued its order affirming the increase as set forth in Phase I. In March 1995, the Greeley Gas Division filed Phase II in the rate proceeding, which addressed rate structure. In September 1995 all parties to the proceeding entered into a stipulation and agreement which became final in November 1995 upon the recommendation by an administrative law judge of the Colorado Commission. Effective December 1, 1993, GGC received an annual rate increase of approximately $2.1 million or 10.6% in its Kansas service area. The increase reflects SFAS No. 106 expenses with external funding and a moratorium on rate requests in Kansas until December 1, 1996. In September 1992, the Louisiana Public Service Commission ("Louisiana Commission") issued a rate order to the Company's Trans La Division which included a rate stabilization clause ("RSC") for three years that provided for an annual adjustment to the Company's rates to reflect changes in expenses, revenues and invested capital following an annual review. The RSC provided an opportunity for a return on jurisdictional common equity of between 11.75% and 12.25%. As a result of the Company's filings under the RSC, an increase of $730,000 annually or 2% went into effect on March 1, 1993, an increase of $1.1 million annually or 2.7% went into effect on March 1, 1994, and an increase of $1.1 million annually or 2.0% went into effect on March 6, 1995. FINANCIAL CONDITION For the three months ended December 31, 1995 net cash provided by operating activities totaled $11.6 million compared with $16.3 million net cash provided by operating activities for the three months ended December 31, 1994. Net operating assets and liabilities increased $4.2 million for the three months ended December 31, 1995 compared with an decrease of $2.6 million for the three months ended December 31, 1994. 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 three months ended December 31, 1995 included capital expenditures of $19.2 million compared with $13.5 million for the three months ended December 31, 1994. The capital expenditures budget for fiscal 1996 is currently $67.6 million, as compared with actual capital - 10 - expenditures of $62.9 million in fiscal 1995. Capital projects planned for 1996 include major expenditures for mains, services, meters, vehicles and computer equipment. These expenditures will be financed from internally generated funds and financing activities. For the three months ended December 31, 1995, cash flows provided by financing activities amounted to $5.8 million as compared with $1.8 million used by financing activities for the three months ended December 31, 1994. During the quarter, notes payable to banks increased $7.2 million, as compared with a decrease of $35.1 million in the quarter ended December 31, 1994, due to seasonal factors and the refinancing of short-term debt with proceeds from the issuance of $40.0 million of long-term debt in the quarter ended December 31, 1994. There was no issuance or repayment of long-term debt during the quarter ended December 31, 1995. The Company paid $3.7 million in cash dividends during the three months ended December 31, 1995, compared with dividends of $3.5 million paid during the three months ended December 31, 1994. This reflects increases in the quarterly dividend rate and in the number of shares outstanding. In the quarter ended December 31, 1995, the Company issued 386,458 shares of common stock including 313,411 shares issued in connection with the Oceana acquisition. The Company believes that internally generated funds, its short- term credit facilities and access to the debt and equity capital markets will provide necessary working capital and liquidity for capital expenditures and other cash needs for the remainder of fiscal 1996. At December 31, 1995 the Company had $90.0 million in committed short-term credit facilities, all of which was available for additional borrowing. The committed lines are renewed or renegotiated at least annually. At December 31, 1995, the Company also had $140.0 million of uncommitted short-term lines, of which $99.3 million was unused. RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1994 Operating revenues increased to $130.5 million for the three months ended December 31, 1995 from $117.8 million for the three months ended December 31, 1994. The increase in operating revenues was due to increased gas sales volumes related primarily to colder weather. The weather for the three months ended December 31, 1995 was 2% warmer than the 30-year normal but 12% colder than the weather for the corresponding quarter of the prior year. Volumes sold increased to 33.0 billion cubic feet ("Bcf") from 28.1 Bcf. Changes in cost of gas are reflected in regulated sales prices through purchased gas adjustment mechanisms. The average sales price per thousand cubic feet ("Mcf") sold decreased $.17 to $3.86 while the average cost of gas per Mcf sold decreased $.22 to $2.42. The decrease in the average sales price reflects the decreased gas cost, partially - 11 - offset by rate increases implemented during the past year. Recent rate increases include the following: a $2.3 million annual rate increase in Kentucky effective in November 1995, a $1.7 million annual increase in West Texas effective in November 1994 and a $1.1 million rate stabilization clause annual increase in Louisiana effective in March, 1995. Transportation revenues decreased $1.2 million, due to a decrease of 2.4 Bcf in volumes transported and a decrease of $.05 in average transportation revenue per Mcf. The decrease in transportation revenue per Mcf was related to a change in the mix of transportation services, which include firm, interruptible and special contracts. Gross profit increased by 17% to $50.7 million for the three months ended December 31, 1995, from $43.5 million for the three months ended December 31, 1994. The primary factor contributing to the increased gross profit was the increased sales volumes due to colder weather. Operating expenses, excluding income taxes, increased approximately 8% to $32.6 million for the three months ended December 31, 1995 from $30.1 million for the three months ended December 31, 1994. Factors contributing to the increase were higher distribution and employee welfare expenses. Income taxes increased primarily due to higher pre-tax profits. Operating income increased for the three months ended December 31, 1995 by 32% to $12.9 million from $9.8 million for the three months ended December 31, 1994. The increase in operating income resulted from increased gross profit. Interest charges increased slightly due to higher interest rates on short-term debt in the three months ended December 31, 1995. The Company's weighted average short-term interest rate increased to 6.3% for the quarter ended December 31, 1995, as compared with 5.5% for the quarter ended December 31, 1994. Net income increased for the three months ended December 31, 1995 by approximately 42% to $9.2 million from $6.5 million for the three months ended December 31, 1994. This increase primarily resulted from the increase in operating income. Earnings per share increased by 40% to $.59. Average shares outstanding increased 2.2% as compared with the first quarter of fiscal 1995. Dividends per share increased approximately 4.3% to $.24 due to a $.01 per share increase in the quarterly dividend rate beginning with the dividend paid in December 1995. TWELVE MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH TWELVE MONTHS ENDED DECEMBER 31, 1994 Operating revenues decreased to $448.4 million for the 12 months ended December 31, 1995 from $472.2 million for the 12 months ended December 31, 1994 due to decreased gas cost which is reflected in revenues, decreased sales to non-weather related industrial (including agricultural) customers and decreased transportation volumes. Transportation volumes decreased to 28.0 Bcf from 35.0 Bcf, resulting in a $2.0 million decrease in transportation revenues. Total sales and transportation volumes decreased 3% to approximately 142.2 Bcf for the 12 months ended - 12 - December 31, 1995 from approximately 146.6 Bcf for the 12 months ended December 31, 1994. However, the company-wide weather for calendar year 1995 was 3% colder than for calendar year 1994 but 6% warmer than normal. The Company experienced increased sales volumes with all weather sensitive customer types in the 12 months ended December 31, 1995. The average sales price per Mcf sold decreased $.28 to $3.79. The average cost of gas per Mcf sold decreased $.37 to $2.40. Changes in cost of gas are reflected in regulated sales prices through purchased gas adjustment mechanisms. Gross profit increased by 7% to $174.3 million from $163.3 million for the 12 months ended December 31, 1994. The increase in gross profit for the 12 months ended December 31, 1995 was due to colder weather and increased sales volumes. Operating expenses exclusive of income taxes decreased from $129.6 million for the 12 months ended December 31, 1994 to $127.6 million for the 12 months ended December 31, 1995. Factors contributing to the decrease in operating expenses were decreased distribution, employee welfare, and pension expense. Income taxes increased $3.4 million for the 12 months ended December 31, 1995, compared with the 12 months ended December 31, 1994. The primary reason was higher pre-tax income. Operating income increased from the 12 months ended December 31, 1994 by 37% to $35.5 million for the 12 months ended December 31, 1995. The increase in operating income was due to increased gross profit. Interest charges increased due to higher interest rates on short- term debt in the 12 months ended December 31, 1995. The Company's weighted average short-term interest rate increased to 6.8% for the 12 months ended December 31, 1995, as compared with 4.8% for the 12 months ended December 31, 1994. Net income for the 12 months ended December 31, 1995 was $21.6 million compared with $14.1 million for the 12 months ended December 31, 1994. The increase in net income resulted primarily from the increase in operating income. Earnings per share increased by 52% to $1.40. Average shares outstanding increased approximately 1.6% as compared with the prior year. Dividends per share increased approximately 4.5% to $.93. - 13 - ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS Quarter ended December 31, ------------------- 1995 1994 ------- ------- Average Meters in Service Residential 582,705 569,354 Commercial 61,086 60,196 Industrial (including agricultural) 19,062 19,475 Public authority and other 5,026 4,957 ------- ------- Total 667,879 653,982
Quarter ended 12 Months ended December 31, December 31, -------------------- -------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Sales Volumes -- MMcf (1) Residential 16,856 14,205 49,416 47,069 Commercial 6,970 6,097 20,629 19,847 Industrial (including agricultural) 7,272 6,274 39,044 39,903 Public authority and other 1,876 1,565 5,090 4,782 -------- -------- -------- -------- Total 32,974 28,141 114,179 111,601 Transportation Volumes -- MMcf (1) 7,210 9,640 28,033 34,985 -------- -------- -------- -------- Total Volumes Handled 40,184 37,781 142,212 146,586 ======== ======== ======== ======== Operating Revenues (000's) Gas Revenues Residential $ 71,553 $ 62,884 $218,834 $225,574 Commercial 27,061 24,674 82,369 85,950 Industrial (including agricultural) 21,448 19,940 112,323 123,062 Public authority and other 7,123 6,012 19,296 19,968 -------- -------- -------- -------- Total gas revenues 127,185 113,510 432,822 454,554 Transportation Revenues 2,165 3,332 10,544 12,587 Other Revenues 1,118 1,006 5,074 5,014 -------- -------- -------- ------- Total Operating Revenues $130,468 $117,848 $448,440 $472,155 ======== ======== ======== ======== Average Gas Sales Revenues per Mcf $ 3.86 $ 4.03 $ 3.79 $ 4.07 Average Transportation Revenue per Mcf $ .30 $ .35 $ .38 $ .36 Cost of Gas per Mcf Sold $ 2.42 $ 2.64 $ 2.40 $ 2.77 (1) Volumes are reported as metered in million cubic feet ("MMcf").
- 15 - ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS (Continued) HEATING DEGREE DAYS (2)
Weather Quarter ended December 31, 12 Months ended December 31, Service Sensitive -------------------------- ---------------------------- Area Customers % 1995 1994 Normal 1995 1994 Normal - ------- ----------- ----- ----- ----- ----- ----- ----- Texas (Energas) 47 1,249 1,185 1,382 3,216 3,215 3,528 Kentucky (WKG) 26 1,769 1,351 1,576 4,210 4,049 4,376 Louisiana (Trans La) 11 735 500 676 1,683 1,617 1,760 Colorado, Kansas and Missouri (GGC) 16 2,162 2,211 2,339 5,929 5,651 6,234 ---- System Average 100% 1,473 1,315 1,507 3,737 3,643 3,983 (2) A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees. The greater the number of heating degree days, the colder the climate. Heating degree days are used in the natural gas industry to measure the coldness of weather experienced and to compare relative temperatures between one geographic area and another. Normal heating degree days are derived from a 30-year average of actual heating degree days compiled by the National Weather Service.
- 16 - PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note 3 of notes to consolidated financial statements on pages 6 and 7 herein for a description of legal proceedings. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits A list of exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Exhibits Index, which immediately precedes such exhibits. (b) Reports on Form 8-K None - 17 - 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: February 14, 1996 By: /s/ James F. Purser ------------------------------ James F. Purser Executive Vice President and Chief Financial Officer Date: February 14, 1996 By: /s/ David L. Bickerstaff ------------------------------ David L. Bickerstaff Vice President and Controller (Principal Accounting Officer) - 18 - EXHIBITS INDEX Item 6(a) Exhibit Page Number Description Number ------- ----------- ------- 10.1 Atmos Energy Corporation Restricted Stock Grant Plan (Restated as of November 9, 1994) 10.2 Amendment No. 1 to the Atmos Energy Corporation Restricted Stock Grant Plan (Restated as of November 9, 1994) 10.3 Amendment No. 1 to the Atmos Energy Corporation Supplemental Executive Benefits Plan (Restated as of November 11, 1992) 15 Letter regarding unaudited interim financial information 27 Financial Data Schedule for Atmos for the quarter ended December 31, 1995 EX-15 2 AUDITORS' LETTER RE INCORP BY REFERENCE EXHIBIT 15 ---------- February 14, 1996 Board of Directors Atmos Energy Corporation We are aware of the incorporation by reference in the Registra- tion Statements (Form S-3 No. 33-58220, Form S-3 No. 33-56915, Form S-8 No. 33-57687, Form S-8 No. 33-68852, and Form S-8 No. 33-57695) of Atmos Energy Corporation of our report dated February 7, 1996, relating to the unaudited condensed consolidated interim financial statements of Atmos Energy Corporation which are included in its Form 10-Q for the quarter ended December 31, 1995. Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. ERNST & YOUNG LLP Dallas, Texas EX-27 3 FDS FOR ATMOS FOR 3 MONTHS ENDED 12/31/95
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-1996 DEC-31-1995 PER-BOOK 372,638 0 90,894 35,961 0 499,493 80 108,252 57,792 166,124 0 0 125,303 40,700 0 0 13,000 0 2,648 207 151,511 499,493 130,468 5,195 112,328 117,523 12,945 160 13,105 3,872 9,233 0 9,233 3,739 405 11,614 .59 .59
EX-10 4 EX 10.1 RESTRICTED STOCK GRANT PLAN EXHIBIT 10.1 THE ATMOS ENERGY CORPORATION RESTRICTED STOCK GRANT PLAN Effective October 1, 1987 Restated as of November 9, 1994 THE ATMOS ENERGY CORPORATION RESTRICTED STOCK GRANT PLAN (Restated as of November 9, 1994) I. PURPOSE OF PLAN This Plan has been established to align the interest of its participants more directly with those of the Company's shareholders, to retain and attract managerial and professional personnel of exceptional ability and to encourage strong commitment to corporate objectives. II. PLAN DEFINITIONS All rights and conditions under this Plan are specified in the following paragraphs subject to compliance with applicable laws and regulations. As used in this Plan, the following terms and phrases shall have the meanings ascribed to them below: A. "Administrator" shall mean the non-employee members of the Board who qualify as disinterested administrators under the provisions of Rule 16b-3 as promulgated by the Securities and Exchange Commission and as may hereafter be amended from time to time. B. "Board" or "Board of Directors" shall mean the Board of Directors of Atmos Energy Corporation. C. "Common Stock" shall mean the common stock of Atmos Energy Corporation. D. "Company" shall mean Atmos Energy Corporation and Subsidiaries. E. "Disability" shall mean such total and permanent disability as qualifies the participant for benefits under the Company's Long-Term Disability Plan covering the participant at the time. F. "Fair Market Value" with regard to the Restricted Stock on a particular date shall mean the closing price of the Common Stock as reported in the Southwest edition of The Wall Street Journal for that date, or if no prices are quoted for that date, on the last preceding date for which such prices of Common Stock are so quoted. In the event "NASDAQ Over-The-Counter Markets" cease to be reported as such or in the event the Common Stock of the Company is traded over a different exchange, a new, appropriate published stock quotation system shall be selected by the Committee, consistent with appropriate regulatory provisions. - 2 - G. "Plan" shall mean the Atmos Energy Corporation Restricted Stock Grant Plan as evidenced in this document and any amendments hereto. III. ELIGIBILITY The participants in the Plan shall be such employees of the Company as may be selected from time to time by the Administrator in its discretion. Directors of the Company who are not also employees of the Company shall not be eligible to participate in this Plan. In order to receive Restricted Stock, participants must not, at the time the grant of Restricted Stock is made, be subject to any agreement with the Company that restricts the acquisition of shares of Common Stock of the Company. IV. STOCK SUBJECT TO PLAN The stock subject to this Plan shall consist of shares of the Company's Common Stock to which the restrictions specified in Section V(F) are attached. This stock is hereafter referred to as "Restricted Stock". The total number of shares of Restricted Stock, subject to adjustment as provided in Section XII, that may be awarded by the Company under this Plan shall not be more than 900,000 shares. Restricted Stock awarded under this Plan shall, in the sole discretion of the Board of Directors, consist of either previously issued shares purchased on the open market or shares purchased from the Company as original issue shares or treasury shares. V. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS Each share of Restricted Stock awarded under this Plan shall be subject to the following restrictions: A. Shares of Restricted Stock awarded to a Plan participant may not be sold, transferred, pledged, hypothecated, encumbered, or otherwise alienated in any manner, whether voluntarily, by operation of law, or otherwise, until the restrictions on such shares are removed pursuant to this Plan and said shares are delivered to the participant. B. Shares of Restricted Stock awarded to a Plan participant will be forfeited if, prior to the removal of restrictions on Stock awarded hereunder, the recipient terminates employment for any reason other than death, disability, or retirement. C. At the time and on the date of a participant's death, disability, or retirement while employed by the Company, all restrictions placed on each share of Restricted Stock awarded to that participant shall be removed and such shares shall be delivered to the participant or to his legal representatives, - 3 - beneficiaries, or heirs. From and after such date, the participant or the participant's estate, personal representative or beneficiary, as the case may be, shall have full rights of transfer or resale with respect to such stock subject to applicable state and federal regulations. D. Stock certificates representing the number of shares of Restricted Stock granted to an employee of the Company shall be registered in the employee's name, but the certificates representing any shares of Restricted Stock shall be held in the custody of the Company for the participant's account. All dividends and distributions (other than stock dividends and distributions) on shares held in the custody of the Company shall be paid to the participant, however, regardless of the fact that the shares are being held in behalf of the participant. Any new, additional, or different shares or securities issued (due to a stock split, stock dividend, or other stock distribution) with respect to Restricted Stock previously awarded under the Plan shall be held by the Company as Restricted Stock for the participant's account and shall have the same restrictions as the underlying Restricted Stock with respect to which such new, additional, or different shares or securities were issued. At such time as restrictions are removed from any portion of the Restricted Stock held by the Company for the participant, certificates representing such shares shall be delivered free of all restrictions to the participant or to the participant's legal representatives, beneficiaries, or heirs. E. Additional grants of Restricted Stock after the initial grant may have restriction provisions different from those provided in Section VI. If such is the case, the award of such stock will be conditioned upon the acceptance by the participant of such different provisions. F. Each certificate issued in respect of shares of Restricted Stock granted to a participant under this Plan shall bear the following (or similar) legend: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeitures) contained in The Atmos Energy Corporation Restricted Stock Grant Plan. A copy of the Plan is on file in the office of Atmos Energy Corporation, 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240." VI. REMOVAL OF RESTRICTIONS A participant who receives a Restricted Stock award pursuant to this Plan shall be entitled to delivery of shares free and clear of all restrictions, if such participant is an employee of the Company at the time [subject to the provisions of Section V(C) hereof, according to the following schedule: - 4 - Percentage of Original Completed Years of Service Grant Delivered After Date of Grant to Participant 3 25% 4 25% 5 25% 6 25% Notwithstanding the foregoing provisions, each participant shall, in the event of a Change of Control of the Company, receive free of restriction all Restricted Stock granted to the participant on or before the effective date of such Change of Control. As used in this Plan, a "Change in Control" of the Company shall be deemed to have occurred if: A. any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 33-1/3% or more of the combined voting power of the Company's then outstanding securities; or B. during any period of two consecutive years individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses A or C of this paragraph) whose election by the Board of Directors or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or C. the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. - 5 - VII. STOCK WITHHOLDING REQUIREMENT Upon the removal or lapse of the restrictions on any Restricted Stock, the number of shares issuable by the Company to the participant shall be reduced by an amount (i) not less than the amount necessary to satisfy the participant's federal, state, and local tax withholding obligations (including FICA requirements) arising from the removal or lapse of the restrictions on the Restricted Stock and (ii) not more than an amount equal to the value of the Restricted Stock on which the restrictions were removed or lapsed as of the date of such removal or lapse multiplied by the participant's maximum marginal tax rate as of such date. VIII. FORFEITED SHARES If shares of Restricted Stock are forfeited according to the terms of this Plan, such shares may be added back to the number of shares available for issuance under the Plan only to the extent that no dividends from the forfeited shares were paid to the forfeiting participant. IX. RIGHTS OF RECIPIENTS AS SHAREHOLDERS Except as otherwise provided in the Plan, a recipient of a Restricted Stock grant under this Plan shall have all of the rights of a shareholder of the Company with respect to such shares of Restricted Stock, including the right to vote such shares and receive the dividends and other distributions paid or made with respect to such shares in accordance with Section V(D) above. X. ADMINISTRATION OF THE PLAN The Administrator shall have full authority to manage and control the operation and administration of the Plan. Action taken by the Administrator with respect to the Plan shall be taken upon the affirmative vote of a majority of the directors constituting the Administrator. The Administrator shall have the power to construe and interpret this Plan in accordance with its terms and to establish and amend the rules and regulations for its administration. All determinations of the Administrator shall be final and shall not be subject to appeal. The Administrator shall designate those employees of the Company and its Subsidiaries who are eligible to participate in the Plan subject to the provisions of Section III and shall designate the amounts of Restricted Stock to be granted. - 6 - XI. AMENDMENT AND TERMINATION The Board of Directors in its discretion may terminate the Plan at any time with respect to any shares of Restricted Stock which have not theretofore been granted. The Board of Directors shall have the right to alter or amend the Plan or any part thereof from time to time; provided, that no change in any Restricted Stock theretofore granted may be made which would impair the rights of the grantee without the consent of such grantee; and provided, further, that the Board of Directors may not make any alteration or amendment which would materially increase the benefits accruing to participants under the Plan, materially increase the aggregate number of shares which may be issued pursuant to the provisions of the Plan, change the class of employees eligible to receive grants under the Plan, withdraw the administration of the Plan from the Administrator, or permit any non-employee member of the Board to be eligible to receive a grant under the Plan without the approval of the stockholders of the Company. XII. ADJUSTMENT UPON CHANGES IN STOCK If there shall be any change in the Common Stock subject to the Plan or to any Restricted Stock granted thereunder, through subdivision, combination, or reclassification of shares, or through merger, consolidation, reorganization, recapitalization, stock dividend, stock split or other change in the corporate structure, appropriate adjustment shall be made by the Board of Directors in the aggregate number of shares subject to the Plan. XIII. NO EMPLOYMENT RIGHTS The adoption of the Plan does not confer upon any employee of the Company or a Subsidiary any right to continue employment with the Company or Subsidiary, as the case may be, nor does it interfere in any way with the right of the Company or a Subsidiary to terminate the employment of any of its employees at any time. IN WITNESS WHEREOF, and as conclusive evidence of its adoption of this Restated Plan, the Employer has caused this Plan to be duly executed as of November 9, 1994. ATMOS ENERGY CORPORATION By: /s/Ronald L. Fancher ---------------------------- Ronald L. Fancher, President and Chief Executive Officer - 7 - EX-10 5 EX 10.2 AMEND. 1 TO ATMOS RESTR. STOCK GRANT PLAN EXHIBIT 10.2 AMENDMENT NO. 1 TO THE ATMOS ENERGY CORPORATION RESTRICTED STOCK GRANT PLAN (Restated as of November 9, 1994) WHEREAS, effective October 1, 1987, ATMOS ENERGY CORPORATION (the "Company") adopted THE ATMOS ENERGY CORPORATION RESTRICTED STOCK GRANT PLAN, as amended and restated as of November 9, 1994 (the "Plan"); and WHEREAS, on November 9, 1994, the Company restated the Plan in its entirety; and WHEREAS, pursuant to Section XI of the Plan, the Company desires to amend the Plan as hereinafter set forth; NOW, THEREFORE, the Plan shall be, and hereby is, amended, effective as of the date this Amendment is executed, in the following respects: Section VIII of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "If shares of Restricted Stock are forfeited according to the terms of this Plan, the number of shares forfeited may be added back to the number of shares available for issuance under the Plan. Any shares of Restricted Stock that are forfeited according to the terms of this Plan shall be held by the Company as treasury shares and shall be available for reissuance under this Plan." IN WITNESS WHEREOF, the Company has executed this Amendment No. 1 to The Atmos Energy Corporation Restricted Stock Grant Plan this 8th day of November, 1995 to be effective as of this date. ATMOS ENERGY CORPORATION By: /s/ Robert F. Stephens --------------------------- Robert F. Stephens President and Chief Operating Officer EX-10 6 EX 10.3 AMENDMENT 1 TO ATMOS SEBP EXHIBIT 10.3 AMENDMENT NO. 1 TO THE ATMOS ENERGY CORPORATION SUPPLEMENTAL EXECUTIVE BENEFITS PLAN (Restated as of November 11, 1992) WHEREAS, effective October 1, 1987, ATMOS ENERGY CORPORATION (the "Employer") adopted THE ATMOS ENERGY CORPORATION SUPPLEMENTAL EXECUTIVE BENEFITS PLAN (the "Plan"); and WHEREAS, on November 11, 1992, the Employer restated the Plan in its entirety; and WHEREAS, pursuant to Section 9.1 of the Plan, the Employer desires to amend the Plan as hereinafter set forth; NOW, THEREFORE, the Plan shall be, and hereby is, amended, effective as of the date this Amendment is executed, in the following respects: 1. The first sentence of the definition of "Pension Plan" in Section 2.1(j) of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "The Employees' Retirement Plan of Atmos Energy Corporation, the Western Kentucky Gas Retirement Plan, or the Greeley Gas Company Employees' Pension Plan, whichever is applicable, as amended from time to time." 2. Section 2.3 of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "GOVERNING LAW: This Plan shall be construed in accordance with and governed by the laws of the State of Texas except to the extent otherwise preempted by the Employee Retirement Income Security Act of 1974, as amended, or any other federal law." 3. Section 3.1 of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "EMPLOYEES ELIGIBLE TO PARTICIPATE: All corporate officers of the Employer elected by the Board of Directors (excluding any assistant officers that may be elected from time to time) shall participate in this Plan; provided, however, that all benefits payable under this Plan are subject to the provisions of Section 9.5 hereof. Any Participant who ceases being a corporate officer of the Employer during his employment with the Employer shall immediately cease participation in this Plan except as otherwise set forth in this Plan." 4. The first paragraph of Section 5.1 of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "Except as otherwise provided elsewhere in this Plan or in a Participation Agreement entered into in the form attached to this Plan as Exhibit C-2, if a Participant (i) has been a corporate officer of the Employer for at least two years, (ii) has at least five years of vesting service under the Pension Plan, and (iii) has reached the age when he is eligible for the immediate commencement of his Pension Plan benefit when his employment with the Employer terminates, he shall be entitled to a monthly Supplemental Pension calculated pursuant to Exhibit A-1 attached hereto; provided, however, in no event shall the combined annual payment from this Plan and the Pension Plan to any Participant listed on the Minimum Benefit Schedule attached to this Plan as Exhibit A be less than the minimum Annual Amount for such Participant specified in the Minimum Benefit Schedule." 5. The first paragraph of Section 5.6 of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "Notwithstanding anything expressly or impliedly to the contrary contained in this Plan, if, following a Change in Control of the Employer, a Participant's employment is terminated, or he is demoted or reassigned to a position that is no longer a corporate officer position, for any reason other than for Cause (as defined in Section 9.2 of this Plan), the Participant shall nevertheless be entitled to receive a Supplemental Pension at such time as he becomes entitled to receive a benefit under the Pension Plan regardless of whether the Participant has been a corporate officer for at least two years or has five years of vesting service under the Pension Plan at the time of such termination, demotion, or reassignment. Such Supplemental Pension shall be calculated in the same manner as set forth in Section 9.1 of this Plan for benefits payable in the event of a termination of the Plan." 6. Section 6.3 of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "COMMENCEMENT OF SUPPLEMENTAL PENSION: Notwithstanding the requirement contained in Section 5.1 hereof that a Participant have been a corporate officer of the Employer for at least two years, have at least five years of vesting service under the Pension Plan, and have reached the age when he is eligible for the immediate commencement of his Pension Plan benefit when his employment with Employer terminates, a Participant receiving a Disability Pension hereunder will be eligible for a Supplemental Pension under Article V hereof, provided his disability continues until the commencement of the Supplemental Pension. However, all applicable provisions of Article V relating to a reduction in the amount of a Participant's Supplemental Pension shall apply to any Supplemental Pension received hereunder unless the terms of the Plan provide otherwise." - 2 - 7. The first sentence of the fourth paragraph of Section 9.1 of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "In the event the Board of Directors terminates the Plan or any portion thereof and such termination affects the Supplemental Pension described in the Plan, a Participant's right to a Supplemental Pension shall immediately vest regardless of whether the Participant has been a corporate officer of the Employer for at least two years or has five years of vesting service under the Pension Plan." 8. The first paragraph of Section 9.2 shall be, and hereby is, amended and revised to read in its entirety as follows: "Nothing contained in this Plan shall be construed as a contract of employment between the Employer and any employee, or as a right of any employee to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge any of its employees, with or without Cause. If a Participant's employment with the Employer is terminated without Cause or if the Participant's participation in the Plan is terminated for any reason other than resignation or termination of employment for Cause (except as otherwise provided in a Participation Agreement entered into in the form attached hereto as Exhibit C-2), the Participant shall be entitled to the benefits payable under this Plan that have accrued prior to the termination of employment or Plan participation. If such termination occurs upon or after a 'Change in Control' (as defined in Section 5.6 hereof), the Participant's right to a Supplemental Pension shall immediately vest regardless of whether the Participant has been a corporate officer of the Employer for at least two years or has five years of vesting service under the Pension Plan as of the date of such termination. The amount of the benefits payable under this Plan to a Participant whose employment with the Employer has been terminated without Cause or whose participation in the Plan has been terminated for any reason other than resignation or termination of employment for Cause (except as otherwise provided in a Participation Agreement entered into in the form attached hereto as Exhibit C-2) shall, if such termination occurs upon or after a 'Change of Control' (as defined in Section 5.6 hereof), be calculated in the same manner as set forth in Section 9.1 above for benefits payable in the event of a termination of the Plan. Notwithstanding any provision to the contrary herein contained, if, prior to a 'Change of Control' (as defined in Section 5.6 hereof), a Participant's employment with the Employer is terminated without Cause or if the Participant's participation in the Plan is terminated for any reason other than resignation or termination of employment for Cause, then, except as otherwise provided in a Participation Agreement entered into in the form attached hereto as Exhibit C-2, the amount of the benefits payable under this Plan to such Participant shall be calculated in the manner set forth in Section 5.1 above and the Participant's right to a Supplemental Pension shall vest only if the Participant has been - 3 - a corporate officer of the Employer for at least two years and has five years of vesting service under the Pension Plan as of the date of such termination." 9. Exhibit B shall be, and hereby is, replaced with Exhibit B attached to this Amendment. 10. Exhibit C-1 shall be, and hereby is, replaced with Exhibit C-1 attached to this Amendment. IN WITNESS WHEREOF, the Employer has executed this Amendment No. 1 to The Atmos Energy Corporation Supplemental Executive Benefits Plan this day of November, 1995 to be effective as of this date. ATMOS ENERGY CORPORATION By: /s/ Robert F. Stephens ----------------------------- Robert F. Stephens President and Chief Operating Officer - 4 - EXHIBIT B NONCOMPETITION AGREEMENT THIS NONCOMPETITION AGREEMENT is entered into as of the ____ day of , 19 by and between ATMOS ENERGY CORPORATION, a Texas corporation (the "Employer"), and ("Participant"). W I T N E S S E T H: WHEREAS, the Employer has adopted the Atmos Energy Corporation Supplemental Executive Benefits Plan (the "Plan"), pursuant to which the corporate officers may receive supplemental retirement, disability, and death benefits; and WHEREAS, in accordance with the requirements of the Plan and as an inducement to the Employer to allow Participant's participation in the Plan, Participant has agreed to execute and enter into this Agreement; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Participant agrees that, during the term of this Agreement, Participant shall not (a) participate, directly or indirectly, as an employee, agent, representative, officer, director, stockholder, partner, joint venturer, or otherwise or (b) have any direct or indirect financial interest in any form in any business that sells or offers for sale, directly or indirectly, any products or services that are competitive with the products or services sold or offered for sale by the Employer in any geographic location which the Employer shall be doing business during such period of time as Participant is a participant in the Plan; provided, however, that the ownership by Participant of any stock listed on a national securities exchange of any corporation conducting a competing business shall not be deemed a violation of this Agreement if the aggregate amount of such stock owned by Participant does not exceed one percent (1%) of the total outstanding stock of such corporation. 2. In the event of a breach or threatened breach of the provisions of this Agreement by Participant, the Employer shall be entitled (as an absolute right and without the necessity of proving irreparable injury or damages and in addition to any other remedies available under the Plan or otherwise) to an injunction restraining Participant from such violation. 3. If any provision of this Agreement shall, for any reason, be adjudged by any court of competent jurisdiction to be invalid or unenforceable, such judgment shall not affect, impair, or invalidate the remainder of this Agreement but shall be - 5 - confined in its operation to the provisions of this Agreement directly involved in the controversy in which such judgment shall have been rendered. To the extent that the provisions of this Agreement are adjudged to be invalid or unenforceable, this Agreement shall be construed and (in the absence of such construction) reformed so as to allow the maximum benefit of the provisions of this Agreement permitted by law. If, however, this Agreement shall for any reason be held by a court of competent jurisdiction to be excessively broad as to time, duration, geographical scope, activity, or subject matter, it shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the applicable laws as they shall then appear. 4. This Agreement shall become effective as of the commencement of Supplemental Pension or Disability Pension benefits from the Plan and shall terminate upon the earliest to occur of (i) five (5) years from the date Participant begins receiving Supplemental Pension or Disability Pension benefits from the Plan, (ii) the attainment of age 67 by Participant, or (iii) Participant's death. 5. This Agreement shall be construed and enforced in accordance with the laws of the State of Texas. IN WITNESS WHEREOF, the parties hereto have executed this Noncompetition Agreement as of the date first written above. PARTICIPANT: ATMOS ENERGY CORPORATION By: - ------------------------------ -------------------- - 6 - EXHIBIT C-1 (FORM OF AGREEMENT FOR ALL PARTICIPANTS OTHER THAN MR. VAUGHAN) PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT is entered into as of the day of , 19 by and between ATMOS ENERGY CORPORATION, a Texas corporation (the "Employer"), and ("Participant"). W I T N E S S E T H: WHEREAS, the Employer has adopted the Atmos Energy Corporation Supplemental Executive Benefits Plan (the "Plan"), pursuant to which the corporate officers may receive supplemental retirement, disability, and death benefits; and WHEREAS, in accordance with Section 9.6 of the Plan, the Employer and Participant have agreed to execute and enter into this Agreement; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The Employer hereby agrees to provide to Participant the benefits described in the Plan pursuant to the terms and conditions set forth therein. Employer further agrees that, in the event it amends or terminates the Plan in such a manner that results in a decrease in the amount of the benefits to be paid under the Plan to Participant or terminates Participant's employment without Cause or Participant's participation in the Plan for any reason other than Participant's resignation or termination of Participant's employment for Cause, Participant shall have the right to, and the Employer agrees to pay to Participant, any benefits accrued prior to the effective date of such amendment or termination of the Plan or of such termination of Participant's employment with the Employer or participation in the Plan, the amount of which benefit shall be calculated as follows: (a) In the event the Employer amends the Plan and such amendment results in a decrease in the amount of the Supplemental Pension, Disability Pension, or death benefit that would be paid under the Plan but for the amendment thereof, the amount of Participant's benefit shall be the sum of (i) Participant's benefit as calculated pursuant to the terms of the Plan in effect immediately prior to the amendment thereof and based upon Participant's Compensation as of the date of his retirement, disability, or death multiplied by a fraction, the numerator of which shall be the number of years of vesting service by Participant in the Pension Plan prior to the effective date of the amendment (which number shall not be less than 5 nor greater - 7 - than 20) and the denominator of which shall be the total number of years of vesting service by Participant in the Pension Plan (which number, for purposes of calculating Participant's Supplemental Pension, shall not be greater than 20), plus (ii) Participant's benefit as calculated pursuant to the terms of the Plan as amended based upon Participant's Compensation as of the date of his retirement, disability, or death multiplied by a fraction, the numerator of which shall be the number of years that Participant participated in the Pension Plan after the effective date of the amendment (which number, for purposes of calculating Participant's Supplemental Pension, when added to the numerator of the fraction in clause (i) above, may not exceed 20) and the denominator of which shall be the total number of years of vesting service by Participant in the Pension Plan (which number for purposes of calculating Participant's Supplemental Pension, shall not be greater than 20); provided, however, that if the Plan is so amended prior to Participant's fifth year of vesting service in the Pension Plan, Participant's Supplemental Pension payable hereunder shall be calculated solely in accordance with the terms of the Plan as amended; provided further that, in the event of any such amendment occurring upon and after a "Change in Control" (as defined in Paragraph 2 hereof), Participant's Supplemental Pension must be at least equal to that calculated pursuant to the provisions of Section 9.1 of the Plan for benefits payable in the event of a termination of the Plan. (b) In the event the Employer terminates the Plan or any portion thereof and such termination affects the Disability Pension or death benefit described in the Plan, Participant's Disability Pension and death benefit shall be calculated as of the date of termination of such benefit as though the date of such termination was the date that Participant became disabled or died. Such Disability Pension and death benefit shall become payable, however, only upon Participant's disability or death occurring in accordance with the terms of the Plan in effect immediately prior to the date of its termination. (c) In the event the Employer terminates the Plan or any portion thereof and such termination affects the Supplemental Pension described in the Plan, Participant's right to a Supplemental Pension shall immediately vest regardless of whether Participant has been a corporate officer of the Employer for at least two years or has five years of vesting service under the Pension Plan. In such event, Participant's Supplemental Pension shall be the amount determined in accordance with Section 5.1 of the Plan (i) except that it shall be based upon Participant's Compensation as of the date of the termination of the Plan, (ii) except that Participant shall be treated as having the number of years of benefits service under the Pension Plan as he would have if he remains in the Pension Plan until he reaches his Earliest Commencement Age as set forth in the Minimum Benefit Schedule attached to the Plan as Exhibit A or, if Participant is not listed on the Minimum Benefit Schedule, age 62, and (iii) except that, if Participant is not fully vested under the Pension - 8 - Plan, the calculation made under paragraph (b) of Exhibit A-1 to the Plan shall be made on the basis of the monthly amount of pension that would be payable to Participant if he were so fully vested. (d) If, at any time prior to a "Change in Control" (as defined in Paragraph 2 hereof), Participant's employment with the Employer is terminated without Cause (as defined in this Paragraph 1(d)) or if Participant's participation in the Plan is terminated for any reason other than resignation or termination of employment for Cause, Participant shall nevertheless be entitled to the benefits payable under the Plan that have accrued prior to the termination of Participant's employment or Plan participation, the amount of such benefits to be calculated in the manner set forth in Section 5.1 of the Plan; provided, however, that Participant's right to a Supplemental Pension shall vest only if Participant has been a corporate officer of the Employer for at least two years and has at least five years of vesting service under the Pension Plan as of the date of such termination. The amount of the benefits payable under the Plan to Participant in such event shall be calculated in the same manner as set forth in Subparagraph 1(c) above for benefits payable in the event of a termination of the Plan. As used in this Paragraph 1, "Cause" for termination of employment shall mean termination upon (i) the willful and continued failure by Participant to substantially perform his duties with the Employer (other than any such failure resulting from Participant's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to Participant by the Employer that specifically identifies the manner in which the Employer believes that Participant has not substantially performed his duties or (ii) Participant's willful engagement in conduct that is demonstrably and materially injurious to the Employer, monetarily or otherwise. For purposes of this paragraph, no act, or failure to act, on Participant's part shall be deemed "willful" unless done, or omitted to be done, by Participant not in good faith and without a reasonable belief that the action or omission was in the best interests of the Employer. Notwithstanding the foregoing, Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board of Directors of the Employer at a meeting of such Board of Directors called and held for such purpose (after reasonable notice to Participant and an opportunity for Participant, together with Participant's counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors that Participant was guilty of conduct set forth above in clauses (i) or (ii) of this Subparagraph 1(d) and specifying the particulars thereof in detail. 2. Notwithstanding anything expressly or impliedly to the contrary contained in this Agreement or the Plan, if, following a Change in Control of the Employer, Participant's employment is - 9 - terminated, or he is demoted or reassigned to a position that is no longer a corporate officer position, for any reason other than for Cause (as defined in Paragraph 1 of this Plan), Participant shall nevertheless be entitled to receive a Supplemental Pension at such time as he becomes entitled to receive a benefit under the Pension Plan regardless of whether Participant has been a corporate officer of the Employer for at least two years or has five years of vesting service under the Pension Plan at the time of such termination, demotion, or reassignment. Such Supplemental Pension shall be calculated in the same manner as set forth in Subparagraph 1(c) above for benefits payable in the event of a termination of the Plan. As used in this Paragraph 2, a "Change in Control" of the Employer shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than a trustee or other fiduciary holding securities under an employee benefit plan of the Employer, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Employer representing 33-1/3% or more of the combined voting power of the Employer's then outstanding securities; or (ii) during any period of two consecutive years individuals who at the beginning of such period constitute the Board of Directors and any new director (other than a director designated by a person who has entered into an agreement with the Employer to effect a transaction described in clauses (i) or (ii) of this Paragraph) whose election by the Board or nomination for election by the Employer's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (iii) the shareholders of the Employer approve a merger or consolidation of the Employer with any other corporation, other than a merger or consolidation which would result in the voting securities of the Employer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 60% of the combined voting power of the voting securities of the Employer or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Employer approve a plan of complete liquidation of the Employer or an agreement for the sale or disposition by the Employer of all or substantially all the Employer's assets. 3. Except as otherwise provided in Paragraph 2 of this Agreement, Participant agrees that nothing in this Agreement or the Plan shall entitle him, or be deemed to entitle him, to receive a Supplemental Pension under the Plan if (i) he has not met the requirements for a Supplemental Pension as set forth in the Plan, (ii) his employment with the Employer is terminated prior to his reaching the age of eligibility for the immediate commencement of his Pension Plan benefit due to resignation, or - 10 - (iii) his employment with the Employer is terminated for Cause (as defined in Paragraph 1 above). 4. No amendment or termination of the Plan by the Employer shall constitute an amendment or termination of this Agreement. This Agreement may be amended or modified only by the written agreement of the parties hereto, and will terminate only upon the occurrence of the earlier of the following events: (i) the execution of a written agreement to terminate this Agreement signed by all of the parties hereto, (ii) the satisfaction of all of the Employer's obligations to Participant under the Plan and this Agreement, (iii) the termination by Participant of Participant's employment with the Employer by resignation effective prior to Participant reaching age 55 unless such resignation occurs after a Change in Control, (iv) the termination for Cause of Participant's employment with the Employer, or (v) the breach by Participant of any of the terms or provisions of the Noncompetition Agreement executed by Participant in accordance with the Plan. 5. Nothing contained in this Agreement shall be construed as a contract of employment between the Employer and Participant, or as a right of Participant to be continued in the employment of the Employer, or as a limitation of the right of the Employer to discharge Participant with or without cause. 6. The Employer agrees to pay any and all legal fees and expenses incurred by Participant in seeking to obtain or enforce any right or benefit provided by this Agreement. 7. Each capitalized term used in this Agreement that is not otherwise defined herein shall have the same meaning attributed to it in the Plan. 8. Any successor to the Employer hereunder, which successor continues or acquires any of the business of the Employer, shall be bound by the terms of this Agreement in the same manner and to the same extent as the Employer. 9. This Agreement shall be construed and enforced in accordance with the laws of the State of Texas. IN WITNESS WHEREOF, the parties hereto have executed this Participation Agreement as of the date first written above. PARTICIPANT: ATMOS ENERGY CORPORATION By: - 11 - -----END PRIVACY-ENHANCED MESSAGE-----