-----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, KAbqHAQFPwTpoFCC4kWBJFbd7vqh2QVYIihNjbZ3p8F515ahli1NE4e7mdbOsHaB RtdXmiXqexVAld1ckufuOA== 0000731802-96-000008.txt : 19960816 0000731802-96-000008.hdr.sgml : 19960816 ACCESSION NUMBER: 0000731802-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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: 96613123 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 6/30/96 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-10042 ATMOS ENERGY CORPORATION (Exact name of registrant as specified in its charter) TEXAS 75-1743247 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1800 Three Lincoln Centre 5430 LBJ Freeway, Dallas, Texas 75240 (Address of principal executive offices) (Zip Code) (214) 934-9227 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X .No . Number of shares outstanding of each of the issuer's classes of common stock, as of July 30, 1996. Class Shares Outstanding ------------ ------------------ No Par Value 15,990,905 PART 1. FINANCIAL INFORMATION Item 1. Financial Statements ATMOS ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30, September 30, 1996 1995 ------------ ------------ ASSETS (Unaudited) Property, plant and equipment $650,995 $595,359 Less accum. depreciation and amort. 252,300 232,107 -------- -------- Net property, plant and equipment 398,695 363,252 Current assets Cash and cash equivalents 2,153 2,294 Accounts receivable, net 34,027 25,690 Inventories 7,410 6,747 Gas stored underground 8,307 10,758 Prepayments 2,175 2,747 -------- -------- Total current assets 54,072 48,236 Deferred charges and other assets 35,518 34,295 -------- -------- $488,285 $445,783 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Shareholders' equity Common stock outstanding: 15,982,304 shares at 6/30/96 and 15,519,112 shares at 9/30/95 $ 80 $ 78 Additional paid-in capital 110,139 106,496 Retained earnings 68,837 51,704 -------- -------- Total shareholders' equity 179,056 158,278 Long-term debt 125,303 131,303 -------- -------- Total capitalization 304,359 289,581 Current liabilities Current maturities of long-term debt 6,000 7,000 Notes payable to banks 36,100 33,500 Accounts payable 30,196 24,945 Taxes payable 11,137 1,926 Customers' deposits 9,758 9,343 Other current liabilities 16,287 10,641 -------- -------- Total current liabilities 109,478 87,355 Deferred income taxes 35,427 33,120 Deferred credits and other liabilities 39,021 35,727 -------- -------- $488,285 $445,783 ======== ======== See accompanying notes to consolidated financial statements. ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Three months ended June 30, ------------------- 1996 1995 ------- ------- Operating revenues $93,571 $84,685 Purchased gas cost 59,795 50,616 ------- ------- Gross profit 33,776 34,069 Operating expenses Operation 19,354 20,976 Maintenance 1,013 1,072 Depreciation and amortization 5,456 5,177 Taxes, other than income 3,742 3,825 Income taxes 152 32 ------- ------- Total operating expenses 29,717 31,082 ------- ------- Operating income 4,059 2,987 Other income (expense) (303) 473 Interest charges 3,440 3,378 ------- ------- Net income $ 316 $ 82 ======= ======= Net income per share $ .02 $ .01 ======= ======= Cash dividends per share $ .24 $ .23 ======= ======= Average shares outstanding 15,965 15,450 ======= ======= See accompanying notes to consolidated financial statements. ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Nine months ended June 30, -------------------- 1996 1995 -------- -------- Operating revenues $415,143 $359,827 Purchased gas cost 265,248 222,699 -------- -------- Gross profit 149,895 137,128 Operating expenses Operation 62,022 63,119 Maintenance 3,154 3,224 Depreciation and amortization 16,382 15,500 Taxes, other than income 13,446 13,290 Income taxes 15,715 11,533 -------- -------- Total operating expenses 110,719 106,666 -------- -------- Operating income 39,176 30,462 Other income (expense) (288) 387 Interest charges 10,956 10,346 -------- -------- Net income $ 27,932 $ 20,503 ======== ======== Net income per share $ 1.76 $ 1.33 ======== ======== Cash dividends per share $ .72 $ .69 ======== ======== Average shares outstanding 15,855 15,386 ======== ======== See accompanying notes to consolidated financial statements. ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (In thousands, except per share data) Twelve months ended June 30, --------------------- 1996 1995 -------- -------- Operating revenues $491,136 $437,177 Purchased gas cost 311,359 271,389 -------- -------- Gross profit 179,777 165,788 Operating expenses Operation 82,334 87,436 Maintenance 4,206 4,482 Depreciation and amortization 21,623 20,061 Taxes, other than income 16,767 16,078 Income taxes 13,756 8,883 -------- -------- Total operating expenses 138,686 136,940 -------- -------- Operating income 41,091 28,848 Other income (expense) (458) 602 Interest charges 14,331 13,374 -------- -------- Net income $ 26,302 $ 16,076 ======== ======== Net income per share $ 1.67 $ 1.05 ======== ======== Cash dividends per share $ .95 $ .91 ======== ======== Average shares outstanding 15,767 15,358 ======== ======== See accompanying notes to consolidated financial statements. ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine months ended June 30, -------------------- 1996 1995 -------- -------- Cash Flows From Operating Activities Net income $ 27,932 $ 20,503 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Charged to depreciation and amortization 16,382 15,500 Charged to other accounts 2,705 2,732 Deferred income taxes (benefit) 2,307 (1,179) Other 219 1,838 -------- -------- 49,545 39,394 Net change in operating assets and liabilities 16,398 28,597 -------- -------- Net cash provided by operating activities 65,943 67,991 Cash Flows From Investing Activities Capital expenditures (57,874) (44,796) Retirements of property, plant and equipment 3,344 2,519 -------- -------- Net cash used in investing activities (54,530) (42,277) Cash Flows From Financing Activities Net increase (decrease) in notes payable to banks 2,600 (54,600) Issuance of long-term debt - 40,000 Cash dividends paid (11,393) (10,625) Repayment of long-term debt (7,000) (4,000) Issuance of common stock 4,239 3,166 -------- -------- Net cash used in financing activities (11,554) (26,059) -------- -------- Net decrease in cash and cash equivalents (141) (345) Cash and cash equivalents at beginning of period 2,294 2,766 -------- -------- Cash and cash equivalents at end of period $ 2,153 $ 2,421 ======== ======== See accompanying notes to consolidated financial statements. ATMOS ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1996 1. Unaudited interim financial information In the opinion of management, all material adjustments necessary for a fair presentation have been made to the unaudited interim period financial statements. Such adjustments consisted only of normal recurring accruals. Because of seasonal and other factors, the results of operations for the nine month period ended June 30, 1996 are not indicative of expected results of operations for the year ending September 30, 1996. These interim financial statements and notes are condensed as permitted by the instructions to Form 10-Q, and should be read in conjunction with the audited consolidated financial statements in the 1995 annual report to shareholders of Atmos Energy Corporation ("Atmos" or the "Company"). The condensed consolidated balance sheet of Atmos Energy Corporation, as of June 30, 1996, and the related condensed consolidated statements of income for the three-month, nine-month, and twelve-month periods ended June 30, 1996 and 1995, and the condensed consolidated statements of cash flows for the nine-month periods ended June 30, 1996 and 1995, included herein have been subjected to a review by Ernst & Young LLP, the Company's independent accountants, whose report is included herein. Common stock - As of June 30, 1996, the Company had 75,000,000 shares of common stock, no par value (stated at $.005 per share), authorized and 15,982,304 shares outstanding. 2. Business combination activity Agreement to acquire United Cities Gas Company In July 1996, the Company announced that it had reached a definitive agreement to acquire by merger United Cities Gas Company ("United Cities") of Brentwood, Tennessee, by means of a tax-free reorganization. The Company will exchange approximately 13.1 million shares of its stock for all of the outstanding stock of United Cities. Atmos will be the surviving corporation. Atmos has agreed to increase the indicated annual dividend to not less than $1.02 per share, for no less than four quarters, at the first Board meeting following the closing of the transaction. The transaction will be accounted for by the pooling of interests method. The transaction is subject to approval by the United Cities and Atmos shareholders. Approval by appropriate regulatory bodies will also be required among other conditions precedent to closing. The closing of the transaction is not expected to be in the Company's 1996 fiscal year. United Cities is a natural gas utility engaged in the distribution and sale of natural gas to approximately 310,000 customers in Tennessee, Illinois, Virginia, Kansas, Missouri, South Carolina, Georgia, and Iowa, and in the sale of propane to about 25,000 customers in the states of Tennessee, Virginia and North Carolina. United Cities' assets consist of the property, plant and equipment used in its natural gas and propane sales and distribution businesses. Following consummation of the merger, Atmos intends to continue to operate the United Cities business as a division of Atmos, along with Atmos' Energas Company, Trans Louisiana Gas Company, Western Kentucky Gas Company, and Greeley Gas Company divisions. The accompanying consolidated financial statements of the Company do not include the assets, liabilities, or operating results of United Cities. On August 1, 1996, Southern Union Company filed a Schedule 13D with the Securities and Exchange Commission reporting that it owned 6.5% of United Cities' outstanding common stock. Southern Union stated in its press releases related to the announcement that it opposes the merger of United Cities and Atmos and may provide alternatives to the merger. On August 6, 1996, United Cities and Atmos filed a joint complaint with the Missouri Public Service Commission against Southern Union alleging that Southern Union's purchases of United Cities common stock violated a Missouri statute which requires prior approval of the Missouri Public Service Commission for any public utility in Missouri to acquire the stock of another public utility in Missouri. The complaint asks for a declaration, among other things, that the purchases of United Cities' stock by Southern Union be declared null and void and that Southern Union be prohibited from further purchases of United Cities' stock. Acquisition of Oceana Heights Gas Company In November 1995, Atmos acquired by means of a merger, all of the assets and liabilities of Oceana Heights Gas Company ("Oceana") of Thibodaux, Louisiana. The transaction was accounted for as a pooling of interests. The outstanding shares of Oceana capital stock were converted into 313,411 shares of Atmos common stock having a market value of $6.4 million. Subsequent to the merger, the business of Oceana has been operated through the Company's Trans Louisiana Gas Company division ("Trans La Division"). The acquisition increased the Trans La Division's customer base by approximately 9,200 customers, or 13 percent, to over 79,000 customers. Although significant for the Trans La Division's operations, the acquisition did not have a material impact on the Company's financial condition and results of operations. The acquisition transaction and Oceana's operating results for the nine months ended June 30, 1996 are reflected in the Company's financial statements for the nine months ended June 30, 1996. 3. Contingencies On March 15, 1991, suit was filed in the 15th Judicial District Court of Lafayette Parish, Louisiana, by the "Lafayette Daily Advertiser" and others against the Trans La Division, Trans Louisiana Industrial Gas Company, Inc. ("TLIG"), a wholly owned subsidiary of the Company, and Louisiana Intrastate Gas Corporation and certain of its affiliates ("LIG"). LIG is the Company's primary supplier of natural gas in Louisiana and is not otherwise affiliated with the Company. The plaintiffs purported to represent a class consisting of all residential and commercial gas customers in the Trans La Division's service area. Among other things, the lawsuit alleged that the defendants violated antitrust laws of the state of Louisiana by manipulating the cost-of-gas component of the Trans La Division's gas rate to the purported customer class, thereby causing such purported class members to pay a higher rate. The plaintiffs made no specific allegation of an amount of damages. The defendants brought an appeal to the Louisiana Supreme Court of rulings by the trial court and the Third Circuit Court of Appeal which denied defendants' exceptions to the jurisdiction of the trial court. It was the position of the defendants that the plaintiffs' claims amount to complaints about the level of gas rates and should be within the exclusive jurisdiction of the Louisiana Commission. On January 19, 1993 the Louisiana Supreme Court issued a decision reversing in part the lower courts' rulings, dismissing all of plaintiffs' claims against the defendants which seek damages due to alleged overcharges and further ruling that all such claims are within the exclusive jurisdiction of the Louisiana Commission. Any claims which seek damages other than overcharges were remanded to the trial court but were stayed pending the completion of the Louisiana Commission proceeding referred to below. The Company has reached a tentative settlement with the plaintiffs in the context of the Louisiana Commission proceeding referred to below, which settlement will resolve all outstanding issues relating to the Company, subject to certain procedural conditions. On July 14, 1995, the Louisiana Commission entered an order approving a settlement with the Company and TLIG in connection with its investigation of the costs included in the Trans La Division's purchased gas adjustment component in its rates. The order exonerated the Company of any wrongdoing or manipulation of the cost of gas component of its gas rate to residential and commercial customers. In the settlement, the Company agreed to refund approximately $541,000 plus interest to the Trans La Division's customers over a two-year period due to certain issues related to the calculation of the weighted average cost of gas. The refund totaling approximately $1,016,000, which includes interest calculated through October 1, 1995, began in September 1995 and will be credited to customer bills along with interest that accrues after October 1, 1995. The Company refunded $533,000 under the settlement in the nine months ended June 30, 1996. Most of the issues that generated the refunds arose before Trans Louisiana Gas Company was acquired by the Company in 1986. The Greeley Gas Company Division of the Company was named a defendant in several lawsuits filed as a result of a fire in a building in Steamboat Springs, Colorado on February 3, 1994. The plaintiffs claimed that the fire resulted from a leak in a severed gas service line owned by the Greeley Division. On January 12, 1996, the jury awarded the plaintiffs approximately $2.5 million in compensatory damages and approximately $2.5 million in punitive damages. The jury assessed the Company with liability for all of the damages awarded. The Company has filed a Notice of Appeal with the Colorado Court of Appeals with respect to this case. The Company has adequate insurance to cover the compensatory damages awarded. The Company's insurance carrier recently informed the Company that, based upon a recent Colorado Court ruling, it no longer believes that the punitive damages awarded against the Company can be covered by the Company's insurance policy. The Company is currently reviewing the position of the insurance carrier with respect to coverage of punitive damages. From time to time, claims are made and lawsuits are filed against the Company arising out of the ordinary business of the Company. In the opinion of the Company's management, liabilities, if any, arising from these actions are either covered by insurance, ade quately reserved for by the Company or would not have a material adverse effect on the financial condition of the Company. 4. Long-term and short-term debt During the nine months ended June 30, 1996, the Company paid installments due of $2,000,000 on its 9.75% Senior Notes, $3,000,000 on its 9.76% Senior Notes and $2,000,000 on its 11.2% Senior Notes. At June 30, 1996, the Company had committed, short-term, unsecured bank credit facilities totaling $90,000,000, of which $80,000,000 was unused. The Company also had aggregate uncommitted lines of $150,000,000, of which $123,900,000 was unused. 5. Statements of cash flows Supplemental disclosures of cash flow information for the nine month periods ended June 30, 1996 and 1995 are presented below. Nine months ended June 30, ------------------- 1996 1995 ------- ------- (In thousands) Cash paid for Interest $11,477 $10,983 Income taxes 3,840 7,184 INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors Atmos Energy Corporation We have reviewed the accompanying condensed consolidated balance sheet of Atmos Energy Corporation as of June 30, 1996, and the related condensed consolidated statements of income for the three- month, nine-month, and twelve-month periods ended June 30, 1996 and 1995 and the statements of cash flows for the nine-month periods ended June 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Atmos Energy Corporation as of September 30, 1995, and the related consolidated statements of income, shareholders' equity, and cash flows for the year then ended (not presented herein) and in our report dated November 8, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 1995, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. ERNST & YOUNG LLP Dallas, Texas August 7, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction The Company distributes and sells natural gas to residential, commercial, industrial and agricultural customers in six states. Such business is subject to regulation by state and/or local authorities in each of the states in which the Company operates. In addition, the Company's business is affected by seasonal weather patterns, competition within the energy industry, and economic conditions in the areas that the Company serves. Revenues and sales volume statistics for the three-month, nine- month, and twelve-month periods ended June 30, 1996 and 1995 appear on pages 19-21. Average meters in service are as follows: Nine months ended June 30, ------------------- 1996 1995 ------- ------- Average Meters in Service Residential 586,888 571,219 Commercial 61,385 60,383 Industrial (including agricultural) 18,985 19,432 Public authority and other 5,044 4,972 ------- ------- Total 672,302 656,006 ======= ======= Agreement to Acquire United Cities Gas Company through Merger In July 1996, the Company announced that it has reached a definitive agreement to acquire by merger United Cities Gas Company ("United Cities") of Brentwood, Tennessee by means of a tax-free reorganization. Under the terms of the agreement, one share of Atmos stock will be exchanged for each share of United Cities stock. Atmos will be the surviving corporation. Atmos has agreed to increase the indicated annual dividend to not less than $1.02 per share, for no less than four quarters, at the first board meeting following the closing of the transaction. On June 30, 1996, there were 15,982,304 shares of Atmos common stock outstanding and 13,102,913 common shares of United Cities outstanding. The transaction will be accounted for as a pooling of interests. The Board of Directors of the combined company will consist of all 11 current members of the Atmos board and four current members from the United Cities board. Charles K. Vaughan will remain chairman of the board of Atmos. Gene C. Koonce, currently United Cities chairman of the board, president and chief executive officer, will become vice chairman of the Atmos board. United Cities, a publicly held company, provides natural gas service to approximately 310,000 customers in Tennessee, Illinois, Missouri, Kansas, Iowa, Georgia, South Carolina and Virginia, and has gas storage facilities in Kentucky and Kansas. United Cities also serves about 25,000 propane customers in Tennessee, North Carolina and Virginia. The transaction is subject to the completion of a series of significant events which include approval by the United Cities shareholders, approval by the Atmos shareholders and approval by appropriate regulatory bodies. For further information, please refer to Note 2 in the notes to consolidated financial statements. Rate Activity In May, 1996, the Company filed to increase revenues by approximately $7.7 million for a portion of its Energas Company service area ("Energas Division"). The proposed rates would produce an overall increase of approximately 7.6% of current annual revenue generated from approximately 200,000 customers in Texas. Pending hearings and decisions by the cities, the cities suspended the effective date of the increase for a period not to exceed October 3, 1996. If a final determination has not been made by the cities by that date, the rate increase could be made effective. In February 1995, the Company filed with the Kentucky Commission for a rate increase for its Western Kentucky Gas Company Division. In October 1995, the Kentucky Commission issued an order authorizing the Company to increase its rates by $2.3 million annually effective November 1, 1995, and by an additional $1.0 million annually beginning in March 1996. The settlement included a decrease in depreciation rates, recovery of expenses related to adoption of SFAS No. 106 and included a provision for the Company to begin a three-year demand-side management pilot program for the 1996-97 heating season, which could cost up to $450,000 annually, resulting in a total annual operating income increase of approximately $4.0 million. The Company provides natural gas service to approximately 171,000 customers in Kentucky. In September 1992, the Louisiana Public Service Commission ("Louisiana Commission") issued a rate order to the Company's Trans La Division which included a rate stabilization clause ("RSC") for three years that provided for an annual adjustment to the Company's rates to reflect changes in expenses, revenues and invested capital following an annual review. The RSC provided an opportunity for a return on jurisdictional common equity of between 11.75% and 12.25%. An increase of $1.1 million annually or 2.0% went into effect on March 6, 1995. In April 1996, the Company filed a request with the Louisiana Commission to continue the RSC. Also during the quarter, the Company formed a power marketing subsidiary, Atmos Energy Services Inc., to conduct electric power purchases and sales. The Company expects to market these services to industrial customers in addition to natural gas. FINANCIAL CONDITION For the nine months ended June 30, 1996, net cash provided by operating activities totaled $65.9 million compared with $68.0 million for the nine months ended June 30, 1995. The net change in operating assets and liabilities was $16.4 million for the nine months ended June 30, 1996 compared with $28.6 million for the nine months ended June 30, 1995. Due to the seasonal nature of the natural gas distribution business, large swings in accounts receivable, accounts payable and inventories of gas in underground storage will occur when entering and leaving the winter or heating season. Major cash flows used for investing activities for the nine months ended June 30, 1996 included capital expenditures of $57.9 million compared with $44.8 million for the nine months ended June 30, 1995. The capital expenditures budget for fiscal year 1996 is currently $67.6 million, as compared with actual capital expenditures of $62.9 million in fiscal 1995. Capital projects planned for 1996 include major expenditures for mains, services, meters, vehicles, and computer equipment. These expenditures will be financed from internally generated funds and financing activities. For the nine months ended June 30, 1996, cash used in financing activities amounted to $11.6 million compared with $26.1 million for the nine months ended June 30, 1995. During the nine months ended June 30, 1996, notes payable to banks increased $2.6 million, as compared with a decrease of $54.6 million for the nine months ended June 30, 1995. Payments of long-term debt increased $3.0 million to $7.0 million for the nine months ended June 30, 1996. Payments of long-term debt consisted of a $2.0 million installment on the Company's 9.75% Senior Notes due in 1996, a $3.0 million installment on its 9.76% Senior Notes and a $2.0 million installment on its 11.2% Senior Notes. The Company paid $11.4 million in cash dividends during the nine months ended June 30, 1996, compared with $10.6 million in cash dividends paid during the nine months ended June 30, 1995. This reflects a $.01 per share increase in the quarterly dividend rate and an increase in the number of shares outstanding. In the nine month period ended June 30, 1996, the Company issued 463,192 shares of stock, including 313,411 for the Oceana Heights acquisition and the remainder under the ESOP, the Restricted Stock Grant Plan and the Directors' Stock for Fee Plan compared with 183,749 shares issued during the nine months ended June 30, 1995. The Company believes that internally generated funds, its short- term credit facilities and access to the debt and equity capital markets will provide necessary working capital and liquidity for capital expenditures and other cash needs for the remainder of fiscal 1996. At June 30, 1996 the Company had $90.0 million of committed, short-term credit facilities, $80.0 million of which was available for additional borrowing. The committed lines are renewed or renegotiated at least annually. At June 30, 1996, the Company also had $150.0 million of uncommitted short-term lines, $123.9 million of which was unused. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996, COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995 Operating revenues increased by approximately 10% to $93.6 million for the three months ended June 30, 1996 from $84.7 million for the three months ended June 30, 1995. The primary factors contributing to the increase in operating revenues were increased sales to industrial (including agricultural) customers and higher cost of gas, which is reflected in sales price. During the quarter ended June 30, 1996, temperatures averaged 20% warmer than in the corresponding quarter of the prior year, and 11% warmer than normal. However, the revenue impact of warmer weather in the quarter ended June 30, 1996 was more than offset by increased industrial (including agricultural) sales and higher gas costs. The total volume of gas sold and transported for the three months ended June 30, 1996 was 29.2 billion cubic feet ("Bcf") compared with 27.7 Bcf for the three months ended June 30, 1995. The primary reason for the increased volumes is increased sales to industrial (including agricultural) customers as noted above. The average sales price per Mcf sold increased $.03 to $3.93 as a result of an increase in the average cost of gas, the mix of sales and rate increases in Kentucky and Louisiana. Gross profit decreased by approximately 1% to $33.8 million for the three months ended June 30, 1996, from $34.1 million for the three months ended June 30, 1995. Contributing to the decreased margins was an increase in sales to lower margin industrial (including agricultural) customers. Operating expenses, excluding income taxes, decreased 5% from $31.1 million for the three months ended June 30, 1995 to $29.6 million for the three months ended June 30, 1996 primarily due to lower employee benefit costs. Operating income increased for the three months ended June 30, 1996 to $4.1 million from $3.0 million for the three months ended June 30, 1995. The increase in operating income primarily resulted from decreased operating expenses. Net income increased from $.1 million for the three months ended June 30, 1995 to $.3 million for the three months ended June 30, 1996. This increase in net income primarily resulted from the increase in operating income. NINE MONTHS ENDED JUNE 30, 1996, COMPARED WITH NINE MONTHS ENDED JUNE 30, 1995 Operating revenues increased by approximately 15% to $415.1 million for the nine months ended June 30, 1996 from $359.8 million for the nine months ended June 30, 1995. Factors contributing to the higher operating revenues were increased sales volumes due to colder weather, increased demand in the industrial (including agricultural) market and higher average cost of gas, which is reflected in the sales price. Weather in the Company's service areas was 2% warmer than normal but 10% colder than weather in the corresponding nine-month period of the prior fiscal year. Volumes sold to industrial (including agricultural) customers increased from the corresponding period of the prior year by 19%. The average sales price per Mcf increased from $3.87 for the nine months ended June 30, 1995 to $3.98 for the nine months ended June 30, 1996. The increase in the average sales price reflects increased cost of gas and rate increases. The average cost of gas per Mcf sold increased from $2.49 for the nine months ended June 30, 1995 to $2.61 for the nine months ended June 30, 1996. Gross profit increased to $149.9 million for the nine months ended June 30, 1996, compared with $137.1 million for the nine months ended June 30, 1995. The increase in gross profit was due to a 14% increase in sales volumes which resulted from colder weather than experienced in the nine months ended June 30, 1995 and rate increases implemented in Texas, Louisiana, and Kentucky subsequent to October 1, 1994. Operating expenses, excluding income taxes, decreased $.1 million to $95.0 million for the nine months ended June 30, 1996, compared with the nine months ended June 30, 1995. Operating income increased for the nine months ended June 30, 1996 to $39.2 million from $30.5 million for the nine months ended June 30, 1995. The increase in operating income primarily resulted from increased gross profit. Interest expense increased approximately $0.6 million or 6% for the nine months ended June 30, 1996 compared with the nine months ended June 30, 1995. Net income increased for the nine months ended June 30, 1996, by approximately 36% to $27.9 million from $20.5 million for the nine months ended June 30, 1995. The increase in net income resulted from the increase in operating income. Earnings per share increased to $1.76 for the nine months ended June 30, 1996 from $1.33 for the nine months ended June 30, 1995, while average shares outstanding increased approximately 3%. Dividends per share increased 4% to $.72 for the nine months ended June 30, 1996. TWELVE MONTHS ENDED JUNE 30, 1996, COMPARED WITH TWELVE MONTHS ENDED JUNE 30, 1995 Operating revenues increased by approximately 12% to $491.1 million for the 12 months ended June 30, 1996 from $437.2 million for the 12 months ended June 30, 1995. The increased revenues for the 12 months ended June 30, 1996 were caused by increased sales volumes and higher gas costs as a result of 11% colder winter weather and increased demand. Sales and transportation volumes increased to 147.6 Bcf for the 12 months ended June 30, 1996 compared with 143.3 Bcf for the corresponding prior 12-month period. The average sales price per Mcf increased from $3.87 to $3.93. The average cost of gas per Mcf sold increased from $2.50 to $2.56 for the 12 months ended June 30, 1996. The average sales price reflects the increased cost of gas and rate increases implemented in Texas, Louisiana, and Kentucky subsequent to July 1, 1994. Gross profit increased by approximately 8% to $179.8 million for the 12 months ended June 30, 1996, from $165.8 million for the 12 months ended June 30, 1995. Operating expenses, excluding income taxes, decreased from $128.1 million for the 12 months ended June 30, 1995, to $124.9 million for the 12 months ended June 30, 1996. Factors contributing to the decrease in operating expenses included decreases in operation and maintenance expenses. Income taxes increased $4.9 million for the 12 months ended June 30, 1996, as compared with the 12 months ended June 30, 1995. Operating income increased in the 12 months ended June 30, 1996 by approximately 42% to $41.1 million. The primary reason for the increase in operating income was the increase in gross profit discussed above. Net income for the 12 months ended June 30, 1996 was $26.3 million compared with $16.1 million for the 12 months ended June 30, 1995. The increase in net income resulted primarily from the increase in operating income discussed above. Earnings per share increased by 59% to $1.67. Average shares outstanding increased approximately 3% as compared with the prior year. Dividends per share increased approximately 4% to $.95. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The matters discussed or incorporated by reference in this Report on Form 10-Q contain both historical and forward-looking statements. The forward-looking statements involve risks and uncertainties that affect the Company's operations, markets, services, rates, recovery of costs, availability of gas supply, and other factors as discussed in the Company's filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, governmental, weather, and technological factors. ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS Three months ended June 30, 1996 1995 ------- ------- Sales Volumes -- MMcf (1) Residential 6,568 6,885 Commercial 2,882 3,037 Industrial (including agricultural) 12,870 10,143 Public authority and other 549 582 ------- ------- Total 22,869 20,647 Transportation Volumes -- MMcf (1) 6,335 7,026 ------- ------- Total Volumes Handled - MMcf (1) 29,204 27,673 ======= ======= Operating Revenues (000's) Gas Sales Revenues Residential $38,050 $35,552 Commercial 13,648 13,373 Industrial (including agricultural) 35,492 29,188 Public authority and other 2,781 2,433 ------- -------- Total Gas Revenues 89,971 80,546 Transportation Revenues 2,169 2,773 Other Revenues 1,431 1,366 ------- -------- Total Operating Revenues $93,571 $84,685 ======= ======== Average Gas Sales Revenues per Mcf $ 3.93 $ 3.90 Average Transportation Revenue per Mcf $ .34 $ .39 Cost of Gas per Mcf Sold $ 2.61 $ 2.45 HEATING DEGREE DAYS Weather Three months ended June 30, Service Sensitive --------------------------- Area Customers % 1996 1995 Normal - -------------- ----------- ---- ---- ------ Texas 47% 192 288 237 Kentucky 26% 363 266 349 Louisiana 11% 91 51 37 Colorado, Kansas and Missouri 16% 607 978 768 ---- System Average 100% 291 365 328 Percent of Normal 89% 111% 1. Volumes are reported as metered in million cubic feet("MMcf"). ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS Nine months ended June 30, 1996 1995 -------- -------- Sales Volumes -- MMcf (1) Residential 47,700 42,641 Commercial 19,413 17,544 Industrial (including agricultural) 29,930 25,059 Public authority and other 4,759 4,343 -------- -------- Total 101,802 89,587 Transportation Volumes -- MMcf (1) 20,018 24,449 -------- -------- Total Volumes Handled - MMcf (1) 121,820 114,036 ======== ======== Operating Revenues (000's) Gas Sales Revenues Residential $217,603 $185,361 Commercial 79,891 69,785 Industrial (including agricultural) 87,570 75,071 Public authority and other 19,754 16,353 -------- -------- Total Gas Revenues 404,818 346,570 Transportation Revenues 6,167 9,444 Other Revenues 4,158 3,813 -------- -------- Total Operating Revenues $415,143 $359,827 ======== ======== Average Gas Sales Revenues per Mcf $ 3.98 $ 3.87 Average Transportation Revenue per Mcf $ .31 $ .39 Cost of Gas per Mcf Sold $ 2.61 $ 2.49 HEATING DEGREE DAYS Weather Nine months ended June 30, Service Sensitive ----------------------------- Area Customers % 1996 1995 Normal - -------------- ----------- ------ ------ ------ Texas 47% 3,286 3,090 3,512 Kentucky 26% 4,574 3,738 4,341 Louisiana 11% 1,989 1,443 1,760 Colorado, Kansas and Missouri 16% 5,752 5,800 6,060 ---- System Average 100% 3,870 3,507 3,939 Percent of Normal 98% 89% See footnote on page 19. ATMOS ENERGY CORPORATION CONSOLIDATED OPERATING STATISTICS Twelve months ended June 30, 1996 1995 -------- -------- Sales Volumes -- MMcf (1) Residential 51,824 46,298 Commercial 21,625 19,576 Industrial (including agricultural) 42,917 37,860 Public authority and other 5,195 4,732 -------- -------- Total 121,561 108,466 Transportation Volumes -- MMcf (1) 26,032 34,813 -------- -------- Total Volumes Handled - MMcf (1) 147,593 143,279 ======== ======== Operating Revenues (000's) Gas Sales Revenues Residential $242,407 $208,861 Commercial 90,088 79,691 Industrial (including agricultural) 123,314 112,818 Public authority and other 21,586 18,070 -------- -------- Total Gas Sales Revenues 477,395 419,440 Transportation Revenues 8,434 12,708 Other Revenues 5,307 5,029 -------- -------- Total Operating Revenues $491,136 $437,177 ======== ======== Average Gas Sales Revenues per Mcf $ 3.93 $ 3.87 Average Transportation Revenue per Mcf $ .32 $ .37 Cost of Gas per Mcf Sold $ 2.56 $ 2.50 HEATING DEGREE DAYS Weather Twelve months ended June 30, Service Sensitive ---------------------------- Area Customers % 1996 1995 Normal - -------------- ----------- ------ ------ ------ Texas 47% 3,348 3,105 3,528 Kentucky 26% 4,628 3,790 4,376 Louisiana 11% 1,994 1,443 1,760 Colorado, Kansas and Missouri 16% 5,931 5,890 6,234 ---- System Average 100% 3,942 3,543 3,983 Percent of Normal 99% 89% See footnote on page 19. PART II. OTHER INFORMATION Item 1. Legal Proceedings See Note 3 of notes to consolidated financial statements on pages 8, 9 and 10 herein for a description of legal proceedings. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits A list of exhibits required by Item 601 of Regulation S-K and filed as part of this report is set forth in the Exhibits Index, which immediately precedes such exhibits. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ATMOS ENERGY CORPORATION (Registrant) Date: August 14, 1996 By: /s/ James F. Purser ------------------------------ James F. Purser Executive Vice President and Chief Financial Officer Date: August 14, 1996 By: /s/ David L. Bickerstaff ------------------------------ David L. Bickerstaff Vice President and Controller (Principal Accounting Officer) EXHIBITS INDEX Item 6. (a) Page Number or Exhibit Incorporation Number Description by Reference to - ------- -------------------------------------- --------------- 10.1 Amendment No. 1 to the Atmos Energy Corporation Supplemental Benefits Plan for Key Management Employees (Restated as of November 6, 1995) 10.2 Amendment No. 2 to the Atmos Energy Corporation Supplemental Executive Benefits Plan (Restated as of November 11, 1992) 15 Letter regarding unaudited interim financial information 27 Financial Data Schedule for Atmos Energy Corporation for the nine months ended June 30, 1996 EX-15 2 AUDITORS' LETTER RE INCORP BY REFERENCE EXHIBIT 15 ---------- Board of Directors Atmos Energy Corporation We are aware of the incorporation by reference in the Registra tion Statements (Form S-3 No. 33-58220, Form S-3 No. 33-56915, Form S-3 No. 333-03339, Form S-8 No. 33-57687, Form S-8 No. 33- 68852, and Form S-8 No. 33-57695) of Atmos Energy Corporation of our report dated August 7, 1996, relating to the unaudited condensed consolidated interim financial statements of Atmos Energy Corporation which are included in its Form 10-Q for the quarter ended June 30, 1996. Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. ERNST & YOUNG LLP August 14, 1996 Dallas, Texas EX-27 3 FDS FOR ATMOS FOR 9 MONTHS ENDED 6/30/96
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS SEP-30-1996 JUN-30-1996 PER-BOOK 398,695 0 54,072 35,518 0 488,285 80 110,139 68,837 179,056 0 0 125,303 36,100 0 0 6,000 0 2,557 242 139,027 488,285 415,143 15,715 360,252 375,967 39,176 (288) 38,888 10,956 27,932 0 27,932 11,393 1,215 65,943 1.76 1.76
EX-10 4 EX 10.1 AMEND. NO. 1 TO ATMOS SBP FOR KEY MGMT AMENDMENT NO. 1 TO THE ATMOS ENERGY CORPORATION SUPPLEMENTAL BENEFITS PLAN FOR KEY MANAGEMENT EMPLOYEES (Restated as of November 6, 1995) WHEREAS, effective November 11, 1992, ATMOS ENERGY CORPORATION (the "Employer") adopted THE ATMOS ENERGY CORPORATION SUPPLEMENTAL BENEFITS PLAN FOR KEY MANAGEMENT EMPLOYEES (the "Plan"); and WHEREAS, the Employer restated the Plan in its entirety as of November 6, 1995; and WHEREAS, pursuant to Section 9.1(a) of the Plan, the Employer desires to amend the Plan as hereinafter set forth; NOW, THEREFORE, the Plan shall be, and hereby is, amended, effective as of the date this Amendment is executed, in the following respects: 1. Section 5.2(a)(i) of the Plan shall be, and hereby is, amended and revised to read in its entirety as follows: "(i) One-twelfth (1/12th) of seventy-five percent (75%) of the Participant's Compensation, reduced if the Participant has fewer than ten (10) years of vesting service under the Pension Plan by one-tenth (1/10th) for each year of his vesting service less than ten (10)." 2. Section 9.1(b) of the Plan shall be, and hereby is, amended by changing all references to the numeral "20" therein to be and read "10." 3. Paragraph 10 of Exhibit B shall be, and hereby is, amended by changing all references to the numeral "20" therein to be and read "10." IN WITNESS WHEREOF, the Employer has executed this Amendment No. 1 to The Atmos Energy Corporation Supplemental Benefits Plan for Key Management Employees this 8th day of May, 1996 to be effective as of this date. ATMOS ENERGY CORPORATION By: /s/ Robert F. Stephens ____________________________ Robert F. Stephens President and Chief Operating Officer -2- EX-10 5 EX 10.2 AMEND. 2 TO ATMOS SEBP AMENDMENT NO. 2 TO THE ATMOS ENERGY CORPORATION SUPPLEMENTAL EXECUTIVE BENEFITS PLAN (Restated as of November 11, 1992) WHEREAS, effective October 1, 1987, ATMOS ENERGY CORPORATION (the "Employer") adopted THE ATMOS ENERGY CORPORATION SUPPLEMENTAL EXECUTIVE BENEFITS PLAN (the "Plan"); and WHEREAS, the Employer restated the Plan in its entirety as of November 11, 1992 and subsequently amended the Plan by Amendment No. 1 dated November 8, 1995; and WHEREAS, pursuant to Section 9.1 of the Plan, the Employer desires to amend the Plan as hereinafter set forth; NOW, THEREFORE, the Plan shall be, and hereby is, amended, effective as of the date this Amendment is executed, in the following respects: 1. The second paragraph of Section 9.1 of the Plan shall be, and hereby is, amended by changing all references to the numeral "20" therein to be and read "10." 2. Paragraph a of Exhibit A-1 shall be, and hereby is, amended and revised to read in its entirety as follows: "(a) One-twelfth (1/12th) of an amount equal to ninety percent (90%) of Compensation with respect to C.K. Vaughan and seventy-five percent (75%) of Compensation with respect to all other Participants; provided, however, that if the Participant has fewer than ten (10) years of vesting service under the Pension Plan, the above amount shall be reduced by one-tenth (1/10th) for each year by which his vesting service is fewer than ten (10)." 3. Paragraph 1(a) of Exhibit C-1 shall be, and hereby is, amended by changing all references to the numeral "20" therein to be and read "10." IN WITNESS WHEREOF, the Employer has executed this Amendment No. 2 to The Atmos Energy Corporation Supplemental Executive Benefits Plan this 8th day of May, 1996 to be effective as of this date. ATMOS ENERGY CORPORATION By: /s/Robert F. Stephens ____________________________ Robert F. Stephens President and Chief Operating Officer -2- -----END PRIVACY-ENHANCED MESSAGE-----