ITEM 1. BUSINESS
Atmos Energy Corporation (the "Company") was organized under the laws of the State of Texas in 1983 as a subsidiary of Pioneer Corporation ("Pioneer") for the purposes of owning and operating Pioneer's natural gas distribution business in Texas. Immediate- ly following the transfer of such business, which had been opera- ted by Pioneer and its predecessors since 1906, Pioneer distrib- uted the outstanding stock of the Company, then known as Energas Company, to Pioneer shareholders. In September 1988, the Company changed its name from Energas Company to Atmos Energy Corporation.
The Company distributes and sells natural gas to residential, commercial, industrial, agricultural, and other customers in 413 cities, towns, and communities in parts of Texas, Louisiana, Kentucky, Colorado, Kansas, and Missouri. The Company also transports gas for others through parts of its distribution system. The Company is also helping promote the development of a market for natural gas as a clean burning vehicular fuel by opening four public refueling facilities in its service areas.
The Company's Texas distribution system is operated through its Energas Company division (the "Energas Division") and is located in the western part of Texas covering an area having a population of approximately 950,000 people. The economy of the area is based primarily on oil and gas production and agricul- ture. The principal cities served by the Energas Division include Amarillo, Lubbock, Midland, and Odessa. At September 30, 1994, the Company had 309,496 gas meters in service in Texas.
The Company's Louisiana distribution system is operated through its Trans Louisiana Gas Company division (the "Trans La Division") and is located in Louisiana covering an area having a population of approximately 250,000 people. The economy of the area is based primarily on oil and gas production, agriculture, and food processing. The principal cities served by the Trans La Division are Lafayette, Pineville, and Natchitoches. At September 30, 1994, the Company had 70,361 gas meters in service in Louisiana.
The Company's Kentucky distribution system is operated through its Western Kentucky Gas Company division (the "Western Kentucky Division") and covers an area having a population of approximately 680,000 people. The economy of the area is based primarily on industry and agriculture. The principal cities served by the Western Kentucky Division include Bowling Green, Owensboro, and Paducah. At September 30, 1994, the Company had 164,828 gas meters in service in Kentucky.
In December 1993, the Company acquired Greeley Gas Company ("GGC") of Denver, Colorado in a merger accounted for as a pool-
ing of interests, and accordingly, all amounts included herein have been restated to include GGC's operating results. Since the merger, the business of GGC has been operated through the Company's Greeley Gas Company division (the "Greeley Gas Division"). It serves customers in areas of Colorado, Kansas, and Missouri having a combined population of approximately 228,000 people. The economies of the areas served are based on oil and gas production, agriculture and resort business in Colorado. The principal cities served include Greeley, Durango and Lamar, Colorado and Bonner Springs, Herington and Ulysses, Kansas. At September 30, 1994 the Greeley Gas Division had 104,634 meters in service.
The natural gas distribution industry is subject to numerous special factors, many of which affect the Company from time to time. These include (i) adequate and timely rate relief from regulatory authorities to recover costs of service and earn a fair return on invested capital; (ii) inherent seasonality of the business in local gas distribution service areas; (iii) competition from alternate fuels; (iv) competition with other gas sources for industrial customers, including bypass of the Company's facilities, which could result in loss of revenues and reduction in the Company's net income; and (v) possible volatility in the supply and price of natural gas.
ACQUISITIONS
Since its organization in 1983, the Company has sought to expand its customer base and to diversify the weather patterns, local economic conditions, and regulatory environments to which its operations are subject. As part of this strategy, the Company acquired Trans Louisiana Gas Company, Inc. ("TLG") in January 1986, Western Kentucky Gas Utility Corporation ("WKG") in December 1987, and Greeley Gas Company ("GGC") in December 1993. The Company continues to consider and pursue, where appropriate, additional acquisitions of natural gas distribution properties and other business opportunities. For further information regarding the GGC merger, see Note 2 of notes to consolidated financial statements, and Management's Discussion and Analysis.
FIVE-YEAR OPERATING STATISTICS
Certain information with respect to the Company's natural gas operations for the past five years is shown on the following page.
GAS SALES
The Company's natural gas distribution business is seasonal and highly dependent on weather conditions in the Company's service areas. Gas sales to residential and commercial customers are greater during the winter months than during the remainder of the year. The volumes of such sales during the winter months will vary with the temperatures during such months. The seasonal nature of the Company's sales to residential and commercial customers is offset partially by the Company's sales in the spring and summer months to its agricultural customers in Texas and Kansas who utilize natural gas to operate irrigation equipment. The Company's management believes that the Company has lessened its sensitivity to weather risk by diversifying its operations into geographic areas having different weather patterns.
The Company's revenues are affected by the cost of natural gas, economic conditions in the areas that the Company serves, and weather conditions. Higher gas costs, which the Company is generally able to pass through to its customers under purchased gas adjustment clauses, may cause customers to conserve, or, in the case of industrial customers, to use alternative energy sources.
In recent years, excess supply in the natural gas market has led to a decline in natural gas prices and an increase in the number of competing marketers of natural gas to large volume users. In order to compete with these marketers, the Company's three gas marketing subsidiaries purchase gas for resale to various large volume customers.
In certain instances, industrial customers purchase gas directly from other marketers or from one of the Company's gas marketing subsidiaries, and the Company transports such gas through its distribution systems to the customers' facilities for a fee. Transportation of customer-owned gas that otherwise would have been sold by the Company reduces the Company's operating revenues and corresponding purchased gas cost. However, the transportation fees received by the Company may offset the loss of gross profit that would have been realized had the Company sold such gas to such customers.
The Company's distribution systems have experienced aggregate peak day deliveries of approximately 1 billion cubic feet ("Bcf") per day. The Company has the ability to curtail deliveries to certain interruptible customers under the terms of contracts and applicable state statutes or regulations which enables it to maintain its deliveries to high priority customers. The Company has not imposed curtailment in its Energas Division since the Company began independent operations in 1983 or in its Trans La Division since the Company acquired TLG in 1986. The Western Kentucky Division curtailed deliveries to certain interruptible customers during exceptionally cold periods in December 1989 and January 1994. GGC has not curtailed deliveries to its sales customers since prior to 1980.
GAS SUPPLY
The principal gas suppliers to the Company in 1994, 1993 and 1992 included Westar Transmission Company ("Westar"), an affiliate of KNEnergy; Anthem Energy Company, L.P. ("Anthem") an affiliate of KNEnergy; Mesa
Operating Company ("Mesa"); Louisiana Intrastate Gas Corporation ("LIG"), an affiliate of Equitable Resources Inc.; Tennessee Gas Pipeline Company ("Tennessee Gas"), an affiliate of Tenneco, Inc.; Texas Gas Transmission Corporation ("Texas Gas"), an affiliate of Transco; Texaco Gas Marketing; Union Pacific Fuels; Vastar, an affiliate of ARCO; Associated Natural Gas, Inc. ("ANGI"); and Rangeline Corporation ("Rangeline"), an affiliate of Astra Resources. The prices paid by the Company for natural gas delivered to it are set by contracts with gas suppliers and/or ratemaking proceedings before regulatory authorities. Charges for gas costs are passed through to the Company's customers under approved or negotiated tariffs or pursuant to contract.
The following table sets forth volumes purchased from the Company's principal gas suppliers for the years ended September 30, 1994, 1993, and 1992. Volumes purchased (MMcf as metered)
1994: Westar and Anthem 47,842 Mesa 9,926 LIG 4,254 Texaco Gas Marketing 5,453 Union Pacific Fuels 5,825 Vastar 6,881 Associated Natural Gas, Inc. 3,283 Rangeline Corporation 2,210
1993: Westar and Anthem 45,031 Mesa 10,659 LIG 4,490 Tennessee Gas 2,575 Texas Gas 10,329 Associated Natural Gas, Inc. 3,291 Rangeline Corporation 1,946
1992: Westar and Anthem 38,539 Mesa 9,823 LIG 5,961 Tennessee Gas 2,594 Texas Gas 16,131 Associated Natural Gas, Inc. 3,049 Rangeline Corporation 1,295
Westar and Anthem supply natural gas to most of the Energas Division under multiple contracts. The Westar contract expires in 1998. The Anthem contracts are renegotiated annually. Westar purchases gas from various pipeline companies and natural gas processing plants and at the wellhead. Westar's gas price to the Company is subject to an annual adjustment in accordance with the existing contract. Under the Westar contract, the Company has the right annually to elect to buy up to 20% of its monthly re- quirements for its Energas Division from other suppliers.
The principal gas supply for the Company's Amarillo, Texas distribution system is furnished by Mesa under a long-term contract that expires upon the depletion of the field from which the gas is produced. Mesa owns the gas rights in certain specified acreage in the West Panhandle field. Pursuant to a contract between Colorado Interstate Gas Company ("CIG") and Mesa, CIG is obligated to deliver to Mesa the volumes of gas required for sale to customers in Amarillo and its environs, subject to certain contractual volume limitations, so long as the gas reserves from the West Panhandle field are commercially producible. In June 1992, the Company renegotiated the pricing provisions of its primary gas supply
contract for the Amarillo, Texas distribution system. The contract calls for a pricing formula which determines the prices the Company pays each year during the five year period that began January 1, 1993. The contract also provides a mechanism for price redetermination each two year period thereafter beginning January 1, 1998.
On October 28, 1991, the Company and LIG entered into new agreements which were approved by the Louisiana Public Service Commission ("Louisiana Commission") on November 26, 1991, and became effective June 1, 1992. These agreements provide continued supply by LIG for most of the Trans La Division's gas requirements for a term of ten years (but subject to cancellation by either party after five years). The agreements provide for market sensitive pricing and allow the Company to purchase certain volumes of gas from other suppliers. Under the contract, the Trans La Division has the right to purchase a portion of its requirements from suppliers other than LIG at market sensitive prices. At the end of the second contract year, the Trans La Division had the right to increase its purchases from others up to approximately 45% of its requirements which right was exercised by Trans La. LIG is required to provide standby service to back up the purchases from the other suppliers.
The Company purchases some gas supplies for resale to certain of its Louisiana industrial customers from suppliers other than LIG. The Company's Louisiana industrial sales subsidiary, Trans Louisiana Industrial Gas Company, Inc., has entered into supply contracts at market sensitive prices with Enron Gas Services, Inc. for the major portion of its requirements, with the remainder being purchased under 30-day contracts from other suppliers. Gas provided by these suppliers is transported by LIG with delivery into the Trans La Division's system.
The Western Kentucky Division transports its natural gas requirements through firm transportation agreements with Texas Gas and Tennessee Gas with the exception of a small percentage of the requirements being purchased directly from intrastate producers. The Western Kentucky Division purchases its supply under staggered term contracts from major producers and marketers including Texaco, Union Pacific, Vastar, Associated Natural, Hadson and Chevron.
The Company's distribution system in the Western Kentucky Division includes six underground storage facilities, which are used to help meet customer requirements during peak demand periods and to reduce the need to contract additional pipeline volumes to meet such peak demand periods. See "Item 2.
ITEM 2. PROPERTIES
The Company owns an aggregate of 21,927 miles of underground pipelines throughout its gas distribution systems. These pipelines are located on easements or rights-of-way granted to the Company, which generally provide for perpetual use. The Company maintains its pipelines through a program of continuous inspection and repair and believes that the pipeline system is in good condition. The Company also owns or operates six underground gas storage facilities in Kentucky that have a total storage capacity of approximately 11.7 Bcf. However, approximately 6.5 Bcf of gas in the storage facilities must be retained as cushion gas. The maximum daily delivery capability of the storage facilities is approximately 112 MMcf.
Substantially all of the Company's properties in its Greeley Gas Division with a book value of approximately $59.2 million are subject to a lien under First Mortgage Bonds assumed by the Company in the acquisition of GGC. At September 30, 1994, the lien secured approximately $17.0 million of outstanding 9.4% Series J First Mortgage Bonds due May 1, 2021.
The Company leases its executive and administrative headquarters in Dallas, Texas under leases that expire in 1997. The Company also maintains field offices throughout its distribution system, substantially all of which are located in leased premises.
The Company holds franchises granted by the incorporated cities and towns and by each Louisiana parish that it serves. At September 30, 1994, the Company held 271 such franchises having terms generally ranging from five to 25 years. The Company believes that each of its franchises will be renewed.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
See Note 11 of notes to consolidated financial statements.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS
The following table sets forth certain information as of September 30, 1994, regarding the executive officers of the Company:
Name Age Office Currently Held ---- --- --------------------- Charles K. Vaughan 56 Chairman of the Board Ronald L. Fancher 51 President and Chief Executive Officer James F. Purser 44 Executive Vice President and Chief Financial Officer Robert F. Stephens 46 Executive Vice President - Corporate Operations H.F. Harber 52 Senior Vice President - Corporate Services Donald E. James 47 Senior Vice President and General Counsel
Charles K. Vaughan has served as Chairman of the Board since the Company's inception on October 18, 1983. From October 1983 through February 1993, he additionally served as President and Chief Executive Officer. From March 1993 through May 1994, he served as Chief Executive Officer. Effective October 1, 1994, Mr. Vaughan elected to take early retirement from the Company, although he remains Chairman of the Board of Directors.
Ronald L. Fancher served as a member of the Board of Directors from February 1984 through February 1993. He has served as President since March 1993 and has held the additional title of Chief Executive Officer since June 1994. He was also appointed to the Board of Directors in November 1994. Prior to joining the Company, he served as Chairman of the Board and Chief Executive Officer of Texas Commerce Bank in Odessa, Texas from 1983 until 1993. Additionally, he served as Chairman of the Board and Chief Executive Officer of Texas Commerce Bank - Lubbock, N.A. in January and February 1993.
James F. Purser was named Executive Vice President and Chief Financial Officer in May 1989. He previously served as Senior Vice President and Chief Financial Officer from August 1988 until May 1989 and as Vice President from September 1986 until August 1988.
Robert F. Stephens was named Executive Vice President - Corporate Operations in May 1989. He served as Senior Vice President, Corporate Operations from January 1988 until May 1989 and as Senior Vice President, Corporate Services from April 1986 until January 1988. He previously served as Vice President, Corporate Development and Regulatory Affairs from August 1984 until April 1986.
H.F. Harber was named Senior Vice President - Corporate Services in August 1993. He previously served as Vice President, Human Resources and Administration from July 1991 to August 1993, as Vice President, Human Resources from May 1990 to July 1991, as Director of Human Resources from November 1987 until May 1990, as Manager, Compensation and Employment from
May 1987 until November 1987, and as Affirmative Action Coordinator from December 1983 until May 1987.
Donald E. James was named Senior Vice President and General Counsel in August 1993. He previously served as Senior Vice President - General Counsel and Corporate Secretary from May 1993 until August 1993, as Senior Vice President and General Counsel from May 1989 until May 1993, as Vice President and General Counsel from January 1986 until May 1989, as Assistant Vice President and General Counsel from August 1985 until January 1986, and as Assistant Vice President and Assistant General Counsel from February 1984 until August 1985.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's stock trades on the New York Stock Exchange under the trading symbol "ATO". The high and low sale prices and dividends paid per share of the Company's common stock, as adjusted for the 3-for-2 stock split in May 1994, for fiscal 1994 and 1993 are listed below.
Prior to its acquisition, GGC made distributions to its shareholders in fiscal 1994 and 1993 of $120,000 and $893,000, respectively. The "Dividends paid" information above has not been restated for the pooling of interests in December 1993, but reflects historical cash dividends paid per share of Atmos common stock as restated for the 3-for-2 stock split in May 1994.
See Note 3 of notes to consolidated financial statements for restriction on payment of dividends. The number of record holders of the Company's common stock on September 30, 1994 was 19,881.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data with respect to the Company and should be read in conjunction with the consolidated financial statements included herein.
Year ended September 30, -------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (In thousands, except per share data)
Operating revenues $499,808 $459,641 $403,353 $399,667 $409,975 ======== ======== ======== ======== ========
Net income $ 14,679 $ 17,544 $ 10,998 $ 9,612 $ 7,653 ======== ======== ======== ======== ========
Net income per share $ .97 $ 1.22 $ .80 $ .71 $ .60 ======== ======== ======== ======== ========
Atmos dividends declared per share $ .88 $ .85 $ .83 $ .80 $ .77 ======== ======== ======== ======== ========
Total assets at end of year $416,678 $391,618 $358,363 $338,714 $330,477 ======== ======== ======== ======== ========
Long-term debt at end of year $138,303 $105,853 $112,153 $116,461 $ 88,508 ======== ======== ======== ======== ========
Supplemental net income (1) $ 18,132 $ 10,570 $ 10,130 $ 9,497 ======== ======== ======== ========
Supplemental net income per share $ 1.26 $ .77 $ .75 $ .75 ======== ======== ======== ========
(1) Supplemental net income reflects results if GGC had not made an S Corporation election in 1987.
ITEM 7.
ITEM 7. 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 federal and state regulation and/or regulation by 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.
A consolidated five-year financial and statistical summary is included elsewhere herein.
ACQUISITION OF GREELEY GAS COMPANY THROUGH MERGER
The Company has expanded its customer base and sought to diversify the regulations, weather patterns and local economic conditions to which it is subject through acquisitions in 1986 and 1987 and 1993. The Company continues to consider and pursue, where appropriate, additional acquisitions of natural gas distribution properties and other business opportunities.
In December 1993, the Company acquired Greeley Gas Company ("GGC") of Denver, Colorado in a merger transaction accounted for as a pooling of interests; therefore, all historical financial statements and notes thereto have been restated to retroactively reflect this merger. At that time, GGC was a privately held company providing natural gas service to nearly 100,000 customers in 122 communities in Colorado, Kansas and a small service area in Missouri. The transaction was structured to be a tax-free reorganization. The Company exchanged 2,329,330 shares of its common stock before the 3-for-2 stock split (3,493,995 shares on a post-split basis) for all of the outstanding stock of GGC. For further information regarding the merger, see Note 2 of notes to consolidated financial statements.
The Company believes that, while the merger may result in some dilution during the short term, it is expected to be non-dilutive over the long term with respect to earnings per share. The Company believes this transaction is consistent with its continuing long-term corporate development strategy of increasing the value of the Company through external growth. The Company believes this acquisition will help to further diversify both the geographic scope of its markets and the mix of its customer profile, thereby reducing its exposure to changes in the economic conditions in any given segment of its service area and will add to diversification in the areas of weather, regulatory environment, and economic environment. Over the longer term, the Company expects this combination to contribute to the stability and predictability of earnings and cash flow.
RATE ACTIVITY
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"). The proposed rates would produce an overall increase of approximately 1.9% of current annual revenues generated from approximately 217,000 customers and reflects recovery of accrual accounting of postretirement benefits in accordance with SFAS No. 106. See Note 8 of the accompanying notes to consolidated financial statements. In November 1994, the Company implemented an annual revenue increase of approximately $1.5 million affecting about 90% of the customers in this portion of its Energas Division.
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. The next step in the rate proceeding will be Phase II, which will address rate redesign issues.
Effective December 1, 1993, GGC received an annual rate increase of approximately $2.1 million or 10.6% in its Kansas service area. The increase reflects SFAS No. 106 expenses with external funding and a moratorium on rate requests in Kansas until December 1, 1996.
On February 11, 1992, the Company filed a rate case with the city of Amarillo, Texas seeking to increase annual revenues by approximately $4.4 million, or 12%. In November 1992, the Railroad Commission issued its decision resulting in a total annual increase of $2.1 million. The Company and the city requested a rehearing of the Order. On January 11, 1993, the Railroad Commission denied rehearing to both parties. In February 1993, the city appealed the Railroad Commission's rate order to the District Court of Travis County, Texas. In January 1994, the District Court denied the city's appeal. The city has appealed to the Court of Appeals.
During the period of 1991 through 1993, the Company also filed for and received small rate increases in certain other rate jurisdictions in its Energas Division totaling approximately $.3 million annually.
The Company filed for a rate increase with the Louisiana Public Service Commission (the "Louisiana Commission") in November 1991 for its Louisiana service area ("Trans La Division"). The proposed rates would produce approximately $3.4 million per year in additional revenues, or an overall increase of approximately 9.8% for the Trans La Division. Effective September 3, 1992, the Louisiana Commission granted an increase of approximately $1.0 million per year in additional revenues, or an overall increase of approximately 2.8%. The rate order also allowed the Company to collect franchise taxes as a line item on the Company's bills which will reduce taxes, other than income taxes, by approximately $800,000 per year. The rate order also approved a rate stabilization clause for three years that provides for an annual adjustment to the Company's rates to reflect changes in expenses, revenues and invested capital following an
annual review. The rate stabilization clause provides 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 rate stabilization clause, an increase of $730,000 annually or 2% went into effect on March 1, 1993, and an increase of $1.1 million annually or 2.7% went into effect on March 1, 1994.
In September 1990, the Kentucky Public Service Commission (the "Kentucky Commission") issued an order that increased annual revenues approximately $1.0 million for the Company's Kentucky service area. In May 1991, the Kentucky Commission issued an Order on Rehearing increasing allowed revenues an additional $2.6 million. In connection with this rate case the Company filed a Notice of Appeal with the Kentucky Court of Appeals in July 1993. The Company's appeal in Kentucky relates solely to the determination of the appropriate effective date of its last rate increase in Kentucky. The Kentucky Public Service Commission made the increase effective in May 1991, while the Company believes it should have become effective in September 1990. The Company lost the issue at the trial court level. If the Company is successful, it could recover approximately $1 million in additional revenue; if it is unsuccessful, there would be no impact on its revenue. Subsequent to September 30, 1994, the Kentucky Court of Appeals denied the Company's appeal. The Company is currently assessing its options for further appeals.
RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
The Company has not adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits". See Note 9 of notes to consolidated financial statements. The rate treatment of SFAS No. 112 costs has not been determined at this time. Such costs are currently recorded and recovered in rates on the pay-as-you-go basis. The Company does not expect the adoption of this standard to have a material impact on its financial condition or results of operations.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1993
Operating revenues increased to $499.8 million in 1994 from $459.6 million in 1993 due to rate increases received in Kansas, Colorado and Louisiana, an increase in the number of customers, changes in cost of gas and increased volumes sold. Average gas sales revenues per thousand cubic feet ("Mcf") increased from 1993 by $.12 to $4.14 in 1994, while the average cost of gas per Mcf sold increased $.15 to $2.86 in 1994. The number of meters in service increased to 649,319 at September 30, 1994 compared with 636,159 at September 30, 1993. Although the weather was 2% warmer in 1994 than in 1993, it was only slightly warmer than normal. Sales to residential, commercial and public authority customers decreased approximately .5 billion cubic feet ("Bcf") in 1994, but sales to industrial and agricultural customers increased approximately 7 Bcf. Total sales volumes increased 6.7 Bcf to 116.1 Bcf in 1994, as compared with 1993. Revenues from gas transported for others decreased $.9 million to approximately $14.1 million in fiscal 1994 due to a decrease in volumes transported of 4.5 Bcf to 35.3 Bcf in 1994.
Gross profit increased by approximately 3% to $168.2 million in 1994 from $163.1 million in 1993. The primary factors contributing to the higher gross profit were increased prices and volumes, as discussed above. Operating expenses, excluding income taxes, increased to $133.7 million in 1994 from $122.8 million in 1993 due to increased operation expense and depreciation. Operation expense increased $9.9 million due to increased distribution expense, employee welfare expenses including adoption of SFAS No. 106, GGC acquisition and assimilation costs, and the cost of an early retirement program in the Greeley Gas Division in the fourth quarter. SFAS No. 106 expenses in excess of pay-as-you-go expenses were approximately $3.8 million in 1994. The Company has been successful in seeking recovery of SFAS No. 106 expenses in a portion of its service areas and will continue to seek recovery in its remaining service areas (Note 8). GGC acquisition and assimilation costs were approximately $1.5 million in 1994 compared with approximately $.5 million in 1993. The cost of the early retirement program was approximately $1.3 million in 1994. The acquisition and assimilation costs as well as the early retirement program are one-time costs associated with the GGC acquisition. Income taxes decreased to $8.1 million for 1994 from $10.1 million for 1993. The primary reasons for the decrease were lower pre-tax profits and a lower effective tax rate. The effective tax rate decreased to 35.6% in 1994 from 36.5% in 1993. This was primarily due to the impact of permanent differences on the lower pre-tax profits in 1994. Operating income decreased in 1994 by approximately 13% to $26.5 million from $30.3 million in 1993. The decrease in operating income resulted primarily from increased operating expenses as discussed above.
Net income decreased in 1994 by approximately 16% to $14.7 million from $17.5 million in the prior year. This decrease in net income resulted primarily from a decrease in operating income, which was partially offset by a $1.0 million decrease in interest expense. Net income per share decreased to $.97 for 1994 from $1.22 for 1993, reflecting the effects of an increase in average shares outstanding of approximately 6%. One-time acquisition costs, assimilation expenses and an early retirement program in Greeley Gas Company, as well as the effect of adopting SFAS No. 106, reduced earnings per share by approximately $.22 in 1994.
YEAR ENDED SEPTEMBER 30, 1993 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1992
Operating revenues increased to $459.6 million in 1993 from $403.4 million in 1992 due to colder weather, increased sales volumes and revenues for every customer type, rate increases received in Texas and Louisiana, and an increased number of customers in fiscal 1993. Total sales volumes increased 9.7 Bcf to 109.4 Bcf in 1993, as compared with 1992. Average gas sales revenues per Mcf increased $.16 to $4.02 in fiscal 1993 from 1992, while the average cost of gas per Mcf sold increased $.13 to $2.71. The number of meters in service increased to 636,159 at September 30, 1993 compared with 630,365 at September 30, 1992. Weather was 10% colder in 1993 than 1992, and was 2% colder than normal. Because of this colder weather, sales volumes to weather sensitive residential, commercial and public authority customers increased 5.8 Bcf, or 8%, to 78.0 Bcf in 1993, as compared with 1992. Sales volumes to industrial and agricultural customers increased 3.9 Bcf, or 14%, because of increased irrigation fuel demand in the Company's West Texas service area. Revenues from gas
transported for others increased $1.3 million to approximately $15.0 million in 1993. Average transportation fees decreased from $.42 per Mcf to $.38 per Mcf, while transportation volumes increased 7.6 Bcf to 39.8 Bcf in 1993 as compared with 1992. Average transportation fees decreased in 1993 because of increased competition for large volume customers in Kentucky.
Gross profit increased by approximately 12% to $163.1 million in 1993 from $146.3 million in 1992. The primary factors contributing to the higher gross profit were increased rates and colder weather, as discussed above. Operating expenses, excluding income taxes, increased to $122.8 million in 1993 from $117.9 million in 1992 due to increased operating activity. Operation expense increased $3.5 million due to increased distribution expenses, outside services, wages and benefits expense. Income taxes increased to $10.1 million for 1993 from $4.8 million for 1992. The primary reasons for the increase were higher pre-tax profits and a higher effective tax rate. The effective tax rate increased to 36.5% in 1993 from 30.2% in 1992 because of reduced significance of permanent differences due to higher pre-tax profits and a one percent increase in the statutory rate to 35%, effective January 1, 1993. Operating income increased in 1993 by approximately 28% to $30.3 million. The increase in operating income resulted primarily from increased gross profit.
Net income increased in 1993 by approximately 60% to $17.5 million from $11.0 million in 1992. This increase in net income resulted primarily from the increase in operating income. Also, interest expense decreased $.5 million in 1993, as compared with 1992, due to lower weighted average interest rates. Net income per share increased approximately 53% to $1.22 for 1993 compared with 1992, including the effects of an increase in average shares outstanding of approximately 4%.
CAPITAL RESOURCES AND LIQUIDITY (See "Consolidated Statements of Cash Flows")
Cash Flows from Operating Activities
Cash flows from operating activities totaled $41.2 million for 1994 compared with $37.1 million for 1993 and $31.4 million for 1992. The decrease in net income in 1994 as compared with 1993 was more than offset by the net changes in assets and liabilities. Gas stored underground decreased in 1994 because of substantially lower gas prices during the summer of 1994 when the storage reservoir was being refilled. The $10.9 million increase in deferred charges and other assets in 1993 related to the $8.4 million increase in deferred credits and other liabilities and recognized funding for the Supplemental Executive Benefits Plan. See "Consolidated Statements of Cash Flows" for other changes in assets and liabilities.
Cash Flows from Investing Activities
Net cash used in investing activities totaled $48.4 million in 1994 compared with $42.2 million in 1993 and $39.5 million in 1992. Capital expenditures in fiscal 1994 amounted to $50.4 million compared with $43.1 million in 1993 and $42.2 million in 1992. Currently budgeted capital expenditures for 1995 total $56.1 million and include major expenditures
for mains, services, meters, vehicles and computer software. Such expenditures will be financed from internally generated funds and financing activities, as discussed below.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled $7.7 million for 1994 compared with $3.7 million for 1993 and $8.3 million in 1992. Financing activities during these periods included issuance of common stock, dividend payments, borrowings from banks, and issuance and repayments of long-term debt.
Cash dividends and distributions paid. The Company paid $12.7 million in cash dividends and distributions during 1994. The $2.6 million increase over 1993 primarily reflects an increase in the Company's quarterly dividend rate and an increase in the number of shares of common stock outstanding in 1994. The Company has increased its historical dividend rate in each of the last six years.
Short-term financing activities. At September 30, 1994, the Company had committed lines of credit totaling $72.0 million, all of which was unused, in order to provide for short-term cash requirements. These credit facilities are negotiated at least annually. At September 30, 1994, the Company also had uncommitted short-term credit lines of $130.0 million, of which $71.9 million was unused. At September 30, 1994, $40.0 million of notes payable to banks were classified noncurrent and long-term financing was completed subsequent to September 30, 1994. During 1994, notes payable increased $22.4 million compared with increases of $2.6 million during 1993 and $18.6 million in 1992. The increases in 1994 and 1992 were primarily due to funding of capital expenditures and repayment of long-term debt. The increase in 1993 was less than the increases in 1994 and 1992, partly because of funds provided in 1993 from stock issued under the Direct Stock Purchase Plan.
Long-term financing activities. Payments of long-term debt increased $5.4 million to $9.9 million for the year ended September 30, 1994 compared with the year ended September 30, 1993. Payments of long-term debt consisted of a $3.0 million installment on the Company's 9.75% Senior Notes due in 1996, a $2.0 million installment on the 11.2% Senior Notes, the balance of $3.25 million on the 13.75% Series I First Mortgage Bonds and the balance of $1.6 million on the 13% Series G First Mortgage Bonds. At September 30, 1994, the Company was negotiating the private placement of $40.0 million of Senior Notes with two insurance companies. Scheduled payments of long-term debt in fiscal 1993 consisted of a $3.5 million installment on the Company's 9.75% Senior Notes and a $1.0 million payment on the 13.75% Series I First Mortgage Bonds. No long-term debt was issued in 1993. The Company entered into an agreement with an insurance company in August 1992, for a private placement of $10.0 million of unsecured Senior Notes due in annual installments of $1.0 million from 1997 through 2006, with interest to be paid semiannually at 7.95%. The net proceeds from the sale of the Senior Notes were used primarily to refinance an 8.4% note in the amount of $9.8 million. The Company also made scheduled installments of $4.5 million on its 9.75% Senior Notes, $1.0 million on the 13.75% Series I First Mortgage Bonds and a $.3 million installment on GGC's 13% Series G First Mortgage Bonds in fiscal 1992. The loan agreements
pursuant to which all the Company's Senior Notes have been issued contain covenants by the Company with respect to the maintenance of certain debt- to-equity ratios and cash flows, and restrictions on the payment of dividends. Also see Note 3 of notes to consolidated financial statements.
Issuance of common stock. The Company issued 428,264, 897,089 and 306,880 shares of common stock in 1994, 1993 and 1992, respectively, for its Direct Stock Purchase Plan ("DSPP"), Employee Stock Ownership Plan and Incentive Stock Option Plan. The DSPP was implemented in August 1992. The DSPP has been amended to remove the direct stock purchase feature of the plan and has been renamed the Atmos Energy Corporation Dividend Reinvestment and Stock Purchase Plan ("DRSPP"). In 1994, 1993 and 1992, 173,801, 760,089 and 132,249 shares, respectively, were issued under the plan, generating proceeds of $3.0 million, $13.4 million and $1.9 million, respectively. At September 30, 1994, 712,596 shares were available for future issuance under the plan.
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 1995.
Seasonality
The Company's natural gas distribution business is seasonal due to weather conditions in the Company's service areas. Gas sales are affected by winter heating season requirements, and sales to agricultural customers (who use natural gas as fuel in the operation of irrigation pumps) during the period from April through September may be affected by rainfall amounts. These factors generally result in higher operating revenues and net income during the period from October through March of each year and lower operating revenues and either net losses or lower net income during the period from April through September of each year.
The following table sets forth, on an unaudited basis, the Company's quarterly operating revenues, quarterly operating revenues as a percentage of annual operating revenues, quarterly net income (loss) and quarterly net income (loss) as a percentage of annual net income for its past two fiscal years.
Inflation
The Company believes that inflation has caused and will continue to cause increases in certain operating expenses and has required assets and will continue to require assets to be re- placed at higher costs. The Company continually reviews the adequacy of its gas rates in relation to the increasing cost of providing service and the inherent regulatory lag in adjusting those gas rates.
Environmental Matters
From time to time, the Company receives inquiries regarding various environmental matters. The Company believes that its properties and operations substantially comply with and are oper- ated in substantial conformity with all applicable environmental statutes and regulations. There are no administrative or judi- cial proceedings arising under environmental quality statutes pending or known to be contemplated by governmental agencies which, if adversely determined, would have a material adverse effect on the Company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page no.
Report of independent auditors 30
Consolidated balance sheets 31
Consolidated statements of income 32
Consolidated statements of shareholders' equity 33
Consolidated statements of cash flows 34
Notes to consolidated financial statements 36
Supplementary data (unaudited) 57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors Atmos Energy Corporation
We have audited the accompanying consolidated balance sheets of Atmos Energy Corporation at September 30, 1994 and 1993, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended September 30, 1994. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atmos Energy Corporation at September 30, 1994 and 1993, and its consolidated results of operations and its cash flows for each of the three years in the period ended September 30, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
Ernst & Young LLP
Dallas, Texas November 9, 1994
ATMOS ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 1994 1993 -------- -------- ASSETS (In thousands, except share data) Property, plant and equipment Utility plant $537,834 $496,153 Construction in progress 5,858 5,359 -------- -------- 543,692 501,512 Less accumulated depreciation and amortization 216,285 202,237 -------- -------- Net property, plant and equipment 327,407 299,275 Current assets Cash and cash equivalents 2,766 2,286 Accounts receivable, less allowance for doubtful accounts of $787 in 1994 and $963 in 1993 29,678 29,200 Inventories 5,888 6,064 Gas stored underground 12,657 17,603 Prepayments 2,309 4,240 -------- -------- Total current assets 53,298 59,393 Deferred charges and other assets 35,973 32,950 -------- -------- $416,678 $391,618 CAPITALIZATION AND LIABILITIES ======== ======== Shareholders' equity Common stock, no par value (stated at $.005 per share); authorized 50,000,000 shares; issued and outstanding 1994 - 15,297,166 shares, 1993 - 14,868,902 shares $ 77 $ 74 Additional paid-in capital 102,456 94,279 Retained earnings 47,023 45,076 -------- -------- Total shareholders' equity 149,556 139,429 Long-term debt 138,303 105,853 -------- -------- Total capitalization 287,859 245,282 Current liabilities Current maturities of long-term debt 4,000 6,300 Notes payable to banks 18,100 35,700 Accounts payable 21,975 27,803 Taxes payable 4,864 3,797 Customers' deposits 8,257 7,862 Other current liabilities 7,038 6,455 -------- -------- Total current liabilities 64,234 87,917 Deferred income taxes 30,184 32,614 Deferred credits and other liabilities 34,401 25,805 -------- -------- $416,678 $391,618 ======== ======== See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Year ended September 30, ------------------------------- 1994 1993 1992 -------- -------- -------- (In thousands, except per share data)
Operating revenues $499,808 $459,641 $403,353 Purchased gas cost 331,571 296,532 257,091 -------- -------- -------- Gross profit 168,237 163,109 146,262
Operating expenses Operation 92,132 82,185 78,642 Maintenance 5,888 6,335 5,695 Depreciation and amortization 18,841 17,433 17,205 Taxes, other than income 16,808 16,806 16,398 Income taxes 8,102 10,073 4,753 -------- -------- -------- Total operating expenses 141,771 132,832 122,693 -------- -------- --------
Operating income 26,466 30,277 23,569 Other income (expense) Interest income 168 327 376 Other, net 335 239 876 -------- -------- -------- Total other income 503 566 1,252
Interest charges 12,290 13,299 13,823 -------- -------- --------
Net income $ 14,679 $ 17,544 $ 10,998 ======== ======== ======== Net income per share $ .97 $ 1.22 $ .80 ======== ======== ======== Atmos dividends declared per share (Note 2) $ .88 $ .85 $ .83 ======== ======== ======== Average shares outstanding 15,195 14,338 13,789 ======== ======== ========
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common stock ---------------- Additional Number of Stated paid-in Retained shares value capital earnings ---------- ------ ------- -------- (In thousands, except share data) Balance at September 30, 1991, as adjusted for the 3-for-2 stock split 10,170,938 $ 51 $73,392 $16,867
Adjustment for pooling of interests with GGC (Note 2) 3,493,995 17 941 19,690 ---------- ---- ------- ------- Balance, September 30, 1991, as restated 13,664,933 68 74,333 36,557 Net income - - - 10,998 Cash dividends ($.83 per share) - - - (8,516) GGC distributions - - - (402) Common stock issued Stock option plan 6,750 - 71 - Direct stock purchase plan 132,249 1 1,849 - Employee stock ownership plan 167,881 1 2,288 - ---------- ---- ------- -------
Balance, September 30, 1992 13,971,813 70 78,541 38,637 Net income - - - 17,544 Cash dividends ($.85 per share) - - - (9,262) GGC distributions - - - (893) Common stock issued Stock option plan 6,000 - 60 - Direct stock purchase plan 760,089 3 13,401 - Employee stock ownership plan 131,000 1 2,277 - Less: GGC net income for the quarter ended December 31, 1992 (Note 2) - - - (950) ---------- ---- ------- ------- Balance, September 30, 1993 14,868,902 74 94,279 45,076 Net income - - - 14,679 Cash dividends ($.88 per share) - - - (12,612) GGC distributions - - - (120) Common stock issued Restricted stock grant plan 105,000 1 2,134 - Direct stock purchase plan 173,801 1 3,037 - Employee stock ownership plan 149,463 1 2,713 - Other - - 293 - ---------- ---- ------- -------
Balance, September 30, 1994 15,297,166 $ 77 $102,456 $47,023 ========== ==== ======= ======= See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended September 30, 1994 1993 1992 -------- ------- ------- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $14,679 $16,594 $10,998 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Charged to depreciation and amortization 18,841 16,480 17,205 Charged to other accounts 1,476 3,377 4,598 Deferred income taxes 244 2,733 349 Other 2,101 622 281 ------- ------- ------- 37,341 39,806 33,431 Change in assets and liabilities (Increase) decrease in accounts receivable (478) 1,564 (2,202) (Increase) decrease in inventories 176 708 (84) (Increase) decrease in gas stored underground 4,946 (6,176) (14) (Increase) decrease in prepayments 1,931 1,873 (287) (Increase) decrease in deferred charges and other assets (3,824) (10,908) 586 Increase (decrease) in accounts payable (7,128) (58) 1,196 Increase (decrease) in taxes payable (1,314) 195 930 Increase (decrease) in customers' deposits 395 (61) 322 Increase in other current liabilities 583 1,804 803 Increase (decrease) in deferred credits and other liabilities 8,596 8,398 (3,269) ------- ------- ------- Net cash provided by operating activities 41,224 37,145 31,412
CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (50,355) (43,143) (42,169) Retirements of property, plant and equipment 1,906 935 2,629 ------- ------- ------- Net cash used in investing activities (48,449) (42,208) (39,540)
- Continued -
ATMOS ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Year ended September 30, 1994 1993 1992 -------- -------- -------- (In thousands) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in notes payable $ 22,400 $ 2,563 $18,636 Proceeds from issuance of long-term debt - - 10,000 Cash dividends and distributions paid (12,732) (10,155) (8,918) Repayment of long-term debt (9,850) (4,500) (15,608) Issuance of common stock 7,887 15,742 4,210 -------- ------- ------- Net cash provided by financing activities 7,705 3,650 8,320 -------- ------- ------- Net increase (decrease) in cash and cash equivalents 480 (1,413) 192 Cash and cash equivalents at beginning of year 2,286 3,699 3,507 -------- ------- ------- Cash and cash equivalents at end of year $ 2,766 $ 2,286 $ 3,699 ======== ======= =======
See accompanying notes to consolidated financial statements.
ATMOS ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
Description of business - Atmos Energy Corporation and its subsidiaries ("Atmos" or the "Company") are in the business of distributing natural gas to residential, commercial, industrial and agricultural customers within service areas located in Texas, Louisiana, Kentucky, Colorado, Kansas and a small portion of Missouri. Such business is subject to federal and state regulation and/or regulation by local authorities in each of the six states in which the Company operates. The Company has no other material business segments.
Principles of consolidation - The accompanying consolidated financial statements include the accounts of Atmos Energy Corpora- tion and its subsidiaries. Each subsidiary is wholly-owned and all material intercompany items have been eliminated.
Revenue recognition - Sales of natural gas are billed on a monthly cycle basis; however, the billing cycle periods for certain classes of customers do not necessarily coincide with ac- counting periods used for financial reporting purposes. The Company follows the revenue accrual method of accounting for natural gas revenues whereby revenues applicable to gas delivered to customers but not yet billed under the cycle billing method are estimated and accrued and the related costs are charged to ex- pense. Estimated losses due to credit risk are reserved at the time revenue is recognized.
Property, plant and equipment - Property, plant and equipment is stated at original cost net of contributions in aid of constru- ction. The cost of additions includes an allowance for funds used during construction and applicable overhead charges. Major renewals and betterments are capitalized, while the costs of maintenance and repairs are charged to expense as incurred. Property, plant and equipment is depreciated at various rates on a straight-line basis over the estimated useful lives of the assets. In the first quarter of fiscal 1993, the Company changed the estimated average useful lives used to compute depreciation for certain utility plant assets. These changes resulted from revised estimates of the projected economic life of the affected assets based on recent orders received from regulatory bodies having jurisdiction over the Company and independently performed depreciation service life studies. The effect of this change on net income for the year ended September 30, 1993 was an increase of $1,104,000. The composite rates were 3.5% and 3.7% for the years ended September 30, 1994 and 1993, respectively. At the time property, plant and equipment is retired, the cost, plus removal expenses and less salvage, is charged to accumulated depreciation.
Inventories - Inventories consist of materials and supplies and merchandise held for resale. Inventories are stated at the lower of average cost or market.
Gas stored underground - Net additions of inventory gas to underground storage and withdrawals of inventory gas from storage are priced using the average cost method. Non-current gas in storage is classified as property, plant and equipment and is priced at cost.
Income taxes - The Company provides deferred income taxes for significant temporary differences in the recognition of revenues and expenses for tax and financial reporting purposes.
Cash and cash equivalents - The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Deferred charges and other assets - Deferred charges and other assets at September 30, 1994 and 1993 include assets of the Company's qualified defined benefit retirement plans in excess of the plans' obligations in the amounts of $12,275,000 and $13,289,000, respectively, and Company assets related to the nonqualified retirement plans at September 30, 1994 and 1993 of $15,735,000 and $12,758,000, respectively. At September 30, 1994, a payable of $1,300,000 was recorded for expenses related to an early retirement program under Greeley Gas Company's qualified defined benefit retirement plan.
Deferred credits and other liabilities - Deferred credits and other liabilities include customer advances for construction of $8,428,000 and $7,769,000 at September 30, 1994 and 1993, respect- ively; obligations under capital leases of $6,294,000 and $6,389,000 at September 30, 1994 and 1993, respectively; and obligations under the Company's nonqualified retirement plans of $11,151,000 and $8,317,000 at September 30, 1994 and 1993, respectively.
Earnings per share - The calculation of primary earnings per share is based on reported net income divided by weighted average common shares outstanding. The Company does not have other class- es of stock or dilutive common stock equivalents. See Note 2 for a discussion of supplemental net income per share.
2. Greeley Gas Company acquisition
On December 22, 1993, Atmos acquired by means of a merger all of the assets and liabilities of Greeley Gas Company ("GGC") in accordance with the terms and provisions of an Agreement and Plan of Reorganization dated July 2, 1993. GGC is a natural gas utility engaged in the distribution and sale of natural gas to residential, commercial, industrial, agricultural, and other customers throughout Colorado, Kansas, and a small portion of Missouri. All of the shares of GGC's common stock were exchanged for a total of 3,493,995 shares of Atmos common stock as adjusted
for a 3-for-2 stock split (2,329,330 shares on a pre-split basis). See Note 5 for information regarding the stock split in May 1994. This merger transaction was accounted for as a pooling of interes- ts; therefore, all historical financial statements and notes thereto have been restated. Subsequent to the merger, the business of GGC has been operated through the Company's Greeley Gas Company division (the "Greeley Gas Division").
GGC prepared its financial statements on a December 31 fiscal year end. GGC's fiscal year has been changed to September 30 to conform to the Company's year end. The restated September 30, 1993 balance sheet, as presented, is the combined balance sheets of Atmos and GGC as of September 30, 1993. The restated consolidated statements of income and cash flows for the year ended September 30, 1992 include Atmos operations for the year then ended and GGC operations for the year ended December 31, 1992. The restated consolidated statement of income for the year ended September 30, 1993 includes Atmos and GGC operations for the twelve months then ended. As a result, GGC's operations for the three months ended December 31, 1992 (operating revenue of $18,322,842 and net income of $950,185) are included in both the 1993 and 1992 restated statements of income, the GGC net income for this period has been deducted in calculating the shareholders' equity balances at September 30, 1993 and cash flows for the year then ended.
In 1987, GGC elected classification as an S Corporation (small business corporation) under the provisions of the Internal Revenue Code. Normally, income taxes are not reported in the financial statements of S Corporations as the liability for payment of federal and state income taxes is the direct responsib- ility of the shareholders. However, during 1991, as part of the settlement of rate cases filed in the states of Colorado and Kansas, GGC was ordered to begin providing for current and de- ferred income taxes. Accordingly, the Company's restated 1991 financial statements include a one-time charge to income of $1,081,202 to reinstate deferred income taxes for GGC. Supple- mental net income and earnings per share of the Company are presented below to eliminate the one-time charge and to reflect income tax expense in periods prior to 1994 as if GGC had not made the S Corporation election in 1987.
Year ended September 30, 1993 1992 -------- -------- (In thousands, except per share data)
Supplemental net income $ 18,132 $ 10,570 ======== ======== Supplemental net income per share $ 1.26 $ .77 ======== ========
Results of operations and net income for the previously separate companies for periods prior to the merger are as follows:
Quarter ended Year ended September 30, December 31, 1993 1993 1992 ----------------- -------- -------- (In thousands) Operating revenues Atmos $119,223 $388,495 $340,117 GGC 26,278 71,146 63,236 -------- -------- -------- $145,501 $459,641 $403,353 ======== ======== ======== Net income Atmos $ 5,458 $ 15,712 $ 10,031 GGC 1,630 1,832 967 -------- -------- -------- $ 7,088 $ 17,544 $ 10,998 ======== ======== ========
The dividends per share presentation on the consolidated statements of income reflects Atmos dividends declared per share as adjusted for the 3-for-2 stock split in May 1994. The dividends declared by Atmos reflect the per share dividends declared by Atmos Energy Corporation for each of the three years ended September 30, 1994. The restated cash dividends and distributions per share reflect the total amounts paid by Atmos and GGC to their shareholders in each of those three years, divided by the total amount of weighted average shares outstanding in those periods as restated for the shares issued to effect the merger between Atmos and GGC and the 3-for-2 stock split in May 1994.
Year ended September 30, ------------------------ 1994 1993 1992 ---- ---- ---- Atmos dividends declared per share $.88 $.85 $.83 ==== ==== ====
Restated cash dividends and distributions per share, including GGC $.84 $.71 $.65 ==== ==== ====
3. Long-term debt and notes payable
Long-term debt at September 30, 1994 and 1993 consisted of the following: 1994 1993 --------- -------- (In thousands) Unsecured 7.95% Senior Notes, payable in annual installments of $1,000,000 beginning August 31, 1997 through August 31, 2006 with semiannual interest payments $ 10,000 $ 10,000 Unsecured 9.57% Senior Notes, payable in annual installments of $2,000,000 beginning September 30, 1997 through September 30, 2006 with semiannual interest payments 20,000 20,000 Unsecured 9.76% Senior Notes, payable in annual installments of $3,000,000 beginning December 30, 1995 through December 30, 2004 with semiannual interest payments 30,000 30,000 Unsecured 9.75% Senior Notes, payable in varying annual installments through December 30, 1996 5,000 8,000 Unsecured 11.2% Senior Notes, payable in annual installments of $2,000,000 beginning December 30, 1993 through December 30, 2002 with semiannual interest payments 18,000 20,000 First Mortgage Bonds, 9.4% Series J, due May 1, 2021 17,000 17,000 First Mortgage Bonds, 13% Series G - 1,600 Unsecured 10% Notes, due December 31, 2011 2,303 2,303 First Mortgage Bonds, 13.75% Series I - 3,250 Notes payable to banks financed with long-term debt 40,000 - -------- -------- 142,303 112,153 Less amounts classified as current (4,000) (6,300) -------- -------- $138,303 $105,853 ======== ========
Subsequent to September 30, 1994, the Company obtained commitments to enter into new note purchase agreements with two insurance companies to issue at par $20,000,000 of unsecured Senior Notes at 8.07% payable in annual installments of $4,000,000 beginning October 31, 2002 through October 31, 2006 with semi- annual interest payments and $20,000,000 of unsecured Senior Notes at 8.26% payable in annual installments of $1,818,182 beginning October 31, 2004 through October 31, 2014 with semiannual interest payments. At September 30, 1994, $40,000,000 of notes payable to banks were classified as long-term.
The Company entered into a note purchase agreement with an insurance company in August 1992, for a private placement of $10,000,000 of unsecured Senior Notes at 7.95%. The net proceeds from the sale of the Senior Notes were used primarily to refinance an 8.4% note in the amount of $9.8 million.
The Company may prepay any of the Senior Notes in whole at any time, subject to a prepayment premium. The note agreements provide for certain cash flow requirements and restrictions on additional indebtedness, sale of assets and payment of dividends. Under the most restrictive of such covenants, cumulative cash dividends paid after September 30, 1988 may not exceed the sum of 75% of accumulated net income for periods after September 30, 1988 plus $12,000,000 plus the proceeds from the sale of common stock after September 30, 1988. At September 30, 1994, approximately $44,492,000 of shareholders' equity was not so restricted.
As of September 30, 1994, all of the Company's utility plant assets in Colorado, Kansas and Missouri with a book value of approximately $59,173,000 are subject to a lien under the 9.4% Series J First Mortgage Bonds assumed by the Company in the acquisition of GGC.
Maturities of long-term debt are as follows (in thousands):
1995 $ 4,000 1996 7,000 1997 9,000 1998 8,000 1999 8,000 Thereafter 106,303 -------- $142,303 ========
Notes payable to banks
The Company has committed short-term, unsecured bank credit facilities totaling $72,000,000, all of which was unused at September 30, 1994. One facility of $60,000,000 requires a commitment fee of 1/8 of 1% on the unused portion. A second facility for $12,000,000 requires a commitment fee of 3/16 of 1% on the unused portion. The committed lines are renewed or renegotiated at least annually.
The Company also had aggregate uncommitted credit lines of $130,000,000, of which $71,900,000 was unused as of September 30, 1994. The uncommitted lines have varying terms and the Company pays no fee for the availability of the lines. Borrowings under these lines are made on a when and as-available basis at the discretion of the banks.
Information related to notes payable to banks follows:
1994 1993 1992 -------- -------- -------- (In thousands, except for percents) Notes outstanding at September 30 prior to long-term financing $58,100 $35,700 $32,600 Reclassification for long-term financing subsequent to year end (40,000) - - -------- -------- -------- Notes outstanding at September 30 $18,100 $35,700 $32,600 Weighted average interest rate at September 30 5.6% 4.1% 4.7% Maximum amount outstanding during the year $58,100 $50,300 $36,800 Daily average amount outstanding during the year $26,597 $19,801 $12,078 Weighted average interest rate during the year computed on a daily basis 4.3% 4.2% 5.3%
Notes payable to shareholders and employees
Notes payable to shareholders and employees of GGC were outstanding at times prior to September 30, 1993. They were for six-month terms and bore interest at rates ranging from 4.0% to 4.5%. Interest incurred on such notes aggregated $11,326 and $28,593 for 1993 and 1992, respectively.
4. Income taxes
The components of income tax expense for 1994, 1993 and 1992 are as follows: 1994 1993 1992 ------- ------- ------- (In thousands) Current $7,858 $7,340 $4,653 Deferred 244 2,733 100 ------ ------ ------ $8,102 $10,073 $4,753 ====== ====== ======
Included in the provision for income taxes are state income taxes of $328,000, $890,000, and $403,000 for 1994, 1993, and 1992, respectively.
Effective October 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") and, as permitted under the new rules, prior years' financial statements have not been restated. Adoption of the new standard in 1994 had no significant effect on net income.
This standard changes the Company's method of accounting for income taxes from the deferred method (APB 11) to the liability
method. Previously the Company deferred the past tax effects of timing differences between financial reporting and taxable income. Under the liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the estimated future tax effects of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred income taxes reflect the tax effect of differences between the basis of assets and liabilities for book and tax purposes. The tax effect of temporary differences that give rise to significant components of the deferred tax liabilities and deferred tax assets at September 30, 1994 and October 1, 1993 are presented below (in thousands): 1994 1993 ------- ------- Deferred tax assets Costs expensed for book purposes and capitalized for tax purposes $ 914 $ 744 Accruals not currently deductible for tax purposes 1,929 689 Customer advances 2,365 2,128 Nonqualified benefit plans 5,074 2,740 Postretirement benefits 1,442 - Other, net 1,198 1,407 ------- ------- Total deferred tax assets 12,922 7,708
Deferred tax liabilities Tax and book basis of utility plant 37,316 31,949 Prepaid pensions 4,640 5,134 Other, net 1,150 565 ------- ------- Total deferred tax liabilities 43,106 37,648 ------- ------- Net deferred tax liabilities $30,184 $29,940 ======= ======= SFAS No. 109 deferred accounts for rate regulated entities (included in other deferred credits): Liabilities $ 2,647 $ 2,673 ======= =======
During 1993 and 1992, deferred income taxes were provided for significant timing differences in recognition of revenues and expenses for tax and financial reporting purposes. The effects of these timing differences at September 30, 1993 and 1992 were as follows: 1993 1992 ------ ------ (In thousands) Excess of tax over financial depreciation and amortization $1,754 $ 351 Items capitalized for financial reporting and recognized currently for tax reporting 416 388 Deferred gas service revenue recognized currently for tax reporting 1,464 453 Other, net (901) (1,092) ------ ------ Total deferred income taxes $2,733 $ 100 ====== ====== Reconciliations of the provisions for income taxes computed at the statutory rate to the reported provisions for income taxes for 1994, 1993 and 1992 are set forth below:
Liability Method Deferred Method --------- ----------------- 1994 1993 1992 -------- ------- ------ (In thousands) Tax at statutory rate of 34% through December 31, 1992 and 35% thereafter $ 7,992 $ 9,603 $5,356 Financial expenses, not deductible for tax reporting 503 680 218 Common stock dividends deductible for tax reporting (573) (462) (446) State taxes 328 682 244 Other, net (148) (430) (619) ------- ------- ------ Provision for income taxes $ 8,102 $10,073 $4,753 ======= ======= ======
5. Stock split
On February 9, 1994, the Board of Directors of Atmos approved a 3-for-2 split of its common stock implemented in the form of a stock dividend, which resulted in shareholders receiving one new share for every two shares held. Fractional shares were not issued but were paid in cash or credited to the accounts of participants of the Dividend Reinvestment and Stock Purchase Plan ("DRSPP") and ESOP. The record date for the split was May 4, 1994 and the payment date for mailing the new shares and cash for fractional shares to shareholders was May 16, 1994. All share and
per share amounts in the financial statements and notes thereto have been restated to reflect this split, unless otherwise noted.
6. Common stock and stock options
The Company issued 428,264 shares of its common stock in fiscal 1994 in connection with its Direct Stock Purchase Plan, Restricted Stock Grant Plan and Employee Stock Ownership Plan. It also issued common stock in connection with the GGC merger (Note 2) and the stock split (Note 5).
The Company has an Employee Stock Ownership Plan as discussed in Note 7. The Company has registered 600,000 shares for issuance under the plan, of which 134,776 shares were available for future issuance on September 30, 1994.
In August 1992 the Company announced a Direct Stock Purchase Plan ("DSPP") which was the successor to and replacement for the Dividend Reinvestment Plan ("DRP"). Members of the DRP were automatically enrolled in the DSPP. In November 1993, the Company amended the DSPP to remove the direct stock purchase feature of the plan and to rename the plan the Atmos Energy Corporation Dividend Reinvestment and Stock Purchase Plan ("DRSPP"). The DRSPP is now available to shareholders of record only. Participants in the DRSPP may have all or part of their dividends reinvested at a 3% discount from market prices. DRSPP participants may purchase additional shares of Company common stock as often as weekly with optional cash payments of at least $25, up to an annual maximum of $60,000. At September 30, 1994, 712,596 shares were available for future issuance under the plan.
On April 27, 1988, the Company adopted a Shareholders' Rights Plan (the "Rights Plan") and declared a dividend of one right (a "Right") for each outstanding pre-split share of common stock of the Company, payable to shareholders of record as of May 10, 1988. Each Right will entitle the holder thereof, until the earlier of May 10, 1998 or the date of redemption of the Rights, to buy one share of common stock of the Company at an exercise price of $30 per share, subject to adjustment by the Board of Directors upon the occurrence of certain events. The Rights will be represented by the common stock certificates and are not exercisable or transferable apart from the common stock until a "Distribution Date" (which is defined in the Rights Agreement between the Company and the Rights Agent as the date upon which the Rights become separate from the common stock).
At no time will the Rights have any voting rights. The exercise price payable and the number of shares of common stock or other securities or property issuable upon exercise of the Rights are subject to adjustment from time to time to prevent dilution. Until the Distribution Date, the Company will issue one Right with each share of common stock that becomes outstanding so that all shares of common stock will have attached Rights. After a Distribution Date, the Company may issue Rights when it issues
common stock if the Board deems such issuance to be necessary or appropriate.
The Rights have certain anti-takeover effects and may cause substantial dilution to a person or entity that attempts to acquire the Company on terms not approved by the Board of Directors except pursuant to an offer conditioned upon a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board of Directors because, prior to the time the Rights become exercisable or transferable, the Rights may be redeemed by the Company at $.05 per Right.
The Company has had an Incentive Stock Option Plan for key employees covering an aggregate of 100,000 shares of common stock. The plan provided for options to be granted at prices not less than the fair market value of the stock on the date of grant and to be exercisable over ten years from such date in cumulative annual installments of 25% of the aggregate shares granted, commencing one year after the date of grant. At September 30, 1993, no options were outstanding under the plan. The Company allowed the plan to expire in October 1993 without granting additional options.
The following table summarizes the status of the expired Incentive Stock Option Plan as of September 30, 1993 and 1992:
1993 1992 ------------------- ------------------- Price Price Shares per share Shares per share ------------------ ------- ----------- Outstanding options at beginning of year 6,000 $9.25-10.63 12,750 $9.25-10.63 Exercised (6,000) 9.25-10.63 (6,750) 9.25-10.63 ------ ------ Outstanding options at end of year - - 6,000 9.25-10.63 ====== ======
Exercisable options at end of year - 6,000 Options available for future grants (pre-split) 8,150 8,150
The Company's Restricted Stock Grant Plan for management and key employees of the Company, which became effective October 1, 1987, provides for awards of common stock that are subject to certain restrictions. The plan is administered by the Board of Directors. The members of the Board who are not employees of the Company make the final determinations regarding participation in the plan, awards under the plan, and restrictions on the re- stricted stock awarded. The restricted stock may consist of
previously issued shares purchased in the open market or shares issued directly from the Company. The total number of shares of restricted stock that may be awarded under the plan was increased to 600,000 shares (900,000 post-split shares) after receiving shareholder approval in 1993. During 1994, 1993 and 1992, 109,500, 25,500 and 51,750 shares, respectively, were awarded under the plan. Prior to 1992, 328,950 shares were awarded under the plan. Related compensation expense of $1,164,000, $735,000 and $673,000 was recognized in 1994, 1993 and 1992, respectively. At September 30, 1994, 384,300 shares were available for award.
7. Employee retirement and stock ownership plans
At September 30, 1994, the Company had three defined benefit pension plans. One covers the Western Kentucky Division employ- ees, one covers the Greeley Gas Division employees, and the third covers all other Atmos employees. The plans provide essentially the same benefits to all employees. Benefits are based on years of service and the employee's compensation during the highest paid five consecutive calendar years within the last 10 years of employment. The Company's funding policy is to contribute annually an amount in accordance with the requirements of the Em- ployee Retirement Income Security Act of 1974. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.
The following table sets forth the combined funded status of the Company's defined benefit retirement plans at June 30, 1994 and 1993 and amounts recognized in the Company's balance sheets at September 30, 1994 and 1993 for the plans covering all employees except for employees of the Greeley Gas Division:
1994 1993 --------- --------- (In thousands) Actuarial present value of benefit obligations Accumulated benefit obligation, including vested benefits of $87,906 and $86,141 in 1994 and 1993, respectively $ (89,680) $ (87,006) ========= ========= Projected benefit obligation $(102,223) $(100,214) Plan assets at fair value 110,864 114,772 --------- --------- Funded status 8,641 14,558 Unrecognized net asset being recognized over 13 years (633) (851) Unrecognized prior service cost 1,423 482 Unrecognized net (gain)/loss 1,883 (2,032) --------- --------- Prepaid pension cost $ 11,314 $ 12,157 ========= =========
Net periodic pension cost for 1994, 1993 and 1992 included the following components:
1994 1993 1992 -------- -------- -------- (In thousands) Service cost $ 2,575 $ 2,182 $ 2,117 Interest cost 7,774 7,258 6,783 Actual return on plan assets (631) (15,049) (12,534) Net amortization and deferral (8,875) 6,316 3,981 -------- -------- -------- Net periodic pension cost $ 843 $ 707 $ 347 ======== ======== ========
The weighted-average discount rates used in determining the actuarial present value of the projected benefit obligation were 8.375% and 7.75% at June 30, 1994 and 1993, respectively. The rate of increase in future compensation levels reflected in such determination was 4.5% and 5.0% for the years ended September 30, 1994 and 1993, respectively. The expected long-term rate of return on assets was 9.5%, 8.5% and 9.0% for the years ended September 30, 1994, 1993 and 1992, respectively. The plan assets consist primarily of investments in common stocks, interest bearing securities and interests in commingled pension trust funds. Prepaid pension cost is included in deferred charges and other assets.
The following table sets forth the Greeley Gas Division plan's funded status at September 30, 1994 and 1993:
1994 1993 --------- -------- (In thousands) Actuarial present value of benefit obligations
Accumulated benefit obligation, including vested benefits of $12,849 and $9,959 in 1994 and 1993, respectively $ (13,206) $ (10,088) ========= ========= Projected benefit obligation $ (15,020) $ (13,359) Plan assets at fair value 13,140 14,204 --------- -------- Funded status (1,880) 845 Unrecognized net asset being recognized over 15 years (2,100) (2,390) Unrecognized prior service cost 455 - Unrecognized net loss 3,186 2,677 --------- -------- (Accrued) prepaid pension cost $ (339) $ 1,132 ========= ========
Net periodic pension cost (credit) for the Greeley Gas Division plan for 1994, 1993 and 1992 included the following components:
1994 1993 1992 ------- ------- ------- (In thousands) Service cost $ 486 $ 374 $ 385 Interest cost on projected benefit obligation 1,039 954 952 Actual return on plan assets 441 (1,180) (1,146) Net amortization and deferral (1,795) (257) (218) ------- ------- ------- Net periodic pension cost (credit) $ 171 $ (109) $ (27) ======= ======= =======
Accumulated plan benefits were computed using the Projected Unit Credit funding method. The discount rate and rate of in- crease in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 8.375% and 4.5%, respectively, in 1994 and 7.75% and 6.25%, respectively, in 1993. The expected long-term rate of return on plan assets was 9.5% and 9.0% in 1994 and 1993, respectively. Plan assets consist primarily of corporate bonds, equity securit- ies, mutual funds, partnership interests, and other miscellaneous investments. The actual return on plan assets in 1994 resulted in a loss of $.4 million due to writedowns of certain plan assets to reflect current market value.
Effective October 1, 1987, the Company adopted a nonqualified Supplemental Executive Benefits Plan ("Supplemental Plan") which provides additional pension benefits to the executive officers and certain other employees of the Company. Expense recognized in connection with the Supplemental Plan during fiscal 1994, 1993 and 1992 was $2,062,000, $1,492,000 and $872,000, respectively.
The Company sponsors an Employee Stock Ownership Plan ("ESOP"). Full time employees who have completed one year of service, as defined in the plan, are eligible to participate. Each participant enters into a salary reduction agreement with the Company pursuant to which the participant's salary is reduced by an amount not less than 2% nor more than 10%. Taxes on the amount by which the participant's salary is reduced are deferred pursuant to Section 401(k) of the Internal Revenue Code. The amount of the salary reduction is contributed by the Company to the ESOP for the account of the participant. The Company may make a matching contribution for the account of the participant in an amount determined each year by the Board of Directors, which amount must be at least equal to 25% of all or a portion of the participant's salary reduction. For the 1994 plan year, the Board of Directors elected to match 100% of each participant's salary reduction contribution up to 4% of the participant's salary. These matching percentages have also been approved for the 1995 plan year. Matching contributions to the ESOP amounted to $1,780,000, $1,413,000, and $1,324,000 for 1994, 1993 and 1992, respectively. The Directors may also approve discretionary contributions, subject to the provisions of the Internal Revenue Code of 1986 and applicable regulations of the Internal Revenue Service. The Company recorded a charge of $1,000,000 for a discretionary contribution in the year ended September 30, 1993. Company contributions to the plan are expensed as incurred.
Effective January 1, 1988, the Greeley Gas Division adopted a 401(k) plan that covers substantially all the Greeley Gas Division employees. Employee contributions are limited to 6% of base compensation. The Company matches 50% of employee contributions. Total employer contributions to the 401(k) plan were $141,000, $230,000, and $288,000 for the periods ended September 30, 1994, 1993, and 1992, respectively. Contributions to the plan were discontinued on March 31, 1994 and participants were enrolled in the Atmos ESOP on April 1, 1994.
8. Other postretirement benefits
In addition to providing pension benefits, the Company provides certain other postretirement benefits for retired employees, the major benefit being health care. To be eligible for these benefits, an employee must retire under the terms of the Company's retirement plans. Prior to 1994, the cost of other postretirement benefits was recognized by expensing claims and annual insurance premiums as incurred. In fiscal 1993 and 1992, these costs totaled $1,453,000 and $1,626,000, respectively.
Effective October 1, 1993, the Company adopted Financial Accounting Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS No. 106 focuses principally on postretirement health care benefits and significantly changed the practice of accounting for post- retirement benefits on a pay-as-you-go basis by requiring accrual of such benefit costs at Atmos on an actuarial basis from the date each employee reaches age 45 until the date of full eligibility for such benefits. The Company is amortizing on a straight line basis the initial transition obligation of $33,354,000 over 20 years. The effect of adopting the new rules increased net periodic postretirement benefit cost for the year ended September 30, 1994 by $3,789,000 and decreased net income for the period by $2,440,000. Approximately $746,000 of this increased cost was recovered through rates during 1994.
Atmos sponsors two defined benefit postretirement plans other than pensions. One plan provides medical, dental, vision and life insurance benefits to retired employees of Greeley Gas Company. The other offers medical benefits to all other retired Atmos employees. Substantially all of the Company's employees may become eligible for these benefits if they reach retirement age while working for the Company and attain 10 consecutive years of service. Participant contributions are required under these plans. Prior to June 1994, the plans were not funded. In June 1994, the Company made its first quarterly payment to the external trust set up to fund SFAS No. 106 costs in excess of the pay-as- you-go cost in Kansas in accordance with an order of the Kansas Corporation Commission. The amount of funding will ultimately depend upon the ratemaking treatment allowed in the Company's various rate jurisdictions.
The components of net periodic postretirement benefit cost for the year ended September 30, 1994 are as follows (in thou- sands):
Service cost $1,817 Interest cost 2,269 Amortization of transition obligation 1,668 ------ $5,754 ======
The following is a reconciliation of the funded status of the plans to the net postretirement benefits liability on the balance sheet as of September 30, 1994 and October 1, 1993 (in thousands):
1994 1993 -------- -------- Accumulated postretirement benefit obligation Retirees $(18,083) $(18,237) Fully eligible employees (6,827) (8,596) Other employees (4,206) (6,521) -------- -------- (29,116) (33,354)
Plan assets 274 - -------- -------- Accumulated postretirement benefit obligation in excess of plan assets (28,842) (33,354) Unrecognized prior service cost (2,256) - Unrecognized net (gain) or loss (4,105) - Unrecognized transition obligation 31,686 33,354 -------- -------- Accrued postretirement benefits liability $ (3,517) $ - ======== ========
In the latest actuarial calculation of the accrued postre- tirement benefits liability, the assumed health care cost trend rate used to estimate the cost of postretirement benefits was 10.5% for the 1993-1994 year, 9.5% for the 1994-1995 year and is assumed to decrease gradually to 5.0% for 1999-2000 and remain at that level thereafter. Similarly, the dental trend rate is 8.0% for the 1993-1994 year and gradually decreases to 7.0% for 1995- 1996 at which time dental benefits will be discontinued. The trend for vision benefits is assumed to remain level for all years at 4.5%. The effect of a 1% increase in the assumed health care cost trend rate for each future year is $410,000 on the annual aggregate of the service and interest cost components of net periodic postretirement benefit costs and $2,279,000 on the accumulated postretirement benefit obligation as of September 30, 1994. The assumed discount rate, the rate at which liabilities could be settled, was 8.25% and 7.0% as of September 30, 1994 and 1993, respectively.
The Company is currently recovering other postretirement benefit ("OPEB") costs through its regulated rates on a pay-as- you-go basis in a majority of its service areas in Texas, Kentucky and Louisiana. It is allowed to recover OPEB costs in its remaining service areas under SFAS No. 106 accrual accounting. The rate recovery of SFAS No. 106 cost by jurisdiction is discuss- ed below. Management believes that accrual accounting in accor- dance with SFAS No. 106 is appropriate and will seek rate recovery of accrual-based expenses in all of its ratemaking jurisdictions.
In May 1993, the Louisiana Commission issued an order for all utilities under its jurisdiction to continue to use the pay-as- you-go accounting method for rate treatment of SFAS No. 106 costs.
Utilities may apply to the Louisiana Commission for authority to recognize a regulatory asset to be amortized on a pay-as-you-go basis to bridge the gap between ratemaking and accounting. The Louisiana Commission retains the flexibility to examine individual companies' accounting for SFAS No. 106 costs to determine if special exceptions to this order are warranted. Recovery of SFAS No. 106 costs were not allowed in the Company's Rate Stabilization Clause increase implemented March 1, 1994.
In June 1992, the Kentucky Public Service Commission ("Kentucky Commission") declined a request by a group of utilities to grant a blanket commitment for the future recovery of SFAS No. 106 costs in excess of pay-as-you-go costs for all utilities. The Kentucky Commission's order stated that each utility could file an individual application to seek recovery of such costs. At a rehearing held in December 1992, the Kentucky Commission affirmed its initial order.
In May 1993, the Company filed rate requests which included SFAS No. 106 costs in Fritch and Sanford, Texas and for the surrounding environs. The rates for the environs are subject to the jurisdiction of the Railroad Commission of Texas ("Railroad Commission"). In its order of August 30, 1993, the Railroad Commission approved recovery of SFAS No. 106 costs and internal funding.
In September 1994 the Company filed for a rate increase with its West Texas cities. The rate case, which included SFAS No. 106 costs, was settled with those cities subsequent to September 30, 1994.
In September 1993, GGC filed a rate request for its Colorado service area which included SFAS No. 106 costs. In May 1994, the Company began implementing new rates in its Colorado service area. The new rates increased annual revenues by $3,200,000 and included recovery of accrual-based SFAS No. 106 costs. By order issued in October 1994, the Colorado Public Utility Commission approved recovery of SFAS No. 106 costs with the condition of external funding of the difference between SFAS No. 106 expense and pay-as- you-go expense.
By order issued in November 1993, the Kansas Corporation Commission approved recovery of SFAS No. 106 expenses beginning in December 1993 with the condition that the difference between amounts computed as SFAS No. 106 expense and pay-as-you-go expense shall be remitted quarterly to an external trust fund.
The Company will seek rate recovery of accrual based SFAS No. 106 expenses in its ratemaking jurisdictions that have not yet approved the recovery of these expenses. The portion of this additional expense in excess of the pay-as-you-go amount in these ratemaking jurisdictions that will immediately or ultimately be allowed in rates cannot presently be determined. The ultimate impact of the adoption of SFAS No. 106 on the Company's financial position and results of operations will not be known with certain-
ty until the regulatory treatment that will be allowed in each of the Company's ratemaking jurisdictions is determined.
9. Postemployment benefits
The Company also provides postemployment benefits, primarily workers' compensation, to former or inactive employees after employment but before retirement. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS No. 112"), which applies to such benefits and will be effective for the Company's 1995 fiscal year. Under SFAS No. 112, employers are required to recognize the obligation to provide postemployment benefits if certain conditions are met. Postemployment benefit costs are currently recorded and recovered in rates on the pay-as-you-go basis. The rate treatment of SFAS No. 112 accrual based costs has not been determined at this time. The reduction in future earnings, if any, that would result from this accrual would be offset to the extent that it is approved to be recovered in rates. Based on a preliminary actuarial study, the Company currently estimates that the cumulative effect of impleme- ntation of SFAS No. 112 and the increase in future annual costs will not have a material adverse effect on earnings.
10. Supplementary information
Taxes, other than income taxes for 1994, 1993 and 1992 consisted of the following:
1994 1993 1992 ------- ------- ------- (In thousands)
Gross receipts $ 7,252 $ 7,312 $ 7,393 Ad valorem 5,124 4,992 4,618 Payroll 3,475 3,353 3,322 Other 957 1,149 1,065 ------- ------ ------- $16,808 $16,806 $16,398 ======= ======= =======
11. 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 Corporati- on and certain of its affiliates ("LIG"). LIG is the Company's primary supplier of natural gas in Louisiana and is not otherwise affiliated with the Company.
The plaintiffs purported to represent a class consisting of all residential and commercial gas customers in the Trans La Division's service area. Among other things, the lawsuit alleged
that the defendants violated antitrust laws of the state of Louisiana by manipulating the cost-of-gas component of the Trans La Division's gas rate to the purported customer class, thereby causing such purported class members to pay a higher rate. The plaintiffs made no specific allegation of an amount of damages.
The defendants brought an appeal to the Louisiana Supreme Court of rulings by the trial court and the Third Circuit Court of Appeal which denied defendants' exceptions to the jurisdiction of the trial court. It was the position of the defendants that the plaintiffs' claims amount to complaints about the level of gas rates and should be within the exclusive jurisdiction of the Louisiana Commission.
On January 19, 1993, the Louisiana Supreme Court issued a decision reversing in part the lower courts' rulings, dismissing all of plaintiffs' claims against the defendants which seek damages due to alleged overcharges and further ruling that all such claims are within the exclusive jurisdiction of the Louisiana Commission. Any claims which seek damages other than overcharges were remanded to the trial court but were stayed pending the completion of the Louisiana Commission proceeding referred to below.
The Louisiana Commission has instituted a docketed proceeding for the purpose of investigating the costs included in the Trans La Division's purchased gas adjustment component of its rates. Both the Trans La Division and LIG are parties to the proceeding. Much of the discovery in this proceeding has been conducted and a procedural schedule has been established. The Company believes the allegations as they relate to the Company, whether brought in court or at the Louisiana Commission, are without merit, and that the chances of a material adverse outcome are remote. The Company will continue to vigorously protect its interest in this matter.
From time to time, claims are made and lawsuits are filed against 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.
12. Statement of cash flows
Supplemental disclosures of cash flow information for 1994, 1993 and 1992 are presented below:
1994 1993 1992 ------- ------- ------- (In thousands) Cash paid for Interest $12,756 $13,436 $14,496 Income taxes 6,352 8,190 3,754
13. Leases
The Company has entered into noncancelable leases involving office space and warehouse space. The remaining lease terms range from one to 20 years and generally provide for the payment of taxes, insurance and maintenance by the lessee. Net property, plant and equipment included amounts for capital leases of $5,664,000 and $6,029,000 at September 30, 1994 and 1993, respectively.
The related future minimum lease payments at September 30, 1994 were as follows: Capital Operating leases leases -------- -------- (In thousands)
1995 $ 1,716 $ 5,071 1996 1,717 4,817 1997 1,683 3,808 1998 1,628 2,958 1999 1,504 3,036 Thereafter 11,297 23,335 ------- ------- Total minimum lease payments 19,545 43,025
Less amount representing contingent payments from increases in the Consumer Price Index (946) (20) ------- ------- Net minimum lease payments 18,599 $43,005 ======= Less amount representing interest (12,305) ------- Present value of net minimum lease payments $ 6,294 =======
Consolidated rent expense amounted to $6,490,000, $5,277,000 and $5,395,000 for fiscal 1994, 1993 and 1992, respectively. Rents are expensed and recovered in rates on a pay-as-you-go basis.
SUPPLEMENTARY DATA
Quarterly Financial Data (Unaudited) Summarized unaudited quarterly financial data are presented below. The sum of net income per share by quarter may not equal the net income per share for the year due to variations in the weighted average shares outstanding used in computing such amounts.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors is incorporated herein by reference from the Company's definitive proxy statement for the annual meeting of shareholders on February 8, 1995.
Information regarding executive officers is included in Part I.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy statement for the annual meeting of shareholders on February 8, 1995.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy statement for the annual meeting of shareholders on February 8, 1995.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy statement for the annual meeting of shareholders on February 8, 1995.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 and 2. Financial statements and financial statement schedules
The financial statements and financial statement schedules listed in the accompanying Index to Financial Statements and Financial Statement Schedules are filed as part of this annual report.
3. Exhibits
The exhibits listed in the accompanying Exhibits Index are filed as part of this annual report. The exhibits numbered 10.18(a) through 10.26(c) are management contracts or compensatory plans or arrangements.
(b) Reports on Form 8-K
None.
AND FINANCIAL STATEMENT SCHEDULES (Item 8, 14(a) 1 and 2)
Page Number
Financial statements: Consolidated balance sheets at September 30, 1994 and 1993 31
Consolidated statements of income for the years ended September 30, 1994, 1993 and 1992 32
Consolidated statements of shareholders' equity for the years ended September 30, 1994, 1993 and 1992 33
Consolidated statements of cash flows for the years ended September 30, 1994, 1993 and 1992 34
Notes to consolidated financial statements 36-56
Independent auditors' report 30
Financial statement schedules for the years ended September 30, 1994, 1993 and 1992:
V - Property, plant and equipment 61
VI - Accumulated depreciation and amortization of property, plant and equipment 62
All other financial statement schedules are omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and accompanying notes thereto.
ATMOS ENERGY CORPORATION SCHEDULE V PROPERTY, PLANT AND EQUIPMENT
Balance at Retire- Balance beginning Additions ments at end of of year at cost or sales year --------- --------- -------- --------- (In thousands)
Year ended September 30, 1994: Utility plant $496,153 $49,544 $7,863 $537,834 Construction in progress 5,359 811 312 5,858 -------- ------- ------ -------- $501,512 $50,355 $8,175 $543,692 ======== ======= ====== ========
Year ended September 30, 1993: Utility plant $458,548 $41,824 $4,219 $496,153 Construction in progress 4,065 1,319 25 5,359 -------- ------- ------ -------- $462,613 $43,143 $4,244 $501,512 ======== ======= ====== ========
Year ended September 30, 1992: Utility plant $421,048 $41,613 $4,113 $458,548 Construction in progress 3,519 556 10 4,065 -------- ------- ------ -------- $424,567 $42,169 $4,123 $462,613 ======== ======= ====== ========
Depreciation is provided at various rates on a straight-line basis over the estimated useful lives of the assets. Such rates range from 2% to 33% per year with the average rate currently being approximately 3.5% per year.
ATMOS ENERGY CORPORATION SCHEDULE VI ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
Additions Deductions Balance charged to at to retirements, Balance beginning costs and renewals and at end of year expenses replacements of year --------- --------- ------------ ------- (In thousands)
Year ended September 30, 1994: Utility plant $202,237 $20,317 $ 6,269 $216,285
Year ended September 30, 1993: Utility plant $185,689 $19,857 $ 3,309 $202,237
Year ended September 30, 1992: Utility plant $165,380 $21,803 $ 1,494 $185,689
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By /s/ JAMES F. PURSER ----------------------- James F. Purser Executive Vice President and Chief Financial Officer
Date: December 15, 1994
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints James F. Purser, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Form 10-K, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
/s/ CHARLES K. VAUGHAN Chairman of December 15, 1994 ------------------------- the Board Charles K. Vaughan
/s/ RONALD L. FANCHER President and December 15, 1994 ------------------------- Chief Executive Ronald L. Fancher Officer
/s/ JAMES F. PURSER Executive Vice December 15, 1994 ------------------------- President and James F. Purser Chief Financial Officer
/s/ DAVID L. BICKERSTAFF Vice President December 15, 1994 ------------------------- and Controller David L. Bickerstaff (Principal accounting officer)
/s/ TRAVIS W. BAIN, II Director December 15, 1994 ------------------------- Travis W. Bain, II
/s/ DAN BUSBEE Director December 15, 1994 ------------------------- Dan Busbee
/s/ PHILLIP E. NICHOL Director December 15, 1994 ------------------------- Phillip E. Nichol
/s/ JOHN W. NORRIS, JR. Director December 15, 1994 ------------------------- John W. Norris, Jr.
/s/ CARL S. QUINN Director December 15, 1994 ------------------------- Carl S. Quinn
/s/ LEE E. SCHLESSMAN Director December 15, 1994 ------------------------- Lee E. Schlessman
/s/ RICHARD WARE II Director December 15, 1994 ------------------------- Richard Ware II
/s/ DEWEY G. WILLIAMS Director December 15, 1994 ------------------------- Dewey G. Williams
EXHIBITS INDEX Item 14. (a) (3)
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
3.1 Restated Articles of Incorporation Exhibit (3)(a) of Form dated November 10, 1989 10-K for fiscal year ended September 30, 1991
3.2 By-Laws of Atmos Energy Corporation Exhibit (3) of Form 10-Q (Amended and restated as of May 11, for quarter ended June 1994) 30, 1994 4.1 Specimen Common Stock Certificate Exhibit (4) of the (Energas Company) October 28, 1983 Form 10 (File No. 0-11249)
4.2 Specimen Common Stock Certificate Exhibit (4) (b) of Form (Atmos Energy Corporation) 10-K for fiscal year ended September 30, 1988 (File No. 1-10042)
4.3(a) Rights Agreement, dated as of April Exhibit (1) of Form 8-K 27, 1988, between the Company and filed May 10, 1988 (File Morgan Shareholder Services Trust No. 0-11249) Company
4.3(b) Amendment No. 1 to Rights Agreement, dated August 10, 1994 4.3(c) Certificate of Adjusted Price, dated August 15, 1994
9 Not applicable
10.1(a) Note Purchase Agreement, dated Exhibit (10)(a)(i) of December 30, 1986, by and between Form 10-K for fiscal year the Company and John Hancock Mutual ended September 30, 1991 Life Insurance Company
Note Purchase Agreement, dated December 30, 1986, by and between the Company and Mellon Bank, N.A., Trustee under Master Trust Agreement of NYNEX Corporation dated January 1, 1984 for Employee Pension Plans - NYNEX - John Hancock - Private Placement. (Agreement is identical to the Hancock Agreement listed above except as to the parties thereto.)
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
10.1(b) Letter, dated November 13, 1987, Exhibit 28(a) of Form 8-K from John Hancock Mutual Life filed January 7, 1988 Insurance Company to the Company (File No. 0-11249)
Letter, dated November 13, 1987, from Mellon Bank, N.A., Trustee under Master Trust Agreement of NYNEX Corporation dated January 1, 1984 for Employee Pension Plans - NYNEX - John Hancock - Private Placement to the Company (Mellon letter is identical to the Hancock letter listed above except as to the parties thereto.) 10.1(c) Amendment to Note Purchase Exhibit (10)(a)(iii) of Agreement, dated October 11, 1989, Form 10-K for fiscal year by and between the Company and John ended September 30, 1989 Hancock Mutual Life Insurance (File No. 1-10042) Company revising Note Purchase Agreement dated December 30, 1986
Amendment to Note Purchase Agreement, dated October 11, 1989, by and between the Company and Mellon Bank, N.A., Trustee under Master Trust Agreement of NYNEX Corporation dated January 1, 1984 for Employee Pension Plans - NYNEX - John Hancock - Private Placement revising Note Purchase Agreement dated December 30, 1986. (This amendment is identical to the Hancock amendment listed above except as to the parties thereto.)
10.1(d) Amendment to Note Purchase Exhibit (10)(a)(iv) of Agreement, dated November 12, 1991, Form 10-K for fiscal year by and between the Company and John ended September 30, 1991 Hancock Mutual Life Insurance Company revising Note Purchase Agreement dated December 30, 1986.
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
Amendment to Note Purchase Agreement, dated November 12, 1991, by and between the Company and Mellon Bank, N.A., Trustee under Master Trust Agreement of NYNEX Corporation dated January 1, 1984 for Employee Pension Plans - NYNEX - John Hancock - Private Placement revising Note Purchase Agreement dated December 30, 1986. (This amendment is identical to the Hancock amendment listed above except as to the parties thereto.)
10.2(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 8-K December 21, 1987, by and between filed January 7, 1988 the Company and John Hancock Mutual (File No. 0-11249) Life Insurance Company Note Purchase Agreement, dated as of December 21, 1987, by and between the Company and John Hancock Charitable Trust I (Agreement is identical to Hancock Agreement listed above except as to the parties thereto.)
Note Purchase Agreement dated as of December 21, 1987, by and between the Company and Mellon Bank, N.A., Trustee under Master Trust Agreement of AT&T Corporation, dated January 1, 1984, for Employee Pension Plans - AT&T - John Hancock - Private Placement (Agreement is identical to Hancock Agreement listed above except as to the parties thereto.)
10.2(b) Amendment to Note Purchase Exhibit (10)(b)(ii) of Agreement, dated October 11, 1989, Form 10-K for fiscal year by and between the Company and John ended September 30, 1989 Hancock Mutual Life Insurance (File No. 1-10042) Company revising Note Purchase Agreement dated December 21, 1987
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
Amendment to Note Purchase Agreement, dated October 11, 1989, by and between the Company and John Hancock Charitable Trust I revising Note Purchase Agreement dated December 21, 1987. (Amendment is identical to Hancock amendment listed above except as to the parties thereto.)
Amendment to Note Purchase Agreement, dated October 11, 1989, by and between the Company and Mellon Bank, N.A., Trustee under Master Trust Agreement of AT&T Corporation, dated January 1, 1984, for Employee Pension Plans - AT&T - John Hancock - Private Placement revising Note Purchase Agreement dated December 21, 1987 (Amendment is identical to Hancock amendment listed above except as to the parties thereto.) 10.2(c) Amendment to Note Purchase Exhibit 10(b)(iii) of Agreement, dated November 12, 1991, Form 10-K for fiscal year by and between the Company and John ended September 30, 1991 Hancock Mutual Life Insurance Company revising Note Purchase Agreement dated December 21, 1987
Amendment to Note Purchase Agreement, dated November 12, 1991, by and between the Company and John Hancock Charitable Trust I revising Note Purchase Agreement dated December 21, 1987. (Amendment is identical to Hancock amendment listed above except as to the parties thereto.)
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
Amendment to Note Purchase Agreement, dated November 12, 1991, by and between the Company and Mellon Bank, N.A., Trustee under Master Trust Agreement of AT&T Corporation, dated January 1, 1984, for Employee Pension Plans - AT&T - John Hancock - Private Placement revising Note Purchase Agreement dated December 21, 1987. (Amendment is identical to Hancock amendment above except as to the parties thereto.)
10.3(a) Note Purchase Agreement, dated as of Exhibit 10(c) of Form 10- October 11, 1989, by and between the K for fiscal year ended Company and John Hancock Mutual Life September 30, 1989 (File Insurance Company No. 1-10042) 10.3(b) Amendment to Note Purchase Exhibit 10(c)(ii) of Form Agreement, dated as of November 12, 10-K for fiscal year 1991, by and between the Company and ended September 30, 1991 John Hancock Mutual Life Insurance Company revising Note Purchase Agreement dated October 11, 1989
10.4(a) Note Purchase Agreement, dated as of Exhibit 10(f)(i) of Form August 29, 1991, by and between the 10-K for fiscal year Company and The Variable Annuity ended September 30, 1991 Life Insurance Company
10.4(b) Amendment to Note Purchase Exhibit 10(f)(ii) of Form Agreement, dated November 26, 1991, 10-K for fiscal year by and between the Company and The ended September 30, 1991 Variable Annuity Life Insurance Company revising Note Purchase Agreement dated August 29, 1991
10.5 Note Purchase Agreement, dated as of Exhibit (10)(f) of Form August 31, 1992, by and between the 10-K for fiscal year Company and The Variable Annuity ended September 30, 1992 Life Insurance Company 10.6(a) Service Agreement No. 50,772 between Greeley Gas Company and Public Service Company of Colorado (West Gas Supply Co. prior to merger with PSCO) dated August 1, 1992
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
10.6(b) Transportation Storage Service Agreement No. TA-0544 between Greeley Gas Company and Williams Natural Gas Company dated October 1,
10.6(c) No-Notice Transportation Service Agreement No. 31013, Rate Schedule NNT-1, between Greeley Gas Company and Colorado Interstate Gas Company, as amended, dated October 1, 1993
10.6(d) Firm Transportation Service Agreement No. 35009, Rate Schedule TF2, between Greeley Gas Company and Colorado Interstate Gas Company, as amended, dated October 1, 1993
10.7(a) Amarillo Supply Agreement dated January 2, 1993 between the Company and Mesa Operating Company
10.7(b) Interruptible Gas Transportation and Exhibit (10)(g)(iv) of Sales Agreement dated January 1, Form 10-K for fiscal year 1991, between Mesa Operating Limited ended September 30, 1992 Partnership and Energas Company regarding transportation charges to Mesa
10.7(c) Letter agreement between the Company Exhibit (10)(h)(vi) of and Mesa Operating Limited Form 10-K for fiscal year Partnership dated March 21, 1989, ended September 30, 1989 regarding transportation rates (File No. 1-10042) 10.8(a) Gas Sales Agreement between the Exhibit (10)(i)(i) of Company and Westar Transmission Form 10-K for fiscal year Company dated January 1, 1986, as ended September 30, 1989 amended by Letter Agreement dated (File No. 1-10042) November 21, 1986, and Agreement dated December 9, 1988, revising the pricing formula for city gate sales
10.8(b) Amendment to Gas Sales Agreement, Exhibit (10)(h)(ii) of dated February 27, 1987, between the Form 10-K for fiscal year Company and Westar Transmission ended September 30, 1992 Company
10.8(c) Amendment to Gas Sales Agreement, Exhibit (10)(h)(iii) of dated January 1, 1988, between Cabot Form 10-K for fiscal year Gas Supply Corporation ("CGSC") and ended September 30, 1992 the Company
Page Number or Exhibit Incorporation by Number Description Reference to -------- ------------------------------------ -------------------------
10.9(a) Gas Transportation Agreement between Exhibit 10(i)(i) of Form the Company and Westar Transmission 10-K for fiscal year Company dated January 1, 1986, as ended September 30, 1991 amended by letter agreement dated November 21, 1986
10.9(b) Amendment to Gas Transportation Exhibit (10)(i)(ii) of Agreement, dated January 1, 1988, Form 10-K for fiscal year between CGSC and the Company ended September 30, 1992 10.10 Supplemental Gas Sales Agreement, Exhibit (10)(j) of Form dated January 1, 1988, between CGSC 10-K for fiscal year and the Company ended September 30, 1992
10.11 Gas Purchase and Sales Agreement, Exhibit (10)(k) of Form dated January 1, 1988, between Cabot 10-K for fiscal year Energy Marketing Corporation and ended September 30, 1992 EnerMart, Inc.
10.12 Gas Sales Agreement, dated January Exhibit (10)(l) of Form 1, 1988, between the Company and Gas 10-K for fiscal year Marketing, Inc. ("GMI"), relating to ended September 30, 1992 Amarillo supplemental supplies
10.13 Gas Sales Agreement, dated January Exhibit (10)(m) of Form 1, 1988, between the Company and 10-K for fiscal year GMI, relating to West Texas ended September 30, 1992 supplemental supplies 10.14 Settlement Agreement, dated January Exhibit (10)(n) of Form 15, 1988, between CGSC and the 10-K for fiscal year Company ended September 30, 1992
10.15(a) Agreement for Natural Gas Service Exhibit 10(o)(ii) of Form for Distribution and Resale between 10-K for fiscal year Trans La and LIG dated October 28, ended September 30, 1991
10.15(b) Agreement for Intrastate Exhibit 10(o)(iii) of Transportation of Natural Gas Form 10-K for fiscal year between Trans La and LIG dated ended September 30, 1991 October 28, 1991
10.16(a) Gas Transportation Agreement between Exhibit 10.1 of Form 10-Q Texas Gas Transmission Corporation for quarter ended ("Texas Gas") and Western Kentucky December 31, 1993 Gas Company, a division of Atmos Energy Corporation ("Western Ken- tucky") dated November 1, 1993 (Contract no. T3817, zone 2)
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10.16(b) Gas Transportation Agreement between Exhibit 10.2 of Form 10-Q Texas Gas and Western Kentucky dated for quarter ended November 1, 1993 (Contract no. December 31, 1993 T3770, zone 2)
10.16(c) Gas Transportation Agreement between Exhibit 10.3 of Form 10-Q Texas Gas and Western Kentucky Gas for quarter ended dated November 1, 1993 (Contract no. December 31, 1993 T3355, zone 3) 10.16(d) Gas Transportation Agreement between Exhibit 10.4 of Form 10-Q Texas Gas and Western Kentucky Gas for quarter ended dated November 1, 1993 (Contract no. December 31, 1993 T3819, zone 4)
10.16(e) Gas Transportation Agreement between Exhibit 10.5 of Form 10-Q Texas Gas and Western Kentucky Gas for quarter ended dated November 1, 1993 (Contract no. December 31, 1993 N0210, zone 2, Contract no. N0340, zone 3, Contract no. N0435, zone 4)
10.17(a) Gas Transportation Agreement, Exhibit 10.17(a) of Form Contract No. 2550, dated September 10-K for fiscal year 1, 1993, between Tennessee Gas ended September 30, 1993 Pipeline Company, a division of Tenneco, Inc. ("Tennessee Gas"), and Western Kentucky, Campbellsville Service Area
10.17(b) Gas Transportation Agreement, Exhibit 10.17(b) of Form Contract No. 2546, dated September 10-K for fiscal year 1, 1993, between Tennessee Gas and ended September 30, 1993 Western Kentucky, Danville Service Area 10.17(c) Gas Transportation Agreement, Exhibit 10.17(c) of Form Contract No. 2385, dated September 10-K for fiscal year 1, 1993, between Tennessee Gas and ended September 30, 1993 Western Kentucky, Greensburg et al Service Area
10.17(d) Gas Transportation Agreement, Exhibit 10.17(d) of Form Contract No. 2551, dated September 10-K for fiscal year 1, 1993, between Tennessee Gas and ended September 30, 1993 Western Kentucky, Harrodsburg Service Area
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10.17(e) Gas Transportation Agreement, Exhibit 10.17(e) of Form Contract No. 2548, dated September 10-K for fiscal year 1, 1993, between Tennessee Gas and ended September 30, 1993 Western Kentucky, Lebanon Service Area
10.18(a) *Employment Agreement amended and Exhibit 10(r)(i) of Form restated as of August 8, 1991, 10-K for fiscal year between the Company and Charles K. ended September 30, 1991 Vaughan 10.18(b) *Employment Agreement amended and Exhibit 10(r)(ii) of Form restated as of August 8, 1991, 10-K for fiscal year between the Company and Robert F. ended September 30, 1991 Stephens
10.18(c) *Employment Agreement amended and Exhibit 10(r)(iii) of restated as of August 8, 1991, Form 10-K for fiscal year between the Company and Don E. James ended September 30, 1991
10.18(d) *Employment Agreement amended and Exhibit 10(r)(iv) of Form restated as of August 8, 1991, 10-K for fiscal year between the Company and James F. ended September 30, 1991 Purser
10.18(e) *Employment Agreement dated March 1, Exhibit 10.1 of Form 10-Q 1993, between the Company and Ronald for quarter ended March L. Fancher 31, 1993 10.18(f) *Employment Agreement dated August Exhibit 10.18(g) of Form 11, 1993, between the Company and 10-K for fiscal year H.F. Harber ended September 30, 1993
10.19 *1983 Incentive Stock Option Plan of Exhibit 10(u) of Form 10- Energas Company K for fiscal year ended September 30, 1990
10.20 *The Atmos Energy Corporation Exhibit (10)(t) of Form Supplemental Executive Benefits 10-K for fiscal year Plan, effective October 1, 1987, ended September 30, 1992 Restated as of November 11, 1992
10.21(a) *The Atmos Energy Corporation Exhibit (10)(u) of Form Restricted Stock Grant Plan, 10-K for fiscal year effective October 1, 1987, amended ended September 30, 1992 and restated as of May 13, 1992 10.21(b) *Amendment No. 1 to the Atmos Energy Exhibit 10.1 of Form 10-Q Corporation Restricted Stock Grant for the quarter ended Plan (Restated as of May 13, 1992) December 31, 1992
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10.21(c) *Amendment No. 2 to the Atmos Energy Exhibit 10 of Form 10-Q Corporation Restricted Stock Grant for the quarter ended Plan (Restated as of May 13, 1992) June 30, 1993
10.21(d) *Amendment No. 3 to the Atmos Energy Exhibit 10.21(d) of Form Corporation Restricted Stock Grant 10-K for fiscal year Plan (Restated as of May 13, 1992) ended September 30, 1993 10.22 *Atmos Energy Corporation Annual Exhibit 10(x) of Form 10- Performance Bonus Plan for Corporate K for fiscal year ended Officers, restated as of November 8, September 30, 1990
10.23(a) *Atmos Energy Corporation Mini-Med Exhibit 10(w)(i) of Form Plan, as restated effective April 1, 10-K for fiscal year 1989 ended September 30, 1992
10.23(b) *Amendment No. 1 to the Atmos Energy Exhibit (10)(w)(ii) of Corporation Mini-Med Plan Form 10-K for fiscal year ended September 30, 1992
10.23(c) *Amendment No. 2 to the Atmos Energy Exhibit (10)(w)(iii) of Corporation Mini-Med Plan Form 10-K for fiscal year ended September 30, 1992 10.23(d) *Amendment No. 3 to the Atmos Energy Exhibit 10(w)(iv) of Form Corporation Mini-Med Plan 10-K for fiscal year ended September 30, 1992
10.23(e) *Amendment No. 4 to the Atmos Energy Exhibit 10.23(e) of Form Corporation Mini-Med Plan 10-K for fiscal year ended September 30, 1993
10.24 *Atmos Energy Corporation Deferred Exhibit 10(x) of Form 10- Compensation Plan for Outside K for fiscal year ended Directors September 30, 1992
10.25 *Atmos Energy Corporation Retirement Exhibit 10(y) of Form 10- Plan for Outside Directors K for fiscal year ended September 30, 1992 10.26(a) *Description of Car Allowance Exhibit 10.26(a) of Form Payments 10-K for fiscal year ended September 30, 1993
10.26(b) *Description of Financial and Estate Exhibit 10.26(b) of Form Planning Program 10-K for fiscal year ended September 30, 1993
10.26(c) *Description of Sporting Events Exhibit 10.26(c) of Form Program 10-K for fiscal year ended September 30, 1993
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10.27(a) Seventh Supplemental Indenture, Exhibit 10.1 of Form 10-Q dated as of October 1, 1983 between for quarter ended June Greeley Gas Company ("The Greeley 30, 1994 Gas Division") and the Central Bank of Denver, N.A. ("Central Bank")
10.27(b) Ninth Supplemental Indenture, dated Exhibit 10.2 of Form 10-Q as of April 1, 1991, between The for quarter ended June Greeley Gas Division and Central 30, 1994 Bank 10.27(c) Bond Purchase Agreement, dated as of Exhibit 10.3 of Form 10-Q April 1, 1991, between The Greeley for quarter ended June Gas Division and Central Bank 30, 1994
10.27(d) Tenth Supplemental Indenture, dated Exhibit 10.4 of Form 10-Q as of December 1, 1993, between the for quarter ended June Company and Colorado National Bank, 30, 1994 formerly Central Bank
11 Not applicable
12 Not applicable 13 Not applicable
16 Not applicable
18 Not applicable
21 Subsidiaries of the registrant Exhibit 22 of Form 10-K for fiscal year ended September 30, 1992 22 Not applicable
23 Consent of independent auditors
24 Power of Attorney Signature page of Form 10-K for fiscal year ended September 30, 1994
27 Financial Data Schedule for Atmos for year ended September 30, 1994 28 Not applicable
99 Not applicable
_________________________ * This exhibit constitutes a "management contract or compensatory plan, contract, or arrangement."