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Atmos Energy Corporation
1997 Annual Report

Table of contents

  • Page 1
    Atmos Energy Corporation 1997 Annual Report

  • Page 2
    ...: Letter to Shareholders ...2 Chief Executive Officer Q & A ...6 Utility Operations ...8 Energas Company Information ...10 Greeley Gas Company Information ...12 Trans Louisiana Gas Company Information ...14 United Cities Gas Company Information ...16 Western Kentucky Gas Company Information ...18...

  • Page 3
    ... customers in Texas, Colorado, Kansas, Missouri, Louisiana, Tennessee, Illinois, Georgia, North Carolina, South Carolina, Virginia, Iowa and Kentucky through its operating companies - Energas Company, Greeley Gas Company, Trans Louisiana Gas Company, United Cities Gas Company, Western Kentucky Gas...

  • Page 4
    ... 1997 ENERGAS TRANS LA KENTUCKY GAS CITIES UTILITY PROPANE 268,518 25,234 15,589 2,230 73,546 5,409 120 978 154,219 17,706 460 1,573 99,472 13,328 385 274,992 31,026 663 870,474 92,703 17,217 4,781 23,278 4,073 873 873 WESTERN GREELEY UNITED TOTAL CUSTOMERS, at end of year Residential...

  • Page 5
    ... stock transfer inquiries, listen to current company information and access daily stock quotes without the assistance of a customer service representative, call 1-800-543-3038, and have your Atmos Energy shareholder account number and Social Security or taxpayer ID number ready. Atmos financial...

  • Page 6
    Atmos Energy Corporation has been marked by significant achievements and events. E ach year in the impressive history of In 1997, the company completed its merger with United Cities Gas Company, becoming the 12th largest U.S. natural gas distribution company, and launched a number of significant...

  • Page 7
    ... to enhance customer service, integrate United Cities' operations and achieve additional efficiency in Atmos' utility operations, which are already among the most efficient in the industry; ➢ Putting in place a new management team prepared to build on Atmos' successful past but clearly focused on...

  • Page 8
    ... impacted sales of natural gas to farmers in West Texas for irrigation. These negative effects of weather were partially offset by rate increases implemented in fiscal 1996 and 1997 in Texas, Kentucky, Georgia, Iowa, Virginia, Tennessee, Missouri and Illinois. Normal weather conditions would have...

  • Page 9
    ... monitor our service efficiency by reviewing ratios of employees and costs per natural gas customer served. Atmos, excluding United Cities, served 457 customers per employee in 1997, compared with 396 served on average by our local distribution company peer group. Our normalized operating and...

  • Page 10
    ...directed in four areas: running our utility operations exceptionally well; increasing the scope, scale and market share of our non-utility operations (gas marketing and propane); developing plans to participate in retail energy services behind the meter; and growing through acquisitions. We end 1997...

  • Page 11
    ...increase the number of customers served in our existing service areas, manage our costs and expenses carefully, and work to establish incentive rate structures in every jurisdiction possible. in West Texas. Today, Atmos is a regional distribution company with about 1 million utility customers in 12...

  • Page 12
    ... to pursue opportunities to increase the customer base of Woodward Marketing, a wholesale natural gas marketing and gas services limited liability corporation in which we own a 45 percent interest. Third, we intend to develop a plan to participate in retail energy services behind the meter. We also...

  • Page 13
    ... customers served through programs designed to attract residential customers in new development and construction areas and by encouraging commercial and industrial customers to convert to the use of natural gas from other energy sources. The company also promotes the use of efficient new natural gas...

  • Page 14
    ... electronic meter reading devices to improve accuracy and speed. The company also has streamlined business processes to reduce the number of service trips required to start up service for a new customer. Atmos has set up a network of approximately 300 payment centers in grocery stores, convenience...

  • Page 15
    E nergas Co. serves a large agricultural market, which uses natural gas for fueling irrigation engines in the spring and summer, and is pioneering the use of on-site natural gas-powered generators to produce electricity for irrigation pumps. CENTER : Eugene A. Ehler, President REAR FROM LEFT: ...

  • Page 16
    ...IN LUBBOCK, TEXAS, WITH REGIONAL OFFICES IN AMARILLO, LUBBOCK AND MIDLAND, TEXAS. ENERGAS HAS 534 EMPLOYEES AND 13,214 MILES OF PIPE. OUR SERVICE AREA IS 30,000 SQUARE MILES, HOME TO A POPULATION OF 950,000. WE SERVE AN AVERAGE OF 311,571 CUSTOMERS IN 92 COMMUNITIES. WE HAD 3,553 DEGREE DAYS IN 1997...

  • Page 17
    ..., Business Development David Dupont, Vice President of Accounting More than 1,000 archaeological ruins at the Mesa Verde National Park show visitors what life was like 800 years ago for the Anasazi Indians. Today, Greeley Gas contributes to the quality of life in Colorado, Kansas and Missouri by...

  • Page 18
    .... WE SERVE AN AVERAGE OF 113,185 CUSTOMERS IN 123 COMMUNITIES. WE HAD 6,195 DEGREE DAYS IN 1997; 6,274 DAYS IS NORMAL. AS A PUBLIC UTILITY COMPANY GREELEY GAS IS REGULATED BY THE COLORADO PUBLIC UTILITIES COMMISSION, THE KANSAS CORPORATION COMMISSION AND THE MISSOURI PUBLIC SERVICE COMMISSION. No...

  • Page 19
    ... Tom Meyers, Vice President, Technical Services Frank Marino, Vice President, Business Development David Hebert, Vice President, Human Resources Melissa Bowers, Vice President, Accounting Trans La is headquartered in Lafayette, which is also home to our customer Huval Bakery. Huval began baking...

  • Page 20
    ... IN LAFAYETTE, LA., WITH REGIONAL OFFICES IN LAFAYETTE AND NATCHITOCHES, LA. TRANS LA HAS 154 EMPLOYEES AND 2,241 MILES OF PIPE. OUR SERVICE AREA IS 7,000 SQUARE MILES, HOME TO A POPULATION OF 250,000. WE SERVE AN AVERAGE OF 80,053 CUSTOMERS IN 41 COMMUNITIES. WE HAD 1,523 DEGREE DAYS IN 1997; 1,771...

  • Page 21
    ... Cities Gas Co. serves high growth areas surrounding Nashville, Tennessee; East Tennessee and Overland Park, Kansas, and has been a leader in installing residential natural gas heating and cooling units. United Cities has a diverse client base, serving customers in many industries. The grain fields...

  • Page 22
    ... AND COLUMBUS, GA. UNITED CITIES HAS 1,193 EMPLOYEES AND 7,945 MILES OF PIPE. OUR SERVICE AREA IS 70,905 SQUARE MILES, HOME TO A POPULATION OF 6.7 MILLION. WE HAD 3,980 DEGREE DAYS IN 1997; 4,070 DAYS IS NORMAL.WE SERVE AN AVERAGE OF 306,681 CUSTOMERS IN 383 COMMUNITIES. AS A PUBLIC UTILITY COMPANY...

  • Page 23
    ... industrial customer base and continues to increase residential and commercial customers through grass-roots networking with homebuilders and serving on local economic development boards. Western Kentucky Gas CENTER : Earl Fischer, President REAR FROM LEFT: Kevin Akers, Vice President, Operations...

  • Page 24
    ... IN OWENSBORO, KY., WITH REGIONAL OFFICES IN BOWLING GREEN AND MADISONVILLE, KY. WKG HAS 330 EMPLOYEES AND 3,638 MILES OF PIPE. OUR SERVICE AREA IS 12,000 SQUARE MILES, HOME TO A POPULATION OF 680,000. WE SERVE AN AVERAGE OF 173,958 CUSTOMERS IN 163 COMMUNITIES. WE HAD 4,178 DEGREE DAYS IN 1997...

  • Page 25
    ...co-ops. The company plans to continue growth through propane acquisitions and to expand in propane markets in Atmos service areas where natural gas distribution systems are difficult or expensive to construct. The division also is continuing a program of reducing operating costs in order to increase...

  • Page 26
    ... Marketing, L.L.C. Provides services to customers primarily throughout the Southeast and Midwest including: Alabama, Arkansas, California, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Ohio, Oklahoma, Tennessee and Virginia. UNITED CITIES PROPANE 35% Propane...

  • Page 27
    ... the future. As in every area of our business, we are working to further enhance the quality and responsiveness of our shared services to our business units. Senior Management Team CENTER : Robert W. Best, Chairman of the Board, President and Chief Executive Officer REAR FROM LEFT: Wynn D. McGregor...

  • Page 28
    ... Relations and Corporate Communications Don P. Burman, Treasurer GROUP TWO FRONT, FROM LEFT Lee A. Everett, Vice President, Price Policy and Administration David L. Bickerstaff, Vice President and Controller REAR FROM LEFT Gene Mattingly, Vice President, Business Development Cleaburne H. Fritz...

  • Page 29
    ...Current liabilities Current maturities of long-term debt ...Notes payable to banks ...Accounts payable ...Taxes payable ...Customers' deposits...Other current liabilities...Total current liabilities ...Deferred income taxes ...Deferred credits and other liabilities ... $1,301,004 31,668 1,332,672...

  • Page 30
    ... per share data) YEAR ENDED SEPTEMBER 30, 1997 1996 1995 Operating revenues ...Purchased gas cost ...Gross profit ...Operating expenses Operation...Maintenance...Depreciation and amortization ...Taxes, other than income ...Income taxes ...Total operating expenses ...Operating income ...Other...

  • Page 31
    ... data Additional Number of Stated paid-in Retained shares value capital earnings COMMON STOCK Balance, September 30, 1994...Net income ...Cash dividends ($.96 per share) ...Common stock issued: Restricted stock grant plan ...Direct stock purchase plans ...ESOP/401(k) plans ...Woodward Marketing...

  • Page 32
    ...gas stored underground...(Increase) decrease in prepayments ...Increase in deferred charges and other assets ...Increase (decrease) in accounts payable ...Increase (decrease) in taxes payable ...Increase (decrease) in customers' deposits...consolidated financial statements. ATMOS ENERGY CORPORATION 27

  • Page 33
    ...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, Illinois, Tennessee, Iowa, Virginia...

  • Page 34
    ... stock. UCGC was a natural gas utility company engaged in the distribution and sale of natural gas to approximately 306,000 customers in Georgia, Illinois, Iowa, Kansas, Missouri, South Carolina, Tennessee, and Virginia, and in the sale of propane to approximately 29,000 customers in Kentucky, North...

  • Page 35
    ... of $253,000 in the state of South Carolina. UCGC had filed to increase rates by $341,000 on an annual basis. The Georgia Public Service Commission and the Tennessee Regulatory Authority have approved Weather Normalization Adjustments ("WNAs"). The WNAs, effective October 30 ATMOS ENERGY CORPORATION

  • Page 36
    ... 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...

  • Page 37
    .... In Colorado, Greeley Gas Company ("Greeley Gas Division") is a defendant in several lawsuits filed as a result of a fire in a building in Steamboat Springs, Colorado on February 3, 1994. The plaintiffs claim that the fire resulted from a leak in a severed gas service line owned by the Greeley Gas...

  • Page 38
    ... another company, the Company expects recovery of the costs involved in the investigation and response action associated with the mercury meter sites in Kansas. The Company addresses other environmental matters from time to time in the regular and ordinary course of its business. Management expects...

  • Page 39
    ...30, 1997, all of the Greeley Gas Division utility plant assets with a net book value of approximately $83,371,000 are subject to a lien under the 9.4% Series J First Mortgage Bonds assumed by the Company in the acquisition of Greeley Gas Company. Also, substantially all of the United Cities Division...

  • Page 40
    ...,667 18,746 NINE Common stock and stock options The Company issued 100,000 shares of its common stock in fiscal 1997 in connection with its Restricted Stock Grant Plan. Atmos has an Employee Stock Ownership Plan ("ESOP") and the United Cities Division has a 401(k) savings plan, as discussed in Note...

  • Page 41
    ...retirement and stock ownership plans At September 30, 1997, the Company had four defined benefit pension plans, covering the Western Kentucky Division employees, the Greeley Gas Division employees, and the United Cities Division employees, while the fourth covers all other Atmos employees. The plans...

  • Page 42
    ... benefits to the United Cities Division. The other Atmos plan offers medical benefits to all other retired Atmos employees. ATMOS ENERGY CORPORATION $ 205 $ 58 $ 223 Accumulated plan benefits were computed using the Projected Unit Credit funding method. The discount rate and rate of increase in...

  • Page 43
    ... long-term rate of return on plan assets was 5.3% for 1997 and 1996. The Company maintains a separate postretirement health care benefits plan for the United Cities Division. Substantially all of its employees will become eligible for these benefits if they reach the normal retirement age while...

  • Page 44
    ... 106 accrual accounting in Colorado, Kansas, the majority of its Texas service area and in Kentucky (effective November 1, 1995). It receives rate treatment as a cost of service item for OPEB costs on the pay-as-you-go basis in Louisiana. OPEB costs have been specifically addressed in rate orders in...

  • Page 45
    ...building the Atmos team, running the utility operations exceptionally well, increasing the size and market share of the non-utility operations (gas marketing and propane), and developing plans to participate in retail energy services behind the meter. In connection with its merger with United Cities...

  • Page 46
    ... the Company for performing better than certain benchmarks relating to purchased gas cost. A similar program is under way in Georgia. Atmos believes that performancebased rate programs benefit customers and reward efficient service providers like Atmos, and Atmos intends to seek gas cost incentive...

  • Page 47
    ...11 in 1997, while the average cost of gas per Mcf sold increased $.36 to $3.51 in 1997. The number of meters in service increased to 985,448 at September 30, 1997 compared with 976,308 at September 30, 1996. Sales to weather sensitive residential, commercial and public authority customers decreased...

  • Page 48
    ...in 1996, while the average cost of gas per Mcf sold increased $.45 to $3.15 in 1996. The total number of natural gas and propane customers increased to 1,002,416 at September 30, 1996 compared with 972,572 at September 30, 1995. Sales to weather sensitive residential, commercial and public authority...

  • Page 49
    .... The Company plans to decrease the debt to capitalization ratio to nearer its target of 50% over the next three years through cash flow generated from operations, issuance of new common stock under its Direct Stock Purchase Plan and ESOP, recovery of CSI and merger/integration costs and possibly...

  • Page 50
    ...merger added approximately 2,900 natural gas customers in the Vandalia, Illinois area. In May 1995, 320,512 shares of UCGC's common stock valued at $5,000,000 were issued in connection with the purchase of a 45% interest in Woodward Marketing, L.L.C. ("WMLLC") by UCG Energy. In June 1995 UCGC issued...

  • Page 51
    ...867. Selected Financial Data The following table sets forth selected financial data of the Company and should be read in conjunction with the consolidated financial statements included herein. Amounts for 1997 reflect the pooled operations of Atmos and the United Cities Division. Prior year amounts...

  • Page 52
    ... gas sales price per Mcf sold ...Average purchased gas cost per Mcf sold...Average transportation fee per Mcf...STATISTICS Return on average shareholders' equity ...Number of employees ...Net plant per meter ...Utility operating, maintenance and administrative expense per meter ...Utility customers...

  • Page 53
    ... Inc. Plano, Texas Board member since 1988 Committees: Work Session/Annual Meeting (Chairman), Audit, Human Resources Robert W. Best Chairman of the Board, President and Chief Executive Officer, Atmos Energy Corporation Dallas, Texas Board member since 1997 Committees: Executive Dan Busbee...