Atmos Energy 1997 Annual Report Download - page 45

40 ATMOS ENERGY CORPORATION
Introduction
This section provides management’s discussion of Atmos Energy Corporation’s (“the
Company” or “Atmos”) financial condition, cash flows and results of operations with
specific information on liquidity, capital resources and results of operations. It includes
management’s interpretation of such financial results, the major factors expected to affect
future operating results, and future investment and financing plans. This discussion
should be read in conjunction with the Company’s consolidated financial statements and
notes thereto. For financial and operating statistics, please see the tables of restated and
pooled data included herein.
Cautionary Statement under the
Private Securities Litigation Reform Act of 1995
The matters discussed or incorporated by reference in this Annual Report contain “for-
ward-looking statements” within the meaning of Section 27A of the Securities Act of
1933 or Section 21E of the Securities Exchange Act of 1934. All statements other than
statements of historical facts included in this Report including, but not limited to, those
contained in this “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” regarding the Company’s financial position, business strategy and
plans and objectives of management of the Company for future operations, are forward-
looking statements made in good faith by the Company. Although the Company believes
that the expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct. Such forward-
looking statements are subject to risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the statements relating to the
Company’s operations, markets, services, rates, recovery of costs, availability of gas supply
and other factors. These risks and uncertainties include, but are not limited to, economic,
competitive, governmental, weather, technological and other factors.
Organization
The Company distributes, sells and transports natural gas and propane to residential,
commercial, industrial and agricultural customers in thirteen states. The natural gas dis-
tribution business is operated through its five utility divisions, rather than as a holding
company. Such utility business is subject to regulation by state and/or local authorities in
each of the states in which the Company operates. In addition, the Company’s business is
affected by seasonal weather patterns, competition within the energy industry, and eco-
nomic conditions in the areas that the Company serves.
With the completion of the merger with United Cities Gas Company this year, Atmos is
the 12th largest natural gas distribution utility company in terms of total customers in the
country, and the fifth largest pure natural gas utility. 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 in which it operates. As part of
this strategy, the Company has completed major acquisitions in 1986, 1987, 1993 and
1997. In addition to growing through acquisitions, the Company’s strategy includes build-
ing 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 devel-
oping plans to participate in retail energy services behind the meter.
In connection with its merger with United Cities Gas Company, as discussed in Note 2 of
notes to consolidated financial statements, the Company acquired certain non-utility sub-
sidiaries which contributed approximately 14% of 1997 net income and offer potential
growth opportunities.
One non-utility subsidiary, UCG Storage, was formed in 1989 to provide natural gas
storage services. In 1989, a natural gas storage field was purchased in Kentucky to sup-
plement natural gas used by customers in Tennessee. In addition, natural gas storage fields
located in Kansas were sold to UCG Storage and are used to supplement natural gas
requirements of Kansas customers.
The other non-utility subsidiary, UCG Energy, incorporated in 1965, leases appliances,
real estate and equipment, and vehicles to the United Cities Division and others. UCG
Energy also owns a 45% interest in WMLLC of Houston, Texas, which provides natural
gas services to industrial customers, municipalities and local distribution companies in the
Southeast and Midwest, including the United Cities Division. Management services
include contract negotiation and administration, load forecasting, nominations and
scheduling, storage acquisition, capacity utilization and pricing/risk management.
WMLLC was formed in 1995.
UCG Energy has two wholly-owned subsidiaries, United Cities Propane Gas of Tennessee,
Inc. and UCG Leasing, Inc. United Cities Propane Gas of Tennessee, Inc. is engaged in the
retail and wholesale distribution and transportation of propane (LP) gas. As of September
30, 1997, the propane operation served 29,097 customers in Kentucky, North Carolina,
Tennessee and Virginia. UCG Leasing, Inc. was incorporated under the laws of Georgia
in 1987 and leases vehicles, equipment and real estate to the United Cities Division.
Acquisitions and Mergers
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 fiscal years 1997, 1994, 1987, and 1986. The Company plans to continue its acquisi-
tion strategy to add new customers and service areas for both natural gas and propane. It
Management’s Discussion and Analysis of
Financial Condition and Results of Operations