Atmos Energy 1997 Annual Report Download - page 48

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ATMOS ENERGY CORPORATION
age sales price per Mcf sold. Average gas sales revenues per Mcf increased from 1995 by
$.44 to $4.51 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 customers increased approximately
11.0 Bcf in 1996 while sales and transportation volumes delivered to industrial and agri-
cultural customers decreased 2.9 Bcf. Total volumes delivered increased 4% to 222.4 Bcf
in 1996, as compared with 214.3 Bcf in 1995. Revenues from gas sales to weather sensi-
tive customers increased $109.9 million to $616.8 million in fiscal 1996 due to an 11%
increase in average sales price and a 10% increase in volumes sold in 1996. The increase
in volumes sold was due to weather 1% colder than normal in 1996, as compared with
7% warmer than normal weather in 1995. Revenues from gas sold and transported to
industrial and agricultural customers increased $15.2 million due to a $.24 per Mcf or 8%
increase in sales price, despite a slight decrease in volumes delivered.
Gross profit increased by approximately 8% to $324.4 million in 1996 from $300.2 mil-
lion in 1995. The primary factor contributing to the higher gross profit in 1996 was high-
er volumes sold to weather-sensitive customers due to colder weather. The companywide
average margin (sales price per Mcf less cost of gas per Mcf) did not change significantly
in 1996. Operating expenses, excluding income taxes, increased only slightly to $231.8
million in 1996 from $228.2 million in 1995. Income taxes increased to $23.3 million in
1996 from $16.5 million in 1995. The primary reason for the increase was higher pre-tax
profits. The effective tax rate decreased slightly to 36.2% in 1996 from 36.5% in 1995.
Operating income increased in 1996 by approximately 25% to $69.3 million from $55.4
million in 1995. The increase in operating income resulted primarily from the increase in
1996 gross profit, partially offset by increases in operating expenses, primarily income
taxes, as discussed above.
Net income increased in 1996 from 1995 by approximately 43% to $41.2 million from $28.8
million in the prior year. This increase in net income resulted primarily from the increase
in operating income, which was partially offset by a $1.5 million increase in interest
expense. This increase in interest expense was caused by an increase in weighted average
short-term debt outstanding in 1996. Net income per share increased to $1.42 for 1996
from $1.06 for 1995. Average shares outstanding increased 7% to 28,978,000 in 1996.
Capital Resources and Liquidity
(See “Consolidated Statements of Cash Flows”)
Because of the pooling of interests of Atmos, which has a September 30 fiscal year end,
with UCGC, which had a December 31 year end, the activities of UCGC for the quarter
ended December 31, 1996 are included in the restated 1996 consolidated statement of
cash flows and not the 1997 consolidated statement of cash flows. As a result, amounts
in the 1997 consolidated statement of cash flows as reported are different than they would
have been, had they included a full 12 month’s activity for UCGC.
The following pro forma condensed consolidated statement of cash flows reflects activi-
ties of both Atmos and UCGC for the full 12 months ended September 30, 1997.
(In thousands)
Cash flows from operating activities:
Net income................................................................................................................. $ 23,838
Depreciation............................................................................................................... 47,494
Other .......................................................................................................................... (11,054)
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Net cash provided by operating activities............................................................ 60,278
Net cash used in investing activities ............................................................................. (131,286)
Cash flows from financing activities:
Increase in notes payable, net................................................................................... 63,600
Issuance of long-term debt........................................................................................ 40,000
Repayment of long-term debt................................................................................... (16,037)
Issuance of common stock......................................................................................... 10,482
Cash dividends paid................................................................................................... (29,778)
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Net cash provided by financing activities ............................................................. 68,267
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Decrease in cash ............................................................................................................ (2,741)
Cash at beginning of year.............................................................................................. 8,757
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Cash at end of year........................................................................................................ $ 6,016
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Cash Flows from Operating Activities
Cash flows from operating activities as reported in the consolidated statement of cash
flows totaled $68.7 million for 1997 compared with $91.7 million for 1996 and $79.1
million for 1995. Due to non-recurring charges recorded in 1997 and deducting UCGC’s
net income for the quarter ended December 31, 1996, the Company reported lower net
income for the 1997 Statement of Cash Flows as compared with 1996 and 1995.
Depreciation for the full 12 months of fiscal 1997 was $2.2 million higher than for 1996
because of increasing utility plant in service. Using 1997 beginning balances for UCGC as
of December 31, 1996 resulted in large swings in certain seasonal asset and liability
accounts like accounts receivable and accounts payable. Gas stored underground
increased in 1996 because of higher gas cost, but was lower in 1997 and 1995 because of
substantially lower gas prices during the summers of 1997 and 1995 when the storage
reservoirs were being refilled. The changes in deferred charges and other assets and other
current liabilities in 1997 were related to merger and integration costs accrued and the
related regulatory assets recorded in the fourth quarter of 1997. See “Consolidated
Statements of Cash Flows” for other changes in assets and liabilities.
Cash Flows from Investing Activities
A substantial portion of the Company’s cash resources is used to fund its ongoing con-
struction program in order to provide natural gas services to a growing customer base.
Net cash used in investing activities totaled $121.1 million in 1997 compared with $111.9
million in 1996 and $101.4 million in 1995. During 1995, UCGC completed construction
of a twenty-eight mile main which connects two of its fastest growing distribution systems