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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 27
BOARD OF DIRECTORS
ATMOS ENERGY CORPORATION
We have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Atmos Energy
Corporation at September 30, 2004 and 2003, and the
related consolidated statements of income, shareholders’
equity and cash flows for each of the three years in the
period ended September 30, 2004 (not presented herein)
and in our report dated November 9, 2004, we expressed
an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance
sheets and statements of income and cash flows are fairly
stated in all material respects in relation to the basic
consolidated financial statements from which they have
been derived.
Dallas, Texas
November 9, 2004
YEAR ENDED SEPTEMBER 30 (Dollars in thousands) 2004 2003 2002
Cash Flows from Operating Activities
Net income $ 86,227 $ 71,688 $ 59,656
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change,
net of income tax benefit — 7,773 —
Gain on sales of assets (6,700) — —
Depreciation and amortization:
Charged to depreciation and amortization 96,647 87,001 81,469
Charged to other accounts 1,465 2,193 2,452
Deferred income taxes 36,997 53,867 14,509
Other (1,772) (5,885) (3,371)
Changes in assets and liabilities 57,870 (167,186) 142,680
Net cash provided by operating activities 270,734 49,451 297,395
Cash Flows Used in Investing Activities
Capital expenditures (190,285) (159,439) (132,252)
Acquisitions, net of cash received (1,957) (74,650) (15,747)
Retirements of property, plant and equipment, net (570) 704 (1,725)
Assets for leasing activities — — (8,511)
Proceeds from sale of assets 27,919 — —
Net cash used in investing activities (164,893) (233,385) (158,235)
Cash Flows from Financing Activities
Net decrease in short-term debt (118,595) (27,196) (55,456)
Net proceeds from issuance of long-term debt 5,000 253,267 —
Proceeds from bridge loan — 147,000 —
Repayment of bridge loan — (147,000) —
Repayment of long-term debt (9,713) (73,165) (20,651)
Repayment of Mississippi Valley Gas debt — (70,938) —
Cash dividends paid (66,736) (55,291) (48,646)
Issuance of common stock 34,715 25,720 18,321
Net proceeds from equity offering 235,737 99,229 —
Net cash provided (used) by financing activities 80,408 151,626 (106,432)
Net increase (decrease) in cash and cash equivalents 186,249 (32,308) 32,728
Cash and cash equivalents at beginning of year 15,683 47,991 15,263
Cash and cash equivalents at end of year $ 201,932 $ 15,683 $ 47,991
26 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS