Atmos Energy 2006 Annual Report Download - page 11

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Atmos Energy helped create
two statues in West Texas
to commemorate the fallen
space shuttle Columbia.
The statue of pilot William
McCool stands in Lubbock,
and the statue of shuttle
commander Rick Husband
stands in Amarillo. Together,
their upraised hands point to
the trajectory of the shuttle
and her crew’s final mission.
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increase of $3.4 million. Significantly, the
commission staff has agreed to support
a fixed monthly delivery charge, which
would allow us to earn our residential
margins regardless of customers’ usage.
A final decision in the case is expected
in March 2007.
In a contested case, the Tennessee
Regulatory Authority ordered a $6.1 million
reduction in our base rates, effective
December 1, 2006. Because the company
had absorbed a decade of inflation
and expenses for system improvements
without seeking a rate increase, we
believe the current rates are deficient.
We are continuing to analyze our rate
strategy in Tennessee.
S U C C E S S A N D I N D E P E N D E N C E
Strategic innovation has always set our
company apart. For example, in 1986, the
company was still a regional utility in West
Texas with a complementary irrigation
business. That year, CEO Charles Vaughan
made a tender offer to acquire Trans
Louisiana Gas Company. It was a bold
step that set the course for the company’s
future growth.
“We had to do something because our
service area was not growing,” Vaughan
said. “We had to buy something—or be
bought ourselves.”
Vaughan chose to diversify the
company’s operations into other states
but to maintain its basic strategy as a
regulated local distribution company.
Other successful acquisitions followed
that confirmed the corporate vision and
the long-standing belief in independence by
our board of directors. Charles Vaughan
set the dual hallmarks of financial success
and corporate independence by which
we operate today.
Atmos Energy has continued to
expand, largely through mergers and
acquisitions, to become the largest all-
natural-gas distribution company in the
country. Our 10 major acquisitions
to date not only have bolstered our core
utility business, but also have provided
valuable diversification.
In particular, our acquisition in 2001
of the balance of Woodward Marketing
has proved to be one of our best steps. We
acquired one of the country’s leading
and most respected mid-tier natural
gas marketing companies. Under
JD Woodward’s leadership, we greatly
expanded the scope and scale of our
nonutility business.
In 2004, we acquired the operations
of TXU Gas Company. Not only did we
obtain one of the most dynamic markets
for natural gas distribution—Dallas-Fort
Worth is now the nation’s fourth largest
metropolitan statistical area, but we also
acquired a highly valuable intrastate
gas pipeline system. Today, it is yielding
superior returns in our pipeline and
storage segment while offering growth due
to the extensive rate of gas drilling
in Texas and the producers’ needs to
transport the gas to markets.
S T R A T E G I C F O C U S
As Atmos Energy enters its second
century, our strategic focus remains fixed
on being financially successful by
profitably delivering natural gas to our
customers. We expect our earnings in
fiscal 2007 to grow at our stated goal of
4 percent to 6 percent a year, on average.
Our utility operations will remain our
core business. And we will remain
active in using acquisitions as an engine
of future growth. However, we expect
to be even more selective to find the right
fit of properties.
We will invest most of our future
growth capital in states with timely and
adequate rates of return as well as in
new nonutility projects. We expect our
capital expenditures in fiscal 2007 will be
between $425 million and $440 million, as
compared to $425.3 million in fiscal 2006.
We will continue to work for federal
laws to increase our country’s natural gas
supply in order to moderate gas prices.
Towards this end, our interests are aligned
perfectly with our customers’ interests.
We both want reasonable gas costs and
lower volatility in gas prices.
Today, Atmos Energy is in an excellent
position to expand its core business,
stabilize its earnings and take advantage
of its complementary strategy. We are
pursuing consistent and focused strategies
61,000
Atmos Energy Marketing
added the city of Hamilton,
Ohio (population 61,000),
to its more than 1,000
municipal and industrial
customers.
Atmos Energy’s Kentucky
Division was named one of
the 20 best places to work
in the state, coming in 12th.
I am confident that we are in a better position today than at any time in our past.
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. . . . . United Cities Gas Company. 2001: Woodward Marketing became a wholly owned subsidiary, greatly expanding the company’s nonutility business. 2002: Mississippi Valley Gas, the state’s largest gas supplier, was acquired. 2004: Atmos Energy acquired the operations of TXU Gas in Texas, becoming . . . . . . . . . .
2 0 0 3 2 0 0 4
C A S H D I V I D E N D S P E R S H A R E
$ 1. 4 0
1. 2 0
1. 0 0
. 8 0
. 6 0
. 4 0
.2 0
0
2 0 0 5 2 0 0 6 2 0 0 7
20 07 dividend is the indicated rate
$1.20
$1.22
$1.24
$1.26
$1.28
2 0 0 2
$1.18