Atmos Energy 1997 Annual Report Download - page 44

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ATMOS ENERGY CORPORATION
tirement benefit costs and $1,732,000 and $1,099,000 on the accumulated postretirement
benefits obligation as of September 30, 1997 and December 31, 1996, respectively. The
assumed discount rate, the rate at which liabilities could be settled, was 7.5% as of
September 30, 1997 and December 31, 1996, respectively. The expected long-term rate of
return on plan assets was 4.3% for 1997 and 1996.
The Company is currently recovering other postretirement benefits (“OPEB”) costs
through its regulated rates under SFAS No. 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 each jurisdiction
served by the United Cities Division or have been included in a rate case and not disal-
lowed. However, the Company was required to recover the portion of the UCGC transition
obligation applicable to Virginia operations over 40 years, rather than 20 years, as in
other states. Management believes that accrual accounting in accordance with SFAS No.
106 is appropriate and will continue to seek rate recovery of accrual based expenses in its
ratemaking jurisdictions that have not yet approved the recovery of these expenses.
Management’s Responsibility for Financial Statements
Management is responsible for the preparation, presentation and integrity of the financial
statements and other financial information in this report. The accompanying financial
statements have been prepared in accordance with generally accepted accounting princi-
ples, and include estimates and judgments made by management that were necessary to
prepare the statements in accordance with such accounting principles.
The Company maintains a system of internal accounting controls designed to provide
reasonable assurance that assets are safeguarded from loss and that transactions are exe-
cuted and recorded in accordance with established procedures. The concept of reasonable
assurance is based on the recognition that the cost of maintaining a system of internal
accounting controls should not exceed related benefits. The system of internal accounting
controls is supported by written policies and guidelines, internal auditing and the careful
selection and training of qualified personnel.
The financial statements have been audited by the Company’s independent auditors. Their
audit was made in accordance with generally accepted auditing standards, as indicated in
the Report of Independent Auditors, and included a review of the system of internal
accounting controls and tests of transactions to the extent they considered necessary to
carry out their responsibilities for the audit.
Management has considered the internal auditors’ and the independent auditors’ recom-
mendations concerning the Company’s system of internal control and has taken actions
that we believe are cost-effective in the circumstances to respond appropriately to these
recommendations. The Audit Committee of the Board of Directors meets periodically
with the internal auditors and the independent auditors to discuss the Company’s internal
accounting controls, auditing and financial reporting matters.
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Atmos Energy Corporation
We have audited the accompanying consolidated balance sheets of Atmos Energy
Corporation at September 30, 1997 and 1996, and the related consolidated statements of
income, shareholders’ equity and cash flows for each of the three years in the period ended
September 30, 1997. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements
based on our audits. We did not audit the financial statements of United Cities Gas
Company, wholly owned by Atmos Energy Corporation (see Note 2), which statements
reflect total assets of $513,649,000 as of December 31, 1996, and total revenues of
$402,947,000 and $313,735,000 for the years ended December 31, 1996 and 1995.
Those statements were audited by other auditors whose report has been furnished to us
and our opinion, insofar as it relates to data included for United Cities Gas Company is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the financial state-
ments referred to above present fairly, in all material respects, the consolidated financial
position of Atmos Energy Corporation at September 30, 1997 and 1996, and its consol-
idated results of operations and its cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting principles.
Dallas, Texas
November 11, 1997