Atmos Energy 1998 Annual Report Download - page 47

Introduction This section provides management’s discussion of
Atmos Energy Corporation’s (“the Company” or “Atmos”) finan-
cial condition, cash flows and results of operations with specific
information on liquidity, capital resources and results of opera-
tions. It includes management’s interpretation of such financial
results, the factors affecting these 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.
Cautionary Statement for the Purposes of the Safe Harbor Under
the Private Securities Litigation Reform Act of 1995
The matters discussed or incorporated by reference in this
Annual Report may contain “forward-looking statements” within
the meaning of Section 21E of the Securities Exchange Act of 1934.
All statements other than statements of historical facts included in
this “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the notes to consolidated financial
statements, 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 and are intended to qualify for the
safe harbor from liability established by the Private Securities
Litigation Reform Act of 1995. When used in this Report or in
any of the Company’s other documents or oral presentations, the
words “anticipate,” “expect,” “estimate,” “plans,” “believes,” “objec-
tive,” “forecast,” “goal” or similar words are intended to identify
forward-looking statements. 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 state-
ments relating to the Company’s operations, markets, services,
rates, recovery of costs, availability of gas supply, and other fac-
tors. These risks and uncertainties include, but are not limited to,
national, regional and local economic and competitive conditions,
regulatory and business trends and decisions, technological devel-
opments, Year 2000 issues, inflation rates, weather conditions, and
other uncertainties, all of which are difficult to predict and many
of which are beyond the control of the Company.
Accordingly, while the Company believes that the expecta-
tions reflected in the forward-looking statements are reasonable,
there can be no assurance that such expectations will be realized
or will approximate actual results.
Organization The Company distributes and sells natural gas
through 1,004,532 meters in service areas located in Texas,
Louisiana, Kentucky, Colorado, Kansas, Illinois, Tennessee, Iowa,
Virginia, Georgia, South Carolina and Missouri. The Company
also transports gas for others through parts of its distribution sys-
tem. Its non-utility operations include a propane operation; a
leasing and rental operation; and an energy services operation that
includes storage, gas marketing, irrigation and energy services.
The Company’s primary source of revenues, net income and
cash flows is its utility business which is composed of five local
distribution companies that are operated as divisions of Atmos.
For additional information about these businesses, please see the
“Description of Business” section of Note 1in the accompanying
notes to consolidated financial statements.
Each segment’s contribution to net income is reflected in the
table below:
Year ended September 30,
1998 1997 1996
Utility 76.3 % 71.3 % 77.5%
Propane (0.1)% (.4)% 3.1%
Leasing / Rental 5.9 % 4.7 % 3.0%
Storage and Energy Services 17.9 % 24.4 % 16.4%
Total 100.0 % 100.0 % 100.0%
Acquisitions and Mergers The Company has expanded its cus-
tomer base and sought to diversify the regulatory climates, 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 acquisition strategy to add
new customers and service areas for both natural gas and
propane. It has an excellent track record of acquiring local distri-
bution company (“LDC”) operations and achieving synergies and
benefits quickly, while preserving brand equity.
In addition to growing through acquisitions, the Company’s
strategy includes running the utility operations exceptionally
well, increasing the size and market share of non-utility opera-
tions (gas marketing, related storage and energy services and
propane) and developing plans to participate in retail services
behind the meter.
Ratemaking Procedures The Company’s five utility divisions are
regulated by various state or local public utility authorities. The
method of determining regulated rates varies among the 12 states
in which the Company has utility operations. It is the responsibility
of the regulators to determine that utilities under their jurisdiction
operate in the best interests of customers while providing the
utilities the opportunity to earn a reasonable return on investment.
In a general rate case, the applicable regulatory authority,
which is typically the state public utility commission, establishes
a base margin, which is the amount of revenue authorized to be
collected from customers to recover authorized operating
expense (other than the cost of gas), depreciation, interest, taxes
43
ATMOS ENERGY CORPORATION
MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS