Atmos Energy 1998 Annual Report Download - page 51

reorganization ($2.8million or $.10 per share) and reserves relat-
ed to the UCGC merger and integration ($12.6million or $.43 per
share). Excluding the effect of these charges, the Company’s net
income would have been $39.3million or $1.34 per share in 1997,
compared with $41.2million, or $1.42 per share for 1996. The
1997 results include UCGC, which merged with Atmos effective
July 31,1997, and operating results for years prior to the merger
have been restated to reflect the pooling of interests accounting
which was used for the merger.
Non-Recurring Charges In 1998 the Company sold the office
building in which UCGC had headquartered its operation in
Brentwood, Tennessee; two office buildings and a piece of land in
Franklin, Tennessee UCGC had held for investment; and an air-
plane. The Company realized a pre-tax gain on the sale of assets
totaling $3.3million or $2.2million after-tax.
In 1997 the Company completed a management reorganiza-
tion and recorded a charge of $4.4million ($2.8million after-tax)
in related costs.
In connection with the UCGC merger and integration in 1997,
the Company recorded approximately $17 million of transaction
costs and $42.8million for separation and other costs. There are
substantial longer term benefits to the Company’s customers and
shareholders from the merger of the two companies, which the
Company expects to result in cost savings over the next 10 years
totaling about $375 million. The Company believes a significant
amount of the costs to achieve these benefits will be recovered
through rates and future operating efficiencies of the combined
operations. Therefore, the Company recorded as regulatory assets
the costs of the merger and integration of UCGC. However, the
Company established a reserve of $20.3million ($12.6million
after-tax), to account for costs that may not be recovered. For
further information regarding the merger please see Note 2of
notes to consolidated financial statements.
The statements in the preceding paragraph relating to the
anticipated cost savings over the next 10 years constitute “forward-
looking statements.” Such forward-looking statements should be
read in conjunction with the Company’s disclosures under the
heading “Cautionary Statement for the Purposes of the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995”
at the beginning of Management’s Discussion and Analysis.
Net Income by Segment As previously discussed, the Company
currently has four business segments: utility operations, propane
operations, leasing/rental operations, and storage and energy serv-
ices including the Company’s 45% interest in WMLLC.
The following table sets forth the net income (loss) of each of
these business operations for the years 1998,1997 and 1996.
Year ended September 30,
1998 1997 1996
(In thousands)
Utility $42,147 $16,991 $31,905
Propane (66) (90) 1,276
Leasing/Rental 3,272 1,117 1,237
Storage and Energy Services 9,912 5,820 6,733
Reported net income $55,265 $23,838 $41,151
Results of Utility Operations Key financial and operating data for the
Company’s utility operations are highlighted in the following table.
Year ended September 30,
1998 1997 1996
(Dollars in thousands)
Financial
Operating revenues $744,652 $811,537 $778,208
Purchased gas cost 444,288 510,943 488,575
Gross profit 300,364 300,594 289,633
Operating expenses 225,933 253,997 229,158
Other income 901 846 429
Interest charges 33,185 30,452 28,999
Net income $ 42,147 $ 16,991 $ 31,905
Operating
Sales volumes (MMcf):
Residential 73,472 75,215 77,001
Commercial 36,083 37,382 38,247
Public authority and other 4,937 5,195 5,182
Industrial and irrigation 24,057 29,452 34,898
Total 138,549 147,244 155,328
Transportation (MMcf ) 56,224 48,800 44,146
Total volumes (MMcf ) 194,773 196,044 199,474
Meters in service, end of year 1,004,532 985,448 976,308
Average gas sales price/Mcf $ 5.37 $ 5.51 $ 5.01
Average cost of gas/Mcf $ 3.21 $ 3.47 $ 3.15
Average transportation
revenue/Mcf $ .43 $ .41 $ .43
Year ended September 30, 1998 compared with
year ended September 30, 1997
Utility operating revenues decreased 8% to $744.7million for
1998 from $811.5million for 1997 due to lower total volumes deliv-
ered and a lower average sales price per Mcf. The lower total vol-
umes delivered resulted from weather that was 3% warmer than
1997 and 5% warmer than 30-year normals. Sales volumes and rev-
enues were also reduced by certain industrial customers switching
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ATMOS ENERGY CORPORATION