Atmos Energy 1998 Annual Report Download - page 53

Year ended September 30, 1998, compared with
year ended September 30, 1997
Revenues from propane operations decreased from $33.2mil-
lion in 1997 to $29.1million in 1998 primarily due to the
decreased selling price per gallon to retail and wholesale cus-
tomers. This decreased selling price was the result of the lower
demand because of warmer weather and increased competition
for customers as compared to the prior year. Partially offsetting
this decrease was an increase in total gallon sales. The increase in
volumes sold resulted from the acquisitions of Ingas, Inc. in May
1998, Harris Propane Gas Co., Inc. in July 1998, Massey Propane
Gas Company and E-con Gas, Inc. in August 1998 and Shaw LP
Gas, Inc. in September 1998.
Purchased gas cost decreased from $21.2million in 1997 to
$17.7million in 1998 primarily due to the decreased market cost
of propane to the Company amounting to approximately $.12 per
gallon. Partially offsetting this decrease was increased retail and
wholesale gallon sales in 1998 as compared to 1997.
Operating expenses decreased from $11.5million in 1997 to
$10.7million in 1998 primarily due to decreased administrative
and general expenses due to control of operating expenses during
1998. Partially offsetting this decrease was an increase in deprecia-
tion and amortization expense from $2.1million in 1997 to $2.3
million in 1998 due to the acquisitions in 1997 and in 1998, and
depreciation on additional plant placed in service.
Interest expense increased from $.74 million in 1997 to $.80
million in 1998 due to increased short-term borrowings and long-
term interest payments associated with the acquisitions in 1998,
as well as increased short-term borrowings to cover cash flow
deficits from decreased sales.
Net loss from propane operations decreased from $90,000 in 1997
to $66,000 in 1998, due primarily to the favorable operating expense
variances discussed above. The Company is committed to substan-
tially improving the profitability of its propane operations. To
that end, the Company plans to exit the less profitable propane
transportation, cylinder exchange, and appliance sales and service
segments in 1999.
Year ended September 30, 1997 compared with
year ended September 30, 1996
Propane revenues decreased $5.2million from $38.4million in
1996 to $33.2million in 1997 primarily due to decreased retail
and wholesale volumes sold as a result of warmer than normal
weather. The weather in 1997 was 4% warmer than normal, com-
pared to 8% colder than normal in 1996. Partially offsetting the
decrease in volumes sold was an increase in the average selling
price per gallon in 1997.
Purchased gas cost decreased $3.7million from $24.9million
in 1996 to $21.2million 1997 due primarily to decreased propane
volumes sold as a result of warmer than normal weather. This
decrease was partially offset by an increase in wholesale cost per
gallon of $.04 per gallon from $.61 per gallon in 1996 to $.65 per
gallon in 1997.
Operating expenses decreased $.3million from $11.8million
in 1996 to $11.5million in 1997 due primarily to a decrease in
income tax expense of $.9million, which was partially offset by
increased administrative and general expenses due to the acquisi-
tions of Harlan LP Gas, Inc. and Propane Sales and Services, Inc.
in 1997. Additionally, depreciation and amortization expense
increased from $1.9million in 1996 to $2.1million in 1997. This
increase was due primarily to the acquisitions, and increased
depreciation expense on additional plant and equipment placed
in service.
Interest expense increased from $.7million in 1996 to $.74
million in 1997 due to increased short-term borrowings and long-
term interest payments associated with the acquisitions in 1997,
as well as increased short-term borrowings to cover cash flow
deficits from decreased sales.
Net income from propane operations decreased from $1.3
million in 1996 to a net loss of $90,000 in 1997, due primarily to
warmer than normal weather. The decrease in gross profit of $1.5
million more than offset the decrease in operating expenses of
$.3million, resulting in 1997 being less profitable when compared
to 1996.
Effects of Weather Like the utility operations, annual sales vol-
umes and revenues of the propane operation vary in relation to
winter heating degree days. The table above presents data for
propane heating degree days, propane volumes delivered and
profitability of the propane business for 1998,1997 and 1996.
Gas Storage and Energy Services This segment is currently com-
posed of four parts: United Cities Gas Storage Company, which
owns underground storage fields in Kansas and Kentucky and
provides storage services to the United Cities Division and other
non-regulated customers; EnerMart, Inc. and EGASCO, which
market gas to industrial and irrigation customers in West Texas;
Atmos Energy Services, which is developing plans for marketing
various non-regulated services and products; and the Company’s
45% investment in WMLLC, a gas marketing and energy manage-
ment services business.
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ATMOS ENERGY CORPORATION