Atmos Energy 1998 Annual Report Download - page 54

Key financial data for the storage and energy services segment
are set forth below.
Year ended September 30,
1998 1997 1996
(In thousands)
Operating revenues $70,488 $58,099 $65,907
Purchased gas cost 54,375 45,045 48,846
Gross profit 16,113 13,054 17,061
Operating expense 10,357 9,230 11,509
Other income 1,418 358 432
Equity in WMLLC 3,920 3,254 1,997
Interest charges 1,182 1,616 1,248
Net income $ 9,912 $ 5,820 $ 6,733
Year ended September 30, 1998 compared with
year ended September 30, 1997
Operating revenues increased 21% from $58.1million for 1997
to $70.5million for 1998 due to increases of $10.7million in non-
regulated West Texas irrigation and industrial revenues, and $1.7
million for gas storage operations. The increase in irrigation and
industrial revenues was primarily due to hotter and drier than
normal weather in West Texas. The increase in storage revenues
was due to increased volumes withdrawn from underground stor-
age in 1998 as compared with 1997. Like the utility and propane
operations, gas storage volumes and revenues vary in relation to
winter heating degree days.
Operating expenses increased $1.1million in 1998 as com-
pared with 1997 due primarily to the increased volumes delivered
to West Texas irrigation customers and storage customers in
Kansas and Tennessee.
Other income increased to $1.4million for 1998 as compared
with $.4million for 1997. The increase was primarily due to gas
brokering and utilization of storage capacity in excess of that dedi-
cated to regulated markets to serve certain non-regulated markets.
Interest charges decreased $.4million in 1998 as compared
with 1997 due primarily to reduced debt balances in EnerMart
Inc., the Company’s wholly-owned subsidiary that conducts non-
regulated utility operations in West Texas.
Net income for 1998 increased by $4.1million from 1997 pri-
marily due to increased West Texas irrigation revenues, favorable
returns from its 45% investment in WMLLC, increased other
income from non-regulated storage services and gas brokering,
and a reduction in interest expense.
Year ended September 30, 1997 compared with
year ended September 30, 1996
Operating revenues decreased 12% from $65.9million in 1996
to $58.1million in 1997 due primarily to decreased West Texas
non-regulated irrigation and industrial revenues. The decrease in
irrigation revenues was due to increased rainfall and cooler sum-
mer temperatures in West Texas. Storage revenues also decreased
due to decreased volumes withdrawn from underground storage
as a result of warmer than normal winter weather in Kansas and
Tennessee.
Operating expenses decreased $2.3million due primarily to
decreased irrigation volumes in West Texas and storage with-
drawals in Kansas and Tennessee.
Interest charges increased $.4million due primarily to
increased short-term debt due to lower cash flows and revenues
from irrigation and storage operations in 1997 as compared
with 1996.
Net income decreased to $5.8million in 1997 as compared
with $6.7million in 1996. The primary factor causing the
decreased net income was a $7.1million decrease in West Texas
irrigation revenues in 1997 as discussed above.
Equity in Earnings of WMLLC The Company accounts for its 45%
investment in WMLLC through UCG Energy using the equity
method of accounting. Against the 45% of the net income before
tax recorded in the WMLLC financial statements, the Company
records the amortization of the excess of the purchase price over
the value of the net tangible assets, amounting to approximately
$5.4million which was allocated to intangible assets consisting of
customer contracts and goodwill, and are being amortized over
ten and twenty years, respectively, as well as the provision for
income taxes.
The following table presents the WMLLC financial results
recorded by Atmos for the years ended September 30,1998,
1997 and 1996.WMLLC has a calendar year for financial report-
ing purposes.
Year ended September 30,
1998 1997 1996
(In thousands)
WMLLC net income $8,711 $7,231 $4,438
Atmos share @ 45% 3,920 3,254 1,997
Less:
Amortization of excess
purchase price 400 359 352
Provision for taxes 1,337 1,100 625
Atmos equity in WMLLC
earnings $2,183 $1,795 $1,020
The net income of WMLLC increased from $4.4million for
1996, to $7.2million for 1997, to $8.7million for 1998, due to
growth in number of customers and gas marketing revenues each
year. Gross brokerage profit increased approximately 48% in 1998
50 ATMOS ENERGY CORPORATION