Atmos Energy 1998 Annual Report Download - page 56

when the storage reservoirs were being refilled. The changes in
deferred charges and other assets and other current liabilities in
1997 and 1998 were related to merger and integration costs
accrued and the related regulatory assets recorded in the fourth
quarter of 1997. See “Consolidated Statements of Cash Flows” for
other changes in assets and liabilities.
Cash Flows From Investing Activities A substantial portion of the
Company’s cash resources is used to fund its ongoing construc-
tion program in order to provide natural gas services to a growing
customer base and CSI which will upgrade processes and systems
companywide. Net cash used in investing activities totaled $118.8
million in 1998 compared with $121.1million in 1997 and $111.9
million in 1996. In 1998, the Company received $16.0million
from the sale of office buildings and an airplane. Capital expendi-
tures in fiscal 1998 amounted to $135.0million compared with
$122.3million in 1997 and $117.6million in 1996. Currently bud-
geted capital expenditures for 1999 total $86.8million and
include funds for completing the CSI project and implementing
new financial systems, as well as funds for additional mains, serv-
ices, meters, and vehicles. The CSI project includes application
software, related technology infrastructure and business process
changes. Capital expenditures on the CSI project to date include
approximately $26 million in 1997 and $54 million in 1998.
Benefits related to the CSI project include enabling the
Company’s ability to achieve its vision by positioning for future
growth, using industry best practices, timely integration of new
acquisitions and resolution of Year 2000 issues. Capital expendi-
tures for fiscal 1999 are planned to be financed from internally
generated funds and financing activities, as discussed below.
The following table reflects the Company’s capitalization,
including short-term debt except for the portion related to cur-
rent storage gas.
September 30,
1998 1997
(In thousands)
Working capital
Short-term debt(1) $48,909 $ 48,122
Short-term debt $ 17,491 2.1% $119,178 15.6%
Long-term debt 456,331 54.0% 318,182 41.6%
Shareholders’ equity 371,158 43.9% 327,260 42.8%
Total capitalization $844,980 100.0% $764,620 100.0%
(1) Includes short-term borrowings associated with working gas inventories.
As of the end of fiscal 1998, the debt to capitalization ratio
had decreased to 56.1% from 57.2% for 1997 which was an
increase from 53.4% for 1996. The improvement in 1998 reflects
the benefits of 1998 net income in excess of dividend require-
ments and the issuance of equity under the Direct Stock
Purchase Plan (“DSPP”). The increase in 1997 was primarily due to
increased cash requirements related to merger and integration
costs and CSI investments, as well as the effects of the nonrecur-
ring charges and reserves previously discussed. The Company
plans to decrease the debt to capitalization ratio to nearer its tar-
get range of 50-52% over the next two years through cash flow
generated from operations, issuance of new common stock under
its DSPP and ESOP, recovery of CSI and merger/integration costs
and from the possible sale of certain remaining real estate assets.
Future Capital Requirements Short-term borrowings are expect-
ed to continue to increase somewhat in fiscal 1999 due to budget-
ed capital expenditures discussed above and scheduled maturities
of long-term debt of $57.8million. The Company has access to
$262.0million under its committed lines of credit and $80.0mil-
lion under its uncommitted lines. A committed line of credit of
$250.0million is used to support the Company’s $250.0million
commercial paper program which was begun in October 1998.
Forward-looking cash requirements beyond fiscal 1999 include
capital expenditures and possible contingencies and environmen-
tal matters as discussed in the notes to consolidated financial
statements. The Company plans to fund future requirements
through internally generated cash flows, credit facilities and its
access to the public debt and equity capital markets.
Cash Flows From Financing Activities Net cash provided by
financing activities totaled $25.9million for 1998 compared with
$47.3million for 1997 and $22.0million for 1996. Financing activi-
ties during these periods included issuance of common stock, div-
idend payments, short-term borrowings from banks under the
Company’s credit lines, and issuance and repayments of long-
term debt.
Cash Dividends Paid The Company paid $31.8million in cash div-
idends during 1998 compared with $26.4million in 1997 (exclud-
ing dividends of $3.4million paid by UCGC in the quarter ended
December 31,1996) and $28.5million in 1996. Prior to the UCGC
merger in July 1997, Atmos increased its actual annual dividend
rate by $.04 in each of the years presented. It also raised the divi-
dend rate $.04 for 1998 and 1999. Including fiscal 1999, the
Company has increased its dividend rate for 11 consecutive years.
Short-Term Financing Activities At September 30,1998, the
Company had committed lines of credit totaling $262.0million,
$250.0million of which was unused, in order to provide for short-
term cash requirements. These credit facilities are negotiated at
least annually. At September 30,1998, the Company also had
uncommitted short-term credit lines of $80.0million, of which
$25.6million was unused. Subsequent to September 30,1998, the
Company began a commercial paper program under which it is
authorized to issue up to $250.0million. The commercial paper
52 ATMOS ENERGY CORPORATION