Atmos Energy 1999 Annual Report Download

Download and view the complete annual report

Please find the complete 1999 Atmos Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 70

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70

Atmos
Energy
Corporation
1999
Annual
Report

Table of contents

  • Page 1
    Atmos Corporation 1999 Energy Annual Report

  • Page 2
    ... per share - diluted ...Cash dividends per share ...Book value per share at end of year ...Total throughput (MMcf) ...Heating degree days ...Degree days as a % of normal ...Total meters and propane customers at end of year...Return on average shareholders' equity ...Shareholders' equity as a % of...

  • Page 3
    Atmos at a Glance Year ended September 30, 1999 1998 1997 Meters In Service Residential...Commercial ...Industrial (including agricultural) ...Public authority and other ...Total meters...Propane customers ...Total ...Heating Degree Days 919,012 98,268 14,329 6,386 1,037,995 39,539 1,077,534 3,...

  • Page 4
    ... Dallas, Texas, Atmos Energy Corporation distributes natural gas and propane to more than one million customers in Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia through its operating divisions - Energas Company...

  • Page 5
    ... strong local brand identities. We're innovative, preparing to introduce new retail products and services through our unregulated businesses. We're creating a spirited team of dedicated employees whose productivity and innovation will ensure Atmos' continued success. Energy Atmos 1 Corporation

  • Page 6
    ... for our Customer Support Center; costs for Year 2000 readiness; improvements in systems, processes and procedures related to the new customer information and billing system and the accounting and human resource systems placed in service; and the costs of a litigation settlement in Louisiana and...

  • Page 7
    ...the filings to mitigate the effects of weather which will help stabilize both customer bills and the Company's earnings. We expect to have new rates in effect in Kentucky, West Texas and Amarillo during fiscal year 2000. In October 1999, Atmos received a final order from the Louisiana Public Service...

  • Page 8
    ... survey are a testament to our employees. With this spirited team focused on building value, you can see why I am confident about the future of Atmos. * Indicated Annual Dividend Robert W. Best Chairman, President and Chief Executive Officer 4 Energy Atmos November 10, 1999 Corporation

  • Page 9
    ... division of Arkansas Western Gas, which is a wholly-owned subsidiary of Southwestern Energy Company. Under the terms of the agreement, Atmos will purchase the Missouri gas system for $32 million in cash. The transaction will add 48,000 customers in Missouri, increasing Atmos' presence in that state...

  • Page 10
    ... operating efficiency. In 1999, we completed the implementation of a state-of-the-art customer information system that integrates our Customer Support Center with other technology used in the field, including automated dispatching of service orders to in-truck terminals and electronic meter reading...

  • Page 11
    [Resourceful] Energy Atmos 7 Corporation

  • Page 12
    [Building Loyalty] 8 Energy Atmos Corporation

  • Page 13
    ... every customer's experience a positive one. For example, George Teater, a 40-year veteran of Western Kentucky Gas Company, installed a thermostat specially designed for the visually impaired in the home of 94-year-old Hollis Young, a customer in Danville, Kentucky. Energy Atmos 9 Corporation

  • Page 14
    ... Well Atmos serves more than one million natural gas customers in Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Missouri, South Carolina, Tennessee, Texas, and Virginia through five utility business units with their own local brand identities - Energas Company, Greeley Gas Company...

  • Page 15
    ...Cities Gas service areas. The Company's focus is on profitably adding new customers through new construction, conversion from other energy sources, and by marketing the advantages of additional gas products such as gas logs and gas lights to our residential customers and builders. Our marketing team...

  • Page 16
    [Growing] 12 Energy Atmos Corporation

  • Page 17
    ... implementing energy-efficient natural gas equipment. In addition to water and space heating, we are promoting gas logs and gas lights to residential customers. For example, the Company serves a suburban area of Kansas City, Kansas, one of the Company's fastest growing service areas, with many homes...

  • Page 18
    ... service technician, serves on the City Council in Pineville, Louisiana, dedicated to attracting new business to the area and preservation of historical buildings. We believe that being a good corporate citizen builds goodwill and support in the communities we serve. 14 Energy Atmos Corporation

  • Page 19
    [Committed] Energy Atmos 15 Corporation

  • Page 20
    ... retail products and services to the Company's one million utility customers through Atmos Energy Services, Inc. Our strategy is to expand the market share of our non-utility businesses, which includes propane, the sale of natural gas for agricultural and industrial customers in West Texas, a 45...

  • Page 21
    ... generators significantly reduce electricity costs, require little maintenance and are portable. In 1999, Enermart opened three customer service centers to provide hands-on customer support, including analysis of customer needs and information about new gas equipment and technologies. Atmos Energy...

  • Page 22
    ... unregulated businesses and pursuing new ways to serve its customers. In West Texas, Enermart Energy Services markets natural gas to industrial customers, as well as agricultural customers who use natural gas to power irrigation pumps. Enermart has pioneered the use of natural gas-powered generators...

  • Page 23
    [Innovative] Energy Atmos 19 Corporation

  • Page 24
    ... a organization performance Atmos' spirited employees are among the most productive in the industry. We are creating an atmosphere that fosters, measures and rewards performance. Our employees have been willing time and time again to go the extra mile to provide superior customer service, day or...

  • Page 25
    [Dedicated]

  • Page 26
    ...to Atmos' business units, including accounting, customer call support, customer billing, treasury, planning and budgeting, purchasing, legal, human resources, information technology, investor relations and corporate communications, and gas supply. Atmos achieves efficiency and consistency in its day...

  • Page 27
    ... Review Selected Financial Data Market Price of Common Stock and Related Matters Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Responsibility for Financial Statements Report of Independent Auditors Consolidated Balance Sheets Consolidated...

  • Page 28
    ...06 32 ⁄16 11 23 ⁄16 1 265⁄16 263⁄8 24 237⁄8 311⁄16 307⁄8 See Note 4 of notes to consolidated financial statements for restriction on payment of dividends. The number of record holders of the Company's common stock on September 30, 1999 was 35,179. 24 Energy Atmos Corporation

  • Page 29
    ... relating to the Company's operations, markets, services, rates, recovery of costs, availability of gas supply, and other factors. These risks and uncertainties include, but are not limited to, national, regional and local economic and competitive conditions, regulatory and business trends and...

  • Page 30
    ... replaced its customer information system, accounting and financial reporting system, and human resources system. Although these systems are Year 2000 ready, the replacement of these systems was not accelerated to 1999 solely in an attempt to address Year 2000 issues. 26 Energy Atmos Corporation

  • Page 31
    .... In May 1999, the Western Kentucky Division requested an increase in revenues of approximately $14.1 million from the Kentucky Public Service Commission. In this case the Western Kentucky Division sought: • • To support the Company's business plans with regulatory strategy; To apply marketing...

  • Page 32
    ... Division filed rate cases with the cities served by its West Texas System and the City of Amarillo. The Company is seeking to: • net losses or lower net income during the period from April through September of each year. The effect of significantly warmer than normal winter weather in 1999...

  • Page 33
    ... the Company's Employee Stock Ownership Plan ("ESOP") and its Direct Stock Purchase Plan ("DSPP"). Cash Flows from Operating Activities Cash flows from operating Company's cash resources is used to fund its ongoing construction program in order to provide natural gas services to a growing customer...

  • Page 34
    ...1996). Atmos raised the dividend rate a total of $.04 per share for both 1998 and 1999. Short-Term Financing Activities At September 30, 1999, the generated funds, its credit facilities, commercial paper program and access to the public debt and equity capital markets will provide necessary working...

  • Page 35
    ... as a result of the first full year of operation of the Company's Customer Support Center in Amarillo; process improvement initiatives related to the new customer information and billing system and the accounting and human resource systems placed in service during the year; and Year 2000 readiness...

  • Page 36
    ... filed against a gas company it acquired in Louisiana in 1995. In 1999, the Company settled the lawsuit for $3.25 million or $2.07 million after-tax. In 1998, the Company sold UCGC's former headquarters office building in Brentwood, Tennessee; two office buildings and a piece of land in Franklin...

  • Page 37
    ... million in 1999. The increase in operating expenses was due to the first full year of operation of the Company's Customer Support Center in (Dollars in thousands, except Mcf data) Financial Operating revenues Purchased gas cost Gross profit Operating expenses Litigation settlement Operating income...

  • Page 38
    ...the company-wide restructuring of the organization and the integration of the United Cities Division. Interest charges increased 7% to $33.2 million primarily due to an increased level of debt and slightly higher average short-term rates in 1998 as compared with 1997. Results of Operations - Propane...

  • Page 39
    ...fields in Kansas and Kentucky and provides storage services to the United Cities Division and the Greeley Gas Company ("Greeley Division") and other non-regulated customers. Atmos Energy Services, Inc., ("AESI") markets gas to irrigation and industrial customers in West Texas through Enermart Energy...

  • Page 40
    ... and will continue to require assets to be replaced at higher costs. The Company has a process in place to continually review the adequacy of its gas rates in relation to the increasing cost of providing service and the inherent regulatory lag in adjusting rates. 36 Energy Atmos Corporation

  • Page 41
    ... to discuss the Company's internal accounting controls, auditing and financial reporting matters. Report of Independent Auditors Board of Directors Atmos Energy Corporation We have audited the accompanying consolidated balance sheets of Atmos Energy Corporation at September 30, 1999 and 1998, and...

  • Page 42
    ... payable ...Taxes payable ...Customers' deposits ...Other current liabilities ...Total current liabilities ...Deferred income taxes ...Deferred credits and other liabilities ... $ 1,230,537 See accompanying notes to consolidated financial statements. $ 1,141,390 38 Energy Atmos Corporation

  • Page 43
    Consolidated Statements of Income Year ended September 30, 1999 1998 1997 (In thousands, except per share data) Operating revenues ...Purchased gas cost ...Gross profit ...Operating expenses $ 690,196 390,402 299,794 144,815 9,141 3,250 56,874 31,475 245,555 54,239 7,156 765 2,202 10,123 37,...

  • Page 44
    ... on investments, net ...Cash dividends ($1.10 per share) ...Common stock issued: Restricted stock grant plan ...Direct stock purchase plan ...ESOP ...Long-term stock plan for United Cities Division ...Outside directors stock-for-fee plan ...Balance, September 30, 1999 ...See accompanying notes to...

  • Page 45
    ... other assets ...Increase (decrease) in accounts payable ...Increase (decrease) in taxes payable ...Decrease in customers' deposits ...Increase (decrease) in other current liabilities ...Increase in deferred credits and other liabilities ...Net cash provided by operating activities ...(35,677) 7,010...

  • Page 46
    ... utility divisions in Tennessee, Kansas and Illinois and to provide storage services to other customers that may be in other states. Through Atmos Energy Services, Inc., the Company markets gas to industrial and irrigation customers primarily in West Texas through Enermart Energy Services Trust...

  • Page 47
    ... and human resource technology systems that were completed and placed in service in 1999. Non-Utility Property, Plant and Equipment Balances are stated at cost and depreciation is computed generally on the straight-line method for financial reporting purposes. Energy Atmos 43 Corporation

  • Page 48
    ... with the United Cities Division's purchased gas adjustment ("PGA") clause, the liquidation of a LIFO layer would be reflected in subsequent gas adjustments in customer rates and does not affect the results of operations. Noncurrent gas in storage is classified as property, plant and equipment...

  • Page 49
    ... Atmos positions were eliminated as part of the integration, resulting in approximately 635 total position reductions in the combined Company by September 1998. Atmos also initiated plans to enhance its customer service in Texas, Louisiana, Kentucky, Colorado, Kansas Energy Atmos 45 Corporation

  • Page 50
    ... adjusted annually to allow the Company to earn a minimum return on equity of 10.5%. In May 1999, the Western Kentucky Division requested from the Kentucky Public Service Commission an increase in revenues of approximately $14.1 million, a weather normalization adjustment ("WNA") and changes in rate...

  • Page 51
    ... of Greeley Gas Company. Also, substantially all of the United Cities Division utility plant assets, totaling approximately $293.0 million, are subject to a lien under the Indenture of Mortgage of the Series N through V First Mortgage Bonds. Based on the borrowing rates currently available to...

  • Page 52
    ... 30, 1999 and 1998. Uncommitted Credit Facilities The Company also has unsecured (In thousands) Deferred tax assets: Costs expensed for book purposes and capitalized for tax purposes Accruals not currently deductible for tax purposes Customer advances Nonqualified benefit plans Postretirement...

  • Page 53
    ... Division is a defendant in several lawsuits filed as a result of a fire in a building in Steamboat Springs, Colorado on February 3, 1994. The plaintiffs claimed that the fire resulted from a leak in a severed gas service line owned by the Greeley Division. On January 12, 1996, the jury awarded...

  • Page 54
    ... The United Cities Division is the owner or previous owner of manufactured gas plant sites in Keokuk, Iowa; Johnson City and Bristol, Tennessee; and Hannibal, Missouri, which were used to supply gas prior to availability of natural gas. The gas manufacturing process resulted in certain by-products...

  • Page 55
    ... the Missouri Department of Natural Resources addressing the former manufactured gas plant located in Hannibal, Missouri. Atmos, through its United Cities Division, agreed in the order to perform a removal action, a subsequent site evaluation and to reimburse the response costs incurred by the state...

  • Page 56
    ...in connection with the vesting of shares awarded under the Plan. Employee Stock Ownership Plan Prior to January 1, 1999, Atmos Atmos, certain United Cities Gas Company officers and key employees participated in the United Cities Long-Term Stock Plan implemented in 1989. At the time of the merger on...

  • Page 57
    ... Defined Benefit Plans Prior to January 1, 1999, the Company had four defined benefit pension plans, covering the Western Kentucky Division employees, the Greeley Division employees, the United Cities Division employees, and the fourth covering all other Atmos employees. The plans provided similar...

  • Page 58
    ... 1998, the Company adopted the Performance-Based Supplemental Executive Benefits Plan, which will cover all employees who become officers or business unit presidents after August 12, 1998. 1999 Weighted average assumptions for end of year disclosure: Discount rate Rate of compensation increase...

  • Page 59
    ... assumptions for end of year disclosure: Discount rate Rate of compensation increase Expected return on plan assets 10.0% 4.0% 7.5% 1998 1997 Net periodic pension cost Employee Stock Ownership Plan Atmos sponsors an ESOP for all employees of the Company. Effective January 1, 1999, the ESOP was...

  • Page 60
    ... as provided to other Atmos employees. The obligations as of September 30, 1999 and 1998 reflect this plan change. Substantially all of the Company's employees become eligible for these benefits if they reach retirement age while working for the Company and attain certain specified years of service...

  • Page 61
    ... in Colorado, Kansas, the majority of its Texas service area and Kentucky. It receives rate treatment as a cost of service item for OPEB costs on the pay-as-you-go basis in Louisiana. OPEB costs have been specifically addressed in rate orders in each jurisdiction served by the United Cities Division...

  • Page 62
    ...In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures The Company's determination of reportable segments considers the strategic operating units under which the Company manages sales of various products and services to customers in differing regulatory environments. The accounting policies...

  • Page 63
    ... lease and rental expense amounted to $10.6 million, $9.2 million and $10.5 million for fiscal 1999, 1998 and 1997, respectively. Rents for the regulated business are expensed and the Company receives rate treatment as a cost of service on a pay-as-you-go basis. Energy Atmos 59 Corporation

  • Page 64
    ... Missouri natural gas distribution assets of Associated Natural Gas, a division of Arkansas Western Gas, which is a wholly-owned subsidiary of Southwestern. Under the terms of the agreement, the Company will purchase the Missouri gas (In thousands, except per share data) Fiscal year 1999 Operating...

  • Page 65
    ...Total throughput (MMcf) ...Meters in service at end of year ...Total meters and propane customers ...Heating degree days ...Degree days as a % of normal ...Average gas sales price per Mcf sold ...Average purchased gas cost per Mcf sold ...Average transportation fee per Mcf ...Statistics 140,119 55...

  • Page 66
    62 Energy Atmos Corporation

  • Page 67
    Atmos Officers Senior Management Team Robert W. Best Non-Utility Business Units Jack L. Mars Chairman, President and Chief Executive Officer Larry J. Dagley President, Enermart Energy Trust Robert E. Mattingly Vice President, New Business Ventures - Retail Services Ron W. McDowell Executive ...

  • Page 68
    ...Committees: Human Resources (Chairman), Executive Charles K. Vaughan Consultant and retired partner of Arthur Andersen LLP Nashville, Tennessee Board Member since 1997 Committees: Audit, Nominating Thomas J. Garland Formerly Chairman of the Board Atmos Energy Corporation Dallas, Texas Board member...

  • Page 69
    ...Energy Corporation shareholder information is available by phone seven days a week, 24 hours a day through EquiServe, L.P.'s interactive voice response system. To perform stock transfers, listen to current company information and access daily stock quotes without the assistance of a customer service...

  • Page 70
    Atmos Energy Corporation P.O. Box 650205 Dallas, Texas 75265-0205 (972) 934-9227 3100-AR-2000