Atmos Energy 1999 Annual Report Download - page 35

Atmos
Energy
Corporation
31
Net Income as Reported The Company reported net income of
$17.7 million, or $.58 per diluted share, on operating revenues of
$690.2 million for the fiscal year ended September 30, 1999. Net
income for 1998 was $55.3 million, or $1.84 per diluted share, on
operating revenues of $848.2 million, which included one-time gains
totaling $2.2 million or $.07 per diluted share, from the sales of real
estate and equipment owned by the United Cities Division.
Results for the year were negatively impacted by the warmest win-
ter on record for Atmos. Across the Atmos system, weather was more
than 15 percent warmer than normal and more than 11 percent
warmer than last year. Rainfall in West Texas exceeded average rainfall
levels for the region by more than 32% during the 1999 irrigation
season, resulting in a 43% decrease in irrigation sales over last year. In
addition, increased depreciation and interest expense related to assets
placed in service in advance of recognition in rates adversely affected
financial results. Earnings were also reduced by a charge in the second
quarter of $.07 per share for settlement of litigation in Louisiana.
Net income for 1999 was also negatively impacted by operating
and maintenance expenses that were higher than last year 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 initiatives. Operation expenses also included increased
reserves of $5.0 million for the possible write-off of accounts receiv-
able resulting from a temporary suspension in service cutoffs and
normal efforts to collect past due receivables in connection with the
Company’s conversion to the new customer information and billing
system. In addition to lower gross profit resulting from adverse
weather conditions, gross profit for the year was reduced $4.3 million
by reserves established for deferred gas costs that are not expected to
be recoverable.
Finally, 1999 results were positively impacted by a change in
accounting principle adopted by WMLLC, a gas marketing and servic-
es company in which Atmos owns a 45% interest. WMLLC adopted
Emerging Issues Task Force Issue No. 98-10, “Accounting for
Contracts Involved in Energy Trading and Risk Management
Activities” (“EITF 98-10”), the effect of which added $2.4 million to
other income.
For fiscal year 1998, the Company reported net income of $55.3
million, or $1.84 per diluted share, on operating revenues of $848.2
million. The 1998 net income included one-time gains totaling $2.2
million or $.07 per diluted share, from the sales of real estate and
equipment. Although revenues for 1998 were lower as a result of win-
ter weather that was 5% warmer than normal, as well as warmer than
1997, earnings improved due to gains on asset sales, lower operation
and maintenance expenses and increased irrigation sales. Operation
and maintenance expenses were lower for 1998 due to a company-
wide restructuring of the organization and Atmos’ integration of the
United Cities Division. Sales of gas in West Texas to farmers for
Results of Operations – Consolidated
YEAR ENDED SEPTEMBER 30, 1999 COMPARED WITH YEAR ENDED SEPTEMBER 30, 1998
To assist in management’s discussion of results of operations, the following table presents the effects of certain special items and weather on
reported consolidated net income. Earnings per share amounts presented in this discussion are on a diluted basis.
Year ended September 30,
1999 1998 1997
Per Per Per
Amount Share Amount Share Amount Share
(In thousands, except per share data)
Net income as reported $ 17,744 $ .58 $ 55,265 $1.84 $ 23,838 $ .81
Special items:
Management reorganization — — — — 2,800 .10
Reserve for integration costs — — — — 12,630 .43
Sale of assets — — (2,244) (.07) — —
Litigation settlement 2,070 .07 — — — —
Normalized net income except for
effects of weather 19,814 .65 53,021 1.77 39,268 1.34
Effects of weather 28,224 .91 3,485 .11 3,571 .12
Normalized net income $ 48,038 $1.56 $ 56,506 $1.88 $ 42,839 $ 1.46