Atmos Energy 1999 Annual Report Download - page 48

Atmos
Energy
Corporation
44
Inventories Inventories consist primarily of materials and supplies
and merchandise held for resale. These inventories are stated at the
lower of average cost or market. Inventories also include propane
inventories of $768,000 and $979,000 at September 30, 1999 and
1998, respectively. Propane is priced at average cost.
Gas Stored Underground Net additions of inventory gas to storage
and withdrawals of inventory gas from storage are priced using the
average cost method for all Atmos utility divisions, except for the
United Cities Division, where it is priced on the first-in first-out
method. Gas stored underground and owned by Storage is priced on
the last-in first-out (“LIFO”) method. In accordance with the United
Cities Division’s purchased gas adjustment (“PGA”) clause, the liqui-
dation of a LIFO layer would be reflected in subsequent gas adjust-
ments in customer rates and does not affect the results of operations.
Noncurrent gas in storage is classified as property, plant and equip-
ment and is priced at cost.
Income Taxes Income taxes are provided based on the deferred
method, resulting in income tax assets and liabilities due to tempo-
rary differences. Temporary differences are differences between the
tax bases of assets and liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts
in future years. The deferred method requires the effect of tax rate
changes on current and accumulated deferred income taxes to be
reflected in the period in which the rate change was enacted. The
deferred method also requires that deferred tax assets be reduced by
a valuation allowance unless it is more likely than not that the assets
will be realized.
Cash and Cash Equivalents The Company considers all highly liquid
debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Deferred Charges and Other Assets Deferred charges and other
assets at September 30, 1999 and 1998 include merger and integra-
tion costs of $35.9 million and $39.5 million in 1999 and 1998, respec-
tively, net of the related reserve for possible non-recovery; and the
investment in WMLLC of $16.0 million and $11.9 million in 1999 and
1998, respectively. Also included in deferred charges and other assets
are assets of the Company’s qualified defined benefit retirement plans
in excess of the plans’ obligations, Company assets related to the non-
qualified retirement plans, unamortized debt expense, and deferred
compensation expense related to non-vested restricted stock grants.
Deferred Credits and Other Liabilities Deferred credits and other
liabilities include customer advances for construction, obligations
under capital leases, obligations under other postretirement benefits,
and obligations under the Company’s nonqualified retirement plans.
Earnings Per Share The calculation of basic earnings per share is
based on net income divided by the weighted average number of
common shares outstanding. The calculation of diluted earnings per
share is based on net income divided by the weighted average num-
ber of shares outstanding plus the dilutive shares related to the
United Cities Division’s Long-term Stock Plan and Atmos’ Restricted
Stock Grant Plan.
Segment Information In 1999, the Company adopted Statement of
Financial Accounting Standards No. 131, “Disclosures about Segments
of an Enterprise and Related Information” (“SFAS No. 131”). SFAS No.
131 supersedes Statement of Financial Accounting Standards No. 14,
“Financial Reporting for Segments of a Business Enterprise,” replacing
the “industry segment” approach with the “management” approach.
The management approach requires financial information to be dis-
closed for segments whose operating results are reviewed by the
“chief operating decision maker.” It also requires related disclosures
about products and services. The adoption of SFAS No. 131 did not
affect results of operations or financial position, but did affect the dis-
closure of segment information.
Comprehensive Income In 1999, the Company adopted Statement
of Financial Accounting Standards No. 130, “Reporting Comprehensive
Income.” This statement requires reporting of comprehensive income
and its components (revenues, expenses, gains and losses) in any
complete presentation of general purpose financial statements.
Comprehensive income describes all changes, except those resulting
from investments by owners and distributions to owners, in the equity
of a business enterprise from transactions and other events including,
as applicable, foreign-currency items, minimum pension liability adjust-
ments and unrealized gains and losses on certain investments in debt
and equity securities. While the primary component of comprehensive
income is the Company’s reported net income, the other components
of comprehensive income relate to unrealized gains and losses asso-
ciated with certain investments held as available for sale.