Atmos Energy 1999 Annual Report Download - page 53

Atmos
Energy
Corporation
49
Reconciliations of the provisions for income taxes computed at
the statutory rate to the reported provisions for income taxes for
1999, 1998 and 1997 are set forth below:
1999 1998 1997
(In thousands)
Tax at statutory rate of 35% $ 9,555 $ 30,474 $ 13,348
Common stock dividends
deductible for tax reporting (701) (695) (706)
State taxes 841 2,526 1,300
Other, net (140) (499) 356
Provision for income taxes $ 9,555 $ 31,806 $ 14,298
The Company has net operating loss carryforwards amounting to
$23.9 million which will expire in the year 2019. The Company also
has tax credit carryforwards amounting to $4.1 million, the majority of
which represent alternative minimum tax credits which do not expire.
6) CONTINGENCIES
LITIGATION
Trans La Division In November 1997, a jury in Plaquemine, Louisiana
awarded Brian L. Heard General Contractor, Inc., (“Heard”) a total of
approximately $178,000 in actual damages and $15 million in punitive
damages resulting from a lawsuit by Heard against the Trans La
Division, the successor in interest to Oceana Heights Gas Company,
which the Company acquired in November 1995. The trial judge also
awarded interest on the total judgment amount. The claims were for
events that occurred prior to the time Atmos acquired Oceana Heights
Gas Company. Heard filed the suit against the Trans La Division and
two other defendants, alleging that gas leaks had caused delays in
Heard’s completion of a sewer project, resulting in lost business oppor-
tunities for the contractor during 1994. The Company immediately
appealed the verdict. However, on March 24, 1999, the Company
announced that it had reached a settlement of the case as a result of
mediation discussions. The parties agreed to settle the case for $3.5
million. In the settlement, neither Atmos nor the Trans La Division con-
ceded liability. Atmos paid $3.25 million and the remaining $.25 mil-
lion was paid by Oceana Heights Gas Company’s insurers. In
exchange, the Company obtained a full release from Heard of all
claims against Atmos and the Trans La Division.
Greeley Division In Colorado, the Greeley 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 the
plaintiffs approximately $2.5 million in compensatory damages and
approximately $2.5 million in punitive damages. The jury assessed the
Company with liability for all of the damages awarded. The Company
appealed the judgment to the Colorado Court of Appeals, which
reversed the trial court verdict and ordered a new trial. The Colorado
Supreme Court upheld the Court of Appeals reversal and order for a
new trial. As a result of mediation, a settlement was reached with
five of the claimants, leaving only three remaining claimants with
aggregate claims of approximately $2 million. The Company does not
expect the final outcome of this case to have a material adverse
effect on the financial condition, the results of operations or the cash
flows of the Company because the Company believes it has adequate
insurance and reserves to cover any damages that may ultimately be
awarded.
On September 23, 1999, a suit was filed in the District Court of
Stevens County, Kansas, by Quinque Operating Company, Tom Boles
and Robert Ditto, against more than 200 companies in the natural
gas industry, including the Company and the Greeley Gas Division.
The plaintiffs, who purport to represent a class consisting of gas pro-
ducers, royalty owners, overriding royalty owners, working interest
owners and state taxing authorities, accuse the defendants of under-
paying royalties on gas taken from wells situated on non-federal and
non-Indian lands throughout the United States and offshore waters
predicated upon allegations that the defendants’ gas measurements
are simply inaccurate and that the defendants failed to comply with
applicable regulations and industry standards over the last 25 years.
Although the plaintiffs do not specifically allege an amount of dam-
ages, they do contend that this suit is brought to recover billions of
dollars in revenues that the defendants have allegedly unlawfully
diverted from the plaintiffs to themselves. Since the filing of the peti-
tion, this case has been removed to the United States District Court in
Wichita, Kansas, where there are numerous and various motions
pending, including a request for remand by the plaintiffs as well as a
notice filed to consolidate this case with other similar pending litiga-
tion in federal court in Wyoming in which the Company is also a
defendant along with over 200 other defendants, the case of Jack J.
Grynberg, on behalf of the United States of America.