e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30,
2011
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission File Number 1-10042
Atmos Energy
Corporation
(Exact name of registrant as
specified in its charter)
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Texas and Virginia
(State or other jurisdiction
of
incorporation or organization)
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75-1743247
(IRS employer
identification no.)
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Three Lincoln Centre, Suite 1800
5430 LBJ Freeway, Dallas, Texas
(Address of principal
executive offices)
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75240
(Zip
code)
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(972) 934-9227
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its website, if any, every
Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act) Yes
o
No þ
Number of shares outstanding of each of the issuers
classes of common stock, as of July 29, 2011.
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Class
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Shares Outstanding
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No Par Value
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90,285,306
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TABLE OF CONTENTS
GLOSSARY
OF KEY TERMS
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AEC
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Atmos Energy Corporation
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AEH
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Atmos Energy Holdings, Inc.
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AEM
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Atmos Energy Marketing, LLC
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AOCI
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Accumulated other comprehensive income
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APS
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Atmos Pipeline and Storage, LLC
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Bcf
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Billion cubic feet
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FASB
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Financial Accounting Standards Board
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Fitch
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Fitch Ratings, Ltd.
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GRIP
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Gas Reliability Infrastructure Program
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GSRS
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Gas System Reliability Surcharge
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ISRS
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Infrastructure System Replacement Surcharge
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Mcf
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Thousand cubic feet
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MMcf
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Million cubic feet
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Moodys
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Moodys Investors Services, Inc.
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NYMEX
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New York Mercantile Exchange, Inc.
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PPA
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Pension Protection Act of 2006
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PRP
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Pipeline Replacement Program
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RRC
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Railroad Commission of Texas
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RRM
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Rate Review Mechanism
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S&P
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Standard & Poors Corporation
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SEC
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United States Securities and Exchange Commission
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WNA
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Weather Normalization Adjustment
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1
PART I.
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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ATMOS
ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30,
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September 30,
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2011
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2010
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(Unaudited)
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(In thousands, except
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share data)
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ASSETS
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Property, plant and equipment
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$
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6,599,950
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$
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6,542,318
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Less accumulated depreciation and amortization
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1,683,899
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1,749,243
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Net property, plant and equipment
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4,916,051
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4,793,075
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Current assets
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Cash and cash equivalents
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117,429
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131,952
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Accounts receivable, net
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342,092
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273,207
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Gas stored underground
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256,768
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319,038
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Other current assets
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273,459
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150,995
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Total current assets
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989,748
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875,192
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Goodwill and intangible assets
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739,677
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740,148
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Deferred charges and other assets
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347,994
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355,376
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$
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6,993,470
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$
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6,763,791
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CAPITALIZATION AND LIABILITIES
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Shareholders equity
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Common stock, no par value (stated at $.005 per share);
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200,000,000 shares authorized; issued and outstanding:
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June 30, 2011 90,284,722 shares;
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September 30, 2010 90,164,103 shares
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$
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451
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$
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451
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Additional paid-in capital
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1,730,121
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1,714,364
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Retained earnings
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599,506
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486,905
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Accumulated other comprehensive income (loss)
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5,746
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(23,372
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)
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Shareholders equity
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2,335,824
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2,178,348
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Long-term debt
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2,206,106
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1,809,551
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Total capitalization
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4,541,930
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3,987,899
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Current liabilities
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Accounts payable and accrued liabilities
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312,205
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266,208
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Other current liabilities
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333,643
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413,640
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Short-term debt
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126,100
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Current maturities of long-term debt
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2,434
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360,131
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Total current liabilities
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648,282
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1,166,079
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Deferred income taxes
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967,607
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829,128
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Regulatory cost of removal obligation
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396,201
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350,521
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Deferred credits and other liabilities
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439,450
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430,164
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$
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6,993,470
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|
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$
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6,763,791
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|
|
|
|
|
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|
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|
See accompanying notes to condensed consolidated financial
statements
2
ATMOS
ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended
|
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June 30
|
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2011
|
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2010
|
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|
(Unaudited)
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|
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(In thousands, except
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per share data)
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Operating revenues
|
|
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|
|
|
|
|
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Natural gas distribution segment
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$
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407,031
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$
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396,319
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Regulated transmission and storage segment
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53,570
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44,957
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Nonregulated segment
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491,285
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427,405
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Intersegment eliminations
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(108,271
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)
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|
|
(107,376
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)
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|
|
|
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|
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843,615
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761,305
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Purchased gas cost
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Natural gas distribution segment
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206,839
|
|
|
|
204,988
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Regulated transmission and storage segment
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|
|
|
|
|
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Nonregulated segment
|
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477,880
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|
|
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415,634
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Intersegment eliminations
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(107,909
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)
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|
|
(106,983
|
)
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|
|
|
|
|
|
|
|
|
|
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|
576,810
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|
|
|
513,639
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|
|
|
|
|
|
|
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Gross profit
|
|
|
266,805
|
|
|
|
247,666
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
112,665
|
|
|
|
111,559
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Depreciation and amortization
|
|
|
56,932
|
|
|
|
51,940
|
|
Taxes, other than income
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|
|
52,142
|
|
|
|
51,908
|
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Asset impairments
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|
|
10,988
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|
|
|
|
|
|
|
|
|
|
|
|
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Total operating expenses
|
|
|
232,727
|
|
|
|
215,407
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
34,078
|
|
|
|
32,259
|
|
Miscellaneous expense
|
|
|
(1,430
|
)
|
|
|
(798
|
)
|
Interest charges
|
|
|
35,845
|
|
|
|
37,267
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(3,197
|
)
|
|
|
(5,806
|
)
|
Income tax benefit
|
|
|
(1,723
|
)
|
|
|
(1,577
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(1,474
|
)
|
|
|
(4,229
|
)
|
Income from discontinued operations, net of tax ($590 and $700)
|
|
|
908
|
|
|
|
1,075
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(566
|
)
|
|
$
|
(3,154
|
)
|
|
|
|
|
|
|
|
|
|
Basic earning per share
|
|
|
|
|
|
|
|
|
Loss per share from continuing operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
Income per share from discontinued operations
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Net loss per share basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
Loss per share from continuing operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
Income per share from discontinued operations
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Net loss per share diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
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Cash dividends per share
|
|
$
|
0.34
|
|
|
$
|
0.335
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements
3
ATMOS
ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
Operating revenues
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
2,187,907
|
|
|
$
|
2,512,032
|
|
Regulated transmission and storage segment
|
|
|
157,553
|
|
|
|
146,998
|
|
Nonregulated segment
|
|
|
1,550,456
|
|
|
|
1,652,453
|
|
Intersegment eliminations
|
|
|
(337,542
|
)
|
|
|
(370,229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
3,558,374
|
|
|
|
3,941,254
|
|
Purchased gas cost
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
|
1,317,775
|
|
|
|
1,657,412
|
|
Regulated transmission and storage segment
|
|
|
|
|
|
|
|
|
Nonregulated segment
|
|
|
1,491,815
|
|
|
|
1,556,746
|
|
Intersegment eliminations
|
|
|
(336,413
|
)
|
|
|
(369,017
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
2,473,177
|
|
|
|
2,845,141
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,085,197
|
|
|
|
1,096,113
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
341,317
|
|
|
|
348,458
|
|
Depreciation and amortization
|
|
|
167,176
|
|
|
|
156,201
|
|
Taxes, other than income
|
|
|
145,868
|
|
|
|
152,840
|
|
Asset impairments
|
|
|
30,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
684,631
|
|
|
|
657,499
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
400,566
|
|
|
|
438,614
|
|
Miscellaneous income (expense)
|
|
|
24,046
|
|
|
|
(905
|
)
|
Interest charges
|
|
|
112,615
|
|
|
|
115,481
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
311,997
|
|
|
|
322,228
|
|
Income tax expense
|
|
|
114,211
|
|
|
|
124,199
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
197,786
|
|
|
|
198,029
|
|
Income from discontinued operations, net of tax ($5,122 and
$4,094)
|
|
|
7,854
|
|
|
|
6,273
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
205,640
|
|
|
$
|
204,302
|
|
|
|
|
|
|
|
|
|
|
Basic earning per share
|
|
|
|
|
|
|
|
|
Income per share from continuing operations
|
|
$
|
2.17
|
|
|
$
|
2.12
|
|
Income per share from discontinued operations
|
|
|
0.09
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic
|
|
$
|
2.26
|
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
Income per share from continuing operations
|
|
$
|
2.16
|
|
|
$
|
2.11
|
|
Income per share from discontinued operations
|
|
|
0.09
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Net income per share diluted
|
|
$
|
2.25
|
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
1.02
|
|
|
$
|
1.005
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
90,233
|
|
|
|
92,513
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
90,530
|
|
|
|
92,856
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements
4
ATMOS
ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
205,640
|
|
|
$
|
204,302
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
|
30,270
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
Charged to depreciation and amortization
|
|
|
171,726
|
|
|
|
160,207
|
|
Charged to other accounts
|
|
|
149
|
|
|
|
116
|
|
Deferred income taxes
|
|
|
115,488
|
|
|
|
186,325
|
|
Other
|
|
|
15,927
|
|
|
|
18,425
|
|
Net assets/liabilities from risk management activities
|
|
|
(15,869
|
)
|
|
|
3,429
|
|
Net change in operating assets and liabilities
|
|
|
(3,769
|
)
|
|
|
21,760
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
519,562
|
|
|
|
594,564
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(390,283
|
)
|
|
|
(362,349
|
)
|
Other, net
|
|
|
(3,373
|
)
|
|
|
(438
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(393,656
|
)
|
|
|
(362,787
|
)
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
Net decrease in short-term debt
|
|
|
(132,072
|
)
|
|
|
(76,019
|
)
|
Net proceeds from issuance of long-term debt
|
|
|
394,618
|
|
|
|
|
|
Settlement of Treasury lock agreements
|
|
|
20,079
|
|
|
|
|
|
Unwinding of Treasury lock agreements
|
|
|
27,803
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
(360,066
|
)
|
|
|
(66
|
)
|
Cash dividends paid
|
|
|
(93,039
|
)
|
|
|
(93,913
|
)
|
Repurchase of equity awards
|
|
|
(5,300
|
)
|
|
|
(1,173
|
)
|
Issuance of common stock
|
|
|
7,548
|
|
|
|
8,574
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(140,429
|
)
|
|
|
(162,597
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(14,523
|
)
|
|
|
69,180
|
|
Cash and cash equivalents at beginning of period
|
|
|
131,952
|
|
|
|
111,203
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
117,429
|
|
|
$
|
180,383
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements
5
ATMOS
ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2011
Atmos Energy Corporation (Atmos Energy or the
Company) and our subsidiaries are engaged primarily
in the regulated natural gas distribution and transmission and
storage businesses as well as certain other nonregulated
businesses. Our corporate headquarters and shared-services
function are located in Dallas, Texas and our customer support
centers are located in Amarillo and Waco, Texas.
Through our natural gas distribution business, we deliver
natural gas through sales and transportation arrangements to
over three million residential, commercial, public authority and
industrial customers through our six regulated natural gas
distribution divisions which currently cover service areas
located in 12 states. In addition, we transport natural gas
for others through our distribution system. In May 2011, we
announced that we had entered into a definitive agreement to
sell our natural gas distribution operations in Missouri,
Illinois and Iowa, representing approximately 84,000 customers.
After the closing of this transaction, we will operate in nine
states. Our regulated activities also include our regulated
pipeline and storage operations, which include the
transportation of natural gas to our distribution system and the
management of our underground storage facilities. Our regulated
businesses are subject to federal and state regulation
and/or
regulation by local authorities in each of the states in which
our natural gas distribution divisions operate.
Our nonregulated businesses operate primarily in the Midwest and
Southeast through various wholly-owned subsidiaries of Atmos
Energy Holdings, Inc, (AEH). AEH is wholly owned by the Company
and based in Houston, Texas. Through AEH, we provide natural gas
management and transportation services to municipalities,
natural gas distribution companies, including certain divisions
of Atmos Energy and third parties. AEH also seeks to maximize,
through asset optimization activities, the economic value
associated with storage and transportation capacity it owns or
controls. Certain of these arrangements are with regulated
affiliates of the Company, which have been approved by
applicable state regulatory commissions.
As discussed in Note 11, we operate the Company through the
following three segments:
|
|
|
|
|
the natural gas distribution segment, which includes our
regulated natural gas distribution and related sales operations,
|
|
|
|
the regulated transmission and storage segment, which
includes the regulated pipeline and storage operations of our
Atmos Pipeline Texas Division and
|
|
|
|
the nonregulated segment, which includes our nonregulated
natural gas management, nonregulated natural gas transmission,
storage and other services.
|
|
|
2.
|
Unaudited
Financial Information
|
These consolidated interim-period financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States on the same basis as those used
for the Companys audited consolidated financial statements
included in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. In the
opinion of management, all material adjustments (consisting of
normal recurring accruals) necessary for a fair presentation
have been made to the unaudited consolidated interim-period
financial statements. These consolidated interim-period
financial statements are condensed as permitted by the
instructions to
Form 10-Q
and should be read in conjunction with the audited consolidated
financial statements of Atmos Energy Corporation included in our
Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. Because of
seasonal and other factors, the results of operations for the
nine-month period ended June 30, 2011 are not indicative of
our results of operations for the full 2011 fiscal year, which
ends September 30, 2011.
6
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our earnings have been impacted by several one-time items in the
current year, including the following pre-tax amounts:
|
|
|
|
|
$27.8 million gain recorded in association with the
unwinding of two Treasury locks in conjunction with the
cancellation of a planned debt offering in November 2011.
|
|
|
|
$19.3 million non-cash impairment of assets in the
Ft. Necessity storage project.
|
|
|
|
$11.0 million non-cash impairment of certain natural gas
gathering assets.
|
|
|
|
$5.0 million one-time tax benefit related to the
administrative settlement of various income tax positions.
|
We have evaluated subsequent events from the June 30, 2011
balance sheet date through the date these financial statements
were filed with the Securities and Exchange Commission (SEC). No
events have occurred subsequent to the balance sheet date that
would require recognition or disclosure in the condensed
consolidated financial statements.
Significant
accounting policies
Our accounting policies are described in Note 2 to the
financial statements in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010.
As a result of discontinued operations, certain prior-year
amounts have been reclassified to conform with the current year
presentation.
During the second quarter of fiscal 2011, we completed our
annual goodwill impairment assessment. Based on the assessment
performed, we determined that our goodwill was not impaired.
During the nine months ended June 30, 2011, two new
accounting standards became applicable to the Company pertaining
to goodwill impairment testing for reporting units with zero or
negative carrying amounts and disclosure of supplementary pro
forma information for business combinations. The adoption of
these standards had no impact on our financial position, results
of operations or cash flows. There were no other significant
changes to our accounting policies during the nine months ended
June 30, 2011.
In May 2011, the Financial Accounting Standards Board (FASB)
issued guidance that will provide a consistent definition of
fair value and ensure that fair value measurements and
disclosure requirements are similar between U.S. GAAP and
International Financial Reporting Standards. This guidance will
change certain fair value measurement principles and enhances
the disclosure requirements particularly for Level 3 fair
value measurements and is effective prospectively for the
Company for interim and annual periods beginning after
December 15, 2011. We currently do not have any recurring
Level 3 fair value measurements; accordingly, the adoption
of this guidance will not impact our financial position, results
of operations or cash flows.
In June 2011, the FASB issued guidance related to the
presentation of other comprehensive income which will require
that all nonowner changes in shareholders equity be
presented either in a single continuous statement of
comprehensive income or in two separate but consecutive
statements. In the two-statement approach, the first statement
should present total net income and its components followed by a
second statement that should present total other comprehensive
income, the components of other comprehensive income, and the
total of comprehensive income. This guidance is effective
retrospectively for the Company for fiscal years, and interim
periods within those years, beginning after December 15,
2011. The adoption of this guidance will not impact our
financial position, results of operations or cash flows.
7
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Regulatory
assets and liabilities
Accounting principles generally accepted in the United States
require cost-based, rate-regulated entities that meet certain
criteria to reflect the authorized recovery of costs due to
regulatory decisions in their financial statements. As a result,
certain costs are permitted to be capitalized rather than
expensed because they can be recovered through rates. We record
certain costs as regulatory assets when future recovery through
customer rates is considered probable. Regulatory liabilities
are recorded when it is probable that revenues will be reduced
for amounts that will be credited to customers through the
ratemaking process. Substantially all of our regulatory assets
are recorded as a component of deferred charges and other assets
and substantially all of our regulatory liabilities are recorded
as a component of deferred credits and other liabilities.
Deferred gas costs are recorded either in other current assets
or liabilities and the regulatory cost of removal obligation is
reported separately.
Significant regulatory assets and liabilities as of
June 30, 2011 and September 30, 2010 included the
following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
Pension and postretirement benefit costs
|
|
$
|
200,393
|
|
|
$
|
209,564
|
|
Merger and integration costs, net
|
|
|
6,360
|
|
|
|
6,714
|
|
Deferred gas costs
|
|
|
22,083
|
|
|
|
22,701
|
|
Regulatory cost of removal asset
|
|
|
32,691
|
|
|
|
31,014
|
|
Environmental costs
|
|
|
434
|
|
|
|
805
|
|
Rate case costs
|
|
|
5,321
|
|
|
|
4,505
|
|
Deferred franchise fees
|
|
|
393
|
|
|
|
1,161
|
|
Other
|
|
|
3,940
|
|
|
|
1,046
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
271,615
|
|
|
$
|
277,510
|
|
|
|
|
|
|
|
|
|
|
Regulatory liabilities:
|
|
|
|
|
|
|
|
|
Deferred gas costs
|
|
$
|
18,739
|
|
|
$
|
43,333
|
|
Deferred franchise fees
|
|
|
629
|
|
|
|
|
|
Regulatory cost of removal obligation
|
|
|
429,354
|
|
|
|
381,474
|
|
Other
|
|
|
9,166
|
|
|
|
6,112
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
457,888
|
|
|
$
|
430,919
|
|
|
|
|
|
|
|
|
|
|
The June 30, 2011 amounts above do not include regulatory
assets and liabilities related to our Missouri, Illinois and
Iowa service areas, which are classified as assets held for sale
as discussed in Note 5.
Currently, our authorized rates do not include a return on
certain of our merger and integration costs; however, we recover
the amortization of these costs. Merger and integration costs,
net, are generally amortized on a straight-line basis over
estimated useful lives ranging up to 20 years.
Environmental costs have been deferred to be included in future
rate filings in accordance with rulings received from various
state regulatory commissions.
8
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Comprehensive
income
The following table presents the components of comprehensive
income (loss), net of related tax, for the three-month and
nine-month periods ended June 30, 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Net income (loss)
|
|
$
|
(566
|
)
|
|
$
|
(3,154
|
)
|
|
$
|
205,640
|
|
|
$
|
204,302
|
|
Unrealized holding gains (losses) on investments, net of tax
expense (benefit) of $(56) and $(996) for the three months ended
June 30, 2011 and 2010 and of $876 and $(198) for the nine
months ended June 30, 2011 and 2010
|
|
|
(94
|
)
|
|
|
(1,696
|
)
|
|
|
1,492
|
|
|
|
(337
|
)
|
Amortization, unrealized gain and unwinding of interest rate
hedging transactions, net of tax expense (benefit) of $(4,629)
and $247 for the three months ended June 30, 2011 and 2010
and $7,950 and $743 for the nine month ended June 30, 2011
and 2010
|
|
|
(7,884
|
)
|
|
|
422
|
|
|
|
13,536
|
|
|
|
1,265
|
|
Net unrealized gains (losses) on commodity hedging transactions,
net of tax expense (benefit) of $(182) and $5,066 for the three
months ended June 30, 2011 and 2010 and $9,008 and $2,999
for the nine months ended June 30, 2011 and 2010
|
|
|
(285
|
)
|
|
|
7,921
|
|
|
|
14,090
|
|
|
|
4,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
$
|
(8,829
|
)
|
|
$
|
3,493
|
|
|
$
|
234,758
|
|
|
$
|
209,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), net of tax, as of
June 30, 2011 and September 30, 2010 consisted of the
following unrealized gains (losses):
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Unrealized holding gains on investments
|
|
$
|
5,697
|
|
|
$
|
4,205
|
|
Treasury lock agreements
|
|
|
8,068
|
|
|
|
(5,468
|
)
|
Cash flow hedges
|
|
|
(8,019
|
)
|
|
|
(22,109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,746
|
|
|
$
|
(23,372
|
)
|
|
|
|
|
|
|
|
|
|
We currently use financial instruments to mitigate commodity
price risk. Additionally, we periodically utilize financial
instruments to manage interest rate risk. The objectives and
strategies for using financial instruments have been tailored to
our regulated and nonregulated businesses. The accounting for
these financial instruments is fully described in Note 2 to
the financial statements in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. During the
third quarter there were no changes in our objectives,
strategies and accounting for these financial instruments.
Currently, we utilize financial instruments in our natural gas
distribution and nonregulated segments. We currently do not
manage commodity price risk with financial instruments in our
regulated transmission and storage segment.
9
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our financial instruments do not contain any credit-risk-related
or other contingent features that could cause accelerated
payments when our financial instruments are in net liability
positions.
Regulated
Commodity Risk Management Activities
Although our purchased gas cost adjustment mechanisms
essentially insulate our natural gas distribution segment from
commodity price risk, our customers are exposed to the effects
of volatile natural gas prices. We manage this exposure through
a combination of physical storage, fixed-price forward contracts
and financial instruments, primarily
over-the-counter
swap and option contracts, in an effort to minimize the impact
of natural gas price volatility on our customers during the
winter heating season.
Our natural gas distribution gas supply department is
responsible for executing this segments commodity risk
management activities in conformity with regulatory
requirements. In jurisdictions where we are permitted to
mitigate commodity price risk through financial instruments, the
relevant regulatory authorities may establish the level of
heating season gas purchases that can be hedged. Historically,
if the regulatory authority does not establish this level, we
seek to hedge between 25 and 50 percent of anticipated
heating season gas purchases using financial instruments. For
the
2010-2011
heating season (generally October through March), in the
jurisdictions where we are permitted to utilize financial
instruments, we hedged approximately 35 percent, or
31.7 Bcf of the planned winter flowing gas requirements. We
have not designated these financial instruments as hedges.
The costs associated with and the gains and losses arising from
the use of financial instruments to mitigate commodity price
risk are included in our purchased gas cost adjustment
mechanisms in accordance with regulatory requirements.
Therefore, changes in the fair value of these financial
instruments are initially recorded as a component of deferred
gas costs and recognized in the consolidated statement of income
as a component of purchased gas cost when the related costs are
recovered through our rates and recognized in revenue in
accordance with applicable authoritative accounting guidance.
Accordingly, there is no earnings impact on our natural gas
distribution segment as a result of the use of financial
instruments.
Nonregulated
Commodity Risk Management Activities
In our nonregulated operations, we aggregate and purchase gas
supply, arrange transportation
and/or
storage logistics and ultimately deliver gas to our customers at
competitive prices. To facilitate this process, we utilize
proprietary and customer-owned transportation and storage assets
to provide the various services our customers request.
We also perform asset optimization activities in our
nonregulated segment. Through asset optimization activities, we
seek to enhance our gross profit by maximizing the economic
value associated with the storage and transportation capacity we
own or control. We attempt to meet this objective by engaging in
natural gas storage transactions in which we seek to find and
profit from pricing differences that occur over time. We
purchase physical natural gas and then sell financial
instruments at advantageous prices to lock in a gross profit
margin. Through the use of transportation and storage services
and financial instruments, we also seek to capture gross profit
margin through the arbitrage of pricing differences that exist
in various locations and by recognizing pricing differences that
occur over time. Over time, gains and losses on the sale of
storage gas inventory should be offset by gains and losses on
the financial instruments, resulting in the realization of the
economic gross profit margin we anticipated at the time we
structured the original transaction.
As a result of these activities, our nonregulated segment is
exposed to risks associated with changes in the market price of
natural gas. We manage our exposure to such risks through a
combination of physical storage and financial instruments,
including futures,
over-the-counter
and exchange-traded options and swap contracts with
counterparties. Futures contracts provide the right to buy or
sell the commodity at a fixed price in the future. Option
contracts provide the right, but not the obligation, to buy or
sell the commodity at a fixed
10
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
price. Swap contracts require receipt of payment for the
commodity based on the difference between a fixed price and the
market price on the settlement date.
We use financial instruments, designated as cash flow hedges of
anticipated purchases and sales at index prices, to mitigate the
commodity price risk in our nonregulated operations associated
with deliveries under fixed-priced forward contracts to deliver
gas to customers. These financial instruments have maturity
dates ranging from one to 65 months. We use financial
instruments, designated as fair value hedges, to hedge our
natural gas inventory used in our asset optimization activities
in our nonregulated segment.
Also, in our nonregulated operations, we use storage swaps and
futures to capture additional storage arbitrage opportunities
that arise subsequent to the execution of the original fair
value hedge associated with our physical natural gas inventory,
basis swaps to insulate and protect the economic value of our
fixed price and storage books and various
over-the-counter
and exchange-traded options. These financial instruments have
not been designated as hedges.
Our nonregulated risk management activities are controlled
through various risk management policies and procedures. Our
Audit Committee has oversight responsibility for our
nonregulated risk management limits and policies. A risk
committee, comprised of corporate and business unit officers, is
responsible for establishing and enforcing our nonregulated risk
management policies and procedures.
Under our risk management policies, we seek to match our
financial instrument positions to our physical storage positions
as well as our expected current and future sales and purchase
obligations in order to maintain no open positions at the end of
each trading day. The determination of our net open position as
of any day, however, requires us to make assumptions as to
future circumstances, including the use of gas by our customers
in relation to our anticipated storage and market positions.
Because the price risk associated with any net open position at
the end of each day may increase if the assumptions are not
realized, we review these assumptions as part of our daily
monitoring activities. Our operations can also be affected by
intraday fluctuations of gas prices, since the price of natural
gas purchased or sold for future delivery earlier in the day may
not be hedged until later in the day. At times, limited net open
positions related to our existing and anticipated commitments
may occur. At the close of business on June 30, 2011, our
nonregulated segment had net open positions (including existing
storage and related financial contracts) of 0.1 Bcf.
Interest
Rate Risk Management Activities
We periodically manage interest rate risk by entering into
Treasury lock agreements to fix the Treasury yield component of
the interest cost associated with anticipated financings.
In September 2010, we entered into three Treasury lock
agreements to fix the Treasury yield component of the interest
cost associated with $300 million of a total
$400 million of senior notes that were issued in June 2011.
This offering is discussed in Note 6. We designated these
Treasury locks as cash flow hedges of an anticipated
transaction. The Treasury locks were settled on June 7,
2011 with the receipt of $20.1 million from the
counterparties due to an increase in the
30-year
Treasury lock rates between inception of the Treasury locks and
settlement. Because the Treasury locks were effective, the net
$12.6 million unrealized gain was recorded as a component
of accumulated other comprehensive income and will be recognized
as a component of interest expense over the
30-year life
of the senior notes.
Additionally, our original fiscal 2011 financing plans included
the issuance of $250 million of
30-year
unsecured notes in November 2011 to fund our capital expenditure
program. In September 2010, we entered into two Treasury lock
agreements to fix the Treasury yield component of the interest
cost associated with the anticipated issuance of these senior
notes, which were designated as cash flow hedges of an
anticipated transaction. Due to stronger than anticipated cash
flows primarily resulting from the extension of the Bush tax
cuts that allow the continued use of bonus depreciation on
qualifying expenditures through December 31, 2011, the need
to issue $250 million of debt in November was eliminated
and the related Treasury lock
11
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
agreements were unwound in March 2011. As a result of unwinding
these Treasury locks, we recognized a pre-tax cash gain of
$27.8 million during the second quarter.
In prior years, we entered into Treasury lock agreements to fix
the Treasury yield component of the interest cost associated
with anticipated financings. These Treasury locks, as well as
the Treasury locks discussed above, were settled at various
times at a cumulative net loss. These realized gains and losses
were recorded as a component of accumulated other comprehensive
income (loss) and are being recognized as a component of
interest expense over the life of the associated notes from the
date of settlement. The remaining amortization periods for the
settled Treasury locks extend through fiscal 2041.
Quantitative
Disclosures Related to Financial Instruments
The following tables present detailed information concerning the
impact of financial instruments on our condensed consolidated
balance sheet and income statements.
As of June 30, 2011, our financial instruments were
comprised of both long and short commodity positions. A long
position is a contract to purchase the commodity, while a short
position is a contract to sell the commodity. As of
June 30, 2011, we had net long/(short) commodity contracts
outstanding in the following quantities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
Hedge
|
|
Gas
|
|
|
|
|
|
|
|
Contract Type
|
|
Designation
|
|
Distribution
|
|
|
Nonregulated
|
|
|
|
|
|
|
|
|
Quantity (MMcf)
|
|
|
|
|
|
Commodity contracts
|
|
Fair Value
|
|
|
|
|
|
|
(20,915
|
)
|
|
|
|
|
|
|
Cash Flow
|
|
|
|
|
|
|
28,317
|
|
|
|
|
|
|
|
Not designated
|
|
|
16,340
|
|
|
|
18,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,340
|
|
|
|
25,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Instruments on the Balance Sheet
The following tables present the fair value and balance sheet
classification of our financial instruments by operating segment
as of June 30, 2011 and September 30, 2010. As
required by authoritative accounting literature, the fair value
amounts below are presented on a gross basis and do not reflect
the netting of asset and liability positions permitted under the
terms of our master netting arrangements. Further, the amounts
below do not include $15.4 million and $24.9 million
of cash held on deposit in margin accounts as of June 30,
2011 and September 30, 2010 to collateralize certain
financial instruments. Therefore, these gross balances are not
indicative of either our actual credit exposure or net economic
exposure. Additionally, the amounts below
12
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
will not be equal to the amounts presented on our condensed
consolidated balance sheet, nor will they be equal to the fair
value information presented for our financial instruments in
Note 4.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Distribution
|
|
|
Nonregulated
|
|
|
Total
|
|
|
|
|
|
(In thousands)
|
|
|
June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
$
|
|
|
|
$
|
11,529
|
|
|
$
|
11,529
|
|
Noncurrent commodity contracts
|
|
Deferred charges and other assets
|
|
|
|
|
|
|
241
|
|
|
|
241
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
|
|
|
|
|
|
|
(15,930
|
)
|
|
|
(15,930
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
|
|
|
|
(6,237
|
)
|
|
|
(6,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
(10,397
|
)
|
|
|
(10,397
|
)
|
Not Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
|
1,972
|
|
|
|
19,174
|
|
|
|
21,146
|
|
Noncurrent commodity contracts
|
|
Deferred charges and other assets
|
|
|
767
|
|
|
|
7,093
|
|
|
|
7,860
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
|
|
|
(5,207
|
)
|
|
|
(20,109
|
)
|
|
|
(25,316
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
(56
|
)
|
|
|
(7,170
|
)
|
|
|
(7,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
(2,524
|
)
|
|
|
(1,012
|
)
|
|
|
(3,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Instruments
|
|
|
|
$
|
(2,524
|
)
|
|
$
|
(11,409
|
)
|
|
$
|
(13,933
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Distribution
|
|
|
Nonregulated
|
|
|
Total
|
|
|
|
|
|
(In thousands)
|
|
|
September 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
$
|
|
|
|
$
|
40,030
|
|
|
$
|
40,030
|
|
Noncurrent commodity contracts
|
|
Deferred charges and other assets
|
|
|
|
|
|
|
2,461
|
|
|
|
2,461
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
|
|
|
|
|
|
|
(56,575
|
)
|
|
|
(56,575
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
|
|
|
|
(9,222
|
)
|
|
|
(9,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
(23,306
|
)
|
|
|
(23,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
|
2,219
|
|
|
|
16,459
|
|
|
|
18,678
|
|
Noncurrent commodity contracts
|
|
Deferred charges and other assets
|
|
|
47
|
|
|
|
2,056
|
|
|
|
2,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
|
|
|
(48,942
|
)
|
|
|
(7,178
|
)
|
|
|
(56,120
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
(2,924
|
)
|
|
|
(405
|
)
|
|
|
(3,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
(49,600
|
)
|
|
|
10,932
|
|
|
|
(38,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Instruments
|
|
|
|
$
|
(49,600
|
)
|
|
$
|
(12,374
|
)
|
|
$
|
(61,974
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
Financial Instruments on the Income Statement
Hedge ineffectiveness for our nonregulated segment is recorded
as a component of unrealized gross profit and primarily results
from differences in the location and timing of the derivative
instrument and the hedged item. Hedge ineffectiveness could
materially affect our results of operations for the reported
period. For the three months ended June 30, 2011 and 2010
we recognized a gain arising from fair value and cash flow hedge
ineffectiveness of $5.8 million and $3.8 million. For
the nine months ended June 30, 2011 and 2010 we
13
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
recognized a gain arising from fair value and cash flow hedge
ineffectiveness of $23.3 million and $44.2 million.
Additional information regarding ineffectiveness recognized in
the income statement is included in the tables below.
Fair
Value Hedges
The impact of our nonregulated commodity contracts designated as
fair value hedges and the related hedged item on our condensed
consolidated income statement for the three and nine months
ended June 30, 2011 and 2010 is presented below.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Commodity contracts
|
|
$
|
7,837
|
|
|
$
|
(10,525
|
)
|
Fair value adjustment for natural gas inventory designated as
the hedged item
|
|
|
(1,781
|
)
|
|
|
14,678
|
|
|
|
|
|
|
|
|
|
|
Total impact on revenue
|
|
$
|
6,056
|
|
|
$
|
4,153
|
|
|
|
|
|
|
|
|
|
|
The impact on revenue is comprised of the following:
|
|
|
|
|
|
|
|
|
Basis ineffectiveness
|
|
$
|
853
|
|
|
$
|
(235
|
)
|
Timing ineffectiveness
|
|
|
5,203
|
|
|
|
4,388
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,056
|
|
|
$
|
4,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Commodity contracts
|
|
$
|
4,834
|
|
|
$
|
20,296
|
|
Fair value adjustment for natural gas inventory designated as
the hedged item
|
|
|
19,430
|
|
|
|
26,195
|
|
|
|
|
|
|
|
|
|
|
Total impact on revenue
|
|
$
|
24,264
|
|
|
$
|
46,491
|
|
|
|
|
|
|
|
|
|
|
The impact on revenue is comprised of the following:
|
|
|
|
|
|
|
|
|
Basis ineffectiveness
|
|
$
|
1,265
|
|
|
$
|
(684
|
)
|
Timing ineffectiveness
|
|
|
22,999
|
|
|
|
47,175
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,264
|
|
|
$
|
46,491
|
|
|
|
|
|
|
|
|
|
|
Basis ineffectiveness arises from natural gas market price
differences between the locations of the hedged inventory and
the delivery location specified in the hedge instruments. Timing
ineffectiveness arises due to changes in the difference between
the spot price and the futures price, as well as the difference
between the timing of the settlement of the futures and the
valuation of the underlying physical commodity. As the commodity
contract nears the settlement date,
spot-to-forward
price differences should converge, which should reduce or
eliminate the impact of this ineffectiveness on revenue.
14
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cash
Flow Hedges
The impact of cash flow hedges on our condensed consolidated
income statements for the three and nine months ended
June 30, 2011 and 2010 is presented below. Note that this
presentation does not reflect the financial impact arising from
the hedged physical transaction. Therefore, this presentation is
not indicative of the economic gross profit we realized when the
underlying physical and financial transactions were settled.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2011
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Loss reclassified from AOCI into revenue for effective portion
of commodity contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(3,907
|
)
|
|
$
|
(3,907
|
)
|
Loss arising from ineffective portion of commodity contracts
|
|
|
|
|
|
|
|
|
|
|
(281
|
)
|
|
|
(281
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on revenue
|
|
|
|
|
|
|
|
|
|
|
(4,188
|
)
|
|
|
(4,188
|
)
|
Loss on settled Treasury lock agreements reclassified from AOCI
into interest expense
|
|
|
(614
|
)
|
|
|
|
|
|
|
|
|
|
|
(614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impact from Cash Flow Hedges
|
|
$
|
(614
|
)
|
|
$
|
|
|
|
$
|
(4,188
|
)
|
|
$
|
(4,802
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2010
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Loss reclassified from AOCI into revenue for effective portion
of commodity contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(8,523
|
)
|
|
$
|
(8,523
|
)
|
Loss arising from ineffective portion of commodity contracts
|
|
|
|
|
|
|
|
|
|
|
(350
|
)
|
|
|
(350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on revenue
|
|
|
|
|
|
|
|
|
|
|
(8,873
|
)
|
|
|
(8,873
|
)
|
Loss on settled Treasury lock agreements reclassified from AOCI
into interest expense
|
|
|
(669
|
)
|
|
|
|
|
|
|
|
|
|
|
(669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impact from Cash Flow Hedges
|
|
$
|
(669
|
)
|
|
$
|
|
|
|
$
|
(8,873
|
)
|
|
$
|
(9,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, 2011
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Loss reclassified from AOCI into revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for effective portion of commodity contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(25,488
|
)
|
|
$
|
(25,488
|
)
|
Loss arising from ineffective portion of commodity contracts
|
|
|
|
|
|
|
|
|
|
|
(958
|
)
|
|
|
(958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on revenue
|
|
|
|
|
|
|
|
|
|
|
(26,446
|
)
|
|
|
(26,446
|
)
|
Loss on settled Treasury lock agreements reclassified from AOCI
into interest expense
|
|
|
(1,953
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,953
|
)
|
Gain on unwinding of Treasury lock reclassified from AOCI into
miscellaneous income
|
|
|
21,803
|
|
|
|
6,000
|
|
|
|
|
|
|
|
27,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impact from Cash Flow Hedges
|
|
$
|
19,850
|
|
|
$
|
6,000
|
|
|
$
|
(26,446
|
)
|
|
$
|
(596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, 2010
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Loss reclassified from AOCI into revenue for effective portion
of commodity contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(40,196
|
)
|
|
$
|
(40,196
|
)
|
Loss arising from ineffective portion of commodity contracts
|
|
|
|
|
|
|
|
|
|
|
(2,307
|
)
|
|
|
(2,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on revenue
|
|
|
|
|
|
|
|
|
|
|
(42,503
|
)
|
|
|
(42,503
|
)
|
Loss on settled Treasury lock agreements reclassified from AOCI
into interest expense
|
|
|
(2,008
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impact from Cash Flow Hedges
|
|
$
|
(2,008
|
)
|
|
$
|
|
|
|
$
|
(42,503
|
)
|
|
$
|
(44,511
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the gains and losses arising from
hedging transactions that were recognized as a component of
other comprehensive income (loss), net of taxes, for the three
and nine months ended June 30, 2011 and 2010. The amounts
included in the table below exclude gains and losses arising
from ineffectiveness because those amounts are immediately
recognized in the income statement as incurred.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Increase (decrease) in fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury lock agreements
|
|
$
|
(8,270
|
)
|
|
$
|
|
|
|
$
|
29,822
|
|
|
$
|
|
|
Forward commodity contracts
|
|
|
(2,668
|
)
|
|
|
2,722
|
|
|
|
(1,457
|
)
|
|
|
(19,829
|
)
|
Recognition of (gains) losses in earnings due to
settlements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury lock agreements
|
|
|
386
|
|
|
|
422
|
|
|
|
(16,286
|
)
|
|
|
1,265
|
|
Forward commodity contracts
|
|
|
2,383
|
|
|
|
5,199
|
|
|
|
15,547
|
|
|
|
24,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) from hedging, net of
tax(1)
|
|
$
|
(8,169
|
)
|
|
$
|
8,343
|
|
|
$
|
27,626
|
|
|
$
|
5,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Utilizing an income tax rate ranging from 37 percent to
39 percent based on the effective rates in each taxing
jurisdiction. |
Deferred gains (losses) recorded in AOCI associated with our
treasury lock agreements are recognized in earnings as they are
amortized, while deferred losses associated with commodity
contracts are recognized in earnings upon settlement. The
following amounts, net of deferred taxes, represent the expected
recognition in earnings of the deferred gains (losses) recorded
in AOCI associated with our financial instruments, based upon
the fair values of these financial instruments as of
June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
|
|
|
|
|
|
|
|
|
|
Lock
|
|
|
Commodity
|
|
|
|
|
|
|
Agreements
|
|
|
Contracts
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Next twelve months
|
|
$
|
(1,266
|
)
|
|
$
|
(3,905
|
)
|
|
$
|
(5,171
|
)
|
Thereafter
|
|
|
9,334
|
|
|
|
(4,114
|
)
|
|
|
5,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(1)
|
|
$
|
8,068
|
|
|
$
|
(8,019
|
)
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Utilizing an income tax rate ranging from 37 percent to
39 percent based on the effective rates in each taxing
jurisdiction. |
Financial
Instruments Not Designated as Hedges
The impact of financial instruments that have not been
designated as hedges on our condensed consolidated income
statements for the three months ended June 30, 2011 and
2010 was an increase (decrease) in revenue of
$(4.3) million and $0.7 million. For the nine months
ended June 30, 2011 and 2010 revenue increased
$3.9 million and $13.0 million. Note that this
presentation does not reflect the expected gains or losses
arising from the underlying physical transactions associated
with these financial instruments. Therefore, this presentation
is not indicative of the economic gross profit we realized when
the underlying physical and financial transactions were settled.
17
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As discussed above, financial instruments used in our natural
gas distribution segment are not designated as hedges. However,
there is no earnings impact on our natural gas distribution
segment as a result of the use of these financial instruments
because the gains and losses arising from the use of these
financial instruments are recognized in the consolidated
statement of income as a component of purchased gas cost when
the related costs are recovered through our rates and recognized
in revenue. Accordingly, the impact of these financial
instruments is excluded from this presentation.
|
|
4.
|
Fair
Value Measurements
|
We report certain assets and liabilities at fair value, which is
defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date (exit price). We
record cash and cash equivalents, accounts receivable and
accounts payable at carrying value, which substantially
approximates fair value due to the short-term nature of these
assets and liabilities. For other financial assets and
liabilities, we primarily use quoted market prices and other
observable market pricing information to minimize the use of
unobservable pricing inputs in our measurements when determining
fair value. The methods used to determine fair value for our
assets and liabilities are fully described in Note 2 to the
financial statements in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. During the
three and nine months ended June 30, 2011, there were no
changes in these methods.
Fair value measurements also apply to the valuation of our
pension and postretirement plan assets. Current accounting
guidance requires employers to annually disclose information
about fair value measurements of the assets of a defined benefit
pension or other postretirement plan. The fair value of these
assets is presented in Note 8 to the financial statements
in our Annual Report on
Form 10-K
for the fiscal year ending September 30, 2010.
Quantitative
Disclosures
Financial
Instruments
The classification of our fair value measurements requires
judgment regarding the degree to which market data are
observable or corroborated by observable market data.
Authoritative accounting literature establishes a fair value
hierarchy that prioritizes the inputs used to measure fair value
based on observable and unobservable data. The hierarchy
categorizes the inputs into three levels, with the highest
priority given to unadjusted quoted prices in active markets for
identical assets and liabilities (Level 1), with the lowest
priority given to unobservable inputs (Level 3). The
following tables summarize, by level within the fair value
hierarchy, our assets and liabilities that were accounted for at
fair value on a recurring basis as of June 30, 2011 and
18
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
September 30, 2010. Assets and liabilities are categorized
in their entirety based on the lowest level of input that is
significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Other
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
Netting and
|
|
|
|
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Cash
|
|
|
June 30,
|
|
|
|
(Level 1)
|
|
|
(Level
2)(1)
|
|
|
(Level 3)
|
|
|
Collateral(2)
|
|
|
2011
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
2,739
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,739
|
|
Nonregulated segment
|
|
|
3,696
|
|
|
|
34,367
|
|
|
|
|
|
|
|
(25,006
|
)
|
|
|
13,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments
|
|
|
3,696
|
|
|
|
37,106
|
|
|
|
|
|
|
|
(25,006
|
)
|
|
|
15,796
|
|
Hedged portion of gas stored underground
|
|
|
86,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,544
|
|
Available-for-sale
securities
|
|
|
44,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
134,285
|
|
|
$
|
37,106
|
|
|
$
|
|
|
|
$
|
(25,006
|
)
|
|
$
|
146,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
5,263
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,263
|
|
Nonregulated segment
|
|
|
10,645
|
|
|
|
38,827
|
|
|
|
|
|
|
|
(40,388
|
)
|
|
|
9,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
10,645
|
|
|
$
|
44,090
|
|
|
$
|
|
|
|
$
|
(40,388
|
)
|
|
$
|
14,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices in
|
|
|
Other
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
Netting and
|
|
|
|
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Cash
|
|
|
September 30,
|
|
|
|
(Level 1)
|
|
|
(Level
2)(1)
|
|
|
(Level 3)
|
|
|
Collateral(3)
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
2,266
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,266
|
|
Nonregulated segment
|
|
|
18,544
|
|
|
|
42,462
|
|
|
|
|
|
|
|
(41,760
|
)
|
|
|
19,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments
|
|
|
18,544
|
|
|
|
44,728
|
|
|
|
|
|
|
|
(41,760
|
)
|
|
|
21,512
|
|
Hedged portion of gas stored underground
|
|
|
57,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,507
|
|
Available-for-sale
securities
|
|
|
41,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
117,517
|
|
|
$
|
44,728
|
|
|
$
|
|
|
|
$
|
(41,760
|
)
|
|
$
|
120,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
51,866
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
51,866
|
|
Nonregulated segment
|
|
|
41,430
|
|
|
|
31,950
|
|
|
|
|
|
|
|
(66,649
|
)
|
|
|
6,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
41,430
|
|
|
$
|
83,816
|
|
|
$
|
|
|
|
$
|
(66,649
|
)
|
|
$
|
58,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Our Level 2 measurements primarily consist of
non-exchange-traded financial instruments, such as
over-the-counter
options and swaps where market data for pricing is observable.
The fair values for these assets and liabilities are determined
using a market-based approach in which observable market prices
are |
19
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
adjusted for criteria specific to each instrument, such as the
strike price, notional amount or basis differences. |
|
(2) |
|
This column reflects adjustments to our gross financial
instrument assets and liabilities to reflect netting permitted
under our master netting agreements and the relevant
authoritative accounting literature. In addition, as of
June 30, 2011, we had $15.4 million of cash held in
margin accounts to collateralize certain financial instruments.
Of this amount, $4.4 million was used to offset current
risk management liabilities under master netting arrangements
and the remaining $11.0 million is classified as current
risk management assets. |
|
(3) |
|
This column reflects adjustments to our gross financial
instrument assets and liabilities to reflect netting permitted
under our master netting agreements and the relevant
authoritative accounting literature. In addition, as of
September 30, 2010 we had $24.9 million of cash held
in margin accounts to collateralize certain financial
instruments. Of this amount, $12.6 million was used to
offset current risk management liabilities under master netting
arrangements and the remaining $12.3 million is classified
as current risk management assets. |
Nonrecurring
Fair Value Measurements
As discussed in Note 9, during the third quarter we
performed an impairment assessment of certain natural gas
gathering assets in our nonregulated segment. We used a
combination of a market and income approach in a weighted
average discounted cash flow analysis that included significant
inputs such as our weighted average cost of capital and
assumptions regarding future natural gas prices. This is a
Level 3 fair value measurement because the inputs used are
unobservable. Based on this analysis, we determined the assets
to be impaired. We reduced the carrying value of the assets to
their estimated fair value of approximately $6 million and
recorded a pre-tax noncash impairment loss of approximately
$11 million.
Other
Fair Value Measures
Our debt is recorded at carrying value. The fair value of our
debt is determined using third party market value quotations.
The following table presents the carrying value and fair value
of our debt as of June 30, 2011:
|
|
|
|
|
|
|
June 30,
|
|
|
2011
|
|
|
(In thousands)
|
|
Carrying Amount
|
|
$
|
2,212,630
|
|
Fair Value
|
|
$
|
2,474,064
|
|
|
|
5.
|
Discontinued
Operations
|
On May 12, 2011, we entered into a definitive agreement to
sell all of our natural gas distribution assets located in
Missouri, Illinois and Iowa to Liberty Energy (Midstates)
Corporation, an affiliate of Algonquin Power &
Utilities Corp. for an all cash price of approximately
$124 million. The agreement contains terms and conditions
customary for transactions of this type, including typical
adjustments to the purchase price at closing, if applicable. The
closing of the transaction is subject to the satisfaction of
customary conditions including the receipt of applicable
regulatory approvals.
As required under generally accepted accounting principles, the
operating results of our Missouri, Illinois and Iowa operations
have been aggregated and reported on the condensed consolidated
statements of income as income from discontinued operations, net
of income tax. Expenses related to general corporate overhead
and interest expense allocated to their operations are not
included in discontinued operations.
20
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tables below set forth selected financial and operational
information related to net assets and operating results related
to discontinued operations. Additionally, assets and liabilities
related to our Missouri, Illinois and Iowa operations are
classified as held for sale in other current assets
and liabilities in our condensed consolidated balance sheets at
June 30, 2011. Prior period revenues and expenses
associated with these assets have been reclassified into
discontinued operations. This reclassification had no impact on
previously reported net income.
The following table presents statement of income data related to
discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Operating revenues
|
|
$
|
11,524
|
|
|
$
|
8,952
|
|
|
$
|
71,047
|
|
|
$
|
62,121
|
|
Purchased gas cost
|
|
|
5,460
|
|
|
|
3,390
|
|
|
|
44,993
|
|
|
|
39,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
6,064
|
|
|
|
5,562
|
|
|
|
26,054
|
|
|
|
22,285
|
|
Operating expenses
|
|
|
4,472
|
|
|
|
3,712
|
|
|
|
12,919
|
|
|
|
11,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
1,592
|
|
|
|
1,850
|
|
|
|
13,135
|
|
|
|
10,631
|
|
Other nonoperating expense
|
|
|
(94
|
)
|
|
|
(75
|
)
|
|
|
(159
|
)
|
|
|
(264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before income taxes
|
|
|
1,498
|
|
|
|
1,775
|
|
|
|
12,976
|
|
|
|
10,367
|
|
Income tax expense
|
|
|
590
|
|
|
|
700
|
|
|
|
5,122
|
|
|
|
4,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
908
|
|
|
$
|
1,075
|
|
|
$
|
7,854
|
|
|
$
|
6,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents balance sheet data related to
assets held for sale.
|
|
|
|
|
|
|
June 30,
|
|
|
|
2011
|
|
|
|
(In thousands)
|
|
|
Net plant, property & equipment
|
|
$
|
126,375
|
|
Gas stored underground
|
|
|
5,938
|
|
Other current assets
|
|
|
431
|
|
Deferred charges and other assets
|
|
|
197
|
|
|
|
|
|
|
Assets held for sale
|
|
$
|
132,941
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
1,808
|
|
Other current liabilities
|
|
|
5,086
|
|
Regulatory cost of removal obligation
|
|
|
11,435
|
|
Deferred credits and other liabilities
|
|
|
810
|
|
|
|
|
|
|
Liabilities held for sale
|
|
$
|
19,139
|
|
|
|
|
|
|
21
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Long-term
debt
Long-term debt at June 30, 2011 and September 30, 2010
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Unsecured 7.375% Senior Notes, redeemed May 2011
|
|
$
|
|
|
|
$
|
350,000
|
|
Unsecured 10% Notes, due December 2011
|
|
|
2,303
|
|
|
|
2,303
|
|
Unsecured 5.125% Senior Notes, due 2013
|
|
|
250,000
|
|
|
|
250,000
|
|
Unsecured 4.95% Senior Notes, due 2014
|
|
|
500,000
|
|
|
|
500,000
|
|
Unsecured 6.35% Senior Notes, due 2017
|
|
|
250,000
|
|
|
|
250,000
|
|
Unsecured 8.50% Senior Notes, due 2019
|
|
|
450,000
|
|
|
|
450,000
|
|
Unsecured 5.95% Senior Notes, due 2034
|
|
|
200,000
|
|
|
|
200,000
|
|
Unsecured 5.50% Senior Notes, due 2041
|
|
|
400,000
|
|
|
|
|
|
Medium term notes
|
|
|
|
|
|
|
|
|
Series A,
1995-2,
6.27%, due December 2010
|
|
|
|
|
|
|
10,000
|
|
Series A,
1995-1,
6.67%, due 2025
|
|
|
10,000
|
|
|
|
10,000
|
|
Unsecured 6.75% Debentures, due 2028
|
|
|
150,000
|
|
|
|
150,000
|
|
Rental property term note due in installments through 2013
|
|
|
327
|
|
|
|
393
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
2,212,630
|
|
|
|
2,172,696
|
|
Less:
|
|
|
|
|
|
|
|
|
Original issue discount on unsecured senior notes and debentures
|
|
|
(4,090
|
)
|
|
|
(3,014
|
)
|
Current maturities
|
|
|
(2,434
|
)
|
|
|
(360,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,206,106
|
|
|
$
|
1,809,551
|
|
|
|
|
|
|
|
|
|
|
As noted above, our unsecured 10% notes will mature in
December 2011; accordingly, these have been classified within
the current maturities of long-term debt.
Our $350 million 7.375% senior notes were paid on
their maturity date on May 15, 2011, using funds drawn from
commercial paper. We replaced these senior notes on
June 10, 2011 with $400 million 5.50% senior
notes. The effective interest rate on these notes is
5.381 percent, after giving effect to offering costs and
the settlement of the $300 million Treasury locks discussed
in Note 3. The majority of the net proceeds of
approximately $394 million was used to repay
$350 million of outstanding commercial paper. The remainder
of the net proceeds was used for general corporate purposes.
Short-term
debt
Our short-term borrowing requirements are affected by the
seasonal nature of the natural gas business. Changes in the
price of natural gas and the amount of natural gas we need to
supply our customers needs could significantly affect our
borrowing requirements. Our short-term borrowings typically
reach their highest levels in the winter months.
Prior to the third quarter of fiscal 2011, we financed our
short-term borrowing requirements through a combination of a
$566.7 million commercial paper program and four committed
revolving credit facilities with third-party lenders that
provided approximately $1.0 billion of working capital
funding. On April 13, 2011, our $200 million
180-day
unsecured credit facility expired and was not replaced. On
May 2, 2011, we replaced our $566.7 million unsecured
credit facility with a new five-year $750 million unsecured
credit
22
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
facility with an accordion feature that could increase our
borrowing capacity to $1.0 billion. As a result of these
changes, we have $975 million of working capital funding
from our commercial paper program and three committed revolving
credit facilities with third-party lenders.
At June 30, 2011, there were no short-term debt borrowings
outstanding. At September 30, 2010, there was a total of
$126.1 million outstanding under our commercial paper
program. We also use intercompany credit facilities to
supplement the funding provided by these third-party committed
credit facilities. These facilities are described in greater
detail below.
Regulated
Operations
We fund our regulated operations as needed, primarily through
our commercial paper program and two committed revolving credit
facilities with third-party lenders that provide approximately
$775 million of working capital funding. The first facility
is a five-year $750 million unsecured credit facility,
expiring May 2016, that bears interest at a base rate or at a
LIBOR- based rate for the applicable interest period, plus a
spread ranging from zero percent to 2 percent, based on the
Companys credit ratings. This credit facility serves as a
backup liquidity facility for our commercial paper program. At
June 30, 2011, there were no borrowings under this facility
nor was there any commercial paper outstanding.
The second facility is a $25 million unsecured facility
that bears interest at a daily negotiated rate, generally based
on the Federal Funds rate plus a variable margin. This facility
was renewed effective April 1, 2011. At June 30, 2011,
there were no borrowings outstanding under this facility.
The availability of funds under these credit facilities is
subject to conditions specified in the respective credit
agreements, all of which we currently satisfy. These conditions
include our compliance with financial covenants and the
continued accuracy of representations and warranties contained
in these agreements. We are required by the financial covenants
in each of these facilities to maintain, at the end of each
fiscal quarter, a ratio of total debt to total capitalization of
no greater than 70 percent. At June 30, 2011, our
total-debt-to-total-capitalization ratio, as defined, was
51 percent. In addition, both the interest margin over the
Eurodollar rate and the fees that we pay on unused amounts under
each of these facilities are subject to adjustment depending
upon our credit ratings.
In addition to these third-party facilities, our regulated
operations have a $350 million intercompany revolving
credit facility with AEH. This facility bears interest at the
lower of (i) the one-month LIBOR rate plus
0.45 percent or (ii) the marginal borrowing rate
available to the Company on the date of borrowing. The marginal
borrowing rate is defined as the lower of (i) a rate based
upon the lower of the Prime Rate or the Eurodollar rate under
the five year revolving credit facility or (ii) the lowest
rate outstanding under the commercial paper program. Applicable
state regulatory commissions have approved our use of this
facility through December 31, 2011. There was
$173.8 million outstanding under this facility at
June 30, 2011.
Nonregulated
Operations
Atmos Energy Marketing, LLC (AEM), a wholly-owned subsidiary of
AEH has a three-year $200 million committed revolving
credit facility with a syndicate of third-party lenders with an
accordion feature that could increase AEMs borrowing
capacity to $500 million. The credit facility is primarily
used to issue letters of credit and, on a less frequent basis,
to borrow funds for gas purchases and other working capital
needs.
At AEMs option, borrowings made under the credit facility
are based on a base rate or an offshore rate, in each case plus
an applicable margin. The base rate is a floating rate equal to
the higher of: (a) 0.50 percent per annum above the
latest Federal Funds rate; (b) the per annum rate of
interest established by BNP Paribas from time to time as its
prime rate or base rate for
U.S. dollar loans; (c) an offshore rate (based on
LIBOR with a three-month interest period) as in effect from time
to time; or (d) the cost of funds rate which is
the cost of funds as reasonably determined by the administrative
agent. The offshore rate is a floating rate
23
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
equal to the higher of (a) an offshore rate based upon
LIBOR for the applicable interest period; or (b) a
cost of funds rate referred to above. In the case of
both base rate and offshore rate loans, the applicable margin
ranges from 1.875 percent to 2.25 percent per annum,
depending on the excess tangible net worth of AEM, as defined in
the credit facility. This facility has swing line loan features,
which allow AEM to borrow, on a same day basis, an amount
ranging from $6 million to $30 million based on the
terms of an election within the agreement. This facility is
collateralized by substantially all of the assets of AEM and is
guaranteed by AEH.
At June 30, 2011, there were no borrowings outstanding
under this credit facility. However, at June 30, 2011, AEM
letters of credit totaling $24.8 million had been issued
under the facility, which reduced the amount available by a
corresponding amount. The amount available under this credit
facility is also limited by various covenants, including
covenants based on working capital. Under the most restrictive
covenant, the amount available to AEM under this credit facility
was $125.2 million at June 30, 2011.
AEM is required by the financial covenants in this facility to
maintain a ratio of total liabilities to tangible net worth that
does not exceed a maximum of 5 to 1. At June 30, 2011,
AEMs ratio of total liabilities to tangible net worth, as
defined, was 1.34 to 1. Additionally, AEM must maintain minimum
levels of net working capital and net worth ranging from
$20 million to $40 million. As defined in the
financial covenants, at June 30, 2011, AEMs net
working capital was $139.5 million and its tangible net
worth was $150.9 million.
To supplement borrowings under this facility, AEH has a
$350 million intercompany demand credit facility with AEC,
which bears interest at a rate equal to the greater of
(i) the one-month LIBOR rate plus 3.00 percent or
(ii) the rate for AEMs offshore borrowings under its
committed credit facility plus 0.75 percent. Applicable
state regulatory commissions have approved our use of this
facility through December 31, 2011. There were no
borrowings outstanding under this facility at June 30, 2011.
Shelf
Registration
We have an effective shelf registration statement with the
Securities and Exchange Commission (SEC) that permits us to
issue a total of $1.3 billion in common stock
and/or debt
securities. The shelf registration statement has been approved
by all requisite state regulatory commissions. Due to certain
restrictions imposed by one state regulatory commission on our
ability to issue securities under the new registration
statement, we were able to issue a total of $950 million in
debt securities and $350 million in equity securities prior
to our $400 million senior notes offering in June 2011. At
June 30, 2011, $900 million remains available for
issuance. Of this amount, $550 million is available for the
issuance of debt securities and $350 million remains
available for the issuance of equity securities under the shelf
until March 2013.
Debt
Covenants
In addition to the financial covenants described above, our
credit facilities and public indentures contain usual and
customary covenants for our business, including covenants
substantially limiting liens, substantial asset sales and
mergers.
Additionally, our public debt indentures relating to our senior
notes and debentures, as well as our revolving credit
agreements, each contain a default provision that is triggered
if outstanding indebtedness arising out of any other credit
agreements in amounts ranging from in excess of $15 million
to in excess of $100 million becomes due by acceleration or
is not paid at maturity.
Further, AEMs credit agreement contains a cross-default
provision whereby AEM would be in default if it defaults on
other indebtedness, as defined, by at least $250 thousand in the
aggregate.
24
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Finally, AEMs credit agreement contains a provision that
would limit the amount of credit available if Atmos Energy were
downgraded below an S&P rating of BBB+ and a Moodys
rating of Baa1. We have no other triggering events in our debt
instruments that are tied to changes in specified credit ratings
or stock price, nor have we entered into any transactions that
would require us to issue equity, based on our credit rating or
other triggering events.
We were in compliance with all of our debt covenants as of
June 30, 2011. If we were unable to comply with our debt
covenants, we would likely be required to repay our outstanding
balances on demand, provide additional collateral or take other
corrective actions.
Since we have non-vested share-based payments with a
nonforfeitable right to dividends or dividend equivalents
(referred to as participating securities) we are required to use
the two-class method of computing earnings per share. The
Companys non-vested restricted stock and restricted stock
units, for which vesting is predicated solely on the passage of
time granted under the 1998 Long-Term Incentive Plan, are
considered to be participating securities. The calculation of
earnings per share using the two-class method excludes income
attributable to these participating securities from the
numerator and excludes the dilutive impact of those shares from
the denominator. Basic and diluted earnings per share for the
three and nine months ended June 30, 2011 and 2010 are
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Basic Earnings Per Share from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
(1,474
|
)
|
|
$
|
(4,229
|
)
|
|
$
|
197,786
|
|
|
$
|
198,029
|
|
Less: Income (loss) from continuing operations allocated to
participating securities
|
|
|
(32
|
)
|
|
|
(51
|
)
|
|
|
2,076
|
|
|
|
2,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available to common
shareholders
|
|
$
|
(1,442
|
)
|
|
$
|
(4,178
|
)
|
|
$
|
195,710
|
|
|
$
|
196,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
90,233
|
|
|
|
92,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
2.17
|
|
|
$
|
2.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
908
|
|
|
$
|
1,075
|
|
|
$
|
7,854
|
|
|
$
|
6,273
|
|
Less: Income from discontinued operations allocated to
participating securities
|
|
|
20
|
|
|
|
13
|
|
|
|
82
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations available to common
shareholders
|
|
$
|
888
|
|
|
$
|
1,062
|
|
|
$
|
7,772
|
|
|
$
|
6,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
90,233
|
|
|
|
92,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations per share Basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share Basic
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
2.26
|
|
|
$
|
2.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Diluted Earnings Per Share from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available to common
shareholders
|
|
$
|
(1,442
|
)
|
|
$
|
(4,178
|
)
|
|
$
|
195,710
|
|
|
$
|
196,011
|
|
Effect of dilutive stock options and other shares
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available to common
shareholders
|
|
$
|
(1,442
|
)
|
|
$
|
(4,178
|
)
|
|
$
|
195,714
|
|
|
$
|
196,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
90,233
|
|
|
|
92,513
|
|
Additional dilutive stock options and other shares
|
|
|
|
|
|
|
|
|
|
|
297
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
90,530
|
|
|
|
92,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
2.16
|
|
|
$
|
2.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations available to common
shareholders
|
|
$
|
888
|
|
|
$
|
1,062
|
|
|
$
|
7,772
|
|
|
$
|
6,209
|
|
Effect of dilutive stock options and other shares
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations available to common
shareholders
|
|
$
|
890
|
|
|
$
|
1,062
|
|
|
$
|
7,772
|
|
|
$
|
6,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
90,233
|
|
|
|
92,513
|
|
Additional dilutive stock options and other shares
|
|
|
|
|
|
|
|
|
|
|
297
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
90,127
|
|
|
|
92,648
|
|
|
|
90,530
|
|
|
|
92,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations per share Diluted
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
2.25
|
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were approximately 288,000 and 333,000 stock options and
other shares excluded from the computation of diluted earnings
per share for the three months ended June 30, 2011 and 2010
as their inclusion in the computation would be anti-dilutive.
There were no
out-of-the-money
stock options excluded from the computation of diluted earnings
per share for the three and nine months ended June 30, 2011
and 2010 as their exercise price was less than the average
market price of the common stock during that period.
On, July 1, 2010, we entered into an accelerated share
repurchase agreement with Goldman Sachs & Co. under
which we repurchased $100 million of our outstanding common
stock in order to offset stock grants made under our various
employee and director incentive compensation plans. We paid
$100 million to Goldman Sachs & Co. on
July 7, 2010 for shares of Atmos Energy common stock in a
share forward transaction and received and retired
2,958,580 shares. On March 4, 2011, we received and
retired an additional 375,468 common shares which concluded our
share repurchase agreement. In total, we received and retired
3,334,048 common shares under the repurchase agreement. The
final number of shares we ultimately repurchased in the
transaction was based generally on the average of the daily
volume-weighted average share price of our common stock over the
duration of the agreement. As a result of this transaction,
beginning in our fourth quarter of fiscal 2010, the number of
outstanding shares used to calculate our earnings per share was
26
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
reduced by the number of shares received and the
$100 million purchase price was recorded as a reduction in
shareholders equity.
|
|
8.
|
Interim
Pension and Other Postretirement Benefit Plan
Information
|
The components of our net periodic pension cost for our pension
and other postretirement benefit plans for the three and nine
months ended June 30, 2011 and 2010 are presented in the
following table. Most of these costs are recoverable through our
gas distribution rates; however, a portion of these costs is
capitalized into our gas distribution rate base. The remaining
costs are recorded as a component of operation and maintenance
expense.
In August 2010, the Board of Directors of Atmos Energy approved
a proposal to close the Pension Account Plan (PAP) to new
participants, effective October 1, 2010. Employees
participating in the PAP as of October 1, 2010 were allowed
to make a one-time election to migrate from the PAP into our
defined contribution plan with enhanced features, effective
January 1, 2011. Participants who chose to remain in the
PAP will continue to earn benefits and interest allocations with
no changes to their existing benefits. During the election
period, a limited number of participants chose to join the new
plan, which resulted in an immaterial curtailment gain and a
revaluation of the net periodic pension cost for the remainder
of fiscal 2011. The curtailment gain was recorded in our second
fiscal quarter. The revaluation of the net periodic pension cost
resulted in an increase in the discount rate, effective
January 1, 2011 to 5.68 percent, which will reduce our
net periodic pension cost by approximately $1.8 million for
the remainder of the fiscal year. All other actuarial
assumptions remained unchanged.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Components of net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
4,257
|
|
|
$
|
3,993
|
|
|
$
|
3,601
|
|
|
$
|
3,360
|
|
Interest cost
|
|
|
7,055
|
|
|
|
6,524
|
|
|
|
3,204
|
|
|
|
3,018
|
|
Expected return on assets
|
|
|
(6,285
|
)
|
|
|
(6,320
|
)
|
|
|
(681
|
)
|
|
|
(615
|
)
|
Amortization of transition asset
|
|
|
|
|
|
|
|
|
|
|
377
|
|
|
|
377
|
|
Amortization of prior service cost
|
|
|
(106
|
)
|
|
|
(193
|
)
|
|
|
(362
|
)
|
|
|
(375
|
)
|
Amortization of actuarial loss
|
|
|
2,748
|
|
|
|
2,822
|
|
|
|
87
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
7,669
|
|
|
$
|
6,826
|
|
|
$
|
6,226
|
|
|
$
|
5,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2011
|
|
|
2010
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Components of net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
12,894
|
|
|
$
|
11,982
|
|
|
$
|
10,803
|
|
|
$
|
10,077
|
|
Interest cost
|
|
|
21,034
|
|
|
|
19,569
|
|
|
|
9,610
|
|
|
|
9,051
|
|
Expected return on assets
|
|
|
(18,533
|
)
|
|
|
(18,960
|
)
|
|
|
(2,045
|
)
|
|
|
(1,845
|
)
|
Amortization of transition asset
|
|
|
|
|
|
|
|
|
|
|
1,133
|
|
|
|
1,134
|
|
Amortization of prior service cost
|
|
|
(323
|
)
|
|
|
(582
|
)
|
|
|
(1,087
|
)
|
|
|
(1,125
|
)
|
Amortization of actuarial loss
|
|
|
8,990
|
|
|
|
8,469
|
|
|
|
260
|
|
|
|
282
|
|
Curtailment gain
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
24,022
|
|
|
$
|
20,478
|
|
|
$
|
18,674
|
|
|
$
|
17,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The assumptions used to develop our net periodic pension cost
for the three and nine months ended June 30, 2011 and 2010
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Other
|
|
|
|
|
Account Plan
|
|
Pension Benefits
|
|
Other Benefits
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Discount rate
|
|
|
5.68
|
%
|
|
|
5.52
|
%
|
|
|
5.39
|
%
|
|
|
5.52
|
%
|
|
|
5.39
|
%
|
|
|
5.52
|
%
|
Rate of compensation increase
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
|
|
4.00
|
%
|
Expected return on plan assets
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
8.25
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
The discount rate used to compute the present value of a
plans liabilities generally is based on rates of
high-grade corporate bonds with maturities similar to the
average period over which the benefits will be paid. Generally,
our funding policy has been to contribute annually an amount in
accordance with the requirements of the Employee Retirement
Income Security Act of 1974. In accordance with the Pension
Protection Act of 2006 (PPA), we determined the funded status of
our plans as of January 1, 2011. Based upon this valuation,
we will be required to contribute less than $2 million to
our pension plans during fiscal 2011.
We contributed $8.7 million to our other post-retirement
benefit plans during the nine months ended June 30, 2011.
We expect to contribute a total of approximately
$12 million to these plans during fiscal 2011.
For our Supplemental Executive Retirement Plans, we own equity
securities that are classified as
available-for-sale
securities. These securities are reported at market value with
unrealized gains and losses shown as a component of accumulated
other comprehensive income (loss). We regularly evaluate the
performance of these investments on a fund by fund basis for
impairment, taking into consideration the funds purpose,
volatility and current returns. If a determination is made that
a decline in fair value is other than temporary, the related
fund is written down to its estimated fair value and the
other-than-temporary
impairment is recognized in the income statement.
Assets for the supplemental plans are held in separate rabbi
trusts and comprise the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gain
|
|
|
Loss
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
As of June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity mutual funds
|
|
$
|
27,593
|
|
|
$
|
7,627
|
|
|
$
|
|
|
|
$
|
35,220
|
|
Foreign equity mutual funds
|
|
|
4,597
|
|
|
|
1,416
|
|
|
|
|
|
|
|
6,013
|
|
Money market funds
|
|
|
2,812
|
|
|
|
|
|
|
|
|
|
|
|
2,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,002
|
|
|
$
|
9,043
|
|
|
$
|
|
|
|
$
|
44,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity mutual funds
|
|
$
|
29,540
|
|
|
$
|
5,698
|
|
|
$
|
|
|
|
$
|
35,238
|
|
Foreign equity mutual funds
|
|
|
4,753
|
|
|
|
976
|
|
|
|
|
|
|
|
5,729
|
|
Money market funds
|
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,792
|
|
|
$
|
6,674
|
|
|
$
|
|
|
|
$
|
41,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Commitments
and Contingencies
|
Litigation
and Environmental Matters
With respect to the specific litigation and
environmental-related matters or claims that were disclosed in
Note 12 to the financial statements in our Annual Report on
Form 10-K
for the fiscal year ended September 30,
28
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2010, except as noted below, there were no material changes in
the status of such litigation and environmental-related matters
or claims during the nine months ended June 30, 2011. We
continue to believe that the final outcome of such litigation
and environmental-related matters or claims will not have a
material adverse effect on our financial condition, results of
operations or cash flows.
Since April 2009, Atmos Energy and two subsidiaries of AEH, AEM
and Atmos Gathering Company, LLC (AGC) (collectively, the Atmos
Entities), have been involved in a lawsuit filed in the Circuit
Court of Edmonson County, Kentucky related to our Park City
Gathering Project. The dispute which gave rise to the litigation
involves the amount of royalties due from a third party producer
to landowners (who own the mineral rights) for natural gas
produced from the landowners properties. The third party
producer was operating pursuant to leases between the landowners
and certain investors/working interest owners. The third party
producer filed a petition in bankruptcy, which was subsequently
dismissed due to the lack of meaningful assets to reorganize or
liquidate.
Although certain Atmos Energy companies entered into contracts
with the third party producer to gather, treat and ultimately
sell natural gas produced from the landowners properties,
no Atmos Energy company had a contractual relationship with the
landowners or the investors/working interest owners. After the
lawsuit was filed, the landowners were successful in terminating
for non-payment of royalties the leases related to the
production of natural gas from their properties. Subsequent to
termination, the investors/working interest owners under such
leases filed additional claims against us for the termination of
the leases.
During the trial, the landowners and the investors/working
interest owners requested an award of compensatory damages plus
punitive damages against us. On December 17, 2010, the jury
returned a verdict in favor of the landowners and
investor/working interest owners and awarded compensatory
damages of $3.8 million and punitive damages of
$27.5 million payable by Atmos Energy and the two AEH
subsidiaries.
A hearing was held on February 28, 2011 to hear a number of
motions, including a motion to dismiss the jury verdict and a
motion for a new trial. The motions to dismiss the jury verdict
and for a new trial were denied. However, the total punitive
damages award was reduced from $27.5 million to
$24.7 million. On March 30, 2011, we filed a notice of
appeal of this ruling. We strongly believe that the trial court
erred in not granting our motion to dismiss the lawsuit prior to
trial and that the verdict is unsupported by law. After
consultation with counsel, we believe that it is probable that
any judgment based on this verdict will be overturned on appeal.
In addition, in a related development, on July 12, 2011,
the Atmos Entities filed a lawsuit in the United States
District Court, Western District of Kentucky against the third
party producer and its affiliates to recover all costs,
including attorneys fees, incurred by the Atmos Entities,
which are associated with the defense and appeal of the case
discussed above as well as for all damages awarded to the
plaintiffs in such case against the Atmos Entities. The total
amount of damages being claimed in the lawsuit is
open-ended since the appellate process and related
costs are ongoing. This lawsuit is based upon the
indemnification provisions agreed to by the third party producer
in favor of Atmos Gathering that are contained in an agreement
entered into between Atmos Gathering and the third party
producer in May 2009.
We have accrued what we believe is an adequate amount for the
anticipated resolution of this matter; however, the amount
accrued does not reflect the amount of the verdict. The Company
does not have insurance coverage that could mitigate any losses
that may arise from the resolution of this matter; however, we
believe that the final outcome will not have a material adverse
effect on our financial condition, results of operations or cash
flows.
In addition, we are involved in other litigation and
environmental-related matters or claims that arise in the
ordinary course of our business. While the ultimate results of
such litigation and response actions to such
environmental-related matters or claims cannot be predicted with
certainty, we believe the final outcome of
29
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
such litigation and response actions will not have a material
adverse effect on our financial condition, results of operations
or cash flows.
Purchase
Commitments
AEH has commitments to purchase physical quantities of natural
gas under contracts indexed to the forward NYMEX strip or fixed
price contracts. At June 30, 2011, AEH was committed to
purchase 104.5 Bcf within one year, 52.4 Bcf within
one to three years and 2.4 Bcf after three years under
indexed contracts. AEH is committed to purchase 2.6 Bcf
within one year and 0.2 Bcf within one to three years under
fixed price contracts with prices ranging from $4.13 to $6.36
per Mcf. Purchases under these contracts totaled
$356.8 million and $315.6 million for the three months
ended June 30, 2011 and 2010 and $1,130.0 million and
$1,208.4 million for the nine months ended June 30,
2011 and 2010.
Our natural gas distribution divisions, except for our Mid-Tex
Division, maintain supply contracts with several vendors that
generally cover a period of up to one year. Commitments for
estimated base gas volumes are established under these contracts
on a monthly basis at contractually negotiated prices.
Commitments for incremental daily purchases are made as
necessary during the month in accordance with the terms of the
individual contract.
Our Mid-Tex Division maintains long-term supply contracts to
ensure a reliable source of gas for our customers in its service
area which obligate it to purchase specified volumes at market
and fixed prices. The estimated commitments under these
contracts as of June 30, 2011 are as follows (in thousands):
|
|
|
|
|
2011
|
|
$
|
52,703
|
|
2012
|
|
|
307,694
|
|
2013
|
|
|
112,319
|
|
2014
|
|
|
86,994
|
|
2015
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
$
|
559,710
|
|
|
|
|
|
|
Our nonregulated segment maintains long-term contracts related
to storage and transportation. The estimated contractual demand
fees for contracted storage and transportation under these
contracts are detailed in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. There were no
material changes to the estimated storage and transportation
fees for the nine months ended June 30, 2011.
Regulatory
Matters
As previously described in Note 12 to the consolidated
financial statements in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010, in December
2007, the Company received data requests from the Division of
Investigations of the Office of Enforcement of the Federal
Energy Regulatory Commission (the Commission) in
connection with its investigation into possible violations of
the Commissions posting and competitive bidding
regulations for pre-arranged released firm capacity on natural
gas pipelines. There have been no material developments in this
matter during the nine months ended June 30, 2011. We have
accrued what we believe is an adequate amount for the
anticipated resolution of this proceeding. While the ultimate
resolution of this investigation cannot be predicted with
certainty, we believe that the final outcome will not have a
material adverse effect on our financial condition, results of
operations or cash flows.
We have been replacing certain steel service lines in our
Mid-Tex Division since our acquisition of the natural gas
distribution system in 2004. Since early 2010, we have been
discussing the financial and
30
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
operational details of an accelerated steel service line
replacement program with representatives of 440 municipalities
served by our Mid-Tex Division. As previously discussed in
Note 12 to the consolidated financial statements in our
Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010, all of the
cities in our Mid-Tex Division have agreed to a program of
installing 100,000 replacements during the next two years, with
approved recovery of the associated return, depreciation and
taxes. Under the terms of the agreement, the accelerated
replacement program commenced in the first quarter of fiscal
2011, replacing 25,311 lines for a cost of $34.0 million as
of June 30, 2011. The program is progressing on schedule
for completion in September 2012.
In July 2010, the Dodd-Frank Act was enacted, representing an
extensive overhaul of the framework for regulation of
U.S. financial markets. The Dodd-Frank Act calls for
various regulatory agencies, including the SEC and the
Commodities Futures Trading Commission, to establish regulations
for implementation of many of the provisions of the Dodd-Frank
Act, which we expect will provide additional clarity regarding
the extent of the impact of this legislation on us. The costs of
participating in financial markets for hedging certain risks
inherent in our business may be increased as a result of the new
legislation. We may also incur additional costs associated with
compliance with new regulations and anticipate additional
reporting and disclosure obligations.
As of June 30, 2011, administrative reviews of our rate
review mechanisms in our Mid-Tex and West Texas service areas
were in progress and a gas reliability infrastructure program
(GRIP) filing was in progress in our Atmos Pipeline
Texas service area. In addition, there were other ratemaking
activities in progress in our Kentucky/Mid-States, West Texas
and Louisiana service areas. These regulatory proceedings are
discussed in further detail below in Managements
Discussion and Analysis Recent Ratemaking
Developments and Regulated Transmission and Storage
Segment.
Other
Matters
AGC owns and operates the Park City and Shrewsbury gathering
systems in Kentucky. The Park City gathering system consists of
a 23-mile
low pressure pipeline and a nitrogen removal unit that was
constructed in 2008. The Shrewsbury production, gathering and
processing assets were acquired in 2008 at which time we sold
the production assets to a third party. As a result of the sale
of the production assets, we obtained a
10-year
production payment note under which we are to be paid from
future production generated from the assets.
As noted above, AGC is involved in an ongoing lawsuit with the
Park City gathering system. Due to the lawsuit and a low natural
gas price environment, the assets have generated operating
losses. As a result of these developments, we performed an
impairment assessment of these assets during the third fiscal
quarter and determined the assets to be impaired. We reduced the
carrying value of the assets to their estimated fair value based
on the results of a weighted average discounted cash flow
analysis and recorded a pretax noncash impairment loss of
$11.0 million.
As we previously discussed in Note 9 to the consolidated
financial statements in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010, in February
2008, Atmos Pipeline and Storage, LLC, a subsidiary of AEH,
announced plans to construct and operate a salt-cavern storage
project in Franklin Parish, Louisiana. In March 2010, we entered
into an option and acquisition agreement with a third party,
which provided the third party with the exclusive option to
develop the proposed Fort Necessity salt-dome natural gas
storage project. In July 2010, we agreed with the third party to
extend the option period to March 2011. In January 2011, the
third party developer notified us that it did not plan to
commence the activities required to allow it to exercise the
option by March 2011; accordingly, the option was terminated. We
evaluated our strategic alternatives and concluded the
projects returns did not meet our investment objectives.
Accordingly, in March 2011, we recorded a $19.3 million
pretax noncash impairment loss to write off substantially all of
our investment in the project.
31
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
10.
|
Concentration
of Credit Risk
|
Information regarding our concentration of credit risk is
disclosed in Note 14 to the financial statements in our
Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. During the
nine months ended June 30, 2011, there were no material
changes in our concentration of credit risk.
Through November 30, 2010, our operations were divided into
four segments:
|
|
|
|
|
The natural gas distribution segment, which included our
regulated natural gas distribution and related sales operations.
|
|
|
|
The regulated transmission and storage segment, which
included the regulated pipeline and storage operations of our
Atmos Pipeline Texas Division.
|
|
|
|
The natural gas marketing segment, which included a
variety of nonregulated natural gas management services.
|
|
|
|
The pipeline, storage and other segment, which included
our nonregulated natural gas gathering transmission and storage
services.
|
As a result of the appointment of a new CEO effective
October 1, 2010, during the first quarter of fiscal 2011,
we revised the information used by the chief operating decision
maker to manage the Company. As a result of this change,
effective December 1, 2010, we began dividing our
operations into the following three segments:
|
|
|
|
|
The natural gas distribution segment, remains unchanged
and includes our regulated natural gas distribution and related
sales operations.
|
|
|
|
The regulated transmission and storage segment, remains
unchanged and includes the regulated pipeline and storage
operations of our Atmos Pipeline Texas Division.
|
|
|
|
The nonregulated segment, is comprised of our
nonregulated natural gas management, nonregulated natural gas
transmission, storage and other services which were previously
reported in the natural gas marketing and pipeline, storage and
other segments.
|
Our determination of reportable segments considers the strategic
operating units under which we manage sales of various products
and services to customers in differing regulatory environments.
Although our natural gas distribution segment operations are
geographically dispersed, they are reported as a single segment
as each natural gas distribution division has similar economic
characteristics. The accounting policies of the segments are the
same as those described in the summary of significant accounting
policies found in our Annual Report on
Form 10-K
for the fiscal year ended September 30, 2010. We evaluate
performance based on net income or loss of the respective
operating units.
32
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income statements for the three and nine month periods ended
June 30, 2011 and 2010 by segment are presented in the
following tables. Prior-year amounts have been restated to
reflect the new operating segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2011
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Operating revenues from external parties
|
|
$
|
406,817
|
|
|
$
|
19,772
|
|
|
$
|
417,026
|
|
|
$
|
|
|
|
$
|
843,615
|
|
Intersegment revenues
|
|
|
214
|
|
|
|
33,798
|
|
|
|
74,259
|
|
|
|
(108,271
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407,031
|
|
|
|
53,570
|
|
|
|
491,285
|
|
|
|
(108,271
|
)
|
|
|
843,615
|
|
Purchased gas cost
|
|
|
206,839
|
|
|
|
|
|
|
|
477,880
|
|
|
|
(107,909
|
)
|
|
|
576,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
200,192
|
|
|
|
53,570
|
|
|
|
13,405
|
|
|
|
(362
|
)
|
|
|
266,805
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
86,804
|
|
|
|
18,786
|
|
|
|
7,437
|
|
|
|
(362
|
)
|
|
|
112,665
|
|
Depreciation and amortization
|
|
|
49,099
|
|
|
|
6,790
|
|
|
|
1,043
|
|
|
|
|
|
|
|
56,932
|
|
Taxes, other than income
|
|
|
47,534
|
|
|
|
3,729
|
|
|
|
879
|
|
|
|
|
|
|
|
52,142
|
|
Asset impairments
|
|
|
|
|
|
|
|
|
|
|
10,988
|
|
|
|
|
|
|
|
10,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
183,437
|
|
|
|
29,305
|
|
|
|
20,347
|
|
|
|
(362
|
)
|
|
|
232,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
16,755
|
|
|
|
24,265
|
|
|
|
(6,942
|
)
|
|
|
|
|
|
|
34,078
|
|
Miscellaneous income (expense)
|
|
|
(1,153
|
)
|
|
|
(312
|
)
|
|
|
168
|
|
|
|
(133
|
)
|
|
|
(1,430
|
)
|
Interest charges
|
|
|
28,042
|
|
|
|
7,653
|
|
|
|
283
|
|
|
|
(133
|
)
|
|
|
35,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(12,440
|
)
|
|
|
16,300
|
|
|
|
(7,057
|
)
|
|
|
|
|
|
|
(3,197
|
)
|
Income tax expense (benefit)
|
|
|
(4,311
|
)
|
|
|
5,748
|
|
|
|
(3,160
|
)
|
|
|
|
|
|
|
(1,723
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(8,129
|
)
|
|
|
10,552
|
|
|
|
(3,897
|
)
|
|
|
|
|
|
|
(1,474
|
)
|
Income from discontinued operations, net of tax
|
|
|
908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(7,221
|
)
|
|
$
|
10,552
|
|
|
$
|
(3,897
|
)
|
|
$
|
|
|
|
$
|
(566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
121,452
|
|
|
$
|
20,239
|
|
|
$
|
1,929
|
|
|
$
|
|
|
|
$
|
143,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2010
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Operating revenues from external parties
|
|
$
|
396,097
|
|
|
$
|
22,796
|
|
|
$
|
342,412
|
|
|
$
|
|
|
|
$
|
761,305
|
|
Intersegment revenues
|
|
|
222
|
|
|
|
22,161
|
|
|
|
84,993
|
|
|
|
(107,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,319
|
|
|
|
44,957
|
|
|
|
427,405
|
|
|
|
(107,376
|
)
|
|
|
761,305
|
|
Purchased gas cost
|
|
|
204,988
|
|
|
|
|
|
|
|
415,634
|
|
|
|
(106,983
|
)
|
|
|
513,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
191,331
|
|
|
|
44,957
|
|
|
|
11,771
|
|
|
|
(393
|
)
|
|
|
247,666
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
87,323
|
|
|
|
16,050
|
|
|
|
8,579
|
|
|
|
(393
|
)
|
|
|
111,559
|
|
Depreciation and amortization
|
|
|
45,633
|
|
|
|
5,171
|
|
|
|
1,136
|
|
|
|
|
|
|
|
51,940
|
|
Taxes, other than income
|
|
|
47,946
|
|
|
|
3,010
|
|
|
|
952
|
|
|
|
|
|
|
|
51,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
180,902
|
|
|
|
24,231
|
|
|
|
10,667
|
|
|
|
(393
|
)
|
|
|
215,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10,429
|
|
|
|
20,726
|
|
|
|
1,104
|
|
|
|
|
|
|
|
32,259
|
|
Miscellaneous income (expense)
|
|
|
(72
|
)
|
|
|
94
|
|
|
|
511
|
|
|
|
(1,331
|
)
|
|
|
(798
|
)
|
Interest charges
|
|
|
29,019
|
|
|
|
7,667
|
|
|
|
1,912
|
|
|
|
(1,331
|
)
|
|
|
37,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(18,662
|
)
|
|
|
13,153
|
|
|
|
(297
|
)
|
|
|
|
|
|
|
(5,806
|
)
|
Income tax expense (benefit)
|
|
|
(6,685
|
)
|
|
|
4,688
|
|
|
|
420
|
|
|
|
|
|
|
|
(1,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(11,977
|
)
|
|
|
8,465
|
|
|
|
(717
|
)
|
|
|
|
|
|
|
(4,229
|
)
|
Income from discontinued operations, net of tax
|
|
|
1,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(10,902
|
)
|
|
$
|
8,465
|
|
|
$
|
(717
|
)
|
|
$
|
|
|
|
$
|
(3,154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
106,394
|
|
|
$
|
22,964
|
|
|
$
|
362
|
|
|
$
|
|
|
|
$
|
129,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, 2011
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Operating revenues from external parties
|
|
$
|
2,187,256
|
|
|
$
|
62,602
|
|
|
$
|
1,308,516
|
|
|
$
|
|
|
|
$
|
3,558,374
|
|
Intersegment revenues
|
|
|
651
|
|
|
|
94,951
|
|
|
|
241,940
|
|
|
|
(337,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,187,907
|
|
|
|
157,553
|
|
|
|
1,550,456
|
|
|
|
(337,542
|
)
|
|
|
3,558,374
|
|
Purchased gas cost
|
|
|
1,317,775
|
|
|
|
|
|
|
|
1,491,815
|
|
|
|
(336,413
|
)
|
|
|
2,473,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
870,132
|
|
|
|
157,553
|
|
|
|
58,641
|
|
|
|
(1,129
|
)
|
|
|
1,085,197
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
268,299
|
|
|
|
49,591
|
|
|
|
24,556
|
|
|
|
(1,129
|
)
|
|
|
341,317
|
|
Depreciation and amortization
|
|
|
145,548
|
|
|
|
18,387
|
|
|
|
3,241
|
|
|
|
|
|
|
|
167,176
|
|
Taxes, other than income
|
|
|
132,070
|
|
|
|
11,395
|
|
|
|
2,403
|
|
|
|
|
|
|
|
145,868
|
|
Asset impairments
|
|
|
|
|
|
|
|
|
|
|
30,270
|
|
|
|
|
|
|
|
30,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
545,917
|
|
|
|
79,373
|
|
|
|
60,470
|
|
|
|
(1,129
|
)
|
|
|
684,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
324,215
|
|
|
|
78,180
|
|
|
|
(1,829
|
)
|
|
|
|
|
|
|
400,566
|
|
Miscellaneous income
|
|
|
18,305
|
|
|
|
5,267
|
|
|
|
764
|
|
|
|
(290
|
)
|
|
|
24,046
|
|
Interest charges
|
|
|
87,344
|
|
|
|
23,802
|
|
|
|
1,759
|
|
|
|
(290
|
)
|
|
|
112,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
255,176
|
|
|
|
59,645
|
|
|
|
(2,824
|
)
|
|
|
|
|
|
|
311,997
|
|
Income tax expense (benefit)
|
|
|
94,323
|
|
|
|
21,252
|
|
|
|
(1,364
|
)
|
|
|
|
|
|
|
114,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
160,853
|
|
|
|
38,393
|
|
|
|
(1,460
|
)
|
|
|
|
|
|
|
197,786
|
|
Income from discontinued operations, net of tax
|
|
|
7,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
168,707
|
|
|
$
|
38,393
|
|
|
$
|
(1,460
|
)
|
|
$
|
|
|
|
$
|
205,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
340,713
|
|
|
$
|
44,796
|
|
|
$
|
4,774
|
|
|
$
|
|
|
|
$
|
390,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, 2010
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Operating revenues from external parties
|
|
$
|
2,511,350
|
|
|
$
|
64,281
|
|
|
$
|
1,365,623
|
|
|
$
|
|
|
|
$
|
3,941,254
|
|
Intersegment revenues
|
|
|
682
|
|
|
|
82,717
|
|
|
|
286,830
|
|
|
|
(370,229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,512,032
|
|
|
|
146,998
|
|
|
|
1,652,453
|
|
|
|
(370,229
|
)
|
|
|
3,941,254
|
|
Purchased gas cost
|
|
|
1,657,412
|
|
|
|
|
|
|
|
1,556,746
|
|
|
|
(369,017
|
)
|
|
|
2,845,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
854,620
|
|
|
|
146,998
|
|
|
|
95,707
|
|
|
|
(1,212
|
)
|
|
|
1,096,113
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
266,847
|
|
|
|
53,877
|
|
|
|
28,946
|
|
|
|
(1,212
|
)
|
|
|
348,458
|
|
Depreciation and amortization
|
|
|
137,580
|
|
|
|
15,395
|
|
|
|
3,226
|
|
|
|
|
|
|
|
156,201
|
|
Taxes, other than income
|
|
|
140,234
|
|
|
|
9,226
|
|
|
|
3,380
|
|
|
|
|
|
|
|
152,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
544,661
|
|
|
|
78,498
|
|
|
|
35,552
|
|
|
|
(1,212
|
)
|
|
|
657,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
309,959
|
|
|
|
68,500
|
|
|
|
60,155
|
|
|
|
|
|
|
|
438,614
|
|
Miscellaneous income (expense)
|
|
|
1,474
|
|
|
|
117
|
|
|
|
1,524
|
|
|
|
(4,020
|
)
|
|
|
(905
|
)
|
Interest charges
|
|
|
87,877
|
|
|
|
23,589
|
|
|
|
8,035
|
|
|
|
(4,020
|
)
|
|
|
115,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
223,556
|
|
|
|
45,028
|
|
|
|
53,644
|
|
|
|
|
|
|
|
322,228
|
|
Income tax expense
|
|
|
86,552
|
|
|
|
16,039
|
|
|
|
21,608
|
|
|
|
|
|
|
|
124,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
137,004
|
|
|
|
28,989
|
|
|
|
32,036
|
|
|
|
|
|
|
|
198,029
|
|
Income from discontinued operations, net of tax
|
|
|
6,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
143,277
|
|
|
$
|
28,989
|
|
|
$
|
32,036
|
|
|
$
|
|
|
|
$
|
204,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
302,621
|
|
|
$
|
56,786
|
|
|
$
|
2,942
|
|
|
$
|
|
|
|
$
|
362,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Balance sheet information at June 30, 2011 and
September 30, 2010 by segment is presented to reflect our
business structure as of June 30, 2011 in the following
tables. Prior-year amounts have been restated accordingly.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2011
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Property, plant and equipment, net
|
|
$
|
4,085,081
|
|
|
$
|
771,777
|
|
|
$
|
59,193
|
|
|
$
|
|
|
|
$
|
4,916,051
|
|
Investment in subsidiaries
|
|
|
671,885
|
|
|
|
|
|
|
|
(2,096
|
)
|
|
|
(669,789
|
)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
39,446
|
|
|
|
|
|
|
|
77,983
|
|
|
|
|
|
|
|
117,429
|
|
Assets from risk management activities
|
|
|
1,972
|
|
|
|
|
|
|
|
13,041
|
|
|
|
|
|
|
|
15,013
|
|
Other current assets
|
|
|
565,265
|
|
|
|
15,822
|
|
|
|
469,576
|
|
|
|
(193,357
|
)
|
|
|
857,306
|
|
Intercompany receivables
|
|
|
505,709
|
|
|
|
|
|
|
|
|
|
|
|
(505,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,112,392
|
|
|
|
15,822
|
|
|
|
560,600
|
|
|
|
(699,066
|
)
|
|
|
989,748
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
363
|
|
|
|
|
|
|
|
363
|
|
Goodwill
|
|
|
572,262
|
|
|
|
132,341
|
|
|
|
34,711
|
|
|
|
|
|
|
|
739,314
|
|
Noncurrent assets from risk management activities
|
|
|
767
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
783
|
|
Deferred charges and other assets
|
|
|
319,019
|
|
|
|
16,137
|
|
|
|
12,055
|
|
|
|
|
|
|
|
347,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,761,406
|
|
|
$
|
936,077
|
|
|
$
|
664,842
|
|
|
$
|
(1,368,855
|
)
|
|
$
|
6,993,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION AND LIABILITIES
|
Shareholders equity
|
|
$
|
2,335,824
|
|
|
$
|
251,080
|
|
|
$
|
420,805
|
|
|
$
|
(671,885
|
)
|
|
$
|
2,335,824
|
|
Long-term debt
|
|
|
2,205,910
|
|
|
|
|
|
|
|
196
|
|
|
|
|
|
|
|
2,206,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
4,541,734
|
|
|
|
251,080
|
|
|
|
421,001
|
|
|
|
(671,885
|
)
|
|
|
4,541,930
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
2,303
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
2,434
|
|
Short-term debt
|
|
|
173,845
|
|
|
|
|
|
|
|
|
|
|
|
(173,845
|
)
|
|
|
|
|
Liabilities from risk management activities
|
|
|
5,207
|
|
|
|
|
|
|
|
2,995
|
|
|
|
|
|
|
|
8,202
|
|
Other current liabilities
|
|
|
419,848
|
|
|
|
8,862
|
|
|
|
226,352
|
|
|
|
(17,416
|
)
|
|
|
637,646
|
|
Intercompany payables
|
|
|
|
|
|
|
503,857
|
|
|
|
1,852
|
|
|
|
(505,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
601,203
|
|
|
|
512,719
|
|
|
|
231,330
|
|
|
|
(696,970
|
)
|
|
|
648,282
|
|
Deferred income taxes
|
|
|
798,433
|
|
|
|
163,540
|
|
|
|
5,634
|
|
|
|
|
|
|
|
967,607
|
|
Noncurrent liabilities from risk management activities
|
|
|
56
|
|
|
|
|
|
|
|
6,089
|
|
|
|
|
|
|
|
6,145
|
|
Regulatory cost of removal obligation
|
|
|
396,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,201
|
|
Deferred credits and other liabilities
|
|
|
423,779
|
|
|
|
8,738
|
|
|
|
788
|
|
|
|
|
|
|
|
433,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,761,406
|
|
|
$
|
936,077
|
|
|
$
|
664,842
|
|
|
$
|
(1,368,855
|
)
|
|
$
|
6,993,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
ATMOS
ENERGY CORPORATION
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010
|
|
|
|
Natural
|
|
|
Regulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas
|
|
|
Transmission
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Property, plant and equipment, net
|
|
$
|
3,959,112
|
|
|
$
|
748,947
|
|
|
$
|
85,016
|
|
|
$
|
|
|
|
$
|
4,793,075
|
|
Investment in subsidiaries
|
|
|
620,863
|
|
|
|
|
|
|
|
(2,096
|
)
|
|
|
(618,767
|
)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
31,952
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
131,952
|
|
Assets from risk management activities
|
|
|
2,219
|
|
|
|
|
|
|
|
18,356
|
|
|
|
|
|
|
|
20,575
|
|
Other current assets
|
|
|
528,655
|
|
|
|
19,504
|
|
|
|
325,348
|
|
|
|
(150,842
|
)
|
|
|
722,665
|
|
Intercompany receivables
|
|
|
546,313
|
|
|
|
|
|
|
|
|
|
|
|
(546,313
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,109,139
|
|
|
|
19,504
|
|
|
|
443,704
|
|
|
|
(697,155
|
)
|
|
|
875,192
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
834
|
|
|
|
|
|
|
|
834
|
|
Goodwill
|
|
|
572,262
|
|
|
|
132,341
|
|
|
|
34,711
|
|
|
|
|
|
|
|
739,314
|
|
Noncurrent assets from risk management activities
|
|
|
47
|
|
|
|
|
|
|
|
890
|
|
|
|
|
|
|
|
937
|
|
Deferred charges and other assets
|
|
|
324,707
|
|
|
|
13,037
|
|
|
|
16,695
|
|
|
|
|
|
|
|
354,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,586,130
|
|
|
$
|
913,829
|
|
|
$
|
579,754
|
|
|
$
|
(1,315,922
|
)
|
|
$
|
6,763,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION AND LIABILITIES
|
Shareholders equity
|
|
$
|
2,178,348
|
|
|
$
|
212,687
|
|
|
$
|
408,176
|
|
|
$
|
(620,863
|
)
|
|
$
|
2,178,348
|
|
Long-term debt
|
|
|
1,809,289
|
|
|
|
|
|
|
|
262
|
|
|
|
|
|
|
|
1,809,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
3,987,637
|
|
|
|
212,687
|
|
|
|
408,438
|
|
|
|
(620,863
|
)
|
|
|
3,987,899
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
360,000
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
360,131
|
|
Short-term debt
|
|
|
258,488
|
|
|
|
|
|
|
|
|
|
|
|
(132,388
|
)
|
|
|
126,100
|
|
Liabilities from risk management activities
|
|
|
48,942
|
|
|
|
|
|
|
|
731
|
|
|
|
|
|
|
|
49,673
|
|
Other current liabilities
|
|
|
473,076
|
|
|
|
10,949
|
|
|
|
162,508
|
|
|
|
(16,358
|
)
|
|
|
630,175
|
|
Intercompany payables
|
|
|
|
|
|
|
543,007
|
|
|
|
3,306
|
|
|
|
(546,313
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,140,506
|
|
|
|
553,956
|
|
|
|
166,676
|
|
|
|
(695,059
|
)
|
|
|
1,166,079
|
|
Deferred income taxes
|
|
|
691,126
|
|
|
|
142,337
|
|
|
|
(4,335
|
)
|
|
|
|
|
|
|
829,128
|
|
Noncurrent liabilities from risk management activities
|
|
|
2,924
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
8,924
|
|
Regulatory cost of removal obligation
|
|
|
350,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,521
|
|
Deferred credits and other liabilities
|
|
|
413,416
|
|
|
|
4,849
|
|
|
|
2,975
|
|
|
|
|
|
|
|
421,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,586,130
|
|
|
$
|
913,829
|
|
|
$
|
579,754
|
|
|
$
|
(1,315,922
|
)
|
|
$
|
6,763,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Atmos Energy Corporation
We have reviewed the condensed consolidated balance sheet of
Atmos Energy Corporation as of June 30, 2011, the related
condensed consolidated statements of income for the three-month
and nine-month periods ended June 30, 2011 and 2010, and
the condensed consolidated statements of cash flows for the
nine-month periods ended June 30, 2011 and 2010. These
financial statements are the responsibility of the
Companys management.
We conducted our review in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting
Oversight Board, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with U.S. generally accepted accounting
principles.
We have previously audited, in accordance with the standards of
the Public Company Accounting Oversight Board (United States),
the consolidated balance sheet of Atmos Energy Corporation as of
September 30, 2010, and the related consolidated statements
of income, shareholders equity, and cash flows for the
year then ended, not presented herein, and in our report dated
November 12, 2010, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of September 30, 2010, is fairly stated,
in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Dallas, Texas
August 4, 2011
39
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
INTRODUCTION
The following discussion should be read in conjunction with the
condensed consolidated financial statements in this Quarterly
Report on
Form 10-Q
and Managements Discussion and Analysis in our Annual
Report on
Form 10-K
for the year ended September 30, 2010.
Cautionary
Statement for the Purposes of the Safe Harbor under the Private
Securities Litigation Reform Act of 1995
The statements contained in this Quarterly Report on
Form 10-Q
may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All
statements other than statements of historical fact included in
this Report are forward-looking statements made in good faith by
us and are intended to qualify for the safe harbor from
liability established by the Private Securities Litigation
Reform Act of 1995. When used in this Report, or any other of
our documents or oral presentations, the words
anticipate, believe,
estimate, expect, forecast,
goal, intend, objective,
plan, projection, seek,
strategy or similar words are intended to identify
forward-looking statements. Such forward-looking statements are
subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied in
the statements relating to our strategy, operations, markets,
services, rates, recovery of costs, availability of gas supply
and other factors. These risks and uncertainties include the
following: our ability to continue to access the credit markets
to satisfy our liquidity requirements; the impact of adverse
economic conditions on our customers; increased costs of
providing pension and postretirement health care benefits and
increased funding requirements along with increased costs of
health care benefits; market risks beyond our control affecting
our risk management activities including market liquidity,
commodity price volatility, increasing interest rates and
counterparty creditworthiness; regulatory trends and decisions,
including the impact of rate proceedings before various state
regulatory commissions; possible increased federal, state and
local regulation of the safety of our operations; increased
federal regulatory oversight and potential penalties; the impact
of environmental regulations on our business; the impact of
possible future additional regulatory and financial risks
associated with global warming and climate change on our
business; the concentration of our distribution, pipeline and
storage operations in Texas; adverse weather conditions; the
effects of inflation and changes in the availability and price
of natural gas; the capital-intensive nature of our gas
distribution business; increased competition from energy
suppliers and alternative forms of energy; the inherent hazards
and risks involved in operating our gas distribution business,
natural disasters, terrorist activities or other events, and
other risks and uncertainties discussed herein, all of which are
difficult to predict and many of which are beyond our control.
Accordingly, while we believe these forward-looking statements
to be reasonable, there can be no assurance that they will
approximate actual experience or that the expectations derived
from them will be realized. Further, we undertake no obligation
to update or revise any of our forward-looking statements
whether as a result of new information, future events or
otherwise.
OVERVIEW
Atmos Energy and our subsidiaries are engaged primarily in the
regulated natural gas distribution and transportation and
storage businesses as well as other nonregulated natural gas
businesses. We distribute natural gas through sales and
transportation arrangements to over three million residential,
commercial, public authority and industrial customers throughout
our six regulated natural gas distribution divisions, which
cover service areas currently located in 12 states. In
addition, we transport natural gas for others through our
regulated distribution and pipeline systems. In May 2011, we
announced that we had entered into a definitive agreement to
sell our natural gas distribution operations in Missouri,
Illinois and Iowa, representing approximately 84,000 customers.
After the closing of this transaction, we will operate in nine
states.
Through our nonregulated businesses, we primarily provide
natural gas management and marketing services to municipalities,
other local gas distribution companies and industrial customers
primarily in the Midwest and Southeast and natural gas
transportation and storage services to certain of our natural
gas
40
distribution divisions and to third parties. Through our asset
optimization activities, we also seek to maximize the economic
value associated with the storage and transportation capacity we
own or control.
As discussed in Note 11, we operate the Company through the
following three segments:
|
|
|
|
|
the natural gas distribution segment, which includes our
regulated natural gas distribution and related sales operations,
|
|
|
|
the regulated transmission and storage segment, which
includes the regulated pipeline and storage operations of our
Atmos Pipeline Texas Division and
|
|
|
|
the nonregulated segment, which includes our nonregulated
natural gas management, nonregulated natural gas transmission,
storage and other services.
|
CRITICAL
ACCOUNTING ESTIMATES AND POLICIES
Our condensed consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the
United States. Preparation of these financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses
and the related disclosures of contingent assets and
liabilities. We based our estimates on historical experience and
various other assumptions that we believe to be reasonable under
the circumstances. On an ongoing basis, we evaluate our
estimates, including those related to risk management and
trading activities, the allowance for doubtful accounts, legal
and environmental accruals, insurance accruals, pension and
postretirement obligations, deferred income taxes and the
valuation of goodwill, indefinite-lived intangible assets and
other long-lived assets. Actual results may differ from such
estimates.
Our critical accounting policies used in the preparation of our
consolidated financial statements are described in our Annual
Report on
Form 10-K
for the fiscal year ended September 30, 2010 and include
the following:
|
|
|
|
|
Regulation
|
|
|
|
Revenue Recognition
|
|
|
|
Allowance for Doubtful Accounts
|
|
|
|
Financial Instruments and Hedging Activities
|
|
|
|
Impairment Assessments
|
|
|
|
Pension and Other Postretirement Plans
|
|
|
|
Fair Value Measurements
|
Our critical accounting policies are reviewed quarterly by the
Audit Committee. There were no significant changes to these
critical accounting policies during the nine months ended
June 30, 2011.
RESULTS
OF OPERATIONS
Due to the seasonality of our distribution business, we
typically incur a net loss in our fiscal third quarter. For the
three months ended June 30, 2011, we reported a net loss of
$0.6 million, or $0.01 per diluted share compared to a net
loss of $3.2 million, or $0.03 per diluted share in the
prior-year quarter. The net loss for the three months ended
June 30, 2011 includes noncash, unrealized net gains of
$0.1 million, or $0.00 per diluted share compared with net
losses of $11.1 million, or $0.12 per diluted share for the
three months ended June 30, 2010. The net loss for the
third quarter includes the impact of the non-cash impairment
charge related to Atmos Gathering System assets, totaling
$6.1 million or $0.06 per diluted share.
Excluding the impact of unrealized margins and one-time items,
diluted earnings per share decreased from income of $0.09 per
diluted share in the prior-year quarter to income of $0.05 per
diluted share in the current-year quarter, primarily due a
decrease in asset optimization margins in our nonregulated
segment,
41
partially offset by rate increases in our natural gas
distribution and regulated transmission and storage segments.
During the current quarter, we announced the sale of our natural
gas distribution operations in our Missouri, Illinois and Iowa
service areas. Due to the pending sales transaction, the results
of operations for these three service areas are shown in
discontinued operations. During the current-year quarter,
discontinued operations generated net income of
$0.9 million, or $0.01 per diluted share, compared with net
income of $1.1 million, or $0.01 per diluted share in the
prior-year quarter. Continuing operations in the current quarter
generated a net loss of $1.5 million or $0.02 per diluted
share, compared with a net loss of $4.2 million or $0.04
per diluted share from continuing operations in the prior-year
quarter.
We reported net income of $205.6 million, or $2.25 per
diluted share for the nine months ended June 30, 2011,
compared with net income of $204.3 million or $2.18 per
diluted share in the prior-year period. Income from continuing
operations was $197.8 million, or $2.16 per diluted share
compared with $198.0 million, or $2.11 per diluted share in
the prior-year period. Income from discontinued operations was
$7.9 million or $0.09 per diluted share for the
year-to-date
period, compared with $6.3 million or $0.07 per diluted
share in the prior year. Unrealized losses in our nonregulated
operations during the current period reduced net income by
$1.4 million or $0.02 per diluted share compared with net
losses recorded in the prior-year period of $6.2 million,
or $0.07 per diluted share. Additionally, net income in both
periods was impacted by nonrecurring items. In the prior
year-to-date
period, net income included the net positive impact of a state
sales tax refund of $4.5 million, or $0.05 per diluted
share. In the current
year-to-date
period, net income includes the net positive impact of several
one-time items totaling $6.5 million, or $0.07 per diluted
share related to the following pre-tax amounts:
|
|
|
|
|
$27.8 million favorable impact related to the cash gain
recorded in association with the unwinding of two Treasury locks
in conjunction with the cancellation of a planned debt offering
in November 2011.
|
|
|
|
$30.3 million unfavorable impact related to the non-cash
impairment of certain assets in our nonregulated business.
|
|
|
|
$5.0 million favorable impact related to the administrative
settlement of various income tax positions.
|
On June 10, 2011 we issued $400 million of
5.50% senior notes. The effective interest rate on these
notes is 5.381 percent, after giving effect to the
settlement of the $300 million Treasury locks associated
with the offering. The majority of the net proceeds of
approximately $394 million was used to repay
$350 million of outstanding commercial paper. The remainder
of the net proceeds was used for general corporate purposes. The
Treasury locks were settled on June 7, 2011 with the
receipt of $20.1 million from the counterparties due to an
increase in the
30-year
Treasury lock rates between inception of the Treasury locks and
settlement. Because the Treasury locks were effective, the net
$12.6 million unrealized gain was recorded as a component
of accumulated other comprehensive income and will be recognized
as a component of interest expense over the
30-year life
of the senior notes.
During the nine months ended June 30, 2011, we executed on
our strategy to streamline our credit facilities, as follows.
|
|
|
|
|
On May 2, 2011, we replaced our five-year
$566.7 million unsecured credit facility, due to expire in
December 2011, with a five-year $750 million unsecured
credit facility with an accordion feature that could increase
our borrowing capacity to $1.0 billion.
|
|
|
|
In December 2010, we replaced AEMs $450 million
364-day
facility with a $200 million, three-year facility. The
reduced amount of the new facility is due to the current low
cost of gas and certain regulatory restrictions; however, this
facility contains an accordion feature that could increase our
borrowing capacity to $500 million.
|
|
|
|
In October 2010, we replaced our $200 million
364-day
revolving credit agreement with a $200 million
180-day
revolving credit agreement that expired in April 2011. As
planned, we did not replace or extend this agreement.
|
42
After giving effect to these changes, we now have
$975 million of liquidity available to us from our
commercial paper program and three committed credit facilities
and have reduced our financing costs. We believe this
availability provides sufficient liquidity to fund our working
capital needs.
The following table presents our consolidated financial
highlights for the three and nine months ended June 30,
2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
June 30
|
|
June 30
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
(In thousands, except per share data)
|
|
Operating revenues
|
|
$
|
843,615
|
|
|
$
|
761,305
|
|
|
$
|
3,558,374
|
|
|
$
|
3,941,254
|
|
Gross profit
|
|
|
266,805
|
|
|
|
247,666
|
|
|
|
1,085,197
|
|
|
|
1,096,113
|
|
Operating expenses
|
|
|
232,727
|
|
|
|
215,407
|
|
|
|
684,631
|
|
|
|
657,499
|
|
Operating income
|
|
|
34,078
|
|
|
|
32,259
|
|
|
|
400,566
|
|
|
|
438,614
|
|
Miscellaneous income (expense)
|
|
|
(1,430
|
)
|
|
|
(798
|
)
|
|
|
24,046
|
|
|
|
(905
|
)
|
Interest charges
|
|
|
35,845
|
|
|
|
37,267
|
|
|
|
112,615
|
|
|
|
115,481
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(3,197
|
)
|
|
|
(5,806
|
)
|
|
|
311,997
|
|
|
|
322,228
|
|
Income tax expense (benefit)
|
|
|
(1,723
|
)
|
|
|
(1,577
|
)
|
|
|
114,211
|
|
|
|
124,199
|
|
Income (loss) from continuing operations
|
|
|
(1,474
|
)
|
|
|
(4,229
|
)
|
|
|
197,786
|
|
|
|
198,029
|
|
Income (loss) from discontinued operations, net of tax
|
|
|
908
|
|
|
|
1,075
|
|
|
|
7,854
|
|
|
|
6,273
|
|
Net income (loss)
|
|
$
|
(566
|
)
|
|
$
|
(3,154
|
)
|
|
$
|
205,640
|
|
|
$
|
204,302
|
|
Diluted net income (loss) per share from continuing operations
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
2.16
|
|
|
$
|
2.11
|
|
Diluted net income per share from discontinued operations
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.09
|
|
|
|
0.07
|
|
Diluted net income (loss) per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
2.25
|
|
|
$
|
2.18
|
|
The following tables segregate our consolidated net income
(loss) and diluted earnings per share between our regulated and
nonregulated operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands, except per share data)
|
|
|
Regulated operations
|
|
$
|
2,423
|
|
|
$
|
(3,512
|
)
|
|
$
|
5,935
|
|
Nonregulated operations
|
|
|
(3,897
|
)
|
|
|
(717
|
)
|
|
|
(3,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations
|
|
|
(1,474
|
)
|
|
|
(4,229
|
)
|
|
|
2,755
|
|
Net income from discontinued operations
|
|
|
908
|
|
|
|
1,075
|
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(566
|
)
|
|
$
|
(3,154
|
)
|
|
$
|
2,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from continuing regulated operations
|
|
$
|
0.02
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.05
|
|
Diluted EPS from nonregulated operations
|
|
|
(0.04
|
)
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from continuing operations
|
|
|
(0.02
|
)
|
|
|
(0.04
|
)
|
|
|
0.02
|
|
Diluted EPS from discontinued operations
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands, except per share data)
|
|
|
Regulated operations
|
|
$
|
199,246
|
|
|
$
|
165,993
|
|
|
$
|
33,253
|
|
Nonregulated operations
|
|
|
(1,460
|
)
|
|
|
32,036
|
|
|
|
(33,496
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
197,786
|
|
|
|
198,029
|
|
|
|
(243
|
)
|
Net income from discontinued operations
|
|
|
7,854
|
|
|
|
6,273
|
|
|
|
1,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
205,640
|
|
|
$
|
204,302
|
|
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from continuing regulated operations
|
|
$
|
2.18
|
|
|
$
|
1.77
|
|
|
$
|
0.41
|
|
Diluted EPS from nonregulated operations
|
|
|
(0.02
|
)
|
|
|
0.34
|
|
|
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from continuing operations
|
|
|
2.16
|
|
|
|
2.11
|
|
|
|
0.05
|
|
Diluted EPS from discontinued operations
|
|
|
0.09
|
|
|
|
0.07
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated diluted EPS
|
|
$
|
2.25
|
|
|
$
|
2.18
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
Gas Distribution Segment
The primary factors that impact the results of our natural gas
distribution operations are our ability to earn our authorized
rates of return, the cost of natural gas, competitive factors in
the energy industry and economic conditions in our service areas.
Our ability to earn our authorized rates of return is based
primarily on our ability to improve the rate design in our
various ratemaking jurisdictions by reducing or eliminating
regulatory lag and, ultimately, separating the recovery of our
approved margins from customer usage patterns. Improving rate
design is a long-term process and is further complicated by the
fact that we operate in multiple rate jurisdictions.
Seasonal weather patterns can also affect our natural gas
distribution operations. However, the effect of weather that is
above or below normal is substantially offset through weather
normalization adjustments, known as WNA, which has been approved
by state regulatory commissions for approximately
90 percent of our residential and commercial meters in the
following states for the following time periods:
|
|
|
Georgia, Kansas, West Texas
|
|
October May
|
Kentucky, Mississippi, Tennessee, Mid-Tex
|
|
November April
|
Louisiana
|
|
December March
|
Virginia
|
|
January December
|
Our natural gas distribution operations are also affected by the
cost of natural gas. The cost of gas is passed through to our
customers without markup. Therefore, increases in the cost of
gas are offset by a corresponding increase in revenues.
Accordingly, we believe gross profit is a better indicator of
our financial performance than revenues. However, gross profit
in our Texas and Mississippi service areas includes franchise
fees and gross receipts taxes, which are calculated as a
percentage of revenue (inclusive of gas costs). Therefore, the
amount of these taxes included in revenues is influenced by the
cost of gas and the level of gas sales volumes. We record the
associated tax expense as a component of taxes, other than
income. Although changes in these revenue-related taxes arising
from changes in gas costs affect gross profit, over time the
impact is offset within operating income.
Higher gas costs may also adversely impact our accounts
receivable collections, resulting in higher bad debt expense and
may require us to increase borrowings under our credit
facilities resulting in higher interest expense. Finally, higher
gas costs, as well as competitive factors in the industry and
general economic conditions may cause customers to conserve or
use alternative energy sources.
In May 2011, we announced that we had entered into a definitive
agreement to sell our natural gas distribution operations in
Missouri, Illinois and Iowa. The results of these operations
have been separately
44
reported in the following tables and exclude general corporate
overhead and interest expense that would normally be allocated
to these operations.
Three
Months Ended June 30, 2011 compared with Three Months Ended
June 30, 2010
Financial and operational highlights for our natural gas
distribution segment for the three months ended June 30,
2011 and 2010 are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands, unless otherwise noted)
|
|
|
Gross profit
|
|
$
|
200,192
|
|
|
$
|
191,331
|
|
|
$
|
8,861
|
|
Operating expenses
|
|
|
183,437
|
|
|
|
180,902
|
|
|
|
2,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
16,755
|
|
|
|
10,429
|
|
|
|
6,326
|
|
Miscellaneous expense
|
|
|
(1,153
|
)
|
|
|
(72
|
)
|
|
|
(1,081
|
)
|
Interest charges
|
|
|
28,042
|
|
|
|
29,019
|
|
|
|
(977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
|
(12,440
|
)
|
|
|
(18,662
|
)
|
|
|
6,222
|
|
Income tax benefit
|
|
|
(4,311
|
)
|
|
|
(6,685
|
)
|
|
|
2,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(8,129
|
)
|
|
|
(11,977
|
)
|
|
|
3,848
|
|
Income from discontinued operations, net of tax
|
|
|
908
|
|
|
|
1,075
|
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,221
|
)
|
|
$
|
(10,902
|
)
|
|
$
|
3,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated natural gas distribution sales volumes from
continuing operations MMcf
|
|
|
37,011
|
|
|
|
35,613
|
|
|
|
1,398
|
|
Consolidated natural gas distribution transportation volumes
from continuing operations MMcf
|
|
|
29,955
|
|
|
|
27,956
|
|
|
|
1,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated natural gas distribution throughput from continuing
operations MMcf
|
|
|
66,966
|
|
|
|
63,569
|
|
|
|
3,397
|
|
Consolidated natural gas distribution throughput from
discontinued operations MMcf
|
|
|
2,128
|
|
|
|
2,359
|
|
|
|
(231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated natural gas distribution
throughput MMcf
|
|
|
69,094
|
|
|
|
65,928
|
|
|
|
3,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated natural gas distribution average transportation
revenue per Mcf
|
|
$
|
0.46
|
|
|
$
|
0.46
|
|
|
$
|
|
|
Consolidated natural gas distribution average cost of gas per
Mcf sold
|
|
$
|
5.59
|
|
|
$
|
5.73
|
|
|
$
|
(0.14
|
)
|
45
The following table shows our operating income (loss) from
continuing operations by natural gas distribution division, in
order of total rate base, for the three months ended
June 30, 2011 and 2010. The presentation of our natural gas
distribution operating income (loss) is included for financial
reporting purposes and may not be appropriate for ratemaking
purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands)
|
|
|
Mid-Tex
|
|
$
|
759
|
|
|
$
|
(2,179
|
)
|
|
$
|
2,938
|
|
Kentucky/Mid-States
|
|
|
4,832
|
|
|
|
3,344
|
|
|
|
1,488
|
|
Louisiana
|
|
|
6,779
|
|
|
|
6,537
|
|
|
|
242
|
|
West Texas
|
|
|
605
|
|
|
|
(104
|
)
|
|
|
709
|
|
Colorado-Kansas
|
|
|
3,304
|
|
|
|
1,623
|
|
|
|
1,681
|
|
Mississippi
|
|
|
(615
|
)
|
|
|
950
|
|
|
|
(1,565
|
)
|
Other
|
|
|
1,091
|
|
|
|
258
|
|
|
|
833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,755
|
|
|
$
|
10,429
|
|
|
$
|
6,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $8.9 million increase in natural gas distribution gross
profit was primarily due to the following:
|
|
|
|
|
$7.5 million net increase in rate adjustments, primarily in
the Mid-Tex, Kentucky and Kansas service areas.
|
|
|
|
$1.2 million increase in consolidated throughput due to a
five percent increase in consolidated distribution throughput,
primarily from higher consumption.
|
|
|
|
$1.5 million decrease due to lower revenue-related taxes,
offset by a decrease in taxes, other than income.
|
Operating expenses, which include operation and maintenance
expense, provision for doubtful accounts, depreciation and
amortization expense and taxes, other than income increased
$2.5 million due primarily to a $3.5 million increase
in depreciation and amortization expense, partially offset by
$1.4 million lower employee expenses.
46
Nine
Months Ended June 30, 2011 compared with Nine Months Ended
June 30, 2010
Financial and operational highlights for our natural gas
distribution segment for the nine months ended June 30,
2011 and 2010 are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands, unless otherwise noted)
|
|
|
Gross profit
|
|
$
|
870,132
|
|
|
$
|
854,620
|
|
|
$
|
15,512
|
|
Operating expenses
|
|
|
545,917
|
|
|
|
544,661
|
|
|
|
1,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
324,215
|
|
|
|
309,959
|
|
|
|
14,256
|
|
Miscellaneous income
|
|
|
18,305
|
|
|
|
1,474
|
|
|
|
16,831
|
|
Interest charges
|
|
|
87,344
|
|
|
|
87,877
|
|
|
|
(533
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
255,176
|
|
|
|
223,556
|
|
|
|
31,620
|
|
Income tax expense
|
|
|
94,323
|
|
|
|
86,552
|
|
|
|
7,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
160,853
|
|
|
|
137,004
|
|
|
|
23,849
|
|
Income from discontinued operations, net of tax
|
|
|
7,854
|
|
|
|
6,273
|
|
|
|
1,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
168,707
|
|
|
$
|
143,277
|
|
|
$
|
25,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated natural gas distribution sales volumes from
continuing operations MMcf
|
|
|
253,665
|
|
|
|
285,996
|
|
|
|
(32,331
|
)
|
Consolidated natural gas distribution transportation volumes
from continuing operations MMcf
|
|
|
99,551
|
|
|
|
98,442
|
|
|
|
1,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated natural gas distribution throughput from continuing
operations MMcf
|
|
|
353,216
|
|
|
|
384,438
|
|
|
|
(31,222
|
)
|
Consolidated natural gas distribution throughput from
discontinued operations MMcf
|
|
|
12,723
|
|
|
|
13,835
|
|
|
|
(1,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated natural gas distribution
throughput MMcf
|
|
|
365,939
|
|
|
|
398,273
|
|
|
|
(32,334
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated natural gas distribution average transportation
revenue per Mcf
|
|
$
|
0.47
|
|
|
$
|
0.46
|
|
|
$
|
0.01
|
|
Consolidated natural gas distribution average cost of gas per
Mcf sold
|
|
$
|
5.21
|
|
|
$
|
5.77
|
|
|
$
|
(0.56
|
)
|
The following table shows our operating income from continuing
operations by natural gas distribution division, in order of
rate base, for the nine months ended June 30, 2011 and
2010. The presentation of our
47
natural gas distribution operating income is included for
financial reporting purposes and may not be appropriate for
ratemaking purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
June 30
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands)
|
|
|
Mid-Tex
|
|
$
|
140,674
|
|
|
$
|
128,045
|
|
|
$
|
12,629
|
|
Kentucky/Mid-States
|
|
|
50,522
|
|
|
|
43,791
|
|
|
|
6,731
|
|
Louisiana
|
|
|
44,975
|
|
|
|
42,775
|
|
|
|
2,200
|
|
West Texas
|
|
|
29,405
|
|
|
|
33,053
|
|
|
|
(3,648
|
)
|
Colorado-Kansas
|
|
|
26,256
|
|
|
|
24,071
|
|
|
|
2,185
|
|
Mississippi
|
|
|
27,604
|
|
|
|
28,604
|
|
|
|
(1,000
|
)
|
Other
|
|
|
4,779
|
|
|
|
9,620
|
|
|
|
(4,841
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
324,215
|
|
|
$
|
309,959
|
|
|
$
|
14,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $15.5 million increase in natural gas distribution
gross profit primarily reflects a $35.8 million net
increase in rate adjustments, primarily in the Mid-Tex,
Louisiana, Kentucky, Kansas and Georgia service areas.
These increases were partially offset by:
|
|
|
|
|
$11.2 million decrease due to an eight percent decrease in
consolidated throughput caused principally by lower residential
and commercial consumption combined with warmer weather this
fiscal year compared to the same period last year in most of our
service areas.
|
|
|
|
$8.5 million decrease in revenue-related taxes, primarily
due to lower revenues on which the tax is calculated.
|
Operating expenses, which include operation and maintenance
expense, provision for doubtful accounts, depreciation and
amortization expense and taxes, other than income increased
$1.3 million, primarily due to the following:
|
|
|
|
|
$7.4 million increase due to the absence of a state sales
tax refund received in the prior year.
|
|
|
|
$8.0 million increase in depreciation and amortization
expense.
|
|
|
|
$1.2 million increase in vehicles and equipment expense.
|
These increases were partially offset by:
|
|
|
|
|
$8.2 million decrease in taxes, other than income, due to
lower revenue-related taxes.
|
|
|
|
$6.8 million decrease in employee-related expenses.
|
Net income for this segment for the
year-to-date
period was also favorably impacted by a $21.8 million gain
recognized in March 2011 as a result of unwinding two Treasury
locks and a $5.0 million income tax benefit related to the
administrative settlement of various income tax positions.
Recent
Ratemaking Developments
Significant ratemaking developments that occurred during the
nine months ended June 30, 2011 are discussed below. The
amounts described below represent the operating income that was
requested or received in each rate filing, which may not
necessarily reflect the stated amount referenced in the final
order, as certain operating costs may have changed as a result
of a commissions or other governmental authoritys
final ruling.
48
Annual net operating income increases totaling
$28.1 million resulting from ratemaking activity became
effective in the nine months ended June 30, 2011 as
summarized below:
|
|
|
|
|
|
|
Annual Increase to
|
|
Rate Action
|
|
Operating Income
|
|
|
|
(In thousands)
|
|
|
GRIP filings
|
|
$
|
919
|
|
Annual rate filing mechanisms
|
|
|
25,070
|
|
Other rate activity
|
|
|
2,075
|
|
|
|
|
|
|
|
|
$
|
28,064
|
|
|
|
|
|
|
Additionally, the following ratemaking efforts were in progress
during the third quarter of fiscal 2011 but had not been
completed as of June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
|
Income
|
|
Division
|
|
Rate Action
|
|
Jurisdiction
|
|
Requested
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Kentucky/Mid-States
|
|
PRP(1)
|
|
Georgia
|
|
$
|
1,192
|
|
Louisiana
|
|
LGS RSC(2)
|
|
Louisiana
|
|
|
4,600
|
|
Mid-Tex
|
|
Rate Review Mechanism
(RRM)(3)
|
|
Settled
Cities(4)
|
|
|
13,152
|
|
West Texas
|
|
Environs Rate
Case(5)
|
|
Amarillo
|
|
|
78
|
|
|
|
RRM
|
|
Lubbock
|
|
|
2,136
|
|
|
|
RRM(6)
|
|
WT Cities
|
|
|
2,552
|
|
|
|
Special Contract
|
|
Triangle
|
|
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Pipeline Replacement Program (PRP) surcharge relates to a
long-term cast iron replacement program. |
|
(2) |
|
The Louisiana Commission Staff recommended an increase of
$4.1 million effective July 1, 2011, which the
Commission accepted. |
|
(3) |
|
The amount requested represents an increase of $7.7 million
under the RRM and $5.5 million related to year two of our
steel service line program. In July 2011, the Company and
representatives of the Settled Cities agreed to no change in
operating income under the RRM and an operating income increase
of $5.5 million related to the steel service line program
to be implemented on September 1, 2011. |
|
(4) |
|
Represents 439 of the 440 incorporated cities, or approximately
80 percent of the Mid-Tex Divisions customers, with
whom a settlement agreement was reached during the fiscal 2008
second quarter. |
|
(5) |
|
The Railroad Commission of Texas (RRC) approved the requested
increase in operating income on July 26, 2011. |
|
(6) |
|
On August 1, 2011, the Company and representatives of the
West Texas Cities agreed to resolve the 2010 RRM with no change
to operating income. |
Rate
Filings
A rate case is a formal request from Atmos Energy to a
regulatory authority to increase rates that are charged to our
customers. Rate cases may also be initiated when the regulatory
authorities request us to justify our rates. This process is
referred to as a show cause action. Adequate rates
are intended to provide for recovery of the Companys costs
as well as a fair rate of return to our shareholders and ensure
that we continue to deliver reliable, reasonably priced natural
gas service to our customers. There were no rate cases completed
within our natural gas distribution segment for the first three
quarters of fiscal 2011.
49
GRIP
Filings
The Gas Reliability Infrastructure Program (GRIP) in Texas
allows us to include in our rate base annually approved capital
costs incurred in the prior calendar year provided that we file
a complete rate case at least once every five years. The
following table summarizes our GRIP filings with effective dates
during the nine months ended June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
Incremental
|
|
|
Annual
|
|
|
|
|
|
Calendar
|
|
Net Utility Plant
|
|
|
Operating
|
|
|
Effective
|
Division
|
|
Year
|
|
Investment
|
|
|
Income
|
|
|
Date
|
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
|
|
2011 GRIP:
|
|
|
|
|
|
|
|
|
|
|
|
|
West Texas/Lubbock & WT Cities Environs
|
|
2010
|
|
$
|
17,677
|
|
|
$
|
343
|
|
|
06/01/2011
|
Mid-Tex/Environs
|
|
2010
|
|
|
107,840
|
|
|
|
576
|
|
|
06/27/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2011 GRIP
|
|
|
|
$
|
125,517
|
|
|
$
|
919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual
Rate Filing Mechanisms
As an instrument to reduce regulatory lag, annual rate filing
mechanisms allow us to refresh our rates on a periodic basis
without filing a formal rate case. However, these filings still
involve discovery by the appropriate regulatory authorities
prior to the final determination of rates under these
mechanisms. We currently have annual rate filing mechanisms in
our Louisiana and Mississippi divisions and in significant
portions of our Mid-Tex and West Texas divisions. These
mechanisms are referred to as rate review mechanisms in our
Mid-Tex and West Texas divisions, stable rate filings in the
Mississippi Division and a rate stabilization clause in the
Louisiana Division. The following table summarizes filings made
under our various annual rate filing mechanisms for the nine
months ended June 30, 2011.