10-QPeriod: Q3 FY2003

ATMOS ENERGY CORP Quarterly Report for Q3 Ended Jun 30, 2003

Filed August 14, 2003For Securities:ATO

Summary

Atmos Energy Corporation (ATO) reported a net loss of $0.2 million for the three months ended June 30, 2003, a decrease from a net income of $3.3 million in the same period last year. However, for the nine-month period ended June 30, 2003, the company reported a net income of $74.1 million, an increase from $65.3 million in the prior year. This performance was significantly influenced by the acquisition of Mississippi Valley Gas Company (MVG) in December 2002, which added substantial assets and revenues but also increased debt and operating expenses. The company also completed a significant equity offering in June 2003, raising approximately $96.8 million. This capital was used to partially fund its pension plan, repay debt, and for general corporate purposes. Despite the quarterly loss, the company's nine-month performance shows growth, driven by the successful integration of MVG and ongoing operational improvements. Investors should monitor the company's ability to manage its increased debt load and the integration of the acquired utility.

Key Highlights

  • 1Net loss of $0.2 million for the three months ended June 30, 2003, compared to net income of $3.3 million in the prior year's quarter.
  • 2Nine-month net income increased to $74.1 million ($1.65/diluted share) from $65.3 million ($1.59/diluted share) in the prior year.
  • 3Acquisition of Mississippi Valley Gas Company (MVG) completed in December 2002 for approximately $150 million, significantly expanding the utility's customer base.
  • 4Completed a public offering of common stock in June 2003, raising approximately $96.8 million for pension funding, debt repayment, and general corporate purposes.
  • 5Issued $250 million in Senior Notes in January 2003 to refinance acquisition-related debt and for general corporate purposes.
  • 6Contributed $48.6 million in cash and $28.8 million in stock to its pension plan in June 2003.
  • 7Utility operating income increased for the nine months ended June 30, 2003, driven by MVG acquisition and rate adjustments, though gas trading margin decreased compared to the prior year.

Frequently Asked Questions

The primary driver for the increase in revenues and assets was the acquisition of Mississippi Valley Gas Company (MVG) on December 3, 2002. This acquisition significantly expanded Atmos Energy's customer base and utility infrastructure.

Atmos Energy managed its debt and liquidity through a combination of strategies. They issued $250 million in Senior Notes in January 2003 to refinance acquisition debt and raised approximately $96.8 million through a public stock offering in June 2003, which was used for pension funding, debt repayment, and general corporate purposes. They also maintained committed credit facilities totaling $318 million.

Effective January 1, 2003, the company adopted new accounting guidance (EITF 02-03) for energy trading contracts. This change resulted in a cumulative effect adjustment of $7.8 million (net of tax benefit) recognized in the second quarter of fiscal 2003, as mark-to-market accounting for certain contracts was no longer permitted. This impacted the reporting of gas trading margin.

Atmos Energy operates through three main segments: Utility, Natural Gas Marketing, and Other Non-Utility. The Utility segment's operating income increased for the nine months due to the MVG acquisition and rate adjustments. The Natural Gas Marketing segment saw a decrease in gas trading margin compared to the prior year, partly due to market volatility and hedging strategy adjustments. The 'Other Non-Utility' segment includes pipeline and storage operations.