/2H5 d 1$&%*'ATMOS ENERGY CORPORATION"'CONSOLIDATED BALANCE SHEETS"September 30,"September 30,"-----------"------------- "1998 "1997"-----------"-----------("(In thousands, except share data)("(In thousands, except share data) 'ASSETS$'Property, plant and equipment"$1,333,556"$1,301,004 'Construction in progress "112,864  "31,668 "---------- "---------- "1,446,420 "1,332,672/ 'Less accumulated depreciation and amort. "528,560 "483,545 "---------- "----------('Net property, plant and equipment"917,860"849,127'Current assets 'Cash and cash equivalents "4,735 "6,016*'Accounts receivable, less allowance&'for doubtful accounts of $1,969!'in 1998 and $2,188 in 1997 "34,887 "71,217'Inventories "15,219 "12,333'Gas in storage "48,909 "48,122'Prepayments "3,630 "6,017"----------"----------'Total current assets"107,380"143,705('Deferred charges and other assets"116,150 "95,479"----------"----------"$1,141,390"$1,088,311"=========="==========%'CAPITALIZATION AND LIABILITIES'Shareholders' equity,'Common stock, no par value (stated at* '$.005 per share); 75,000,000 shares)!'authorized; issued and outstanding "'1998 - 30,398,319 shares,#'1997 - 29,642,437 shares#"$ 152#"$ 148!$'Additional paid-in capital$"271,637$"251,174%'Retained earnings %"99,369 %"75,938&"----------&"----------!''Total shareholders' equity'"371,158'"327,260('Long-term debt("398,548("302,981)"----------)"----------*'Total capitalization*"769,706*"630,241+'Current liabilities+,'Current maturities of long-term debt ,"57,783 ,"15,201-'Notes payable to banks -"66,400-"167,300.'Accounts payable ."44,742 ."62,626/'Taxes payable /"12,736 /"4160'Customers' deposits 0"12,029 0"15,098 1'Other current liabilities 1"30,369 1"52,5822"----------2"---------- 3'Total current liabilities3"224,0593"313,2234'Deferred income taxes 4"80,213 4"87,828-5'Deferred credits and other liabilities 5"67,412 5"57,0196"----------6"----------7"$1,141,3907"$1,088,3118"==========8"==========C:'See accompanying notes to consolidated financial statements. <>'ATMOS ENERGY CORPORATION(?'CONSOLIDATED STATEMENTS OF INCOMEB"Year ended September 30,B"Year ended September 30,B"Year ended September 30,C"---------C"-------------C"----------- D"1998 D"1997 D"1996E"--------E"----------E"----------,F"(In thousands, except per share data),F"(In thousands, except per share data),F"(In thousands, except per share data)H'Operating revenuesH"$848,208H"$906,835H"$886,691I'Purchased gas costI"516,372I"577,181I"562,279J"--------J"--------J"--------K'Gross profitK"331,836K"329,654K"324,412L'Operating expensesM'OperationM"131,336M"173,683M"148,196N'Maintenance N"10,278 N"11,974 N"11,719$O'Depreciation and amortization O"47,555 O"45,257 O"41,666P'Taxes, other than income P"29,788 P"32,131 P"30,254Q'Income taxes Q"31,806 Q"14,298 Q"23,316R"--------R"--------R"--------S'Total operating expensesS"250,763S"277,343S"255,151T"--------T"--------T"--------U'Operating income U"81,073 U"52,311 U"69,261V'Other income (expense)%W'Interest and investment income W"5,430 W"5,410 W"3,867X'Other, net X"4,341 X"(288) X"(300)Y"--------Y"--------Y"--------Z'Total other income Z"9,771 Z"5,122 Z"3,567['Interest charges ["35,579 ["33,595 ["31,677\"--------\"--------\"--------]'Net income]"$ 55,265]"$ 23,838]"$ 41,151^"========^"========^"========!_'Basic net income per share_"$ 1.85_"$ .81_"$ 1.42`"========`"========`"========#a'Diluted net income per sharea"$ 1.84a"$ .81a"$ 1.42b"========b"========b"========c'Cash dividends per sharec"$ 1.06c"$ 1.01c"$ .98d"========d"========d"========e'Weighted averagef'shares outstanding g'Basic g"29,822 g"29,409 g"28,978h"========h"========h"========i'Diluted i"30,031 i"29,422 i"28,994j"========j"========j"========Cl'See accompanying notes to consolidated financial statements. np'ATMOS ENERGY CORPORATION!q'CONSOLIDATED STATEMENTS OFr'SHAREHOLDERS' EQUITYu"Common stocku"Common stockv"----------v"----------v"- Add'lw"Number of w"Statedw"paid-inw"Retained x"shares x"valuex"capitalx"earningsy"----------y"----------y"----------y"----------(z"(In thousands, except share data)(z"(In thousands, except share data)(z"(In thousands, except share data)(z"(In thousands, except share data)"{'Balance, September 30, 1995{"28,246,392 {"$141{"$230,630{"$ 73,578|'Net income|"-|"-|"- |"41,151}'Cash dividends ($.98 per ~'share)~"-~"-~"-~"(28,478)'Common stock issued:'Restricted stock grant 'plan "41,700"1 "733"-'Direct stock purchase 'plans"251,224"1 "4,322"- 'ESOP"161,477"1 "3,641"-'Long-term stock plan for'United Cities Division "16,900"- "241"-'Outside directors stock-'for-fee plan "3,389"- "76"-'Monarch Gas Co. acq."207,366"1 "1,499 "933'Oceana Heights acq."313,411"1 "304 "594 'Other"-"- "212"-"---------- "----"--------"--------"'Balance, September 30, 1996"29,241,859 "146"241,658 "87,778'Net income"-"-"- "23,838 'Cash dividends ($1.01 per 'share)"-"-"-"(26,415)'Common stock issued:'Restricted stock'grant plan"100,000"1 "2,443"-'Direct stock purchase 'plans "85,243"- "1,888"-'Outside directors'stock-for-fee plan "3,008"- "72"-'ESOP/401(k) plans"212,327"1 "5,113"-'Less: UCGC net income'for the quarter ended'December 31, 1996"-"-"-"(9,263)"---------- "----"--------"--------"'Balance, September 30, 1997"29,642,437 "148"251,174 "75,938"'Balance, September 30, 1997"29,642,437 "$148"$251,174"$ 75,938'Net income"-"-"- "55,265'Cash dividends ($1.06'per share)"-"-"-"(31,834)'Common stock issued:'Restricted stock'grant plan"114,250"1 "2,898"-'Direct stock purchase 'plan"531,353"3 "14,482"-'ESOP/401(k) plans "52,473"- "1,485"-'Long-term stock plan for'United Cities Division "55,500"- "1,533"-'Outside directors'stock-for-fee plan "2,306"- "65"-"----------"--------"--------"--------"'Balance, September 30, 1998"30,398,319 "$152"$271,637"$ 99,369"=========="========"========"========C'See accompanying notes to consolidated financial statements.'ATMOS ENERGY CORPORATION,'CONSOLIDATED STATEMENTS OF CASH FLOWS"Year ended September 30,"Year ended September 30,"Year ended September 30,"--------------"-----------"------------ "1998 "1997 "1996"------------ -"----------"-----------"(In thousands)"(In thousands)"(In thousands)+'CASH FLOWS FROM OPERATING ACTIVITIES'Net income"$ 55,265"$ 14,575"$ 41,151#'Adjustments to reconcile net%'income to net cash provided by'operating activities:%'Depreciation and amortization:"'Charged to depreciation and'amortization "47,555 "39,970 "41,666 'Charged to other accounts "5,861 "2,237 "3,580'Deferred income taxes"(3,968) "5,807 "7,585#'Gain on sales of non-utility 'assets"(3,335)"-"- 'Other"-"-"(1,866))'Changes in assets and liabilities:&'(Increase) decrease in accounts'receivable "36,330 "32,198"(12,697)'(Increase) decrease in'inventories"(2,886) "1,562"(1,238)!'Increase in gas in storage "(787)"(4,772)"(15,949)'(Increase) decrease in'prepayments "2,387"(3,208) "1,966#'Increase in deferred charges'and other assets"(20,671)"(29,683)"(4,623)'Increase (decrease) in'accounts payable"(17,884)"(17,695) "23,796#'Increase (decrease) in taxes'payable "8,673 "(837) "7,099'Increase (decrease) in'customers' deposits"(3,069)"(1,714) "592#'Increase (decrease) in other'current liabilities"(22,213) "28,716"(4,165)#'Increase in deferred credits'and other liabilities "10,393 "1,593 "4,836"--------"--------"--------'Net cash provided by'operating activities "91,651 "68,749 "91,733'ATMOS ENERGY CORPORATION8'CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)"Year ended September 30,"Year ended September 30,"Year ended September 30,"-------------"---------------"------------ "1998 "1997 "1996"------------"----------"------------"(In thousands)"(In thousands)"(In thousands)+'CASH FLOWS FROM INVESTING ACTIVITIES'Capital expenditures"$(134,989)"$(122,312)"$(117,589)%'Retirements of property, plant'and equipment, net "178 "1,189 "5,708$'Proceeds from sales of assets "15,997"-"-"---------"---------"---------!'Net cash used in investing'activities"(118,814)"(121,123)"(111,881)+'CASH FLOWS FROM FINANCING ACTIVITIES!'Net increase (decrease) in'notes payable"(100,900) "38,812 "62,675 'Proceeds from issuance of'long-term debt"154,445 "40,000"-"'Repayment of long-term debt"(16,296)"(14,659)"(20,734)'Cash dividends paid"(31,834)"(26,415)"(28,478)'Issuance of common stock "20,467 "9,518 "8,523"---------"---------"---------'Net cash provided by'financing activities "25,882 "47,256 "21,986"---------"---------"---------&'Net increase (decrease) in cash'and cash equivalents"(1,281)"(5,118) "1,838#'Cash and cash equivalents at'beginning of year "6,016 "11,134 "9,296"---------"---------"--------- 'Cash and cash equivalents'at end of year"$ 4,735"$ 6,016"$ 11,134 "========= "========= "=========C 'See accompanying notes to consolidated financial statements.