ATMOS ENERGY CORP (Form: 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2008
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 1-10042

Atmos Energy Corporation

(Exact name of registrant as specified in its charter)


Texas and Virginia		75-1743247
(State or other jurisdiction of incorporation or organization)		(IRS employer identification no.)


Three Lincoln Centre, Suite 1800 5430 LBJ Freeway, Dallas, Texas		75240 (Zip code)
(Address of principal executive offices)

(972) 934-9227

(Registrant’s 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 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):

Large Accelerated Filer þ Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company o

(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 issuer’s classes of common stock, as of April 25, 2008.


Class		Shares Outstanding

No Par Value		90,188,545

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME
ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME
ATMOS ENERGY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
ATMOS ENERGY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 31, 2008
	1. Nature of Business
	2. Unaudited Interim Financial Information
	3. Derivative Instruments and Hedging Activities
	4. Debt
	5. Shareholders’ Equity
	6. Earnings Per Share
	7. Interim Pension and Other Postretirement Benefit Plan Information
	8. Commitments and Contingencies
	9. Concentration of Credit Risk
	10. Segment Information
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 6. Exhibits
SIGNATURES
EXHIBITS INDEX
Computation of Ratio of Earnings to Fixed Charges
Letter Regarding Unaudited Interim Financial Information
Rule 13a-14(a)/15d-14(a) Certifications
Section 1350 Certifications

GLOSSARY OF KEY TERMS


AEC		Atmos Energy Corporation
AEH		Atmos Energy Holdings, Inc.
AEM		Atmos Energy Marketing, LLC
AES		Atmos Energy Services, LLC
APS		Atmos Pipeline and Storage, LLC
Bcf		Billion cubic feet
EITF		Emerging Issues Task Force
FASB		Financial Accounting Standards Board
FIN		FASB Interpretation
Fitch		Fitch Ratings, Ltd.
GRIP		Gas Reliability Infrastructure Program
KCC		Kansas Corporation Commission
LGS		Louisiana Gas Service Company and LGS Natural Gas Company, which were acquired July 1, 2001
LPSC		Louisiana Public Service Commission
Mcf		Thousand cubic feet
MMcf		Million cubic feet
Moody’s		Moody’s Investors Services, Inc.
NYMEX		New York Mercantile Exchange, Inc.
RRC		Railroad Commission of Texas
RSC		Rate Stabilization Clause
S&P		Standard & Poor’s Corporation
SEC		United States Securities and Exchange Commission
SFAS		Statement of Financial Accounting Standards
TRA		Tennessee Regulatory Authority
WNA		Weather Normalization Adjustment

PART I. FINANCIAL INFORMATION


Item 1.	*Financial Statements*

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


	March 31,			September 30,
	2008			2007
	(Unaudited)
	(In thousands, except
	share data)

ASSETS
Property, plant and equipment	$	5,518,436		$	5,396,070
Less accumulated depreciation and amortization		1,569,570			1,559,234

Net property, plant and equipment		3,948,866			3,836,836
Current assets
Cash and cash equivalents		139,636			60,725
Cash held on deposit in margin account		29,591			—
Accounts receivable, net		805,940			380,133
Gas stored underground		421,980			515,128
Other current assets		95,567			112,909

Total current assets		1,492,714			1,068,895
Goodwill and intangible assets		737,380			737,692
Deferred charges and other assets		242,034			253,494

	$	6,420,994		$	5,896,917


CAPITALIZATION AND LIABILITIES
Shareholders’ equity
Common stock, no par value (stated at $.005 per share); 200,000,000 shares authorized; issued and outstanding: March 31, 2008 — 90,143,376 shares; September 30, 2007 — 89,326,537 shares	$	451		$	447
Additional paid-in capital		1,722,056			1,700,378
Retained earnings		407,464			281,127
Accumulated other comprehensive loss		(3,978	)		(16,198	)

Shareholders’ equity		2,125,993			1,965,754
Long-term debt		2,119,696			2,126,315

Total capitalization		4,245,689			4,092,069
Current liabilities
Accounts payable and accrued liabilities		809,140			355,255
Other current liabilities		408,575			409,993
Short-term debt		—			150,599
Current maturities of long-term debt		8,453			3,831

Total current liabilities		1,226,168			919,678
Deferred income taxes		420,232			370,569
Regulatory cost of removal obligation		277,560			271,059
Deferred credits and other liabilities		251,345			243,542

	$	6,420,994		$	5,896,917

See accompanying notes to condensed consolidated financial statements

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended
	March 31
	2008			2007
	(Unaudited)
	(In thousands, except
	per share data)

Operating revenues
Natural gas distribution segment	$	1,521,856		$	1,461,033
Regulated transmission and storage segment		51,440			46,068
Natural gas marketing segment		1,128,653			795,041
Pipeline, storage and other segment		10,022			14,077
Intersegment eliminations		(227,986	)		(240,637	)

		2,483,985			2,075,582
Purchased gas cost
Natural gas distribution segment		1,164,332			1,114,787
Regulated transmission and storage segment		—			—
Natural gas marketing segment		1,112,321			771,988
Pipeline, storage and other segment		338			229
Intersegment eliminations		(227,400	)		(240,108	)

		2,049,591			1,646,896

Gross profit		434,394			428,686
Operating expenses
Operation and maintenance		120,053			111,862
Depreciation and amortization		48,790			51,066
Taxes, other than income		54,408			56,746

Total operating expenses		223,251			219,674

Operating income		211,143			209,012
Miscellaneous income		1,467			1,838
Interest charges		33,516			35,262

Income before income taxes		179,094			175,588
Income tax expense		67,560			69,083

Net income	$	111,534		$	106,505

Basic net income per share	$	1.25		$	1.21

Diluted net income per share	$	1.24		$	1.20

Cash dividends per share	$	0.325		$	0.320

Weighted average shares outstanding:
Basic		89,314			88,078

Diluted		89,990			88,735

See accompanying notes to condensed consolidated financial statements

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Six Months Ended
	March 31
	2008			2007
	(Unaudited)
	(In thousands, except
	per share data)

Operating revenues
Natural gas distribution segment	$	2,450,033		$	2,425,277
Regulated transmission and storage segment		96,486			85,940
Natural gas marketing segment		1,969,370			1,506,735
Pipeline, storage and other segment		16,749			25,410
Intersegment eliminations		(391,143	)		(365,147	)

		4,141,495			3,678,215
Purchased gas cost
Natural gas distribution segment		1,819,309			1,816,463
Regulated transmission and storage segment		—			—
Natural gas marketing segment		1,907,075			1,420,548
Pipeline, storage and other segment		1,067			454
Intersegment eliminations		(389,988	)		(363,528	)

		3,337,463			2,873,937

Gross profit		804,032			804,278
Operating expenses
Operation and maintenance		241,242			227,232
Depreciation and amortization		97,303			100,061
Taxes, other than income		95,835			96,813

Total operating expenses		434,380			424,106

Operating income		369,652			380,172
Miscellaneous income		1,374			3,417
Interest charges		70,333			74,794

Income before income taxes		300,693			308,795
Income tax expense		115,356			121,029

Net income	$	185,337		$	187,766

Basic net income per share	$	2.08		$	2.20

Diluted net income per share	$	2.06		$	2.18

Cash dividends per share	$	0.65		$	0.64

Weighted average shares outstanding:
Basic		89,133			85,404

Diluted		89,817			86,061

See accompanying notes to condensed consolidated financial statements

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended
	March 31
	2008			2007
	(Unaudited)
	(In thousands)

Cash Flows From Operating Activities
Net income	$	185,337		$	187,766
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization:
Charged to depreciation and amortization		97,303			100,061
Charged to other accounts		67			118
Deferred income taxes		72,277			72,755
Other		6,853			9,472
Net assets / liabilities from risk management activities		38,165			50,540
Net change in operating assets and liabilities		79,190			91,215

Net cash provided by operating activities		479,192			511,927
Cash Flows From Investing Activities
Capital expenditures		(198,722	)		(172,792	)
Other, net		(3,132	)		(3,749	)

Net cash used in investing activities		(201,854	)		(176,541	)
Cash Flows From Financing Activities
Net decrease in short-term debt		(150,582	)		(382,416	)
Repayment of long-term debt		(2,253	)		(2,206	)
Cash dividends paid		(58,431	)		(54,640	)
Issuance of common stock		12,839			12,428
Net proceeds from equity offering		—			191,913

Net cash used in financing activities		(198,427	)		(234,921	)

Net increase in cash and cash equivalents		78,911			100,465
Cash and cash equivalents at beginning of period		60,725			75,815

Cash and cash equivalents at end of period	$	139,636		$	176,280

See accompanying notes to condensed consolidated financial statements

ATMOS ENERGY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2008


1.	Nature of Business

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. Through our natural gas distribution business, we distribute natural gas through sales and transportation arrangements to approximately 3.2 million residential, commercial, public authority and industrial customers through our six regulated natural gas distribution divisions, in the service areas described below:


Division		Service Area

Atmos Energy Colorado-Kansas Division		Colorado, Kansas, Missouri ⁽¹⁾
Atmos Energy Kentucky/Mid-States Division		Georgia ⁽¹⁾ , Illinois ⁽¹⁾ , Iowa ⁽¹⁾ , Kentucky, Missouri ⁽¹⁾ , Tennessee, Virginia ⁽¹⁾
Atmos Energy Louisiana Division		Louisiana
Atmos Energy Mid-Tex Division		Texas, including the Dallas/Fort Worth metropolitan area
Atmos Energy Mississippi Division		Mississippi
Atmos Energy West Texas Division		West Texas


⁽¹⁾		Denotes states where we have more limited service areas.

In addition, we transport natural gas for others through our distribution system. Our natural gas distribution business is 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 corporate headquarters and shared-services function are located in Dallas, Texas, and our customer support centers are located in Amarillo and Waco, Texas.

Our regulated transmission and storage business consists of the regulated operations of our Atmos Pipeline — Texas Division. The Atmos Pipeline — Texas Division transports natural gas to our Mid-Tex Division, transports natural gas for third parties and manages five underground storage reservoirs in Texas. We also provide ancillary services customary to the pipeline industry including parking arrangements, lending and sales of inventory on hand. Parking arrangements provide short-term interruptible storage of gas on our pipeline. Lending services provide short-term interruptible loans of natural gas from our pipeline to meet market demands.

Our nonregulated businesses operate primarily in the Midwest and Southeast and include our natural gas marketing operations and pipeline, storage and other operations. These businesses are operated through various wholly-owned subsidiaries of Atmos Energy Holdings, Inc. (AEH), which is wholly-owned by the Company and based in Houston, Texas.

Our natural gas marketing operations are managed by Atmos Energy Marketing, LLC (AEM), which is wholly-owned by AEH. AEM provides a variety of natural gas management services to municipalities, natural gas utility systems and industrial natural gas customers, primarily in the southeastern and midwestern states and to our Colorado-Kansas, Kentucky/Mid-States and Louisiana divisions. These services consist primarily of fu