Filed Pursuant to Rule 424B3 Registration No. 333-93705
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 7, 2000)
Atmos Energy Corporation is selling all of the shares.
The shares trade on the New York Stock Exchange under the symbol "ATO." On November 30, 2000, the last sale price of the shares as reported on the New York Stock Exchange was $25 1/8 per share.
PER SHARE TOTAL
--------- -----
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Atmos......................... $ $
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Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about ,
2000.
----------------------
MERRILL LYNCH & CO. UBS WARBURG LLC
----------------------
The date of this prospectus supplement is , 2000.
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Inside Cover Title: Atmos' Operating Regions |
Graphic: Map of the United States displaying the:
o areas where Atmos offers natural gas sales and distribution services,
o location of each of the business unit headquarters of Atmos' five utility divisions and
o location of Atmos' headquarters.
PAGE
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Prospectus Supplement Summary............................... S-1
Use of Proceeds............................................. S-4
Market Price of Common Stock and Dividends.................. S-4
Description of Common Stock................................. S-4
Capitalization.............................................. S-5
Selected Consolidated Operating Statistics and Financial
Data...................................................... S-6
Business.................................................... S-9
Underwriting................................................ S-14
Legal Matters............................................... S-16
Experts..................................................... S-16
Incorporation by Reference.................................. S-16
PROSPECTUS
Forward-Looking Statements.................................. 1
Atmos Energy Corporation.................................... 2
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Securities We May Issue..................................... 4
Prospectus Supplements...................................... 4
Description of Debt Securities.............................. 4
Description of Common Stock................................. 19
Plan of Distribution........................................ 22
Legal Matters............................................... 22
Experts..................................................... 22
Where You Can Find More Information......................... 23
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You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates.
Statements contained in this prospectus supplement that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933. Forward-looking statements are based on management's beliefs as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. Important factors that could cause future results to differ include, but are not limited to:
- national, regional and local economic conditions,
- competition from other energy suppliers and alternative forms of energy,
- regulatory and business trends and decisions,
- successful implementation of new technologies and systems,
- adverse weather conditions,
- successful completion and integration of pending acquisitions,
- inflation rates,
- hedging and market risk factors,
- further deregulation or "unbundling" of the natural gas distribution industry, and
- other factors discussed in this and our other filings with the SEC.
All of these factors are difficult to predict and many 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. When used in our documents or oral presentations, the words "anticipate," "believe," "estimate," "expect," "objective," "projection," "forecast," "goal" or similar words are intended to identify forward-looking statements. We undertake no obligation to update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.
The terms "we," "our" and "us" refer to Atmos Energy Corporation unless the context suggests otherwise. The term "you" refers to a prospective investor.
The abbreviations "Mcf," "MMcf" and "Bcf" mean thousand cubic feet, million cubic feet and billion cubic feet of natural gas, respectively.
This is a summary which does not contain all the information that may be important to you. You should read the more detailed information included elsewhere in this prospectus supplement, the accompanying prospectus and documents incorporated by reference.
Our fiscal year ends on September 30 of each year, and references to fiscal year 2000 and the like are to the year ended September 30 of the referenced year.
OUR COMPANY
We distribute and sell natural gas to over one million residential, commercial, industrial, agricultural and other customers. We operate through five divisions in over 800 cities, towns and communities in service areas located in Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Missouri, Tennessee, Texas and Virginia. In addition, we transport natural gas for others through our distribution system.
We provide natural gas storage services and own natural gas storage fields in Kansas and Kentucky to supplement natural gas used by customers in Kansas, Kentucky, Tennessee and other states. We also own a 45% equity interest, and have agreed to acquire the remaining equity interest, in Woodward Marketing, L.L.C., a privately held company that provides energy management and gas marketing services to industrial customers, municipalities and local distribution companies, including several of our own divisions. In addition, we market natural gas to industrial and agricultural customers primarily in West Texas and to industrial customers in Louisiana.
RECENT DEVELOPMENTS
Pending acquisition of natural gas operations in Louisiana. In April 2000, we entered into an agreement with Citizens Communications Company to acquire the natural gas operations of its Louisiana Gas Service Company division and its LGS Natural Gas Company subsidiary for $375 million. Louisiana Gas provides natural gas distribution services to approximately 276,000 residential and commercial customers in southeastern and northern Louisiana, and LGS Natural Gas Company provides gas transportation services to industrial customers in Louisiana. Upon completion of the acquisition, we believe we will become the largest natural gas distributor in Louisiana, and our national customer base will increase to approximately 1.4 million customers, making us the fifth largest pure natural gas local distribution company in the United States. This transaction is subject to federal and state regulatory approval. Please see "-- Pending Acquisition of Louisiana Natural Gas Operations" for more information.
Acquisition of natural gas distribution assets in Missouri. In May 2000, we completed the acquisition of the Missouri natural gas distribution assets of Associated Natural Gas from a subsidiary of Southwestern Energy Corporation for $32 million. The acquisition increased our presence in Missouri by more than 48,000 customers.
Restructuring and sale of our propane operations. In August 2000, as part of our strategy to restructure our non-regulated operations, we participated in the formation of US Propane, LLC, a joint venture which combined our propane operations with the propane operations of AGL Resources, Inc., Piedmont Natural Gas Company, Inc. and TECO Energy, Inc. US Propane then sold its propane business to Heritage Propane Partners, L.P. for cash and limited partner interests in Heritage Propane Partners. Through our interest in US Propane, we indirectly own approximately 19% of the general partner interests and approximately 6.5% of the limited partner interests in Heritage Propane Partners, whose common units, representing limited partner interests, are traded on the New York Stock Exchange under the symbol "HPG." We believe Heritage Propane Partners now has approximately 480,000 customers in 28 states, making it the fifth largest retail marketer of propane in the United States based on gallons sold.
Pending acquisition of remaining equity interest in Woodward Marketing. In August 2000, we entered into an agreement with Woodward Marketing, Inc. to acquire the 55% interest in Woodward Marketing that we do not already own in exchange for 1,423,193 restricted shares of our common stock.
S-1
Completion of technology upgrades. In fiscal 2000, we completed a significant upgrade of our 24-hour customer call support center, billing systems and financial, accounting and human resources computerized system. We believe that our new call center, together with our new customer information and billing system, will enable us to significantly increase our customer base without any significant changes to our existing technology. We intend to continue to use our technology to better serve our customers and optimize the efficiency of our operations.
Pending sale of our natural gas utility operations in South Carolina. In October 2000, we entered into an agreement to sell all of our natural gas utility operations in South Carolina for approximately $5.8 million. This transaction is subject to state regulatory approval.
STRATEGY
Our overall strategy is:
- continuing to manage our utility operations efficiently,
- growing our non-utility operations to complement our utility operations and developing a retail marketing plan and
- growing our utility business through acquisitions.
We are managing our utility operations efficiently by:
- managing our operating and maintenance expenses,
- leveraging our investments in technology, such as our 24-hour call center, to achieve more efficient operations,
- focusing on regulatory rate proceedings to increase revenue, which resulted in rate increases totaling $12.1 million in fiscal 2000,
- mitigating weather-related risks through weather normalized rates in some jurisdictions and purchasing weather hedges in others and
- disposing of non-growth assets, such as the pending sale of our South Carolina natural gas utility operations.
We are growing our non-utility operations by:
- agreeing to purchase the remaining interest in Woodward Marketing,
- restructuring our propane business and
- increasing our non-regulated gas sales to industrial and agricultural customers.
We are growing our utility business by acquiring natural gas operations, such as our recent acquisition of natural gas distribution assets in Missouri and our pending acquisition of natural gas operations in Louisiana.
S-2
In April 2000, we entered into an agreement with Citizens Communications Company to acquire the gas operations of its Louisiana Gas Service Company division and its LGS Natural Gas Company subsidiary. The acquisition is subject to several conditions, including federal and state regulatory approvals. We anticipate that the acquisition will close in the third quarter of our current fiscal year.
Louisiana Gas provides natural gas distribution service to approximately 276,000 residential and commercial customers in communities in southeastern and northern Louisiana. Its service territory includes the suburban areas of metropolitan New Orleans (excluding Orleans Parish), the north shore of Lake Pontchartrain and the Monroe/West Monroe metropolitan area. The non-regulated operations are conducted primarily by LGS Natural Gas, an intrastate pipeline company, which provides gas transportation service to industrial customers and Louisiana Gas.
On June 1, 2000, we and Citizens filed a joint application with the Louisiana Public Service Commission requesting approval of the purchase by us of the assets of Louisiana Gas and LGS Natural Gas. The commission is evaluating, among other things, the allocation of the purchase price between the regulated and non-regulated assets and the amount of savings that should be shared with ratepayers. Although the resolution of these issues may affect the rates that we will be able to charge, we do not expect them to have a material adverse effect on our future operations.
In addition, the commission has indicated that prior to the approval of the application, two separate proceedings involving Citizens must be addressed to the satisfaction of the commission. These proceedings involve costs associated with the construction of a pipeline and costs associated with the purchase of gas that were charged to ratepayers through the purchased gas adjustment clause of Louisiana Gas. We believe the outcome of these proceedings will not have any material adverse future impact on us, since Citizens will be responsible for any liability arising from these proceedings.
The current rate order that Louisiana Gas received from the commission has an incentive clause that allows Louisiana Gas to earn a specified return on common equity and provides for a mechanism that requires Louisiana Gas to share any amount in excess of this specified return with its gas ratepayers. In October 1999, the commission began to review the earnings of Louisiana Gas. We anticipate that the commission will adjust the amount of the specified return and the mechanism by which any excess is shared with gas ratepayers, but we do not believe any adjustment will result in a material adverse effect on the operations of Louisiana Gas.
Common stock offered by us.......... 5,000,000 shares
Shares outstanding after the
offering............................ 37,016,217 shares
Use of proceeds..................... We estimate that our net proceeds from
this offering without exercise of the
overallotment options will be
approximately $119.0 million. We intend
to use these net proceeds to pay down
outstanding indebtedness and for
general corporate purposes.
NYSE symbol......................... ATO
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The number of shares outstanding after the offering is based on our shares outstanding on November 29, 2000, and excludes 693,350 shares reserved for issuance under outstanding options and the shares to be issued in connection with the Woodward Marketing acquisition. This number assumes that the underwriters' overallotment options are not exercised. If the overallotment options are exercised in full, we will issue and sell an additional 750,000 shares.
S-3
We estimate that we will receive net proceeds from this offering of approximately $119.0 million ($136.9 million if the underwriters' overallotment options are exercised in full), after deducting the underwriting discount and commissions and estimated offering expenses payable by us. The net proceeds will be used to reduce the $250 million of commercial paper outstanding as of September 30, 2000, which has a weighted average interest rate of 6.94% as of November 30, 2000, and has maturities ranging from one day to several months. We will also use a portion of the net proceeds for general corporate purposes.
Our common stock is listed on the New York Stock Exchange under the symbol "ATO." The following table indicates the high and low closing prices of our common stock, as reported by the New York Stock Exchange, and the dividends that we paid per share during the periods indicated.
CASH
HIGH LOW DIVIDENDS PAID
---- --- --------------
Quarter Ended
December 31, 2000 (through November 30, 2000)............. $25 5/16 $19 5/16 --
Quarter Ended
September 30, 2000........................................ $23 1/4 $18 1/2 $.285
June 30, 2000............................................. 20 9/16 14 3/4 .285
March 31, 2000............................................ 20 3/16 15 9/16 .285
December 31, 1999......................................... 25 20 .285
Quarter Ended
September 30, 1999........................................ $26 3/8 $23 7/8 $.275
June 30, 1999............................................. 26 5/16 24 .275
March 31, 1999............................................ 32 11/16 23 1/16 .275
December 31, 1998......................................... 32 1/4 28 3/8 .275
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The last reported sale price of our common stock on the New York Stock Exchange on November 30, 2000, was $25 1/8 per share.
In November 2000, we declared a quarterly dividend of $.29 per share, payable on December 11, 2000, to shareholders of record on November 22, 2000. This dividend would indicate an annual dividend for fiscal 2001 of $1.16, which would represent our thirteenth consecutive annual dividend increase. However, additional dividends for fiscal 2001 have not been declared and dividends on our shares of common stock are payable at the discretion of our board of directors out of legally available funds. Future payments of dividends, and the amounts of these dividends, will depend on our financial condition, results of operations, capital requirements and other factors.
We refer you to "Description of Common Stock" in the accompanying prospectus for a description of our common stock, including the shares offered by this prospectus supplement.
S-4
The following table presents our debt and capitalization as of September 30, 2000:
- on an actual basis and
- on an adjusted basis, which gives effect to the sale of 5,000,000 shares in this offering at a public offering price of $25 1/8, after deducting the underwriting discount and commissions and estimated offering expenses, and application of the net proceeds of $119.0 million to repay outstanding commercial paper, as if the issuance occurred on September 30, 2000. For more information, please see "Use of Proceeds."
You should read this table in conjunction with the consolidated financial statements and related notes, included in our Annual Report for the fiscal year ended September 30, 2000, which is incorporated by reference to this prospectus supplement. Total capitalization excludes short-term debt.
AS OF SEPTEMBER 30, 2000
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ACTUAL AS ADJUSTED
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(IN THOUSANDS)
Short-term debt
Current portion of long-term debt......................... $ 17,566 $ 17,566
Other short-term debt..................................... 250,047 131,053
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Total short-term debt............................. $267,613 $148,619
======== ========
Long-term debt.............................................. $363,198 $363,198
Shareholders' equity
Common stock, no par value (stated at $.005 per share);
100,000,000 shares authorized; 31,952,340 shares issued
and outstanding........................................... 160 185
Additional paid-in capital............................. 306,887 425,856
Retained earnings...................................... 83,154 83,154
Accumulated other comprehensive income................. 2,265 2,265
-------- --------
Shareholders' equity.............................. 392,466 511,460
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Total capitalization.............................. $755,664 $874,658
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The "As Adjusted" column does not include debt that we may incur or assume in connection with our pending acquisitions. In addition, it does not include 693,350 shares of our common stock issuable upon exercise of outstanding options, shares to be issued in connection with the Woodward Marketing acquisition and up to 750,000 shares of our common stock issuable upon the exercise of the underwriters' overallotment options.
S-5
The following tables present our summary consolidated operating statistics for our fiscal years 1998, 1999 and 2000, our restated operating statistics for our fiscal years 1996 and 1997 on a pooled basis with United Cities Gas Company, which we acquired in July 1997, and other audited financial data for our fiscal years 1996, 1997, 1998, 1999 and 2000. Some prior year amounts have been reclassified to conform with the current year presentation. Since the information in these tables is only a summary and does not provide all of the information contained in our financial statements, you should read the information in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included in our Annual Report for the fiscal year ended September 30, 2000, which is incorporated by reference to this prospectus supplement.
In addition, the information presented below includes the financial results
for the propane segment of our operations for the ten-month period ended August
2000, at which time we restructured our propane operations. Our propane assets
are now owned by Heritage Propane Partners, and we indirectly own approximately
6.5% of the limited partner interests in Heritage Propane Partners. Our equity
investment in Heritage Propane Partners, for the periods after August 2000,
has been and will be accounted for in our results of operations on an equity
basis.
S-6
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
METERS IN SERVICE
Residential........................ 860,229 870,747 889,074 919,012 970,873
Commercial......................... 91,960 92,703 94,302 98,268 104,019
Industrial (including
agricultural)................... 19,403 17,217 16,322 14,329 14,259
Public authority and other......... 4,716 4,781 4,834 6,386 7,448
---------- ---------- ---------- ---------- ----------
Total meters............... 976,308 985,448 1,004,532 1,037,995 1,096,599
Propane customers.................. 26,108 29,097 37,400 39,539 --
---------- ---------- ---------- ---------- ----------
Total...................... 1,002,416 1,014,545 1,041,932 1,077,534 1,096,599
========== ========== ========== ========== ==========
HEATING DEGREE DAYS(1)
Actual (weighted average).......... 4,043 3,909 3,799 3,374 3,302
Percent of normal.................. 101% 98% 95% 85% 82%
SALES VOLUMES -- MMcf(2)
Residential........................ 77,001 75,215 73,472 67,128 63,285
Commercial......................... 38,247 37,382 36,083 31,457 30,707
Industrial (including
agricultural)................... 57,863 46,416 44,881 35,741 38,687
Public authority and other......... 5,182 5,195 4,937 5,793 5,520
---------- ---------- ---------- ---------- ----------
Total sales volumes........ 178,293 164,208 159,373 140,119 138,199
Transportation volumes -- MMcf..... 44,146 48,800 56,224 55,468 59,365
---------- ---------- ---------- ---------- ----------
TOTAL THROUGHPUT -- MMcf............. 222,439 213,008 215,597 195,587 197,564
========== ========== ========== ========== ==========
PROPANE -- Gallons (in thousands).... 33,637 25,204 23,412 22,291 19,329
AVERAGE SALES PRICE OF GAS -- per
Mcf................................ $ 4.51 $ 5.11 $ 4.87 $ 4.53 $ 5.65
AVERAGE COST OF GAS SOLD -- per
Mcf................................ 3.15 3.51 3.24 2.79 3.79
AVERAGE TRANSPORTATION
REVENUES -- per Mcf................ .43 .41 .43 .42 .40
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(1) A heating degree day is equivalent to each degree that the average of the high and the low temperatures for a day is below 65 degrees Fahrenheit. The greater the number of heating degree days, the colder the climate. Heating degree days are used in the natural gas industry to measure the relative coldness of weather experienced and to compare relative temperatures between one geographic area and another. Normal degree days are based on 30-year average National Weather Service data for selected locations.
(2) Utility sales volumes reflect utility segment operations including intercompany sales and transportation amounts.
S-7
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING REVENUES
Gas sales revenues
Residential................. $ 409,039 $ 452,864 $ 410,538 $ 349,691 $ 405,552
Commercial.................. 186,032 193,302 184,046 144,836 176,712
Industrial (including
agricultural)............. 187,693 168,386 161,382 117,382 171,447
Public authority and
other..................... 21,738 23,898 20,504 22,330 27,198
---------- ---------- ---------- ---------- ----------
Total gas sales
revenues............. 804,502 838,450 776,470 634,239 780,909
Transportation revenues........ 18,872 19,885 23,971 23,101 23,610
Other gas revenues............. 13,751 6,385 8,121 4,500 4,674
---------- ---------- ---------- ---------- ----------
Total gas revenues..... 837,125 864,720 808,562 661,840 809,193
Propane revenues............... 38,372 33,194 29,091 22,944 22,550
Other revenues................. 11,194 8,921 10,555 5,412 18,409
---------- ---------- ---------- ---------- ----------
Total operating
revenues............. $ 886,691 $ 906,835 $ 848,208 $ 690,196 $ 850,152
========== ========== ========== ========== ==========
NET INCOME....................... $ 41,151 $ 23,838 $ 55,265 $ 17,744 $ 35,918
DILUTED NET INCOME PER SHARE..... 1.42 .81 1.84 .58 1.14
CASH DIVIDENDS PER SHARE......... .98 1.01 1.06 1.10 1.14
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SELECTED BALANCE SHEET DATA
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
TOTAL ASSETS..................... $1,010,610 $1,088,311 $1,141,390 $1,230,537 $1,348,758
DEBT
Short-term debt................ $ 145,167 $ 182,501 $ 124,183 $ 186,152 $ 267,613
Long-term debt................. 276,162 302,981 398,548 377,483 363,198
---------- ---------- ---------- ---------- ----------
Total Debt............. $ 421,329 $ 485,482 $ 522,731 $ 563,635 $ 630,811
========== ========== ========== ========== ==========
SHAREHOLDERS' EQUITY............. $ 329,582 $ 327,260 $ 371,158 $ 377,663 $ 392,466
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Our operations are divided into two segments, a utility operations segment, which includes our natural gas distribution and sales operations, and our non-regulated segment, which includes all of our other operations. Until August 2000, our operations also included a propane segment, which was primarily engaged in the retail and wholesale distribution of propane gas. In August 2000, we merged our propane operations into Heritage Propane Partners. Through our interest in US Propane, we indirectly hold approximately 6.5% of the limited partner interests in Heritage Propane Partners, which is accounted for on an equity basis.
UTILITY OPERATIONS SEGMENT OVERVIEW
Our utility operations segment is operated through our five regulated natural gas divisions:
- Energas Company,
- Greeley Gas Company,
- Trans Louisiana Gas Company,
- United Cities Gas Company and
- Western Kentucky Gas Company.
Energas. Our Energas division operates in Texas. The governing body of each municipality we serve has original jurisdiction over all utility rates, operations and services within its city limits, except with respect to sales of natural gas for vehicle fuel and agricultural use. We operate pursuant to non-exclusive franchises granted by the municipalities we serve, which are subject to renewal from time to time. The Railroad Commission of Texas has exclusive appellate jurisdiction over all rate and regulatory orders and ordinances of the municipalities and exclusive original jurisdiction over rates and services to customers not located within the limits of a municipality. We received a rate increase of $2.2 million effective January 1, 2000, for our Amarillo system. In August 1999, Energas filed a rate request for its West Texas System, which was initially denied. Subsequently, 59 cities representing approximately 58% of our Energas customers ratified a non-binding settlement agreement which would cap the rate increase at $3 million, and would entitle ratifying cities to accept a rate increase below $3 million in the event the Railroad Commission of Texas adopts a lesser increase for the non-ratifying cities. We expect a final resolution in December 2000. At and for the year ended September 30, 2000, we had 302,662 utility meters in service, total throughput of 53,992 MMcf and operating revenues of $146.1 million, representing 19.7% of our total utility operating revenues.
Greeley Gas. Our Greeley Gas division operates in Colorado, Kansas and Missouri and is regulated by the public service commission in each state, with respect to accounting, rates and charges, operating matters and the issuance of securities. We operate under terms of non-exclusive franchises granted by the cities in which we offer services. In November 2000, Greeley Gas filed a rate case with the Colorado Public Utilities Commission for approximately $4.2 million annually. We expect a decision in the case by July 2001. At and for the year ended September 30, 2000, we had 207,161 meters in service, total throughput of 34,455 MMcf and operating revenues of $147.1 million, representing 19.9% of our total utility operating revenues.
Trans Louisiana. Our Trans Louisiana division operates in Louisiana and is regulated by the Louisiana Public Service Commission, which regulates utility services, rates and other matters. In most of the areas in which we operate in Louisiana, we do so pursuant to a non-exclusive franchise granted by the governing authority of each area. Direct sales of natural gas to industrial customers in Louisiana who use gas for fuel or in manufacturing processes and sales of natural gas for vehicle fuel are exempt from regulation. At and for the year ended September 30, 2000, we had 81,419 meters in service, total throughput of 7,448 MMcf and operating revenues of $45.5 million, representing 6.1% of our total utility operating revenues.
S-9
Western Kentucky Gas. Our Western Kentucky Gas division operates in various incorporated cities in Kentucky pursuant to non-exclusive franchises granted by these cities. We are regulated by the Kentucky Public Service Commission which regulates utility services, rates, issuance of securities and other matters. Sales of natural gas for use as vehicle fuel in Kentucky are unregulated. We have been operating under a performance based rate program since July 1998. We also have weather normalization adjustments to our rates in Kentucky. Effective December 1999, we received a rate increase of $9.9 million. At and for the year ended September 30, 2000, we had 181,066 meters in service, total throughput of 47,129 MMcf and operating revenues of $121.2 million, representing 16.4% of our total utility operating revenues.
NON-REGULATED SEGMENT OVERVIEW
Our non-regulated segment is primarily composed of the following three parts:
- Atmos Storage Inc. Atmos Storage owns underground storage fields in Kansas and Kentucky and provides storage services primarily to our United Cities and Greeley Gas divisions and also to other non-regulated customers.
- Atmos Energy Services, Inc. Atmos Energy Services markets gas to irrigation and industrial customers in West Texas and to industrial customers in Louisiana.
- Atmos Energy Marketing, LLC. Atmos Energy Marketing owns our 45% investment in Woodward Marketing. Woodward Marketing provides a variety of natural gas management services to natural gas utility systems and industrial natural gas consumers in several states and to our Greeley Gas, Trans Louisiana, United Cities and Western Kentucky Gas divisions. These services consist primarily of the acquisition and provision of natural gas supplies at fixed and market-based prices, load forecasting and management, gas storage and transportation services, peaking sales and balancing services and gas hedging through the use of derivative products.
FINANCIAL OVERVIEW OF SEGMENTS
The following table summarizes certain information regarding the operation of our utility, non-regulated and propane segments for each of the three years as of and for the period ended September 30, 2000. Amounts for the propane segment for fiscal 2000 reflect operations for 10 months until its sale to Heritage Propane Partners, effective August 10, 2000. After August 10, 2000, our share of propane results is reflected on an equity basis. The information below is presented net of intersegment eliminations.
NON-
UTILITY REGULATED PROPANE TOTAL
---------- --------- ------- ----------
(IN THOUSANDS)
2000
Operating revenues............................. $ 734,835 $92,767 $22,550 $ 850,152
Operating income (loss)........................ 77,207 8,717 (608) 85,316
Net income..................................... 22,459 10,857 2,602 35,918
Identifiable assets............................ 1,246,782 101,277 699 1,348,758
1999
Operating revenues............................. $ 617,313 $49,939 $22,944 $ 690,196
Operating income (loss)........................ 49,000 5,782 (543) 54,239
Net income (loss).............................. 10,800 7,813 (869) 17,744
Identifiable assets............................ 1,125,691 71,115 33,731 1,230,537
1998
Operating revenues............................. $ 738,445 $80,672 $29,091 $ 848,208
Operating income............................... 100,665 11,595 619 112,879
Net income (loss).............................. 43,332 11,999 (66) 55,265
Identifiable assets............................ 1,052,225 52,616 36,549 1,141,390
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GAS SALES
Our natural gas distribution business is seasonal and highly dependent on weather conditions in our service areas. Gas sales to residential and commercial customers are greater during the winter months than during the remainder of the year. The volumes of gas sales during the winter months will vary with the temperature during these months. The seasonal nature of our sales to residential and commercial customers is offset to a limited extent by our sales in the spring and summer months to our agricultural customers in Texas, Colorado and Kansas, who use natural gas to operate irrigation equipment. We also have weather normalization adjustments in our rate jurisdictions in Tennessee, Georgia and Kentucky. We have purchased weather hedges for our Texas and Louisiana operations effective for the 2000-2001 heating season which we believe will reduce the impact of warmer than normal temperatures in winter months.
GAS SUPPLY
We receive natural gas deliveries through 28 pipeline transportation companies, both interstate and intrastate, to satisfy our firm sales market requirements. The transportation agreements are firm and many of them have pipeline no-notice storage service which provide for daily balancing between system requirements and nominated flowing supplies. These agreements have generally been negotiated with the shortest term available to maintain our right to roll over the term. The agreements reduce the risk of paying fixed fees to reserve pipeline capacity on a long-term basis.
PROPERTIES
We own 30,029 miles of underground distribution and transmission mains throughout our gas distribution systems. These mains are located on easements or rights-of-way granted to us which generally provide for perpetual use. We maintain our mains through a program of continuous inspection and repair and believe that our system of mains is in good condition. We also own and operate two propane peak shaving plants with a total capacity of approximately 330,000 gallons which can produce the equivalent of approximately 4,500 Mcf daily. We also own a liquefied natural gas storage facility with a capacity of 500,000 Mcf which can inject a daily volume of 30,000 Mcf into the system as well as underground storage fields which are used to supplement the supply of natural gas in periods of peak demand. We have seven underground gas storage facilities in Kentucky and four in Kansas that have a total storage capacity of approximately 21.1 Bcf. However, approximately 10.0 Bcf of gas in the storage facilities must be retained as cushion gas to maintain reservoir pressure. The maximum daily delivery capability of the storage facilities is approximately 135,000 Mcf.
Net property, plant and equipment at September 30, 2000, included approximately $958.4 million for utility, $23.2 million for non-regulated and $.7 million for propane.
We hold franchises granted by the incorporated cities and towns that we serve. At September 30, 2000, we held 460 such franchises having terms generally ranging from five to 25 years. We believe that each of our franchises will be renewed.
Our administrative offices are consolidated in Dallas, Texas under one lease. We also maintain field offices throughout our distribution system, the majority of which are located in leased premises.
REGULATION
Each of our utility divisions is regulated by various state or local public utility authorities. We are also subject to regulation by the United States Department of Transportation with respect to safety requirements in the operation and maintenance of our gas distribution facilities.
Our distribution operations are also subject to various state and federal laws regulating environmental matters. From time to time we receive inquiries regarding various environmental matters. We believe that our properties and operations substantially comply with and are operated in substantial conformity with applicable safety and environmental statutes and regulations. There are no administrative or judicial proceedings arising under environmental quality statutes pending or known to be contemplated by governmental agencies which would have a material adverse effect on us.
RATES
Approximately 87% of our revenues in fiscal 2000 were derived from sales at rates set, or subject to approval, by local or state authorities. Generally, the regulatory authority in each state in which we operate reviews our rate request and establishes a rate structure which is intended to allow us to generate revenue sufficient to cover our costs of doing business and provide a reasonable return on invested capital.
The method of determining regulated rates varies among the states in which we operate. The regulators have the responsibility of ensuring that utilities under their jurisdiction operate in the best interests of customers while providing the utilities the opportunity to earn a reasonable return on investment. In a general rate case, the applicable regulatory authority, which is typically the state public utility commission, establishes a base margin, which is the amount of revenue authorized to be collected from customers to recover authorized operating expense (other than the cost of gas), depreciation, interest, taxes and return on rate base. The divisions in our utility operations segment perform annual deficiency studies for each rate jurisdiction to determine when to file rate cases, which are typically filed every two to five years.
COMPETITION
We are not currently in significant direct competition with any other distributors of natural gas to residential and commercial customers within our service areas. However, we do compete with other natural gas suppliers and suppliers of alternate fuels for sales to industrial and agricultural customers. We compete in all aspects of our business with alternative energy sources, including, in particular, electricity. Competition for residential and commercial customers is increasing. Promotional incentives, improved equipment efficiencies and promotional rates all contribute to the acceptability of electric equipment. Electric utilities offer electricity as a rival energy source and compete for the space heating, water heating and cooking markets. The principal means to compete against alternative fuels is lower prices, and natural gas historically has maintained its price advantage in the residential, commercial and industrial markets.
We intend to offer the shares in the U.S. and Canada through the underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Warburg LLC are acting as representatives of the underwriters named below. Subject to the terms and conditions described in a purchase agreement among us and the underwriters, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the number of shares listed opposite their names below.
NUMBER
UNDERWRITER OF SHARES
------------------------------------------------------------ ---------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
UBS Warburg LLC.............................................
---------
Total.......................................... 5,000,000
=========
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The underwriters have agreed to purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
Merrill Lynch will be facilitating Internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Web site maintained by Merrill Lynch. Other than the prospectus in electronic format, the information on the Merrill Lynch Web site relating to this offering is not a part of this prospectus.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer's certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
COMMISSIONS AND DISCOUNTS
The representatives have advised us that the underwriters propose initially to offer the shares to the public at the initial public offering price on the cover page of this prospectus supplement and to dealers at that price less a concession not in excess of $ per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment options.
PER SHARE WITHOUT OPTION WITH OPTION
--------- --------------- -----------
Public offering price........................... $ $ $
Underwriting discount........................... $ $ $
Proceeds, before expenses, to us................ $ $ $
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The expenses of the offering, not including the underwriting discount, are estimated at $350,000 and are payable by us.
OVERALLOTMENT OPTIONS
We have granted options to the underwriters to purchase up to 750,000 additional shares at the public offering price less the underwriting discount. The underwriters may exercise these options for 30 days from the date of this prospectus supplement solely to cover any overallotments. If the underwriters exercise these options, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter's initial amount reflected in the above table.
NO SALES OF SIMILAR SECURITIES
We and our executive officers and directors have agreed, with exceptions, not to sell or transfer any common stock for 90 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and these other individuals have agreed not to directly or indirectly
- offer, pledge, sell or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
- grant any option, right or warrant for the sale of any common stock,
- lend or otherwise dispose of or transfer any common stock,
- request or demand that we file a registration statement related to the common stock, or
- enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock, whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities convertible into or exchangeable or exercisable for or repayable with common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition.
NEW YORK STOCK EXCHANGE LISTING
The shares are listed on the New York Stock Exchange under the symbol "ATO."
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
Until the distribution of our common stock is completed, SEC rules may limit the underwriters from bidding for or purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of our common stock, such as bids or purchases that peg, fix or maintain that price.
The underwriters may purchase and sell our common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. "Covered" short sales are sales made in an amount not greater than the underwriters' option to purchase additional shares from the issuer in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment options. "Naked" short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in the
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The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchase shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market.
Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters makes any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
OTHER RELATIONSHIPS
Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Warburg LLC have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us. They have received customary fees and commissions for these transactions.
Gibson, Dunn & Crutcher LLP, Dallas, Texas, and Hunton & Williams, Richmond, Virginia, will opine for us as to the validity of the offered securities. Shearman & Sterling, New York, New York, will pass upon certain legal matters related to the offered securities for the underwriters.
Ernst & Young LLP, independent auditors, have audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2000, as set forth in their report, which is incorporated by reference in this prospectus supplement and elsewhere in the prospectus. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.
The SEC allows us to "incorporate by reference" information into this prospectus supplement and the accompanying prospectus that we have filed with it. This means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus supplement and the accompanying prospectus, except for any information that is superseded by information that is included directly in this document.
This prospectus supplement and the accompanying prospectus incorporate by reference our Annual Report on Form 10-K for the year ended September 30, 2000, which we have previously filed with the SEC but have not included or delivered with this document. The Annual Report contains important information about us, our common stock and our financial condition.
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PROSPECTUS
We will provide specific terms of these securities in supplements to this prospectus. This prospectus may not be used to sell securities unless accompanied by a prospectus supplement. You should read this prospectus and the prospectus supplement carefully before you invest.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus is dated November 7, 2000
Forward-Looking Statements.................................. 1 Atmos Energy Corporation.................................... 2 Use of Proceeds............................................. 3 Ratio of Earnings to Fixed Charges.......................... 3 Securities We May Issue..................................... 4 Prospectus Supplements...................................... 4 Description of Debt Securities.............................. 4 Description of Common Stock................................. 19 Plan of Distribution........................................ 22 Legal Matters............................................... 22 Experts..................................................... 22 Where You Can Find More Information......................... 23 |
The terms "we," "our," and "us" refer to Atmos Energy Corporation unless the context suggests otherwise. The term "you" refers to a prospective investor.
Statements contained in this prospectus, including the documents that are incorporated by reference as set forth in "Incorporation of Certain Documents by Reference," that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933. Forward- looking statements are based on management's beliefs as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. Important factors that could cause future results to differ include, but are not limited to:
- national, regional and local economic and competitive conditions,
- regulatory and business trends and decisions,
- technological developments,
- inflation rates,
- weather conditions, and
- other factors discussed in this and our other filings with the SEC.
All of these factors are difficult to predict and many 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. When used in our documents or oral presentations, the words "anticipate," "believe," "estimate," "expect," "objective," "projection," "forecast," "goal" or similar words are intended to identify forward-looking statements.
ATMOS ENERGY CORPORATION
We distribute and sell natural gas to over one million residential, commercial, industrial, agricultural and other customers. We operate through five divisions in over 800 cities, towns and communities in service areas located in Colorado, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Missouri, Tennessee, Texas and Virginia. We also transport natural gas for others through our distribution system.
We provide natural gas storage services and own natural gas storage fields in Kansas and Kentucky to supplement natural gas used by customers in Kansas, Kentucky, Tennessee and other states. We also own a 45% equity interest, and have agreed to acquire the remaining equity interest, in Woodward Marketing, L.L.C., a privately held company that provides gas marketing and energy management services to industrial customers, municipalities and local distribution companies, including our Trans Louisiana Gas Company, Western Kentucky Gas Company and United Cities Gas Company divisions. In addition, we market natural gas to industrial and agricultural customers primarily in West Texas and to industrial customers in Louisiana.
HISTORY AND STRATEGY
We were organized under the laws of Texas in 1983 as Energas Company, a subsidiary of Pioneer Corporation, for the purposes of owning and operating Pioneer's natural gas distribution business in Texas. Immediately following the transfer by Pioneer to us of its gas distribution business, which Pioneer and its predecessors operated since 1906, Pioneer distributed our outstanding stock to its shareholders. In September 1988, we changed our name from Energas Company to Atmos Energy Corporation. As a result of our merger with United Cities Gas Company in July 1997, we also became incorporated in Virginia.
Through the recent transactions outlined below, we have begun implementing a strategy intended to increase our presence in our larger service areas, sell our smaller, non-strategic natural gas utility operations and restructure our other operations.
RECENT DEVELOPMENTS
In April 2000, we entered into an agreement with Citizens Communications Company to acquire the Louisiana natural gas operations of its Louisiana Gas Service Company division and its LGS Natural Gas Company subsidiary for $375 million. Louisiana Gas Service Company provides natural gas distribution service to approximately 276,000 residential and commercial customers in approximately 190 communities in southeastern and northern Louisiana, which is an area with a combined population of more than 600,000. Its service territory includes the suburban areas of metropolitan New Orleans (excluding Orleans Parish), the north shore of Lake Pontchartrain and the Monroe/West Monroe metropolitan area. LGS Natural Gas Company provides gas transportation services to industrial customers in Louisiana. Upon closing, we will become the largest natural gas distributor in Louisiana, and our national customer base will increase to approximately 1.4 million customers, making us the fifth largest pure natural gas local distribution company in the United States. The acquisition is subject to federal and state regulatory approval.
In May 2000, we completed the acquisition of the Missouri natural gas distribution assets of Associated Natural Gas from a subsidiary of Southwestern Energy Corporation for $32 million. The acquisition increased our presence in Missouri by more than 48,000 customers.
As part of our strategy to restructure our non-natural gas utility operations, in August 2000, we formed US Propane, LLC, a joint venture combining our propane operations with the propane operations of AGL Resources, Inc., Piedmont Natural Gas Company, Inc., and TECO Energy, Inc. US Propane then sold its propane business to Heritage Propane Partners, L.P. for approximately $181 million in cash and limited partnership units of Heritage Propane Partners and purchased all of the outstanding stock of the general partner of Heritage Propane Partners for approximately $120 million. As a result of these transactions, we own approximately 19% of US Propane and US Propane owns all of the general partnership interest and approximately 34% of the limited partnership interest in Heritage Propane
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In August 2000, we entered into an agreement with Woodward Marketing, Inc. to acquire the 55% interest in Woodward Marketing, LLC that we do not own in exchange for 1,423,193 restricted shares of our common stock. The consideration is subject to an upward adjustment if our average share price does not equal $25 per share during a period immediately prior to the fifth anniversary of the completion of the acquisition or an earlier change in control, unless during the period beginning on the first anniversary of the completion of the acquisition and ending on the fifth anniversary or an earlier change in control our share price reaches $25 per share for any 30 consecutive trading-day period. The maximum additional shares that could be issued under the adjustment provision is 232,547, plus an amount to compensate for dividends paid after the completion of the acquisition. Upon the completion of the acquisition, our subsidiary's guaranty of Woodward Marketing, LLC's $100 million short-term working capital and letter of credit facility will increase from 45% to 100% of any amounts outstanding under the facility. This transaction is subject to state and federal regulatory approval.
In August 2000, we entered into a $485 million short-term unsecured credit facility with an interest rate equal to the London Interbank Offered Rate, or LIBOR, plus 0.75%. The facility provides $385 million for the acquisition of the assets of Louisiana Gas Service Company and LGS Natural Gas Company, and $100 million to refinance existing debt which have interest rates ranging from 7.95% to 11.20%. We also entered into a $300 million short-term unsecured credit facility with an interest rate equal to LIBOR plus 0.625%, which replaced a $250 million short-term unsecured credit facility that had an interest rate of LIBOR plus 0.375%. The interest rate on these new credit facilities will change if our debt rating changes. The credit facilities contain covenants which set limits on our ratio of debt to total capitalization and limit our ability to make investments, pay cash dividends, incur additional indebtedness, dispose of assets and create liens.
In October 2000, we entered into an agreement to sell all of our natural gas utility operations in South Carolina for approximately $5.8 million. This transaction is subject to state regulatory approval.
LOCATION OF EXECUTIVE OFFICES
Our address is 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas 75240, and our telephone number is (972) 934-9227.
Except as may be stated in the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities for general corporate purposes, including acquisitions, in our business and related businesses and the repayment of indebtedness. Please refer to the section entitled "Recent Developments" for additional information about our proposed acquisitions and recent financings.
The following table sets forth our ratio of earnings to fixed charges for the periods indicated:
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
-------------------------------- ---------------
1999 1998 1997 1996 1995 2000 1999
---- ---- ---- ---- ---- ------ ------
Ratio.......................................... 1.53 2.94 1.95 2.82 2.31 2.78 2.73
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For purposes of computing the ratio of earnings to fixed charges, earnings consists of the sum of our pretax income from continuing operations and fixed charges. Fixed charges consist of interest expense,
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We may use this prospectus to offer up to $500,000,000 of:
- our debt securities, and
- our common stock.
This prospectus provides you with a general description of the debt securities and common stock we may offer. Each time we offer securities, we will provide a prospectus supplement that will contain specific information about the terms of the offering. The prospectus supplement may also add to or change information contained in this prospectus. If so, the prospectus supplement should be read as superseding this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described under the heading "Where You Can Find More Information."
The prospectus supplement to be attached to the front of this prospectus will describe the terms of any debt securities that we offer, the terms of any common shares that we offer and any initial public offering price, the purchase price and net proceeds that we will receive and the other specific terms related to the offering of the securities.
For more details on the terms of the securities, you should read the exhibits filed with our registration statement.
We may issue debt securities from time to time in one or more distinct series. This section summarizes the material terms of the debt securities that we anticipate will be common to all series. Most of the financial and other terms of any series of debt securities that we offer and any differences from the common terms will be described in the prospectus supplement to be attached to the front of this prospectus. As used in this section, "we," "us" and "our" refer to Atmos Energy Corporation and not to its subsidiaries, unless the context otherwise requires.
As required by U.S. federal law for all bonds and notes of companies that are publicly offered, a document called an "indenture" will govern any debt securities that we issue. An indenture is a contract between us and a financial institution acting as trustee on your behalf. We anticipate entering into an indenture with SunTrust Bank, which will act as trustee. The indenture will be subject to the Trust Indenture Act of 1939. The trustee has the following two main roles:
- the trustee can enforce your rights against us if we default; there are some limitations on the extent to which the trustee acts on your behalf which are described later in this prospectus, and
- the trustee will perform certain administrative duties for us, which include sending you interest payments and notices.
As this section is a summary of the material terms of the form of indenture, it does not describe every aspect of the debt securities. We urge you to read the indenture because it, and not this description, will define your rights as a holder of debt securities. For example, in this section, we use capitalized words to signify terms that are specifically defined in the form of indenture. Some of the definitions are repeated in this prospectus, but for the rest you will need to read the indenture. We have filed or will file the form of indenture, the final indenture and any supplements to it as exhibits to the registration statement that we have filed with the SEC, or as an exhibit to the annual, quarterly or other reports that we file with the
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GENERAL
The debt securities will be our unsecured obligations and will rank equally with all of our other unsecured and unsubordinated Indebtedness.
You should read the prospectus supplement for the following terms of the series of debt securities offered by the prospectus supplement. Our board of directors will establish the following terms before issuance of the series:
- the title of the debt securities,
- the aggregate principal amount of the debt securities, the percentage of their principal amount at which the debt securities will be issued, and the date or dates when the principal of the debt securities will be payable or how those dates will be determined,
- the interest rate or rates, which may be fixed or variable, that the debt securities will bear, if any, and how the rate or rates will be determined,
- the date or dates from which any interest will accrue or how the date or dates will be determined, the date or dates on which any interest will be payable, any regular record dates for these payments or how these dates will be determined and the basis on which any interest will be calculated, if other than on the basis of a 360-day year of twelve 30-day months,
- the place or places, if any, other than or in addition to New York City, of payment, transfer or exchange of the debt securities, and where notices or demands to or upon us in respect of the debt securities may be served,
- any optional redemption provisions,
- any sinking fund or other provisions that would obligate us to repurchase or redeem the debt securities,
- whether the amount of payments of principal of, any premium on, or interest on the debt securities will be determined with reference to an index, formula or other method, which could be based on one or more commodities, equity indices or other indices, and how these amounts will be determined,
- any changes or additions to the events of default or our covenants with respect to the debt securities,
- if not the principal amount of the debt securities, the portion of the principal amount that will be payable upon acceleration of the maturity of the debt securities or how that portion will be determined,
- any changes or additions to the provisions concerning defeasance and covenant defeasance contained in the indenture that will be applicable to the debt securities,
- any provisions granting special rights to the holders of the debt securities upon the occurrence of specified events,
- if other than the trustee, the name of the paying agent, security registrar or transfer agent for the debt securities,
- if we do not issue the debt securities in book-entry form only to be held by The Depository Trust Company, as depository, whether we will issue the debt securities in global form or fully registered form and the identity of any alternative depository,
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- the denomination or denominations in which the debt securities will be issued, if other than denominations of $1,000 or any integral multiples,
- any provisions requiring us to pay Additional Amounts on the debt securities to any holder who is not a United States person in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem the debt securities rather than pay the Additional Amounts, and
- any other material terms of the debt securities or the indenture, which may not be consistent with the terms set forth in this prospectus.
For purposes of this prospectus, any reference to the payment of principal of, any premium on, or interest on the debt securities will include Additional Amounts if required by the terms of the debt securities.
The indenture will not limit the amount of debt securities that we are authorized to issue from time to time. The indenture will also provide that there may be more than one trustee thereunder, each for one or more series of debt securities. If a trustee is acting under the indenture with respect to more than one series of debt securities, the debt securities for which it is acting would be treated as if issued under separate indentures. If there is more than one trustee under the indenture, the powers and trust obligations of each trustee will apply only to the debt securities of the separate series for which it is trustee.
We may issue debt securities with terms different from those of debt securities already issued. Without the consent of the holders of the outstanding debt securities, we may reopen a previous issue of a series of debt securities and issue additional debt securities of that series unless the reopening was restricted when we created that series.
There is no requirement that we issue debt securities in the future under the indenture, and we may use other indentures or documentation, containing different provisions in connection with future issues of other debt securities.
We may issue the debt securities as "Original Issue Discount Securities," which are debt securities, including any zero-coupon debt securities, that are issued and sold at a discount from their stated principal amount. Original Issue Discount Securities provide that, upon acceleration of their maturity, an amount less than their principal amount will become due and payable. We will describe the U.S. federal income tax consequences and other considerations applicable to original issue discount securities in any prospectus supplement relating to them.
HOLDERS OF DEBT SECURITIES
Book-Entry Holders. We will issue debt securities in book-entry form only, unless we specify otherwise in the applicable prospectus supplement. This means debt securities will be represented by one or more global securities registered in the name of a financial institution that holds them as depository on behalf of other financial institutions that participate in the depository's book-entry system. These participating institutions, in turn, hold beneficial interests in the debt securities on behalf of themselves or their customers.
Under the indenture, we will recognize as a holder only the person in whose name a debt security is registered. Consequently, for debt securities issued in global form, we will recognize only the depository as the holder of the debt securities and we will make all payments on the debt securities to the depository. The depository passes along the payments it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners.
The depository and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so under the terms of the debt securities.
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Street Name Holders. In the future we may terminate a global security or issue debt securities initially in non-global form. In these cases, you may choose to hold your debt securities in your own name or in "street name." Debt securities held in street name would be registered in the name of a bank, broker or other financial institution that you choose, and you would hold only a beneficial interest in those debt securities through an account you maintain at that institution.
For debt securities held in street name, we will recognize only the intermediary banks, brokers and other financial institutions in whose names the debt securities are registered as the holders of those debt securities, and we will make all payments on those debt securities to them. These institutions pass along the payments they receive to their customers who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required to do so. If you hold debt securities in street name you will be an indirect holder, and not a holder, of those debt securities.
Legal Holders. Our obligations, as well as the obligations of the trustee and those of any third parties employed by us or the trustee, run only to the legal holders of the debt securities. We do not have obligations to you if you hold beneficial interests in global securities, in street name or by any other indirect means. This will be the case whether you choose to be an indirect holder of a debt security or have no choice because we are issuing the debt securities only in global form.
For example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that holder is required, under agreements with depository participants or customers or by law, to pass it along to the indirect holders but does not do so. Similarly, if we want to obtain the approval of the holders for any purpose (for example, to amend the indenture or to relieve us of the consequences of a default or of our obligation to comply with a particular provision of the indenture) we would seek the approval only from the holders, and not the indirect holders, of the debt securities. Whether and how the holders contact the indirect holders is up to the holders.
When we refer to you, we mean those who invest in the debt securities being offered by this prospectus, whether they are the holders or only indirect holders of those debt securities. When we refer to your debt securities, we mean the debt securities in which you hold a direct or indirect interest.
Special Considerations for Indirect Holders. If you hold debt securities through a bank, broker or other financial institution, either in book-entry form or in street name, you should check with your own institution to find out:
- how it handles securities payments and notices,
- whether it imposes fees or charges,
- how it would handle a request for the holders' consent, if ever required,
- whether and how you can instruct it to send you debt securities registered in your own name so you can be a holder, if that is permitted in the future,
- how it would exercise rights under the debt securities if there were a default or other event triggering the need for holders to act to protect their interests, and
- if the debt securities are in book-entry form, how the depository's rules and procedures will affect these matters.
GLOBAL SECURITIES
What is a Global Security? We will issue each debt security under the indenture in book-entry form only, unless we specify otherwise in the applicable prospectus supplement. A global security represents one
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Each debt security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depository. Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as DTC, will be the depository for all debt securities issued in book-entry form.
A global security may not be transferred to or registered in the name of anyone other than the depository or its nominee, unless special termination situations arise. We describe those situations below under "Special Situations When a Global Security Will Be Terminated." As a result of these arrangements, the depository, or its nominee, will be the sole registered owner and holder of all debt securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account with the depository or with another institution that does. Thus, if your security is represented by a global security, you will not be a holder of the debt security, but only an indirect holder of a beneficial interest in the global security.
Special Considerations for Global Securities. As an indirect holder, your rights relating to a global security will be governed by the account rules of your financial institution and of the depository, as well as general laws relating to securities transfers. We do not recognize an indirect holder as a holder of debt securities and instead deal only with the depository that holds the global security.
If we issue debt securities only in the form of a global security, you should be aware of the following:
- you cannot cause the debt securities to be registered in your name, and cannot obtain non-global certificates for your interest in the debt securities, except in the special situations that we describe below,
- you will be an indirect holder and must look to your own bank or broker for payments on the debt securities and protection of your legal rights relating to the debt securities, as we describe under "Holders of Debt Securities" above,
- you may not be able to sell interests in the debt securities to some insurance companies and to other institutions that are required by law to own their securities in non-book-entry form,
- you may not be able to pledge your interest in a global security in circumstances where certificates representing the debt securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective,
- the depository's policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to your interest in a global security. We and the trustee have no responsibility for any aspect of the depository's actions or for its records of ownership interests in a global security. We and the trustee also do not supervise the depository in any way,
- DTC requires that those who purchase and sell interests in a global security within its book-entry system use immediately available funds and your broker or bank may require you to do so as well, and
- financial institutions that participate in the depository's book-entry system, and through which you hold your interest in a global security, may also have their own policies affecting payments, notices and other matters relating to the debt security. Your chain of ownership may contain more than one financial intermediary. We do not monitor and are not responsible for the actions of any of those intermediaries.
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The special situations for termination of a global security are as follows:
- if the depository notifies us that it is unwilling, unable or no longer qualified to continue as depository for that global security and we do not appoint another institution to act as depository within 60 days,
- if we notify the trustee that we wish to terminate that global security, or
- if an event of default has occurred with regard to debt securities represented by that global security and has not been cured or waived; we discuss defaults later under "Events of Default."
If a global security is terminated, only the depository, and not we or the trustee, is responsible for deciding the names of the institutions in whose names the debt securities represented by the global security will be registered and, therefore, who will be the holders of those debt securities.
COVENANTS
Limitations on Liens. We will covenant in the indenture that we will not, and will not permit any of our Restricted Subsidiaries to, create, incur, issue or assume any Indebtedness secured by any Lien on any Principal Property, or on shares of stock or Indebtedness of any Restricted Subsidiary, known as Restricted Securities, without making effective provision for the outstanding debt securities, other than any outstanding debt securities not entitled to this covenant, to be secured by the Lien equally and ratably with, or prior to, the Indebtedness and obligations secured or to be secured thereby for so long as the Indebtedness or obligations are so secured, except that the foregoing restriction will not apply to:
- any Lien existing on the date of the first issuance of debt securities under the indenture, including the Liens on property or after-acquired property of ours or our Subsidiaries under the Greeley Indenture or the United Cities Indenture, or such other date as may be specified in a prospectus supplement for an applicable series of debt securities,
- any Lien on any Principal Property or Restricted Securities of any person existing at the time that person is merged or consolidated with or into us or a Restricted Subsidiary, or this person becomes a Restricted Subsidiary, or arising thereafter otherwise than in connection with the borrowing of money arranged thereafter and pursuant to contractual commitments entered into prior to and not in contemplation of the person's becoming a Restricted Subsidiary,
- any Lien on any Principal Property existing at the time we or a Restricted Subsidiary acquire the Principal Property, whether or not the Lien is assumed by us or the Restricted Subsidiary, provided that this Lien may not extend to any other Principal Property of ours or any Restricted Subsidiary,
- any Lien on any Principal Property, including any improvements on an existing Principal Property, of ours or any Restricted Subsidiary, and any Lien on the shares of stock of a Restricted Subsidiary that was formed or is held for the purpose of acquiring and holding the Principal Property, in each case to secure all or any part of the cost of acquisition, development, operation, construction, alteration, repair or improvement of all or any part of the Principal Property, or to secure Indebtedness incurred by us or a Restricted Subsidiary for the purpose of financing all or any part of that cost, provided that the Lien is created prior to, at the time of, or within 12 months after the latest of, the acquisition, completion of construction or improvement or commencement of commercial operation of that Principal Property and, provided further, that the Lien may not
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- any Lien on any Principal Property or Restricted Securities to secure Indebtedness owed to us or to a Restricted Subsidiary,
- any Lien in favor of a governmental body to secure advances or other payments under any contract or statute or to secure Indebtedness incurred to finance the purchase price or cost of constructing or improving the property subject to the Lien,
- any Lien created in connection with a project financed with, and created to secure, Non-Recourse Indebtedness,
- any Lien required to be placed on any of our property or any of the property of our Subsidiaries under the provisions of the Greeley Indenture, the United Cities Indenture or the Note Purchase Agreements,
- any extension, renewal, substitution or replacement, or successive extensions, renewals, substitutions or replacements, in whole or in part, of any Lien referred to in any of the bullet points above, provided that the Indebtedness secured may not exceed the principal amount of Indebtedness that is secured at the time of the renewal or refunding, and that the renewal or refunding Lien must be limited to all or any part of the same property and improvements, shares of stock or Indebtedness that secured the Lien that was renewed or refunded, or
- any Lien not permitted above securing Indebtedness that, together with the aggregate outstanding principal amount of other secured Indebtedness that would otherwise be subject to the above restrictions, excluding Indebtedness secured by Liens permitted under the above exceptions, and the Attributable Debt in respect of all Sale and Leaseback Transactions, not including Attributable Debt in respect of any Sale and Leaseback Transactions described in the last two bullet points in the next succeeding paragraph, would not then exceed 15% of our Consolidated Net Tangible Assets.
Limitation on Sale and Leaseback Transactions. We will covenant in the indenture that we will not, and will not permit any Restricted Subsidiary to, enter into any Sale and Leaseback Transaction unless
- we or a Restricted Subsidiary would be entitled, without securing the Outstanding Securities, to incur Indebtedness secured by a Lien on the Principal Property that is the subject of the Sale and Leaseback Transaction,
- the Attributable Debt associated with the Sale and Leaseback Transaction would be in an amount permitted under the last bullet point of the preceding paragraph,
- the proceeds received in respect of the Principal Property so sold and leased back at the time of entering into the Sale and Leaseback Transaction are used for our business and operations or the business and operations of any Subsidiary, or
- within 12 months after the sale or transfer, an amount equal to the proceeds received in respect of the Principal Property sold and leased back at the time of entering into the Sale and Leaseback Transaction is applied to the prepayment, other than mandatory prepayment, of any Outstanding Securities or any Funded Indebtedness owed by us or a Restricted Subsidiary, other than Funded Indebtedness that is held by us or any Restricted Subsidiary or our Funded Indebtedness that is subordinate in right of payment to any Outstanding Securities.
Definitions. Following are definitions of some of the terms used in the covenants described above.
"Attributable Debt" means, as to any lease under which a person is at the time liable for rent, at a date that liability is to be determined, the total net amount of rent required to be paid by that person
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"Capital Stock" means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests, however designated, in stock issued by a corporation.
"Consolidated Net Tangible Assets" means the aggregate amount of assets, less applicable reserves and other properly deductible items, after deducting
- all current liabilities, excluding any portion thereof constituting Funded Indebtedness, and
- all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles,
all as set forth on our most recent consolidated balance sheet contained in our latest quarterly or Annual Report filed with the SEC under the Securities Exchange Act of 1934 and computed in accordance with generally accepted accounting principles.
"Funded Indebtedness" means, as applied to any person, all Indebtedness of the person maturing after, or renewable or extendible at the option of the person beyond, 12 months from the date of determination.
"Greeley Indenture" means the Indenture of Mortgage and Deed of Trust, dated as of March 1, 1957, from Greeley Gas Company to U.S. Bank National Association, formerly The Central Bank and Trust Company, as Trustee, as amended and supplemented through December 1, 1993, the Indenture of Mortgage and Deed of Trust through the Tenth Supplemental Indenture by Atmos to U.S. Bank National Association, formerly The Central Bank and Trust Company, as Trustee, as amended, supplemented or otherwise modified from time to time.
"Indebtedness" means obligations for money borrowed, evidenced by notes, bonds, debentures or other similar evidences of indebtedness.
"Lien" means any lien, mortgage, pledge, encumbrance, charge or security interest securing Indebtedness; provided, however, that the following types of transactions will not be considered, for purposes of this definition, to result in a Lien:
- any acquisition by us or any Restricted Subsidiary of any property or assets subject to any reservation or exception under the terms of which any vendor, lessor or assignor creates, reserves or excepts or has created, reserved or excepted an interest in oil, gas or any other mineral in place or the proceeds of that interest,
- any conveyance or assignment whereby we or any Restricted Subsidiary conveys or assigns to any person or persons an interest in oil, gas or any other mineral in place or the proceeds of that interest,
- any Lien upon any property or assets either owned or leased by us or a Restricted Subsidiary or in which we or any Restricted Subsidiary owns an interest that secures for the benefit of the person or persons paying the expenses of developing or conducting operations for the recovery, storage, transportation or sale of the mineral resources of the property or assets, or property or assets with which it is unitized, the payment to the person or persons of our proportionate part or the Restricted Subsidiary's proportionate part of the development or operating expenses,
- any hedging arrangements entered into in the ordinary course of business, including any obligation to deliver any mineral, commodity or asset, or
- any guarantees that we make for the repayment of Indebtedness of any Subsidiary or guarantees by any Subsidiary of the repayment of Indebtedness of any entity, including Indebtedness of Woodward Marketing, L.L.C.
"Non-Recourse Indebtedness" means, at any time, Indebtedness incurred after the date of the indenture by us or a Restricted Subsidiary in connection with the acquisition of property or assets by us or a Restricted Subsidiary or the financing of the construction of or improvements on property, whenever acquired, provided that, under the terms of this Indebtedness and under applicable law, the recourse at the time and thereafter of the lenders with respect to this Indebtedness is limited to the property or assets so acquired, or the construction or improvements, including Indebtedness as to which a performance or completion guarantee or similar undertaking was initially applicable to the Indebtedness or the related property or assets if the guarantee or similar undertaking has been satisfied and is no longer in effect. Indebtedness which is otherwise Non-Recourse Indebtedness will not lose its character as Non-Recourse Indebtedness because there is recourse to the borrower, any guarantor or any other person for (a) environmental representations, warranties or indemnities, or (b) indemnities for and liabilities arising from fraud, misrepresentation, misapplication or non-payment of rents, profits, insurance and condemnation proceeds and other sums actually received from secured assets to be paid to the lender, waste and mechanics' liens or similar matters.
"Note Purchase Agreements" refers to the following note purchase agreements, as amended, supplemented or otherwise modified from time to time, between us and the following parties:
- John Hancock Mutual Life Insurance Company, dated December 21, 1987,
- Mellon Bank, N.A., Trustee under Master Trust Agreement of AT&T Corporation, dated January 1, 1984, for Employee Pension Plans -- AT&T -- John Hancock -- Private Placement, dated December 21, 1987, which agreement is identical to the Hancock agreement listed above except for the parties and the amounts,
- John Hancock Mutual Life Insurance Company, dated October 11, 1989,
- The Variable Annuity Life Insurance Company, dated August 29, 1991,
- The Variable Annuity Life Insurance Company, dated August 31, 1992, and
- New York Life Insurance Company, New York Life Insurance and Annuity Corporation, The Variable Annuity Life Insurance Company, American General Life Insurance Company and Merit Life Insurance Company, dated November 14, 1994.
"Principal Property" means any natural gas distribution property or propane property located in the United States, except any property that in the opinion of our board of directors is not of material importance to the total business conducted by us and of our consolidated Subsidiaries.
"Restricted Subsidiary" means any Subsidiary the amount of Consolidated Net Tangible Assets of which constitutes more than 5% of the aggregate amount of Consolidated Net Tangible Assets of us and our Subsidiaries.
"Sale and Leaseback Transaction" means any arrangement with any person in which we or any Restricted Subsidiary leases any Principal Property that has been or is to be sold or transferred by us or the Restricted Subsidiary to that person, other than
- a lease for a term, including renewals at the option of the lessee, of not more than three years or classified as an operating lease under generally accepted accounting principles,
- leases between us and a Restricted Subsidiary or between Restricted Subsidiaries, and
- leases of a Principal Property executed by the time of, or within 12 months after the latest of, the acquisition, the completion of construction or improvement, or the commencement of commercial operation, of the Principal Property.
"Subsidiary" of ours means
- a corporation, a majority of whose Capital Stock with rights, under ordinary circumstances, to elect directors is owned, directly or indirectly, at the date of determination, by us, by one or more of our Subsidiaries or by us and one or more of our Subsidiaries, or
- any other person, other than a corporation, in which at the date of determination we, one or more of our Subsidiaries or we and one or more of our Subsidiaries, directly or indirectly, have at least a majority ownership and power to direct the policies, management and affairs of that person.
"United Cities Indenture" means the Indenture of Mortgage, dated as of July 15, 1959, from United Cities Gas Company to U.S. Bank Trust National Association, formerly First Trust of Illinois, National Association, and M.J. Kruger, as Trustees, as amended, supplemented or otherwise modified from time to time, the Indenture of Mortgage through the Twenty-Second Supplemental Indenture by us to U.S. Bank Trust National Association, formerly First Trust National Association, and Russell C. Bergman, as Trustees, as amended, supplemented, or otherwise modified from time to time.
CONSOLIDATION, MERGER OR SALE OF ASSETS
Under the terms of the indenture, we are generally permitted to consolidate with or merge into another entity. We are also permitted to sell or transfer our assets substantially as an entirety to another entity. However, we may not take any of these actions unless all of the following conditions are met:
- the resulting entity must agree to be legally responsible for all our obligations under the debt securities and the indenture,
- the transaction must not cause a default or an Event of Default,
- the resulting entity must be organized under the laws of the United States or one of the states or the District of Columbia, and
- we must deliver an officers' certificate and legal opinion to the trustee with respect to the transaction.
In the event that we engage in one of these transactions and comply with the conditions listed above, we would be discharged from all our obligations and covenants under the indenture and all obligations under the Outstanding Securities, with the successor corporation or person succeeding to our obligations and covenants.
In the event that we engage in one of these transactions, the indenture provides that, if any Principal Property or Restricted Securities would thereupon become subject to any Lien, the debt securities, other than any debt securities not entitled to the benefit of specified covenants, must be secured, as to such Principal Property or Restricted Securities, equally and ratably with, or prior to, the indebtedness or obligations that upon the occurrence of such transaction would become secured by the Lien, unless the Lien could be created under the indenture without equally and ratably securing the debt securities.
MODIFICATION OR WAIVER
There are two types of changes that we can make to the indenture and the debt securities.
Changes Requiring Majority Approval. First, there are changes that we cannot make to the indenture or the debt securities under the indenture without the specific written approval of the holders of
not less than a majority in principal amount of all outstanding debt securities of each series affected by the change. We cannot:
- change the stated maturity of the principal of, any premium on, or the interest on a debt security,
- change any of our obligations to pay Additional Amounts,
- reduce the amount payable upon acceleration of maturity following the default of an Indexed Indenture security or an Original Issue Discount Security,
- adversely affect any right of repayment at your option,
- change the place of payment of a debt security,
- impair your right to sue for payment,
- adversely affect any right to convert or exchange a debt security,
- reduce the percentage of holders of debt securities whose consent is needed to modify or amend the indenture,
- reduce the percentage of holders of debt securities whose consent is needed to waive compliance with any provisions of the indenture or to waive any defaults, and
- modify any of the provisions of the indenture dealing with modification and waiver in any other respect, except to increase any percentage of consents required to amend the indenture or for any waiver or to add to the provisions that cannot be modified without the approval of each affected holder.
The same majority approval would be required for us to obtain a waiver of any of our covenants in the indenture.
Changes Not Requiring Approval. The second type of change does not require any vote by the holders of the debt securities. This type is limited to clarifications and certain other changes that would not adversely affect holders of the outstanding debt securities in any material respect. Nor do we need any approval to make any change that affects only debt securities to be issued under the indenture after the changes take effect.
Further Details Concerning Voting. When taking a vote, we will use the following rules to decide how much principal amount to attribute to a debt security:
- for Original Issue Discount Securities, we will use the principal amount that would be due and payable on the voting date if the maturity of the debt securities were accelerated to that date because of a default, and
- for debt securities whose principal amount is not known (for example, because it is based on an index) we will use a special rule for that debt security described in the prospectus supplement.
Debt securities will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption. Debt securities will also not be eligible to vote if they have been fully defeased as described later under "Defeasance and Covenant Defeasance."
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO CHANGE THE INDENTURE OR THE DEBT SECURITIES OR REQUEST A WAIVER.
EVENTS OF DEFAULT
You will have special rights if an Event of Default occurs as to the debt securities of your series that is not cured, as described later in this subsection. Please refer to the prospectus supplement for information about any changes to the Events of Default or our covenants, including any addition of a covenant or other provision providing event risk or similar protection.
What is an Event of Default? The term "Event of Default" as to the debt securities of your series means any of the following:
- we do not pay interest on a debt security of the series within 30 days of its due date,
- we do not pay the principal of or any premium, if any, on a debt security of the series on its due date,
- we do not deposit any sinking fund payment when and as due by the terms of any debt securities requiring such payment,
- we remain in breach of a covenant or agreement in the indenture, other than a covenant or agreement for the benefit of less than all of the holders of the debt securities, for 60 days after we receive written notice stating that we are in breach from