A T M O S E N E R G Y C O R P O R A T I O N S U M M A R Y A N N U A L R E P O R T 2 0 0 0 C O N T I N U I N G O U R T R A D I T I O N O F G R 0 W T H A T M O S E N E R G Y C O R P O R A T I O N F I N A N C I A L H I G H L I G H T S Year Ended September 30, 2000 1999 % Change (Dollars in thousands, except share data) Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 850,152 Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 325,706 $ 690,196 $ 299,794 Utility net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,459 $ 10,800 Non-utility net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,459 6,944 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,918 $ 17,744 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,348,758 Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 755,664 Net income per share – diluted . . . . . . . . . . . . . . . . . . . . . Cash dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . Book value per share at end of year . . . . . . . . . . . . . . . . . $ $ $ 1.14 1.14 12.28 $ 1,230,537 $ 755,146 $ $ $ .58 1.10 12.09 Total throughput (MMcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,564 195,587 Heating degree days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Degree days as a % of normal . . . . . . . . . . . . . . . . . . . . . 3,302 82% 3,374 85% Meters in service at end of year . . . . . . . . . . . . . . . . . . . . 1,096,599 1,037,995 Return on average shareholders’ equity . . . . . . . . . . . . . . 9.3% 4.7% Shareholders’ equity as a % of total capitalization (including short-term debt) at end of year . . . . . . . . . . Shareholders of record . . . . . . . . . . . . . . . . . . . . . . . . . . . Average shares outstanding – diluted (000’s) . . . . . . . . . . 38.4% 32,394 31,594 40.1% 35,179 30,819 23.2% 8.6% 108.0% 93.8% 102.4% 9.6% 0.1% 96.6% 3.6% 1.6% 1.0% -2.1% -3.5% 5.6% 97.9% -4.2% -7.9% 2.5% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T A B L E O F C O N T E N T S Letter to Shareholders Running Our Utilities Exceptionally Well Expanding Our Non-Utility Operations Growing Through Acquisitions Financial Review Atmos Officers Board of Directors Corporate Information 2 8 12 16 22 31 32 33 G R E E L E Y G A S C O. D E N V E R , C O L O R A D O W E S T E R N K E N T U C K Y G A S C O. OW E N S B O RO , K E N T U C K Y E N E R G A S C O. , T E X A S AT M O S DA L L A S , T E X A S U N I T E D C I T I E S G A S C O. F R A N K L I N , T E N N E S S E E B U S I N E S S U N I T H E A D Q UA RT E R S U T I L I T Y O P E R AT I O N S AT M O S H E A D Q UA RT E R S T R A N S L O U I S I A N A G A S C O. L A FAY E T T E , L O U I S I A N A Headquartered in Dallas, Texas, Atmos Company, United Cities Gas Company and Energy Corporation distributes natural gas Western Kentucky Gas Company. Atmos to more than one million customers in owns an equity interest in Heritage Colorado, Georgia, Illinois, Iowa, Kansas, Propane Partners, the nation’s fifth largest Kentucky, Louisiana, Missouri, South Carolina, retail propane marketer. Atmos also owns Tennessee,Texas and Virginia through its an equity interest in Woodward Marketing operating divisions – Energas Company, LLC, a natural gas services company Greeley Gas Company,Trans Lousiana Gas located in Houston,Texas. I n 2000, Atmos Energy Corporation continued its tradition of growth which resulted in the creation of new customers, new markets and new sources of revenue. Not only did Atmos experience significant growth in key financial areas such as revenues and net income, but we also put into place new rate structures, made acquisitions in important markets and implemented technology that will allow us to better serve our customers. As you will see in this year’s Summary Annual Report, Atmos is growing in a variety of ways – from increasing our presence in the state of Missouri through growth in our utility operations to becoming an owner in one of the nation’s largest propane companies. Just as importantly, steps taken in 2000 have put a solid foundation in place for continued growth in 2001 and beyond. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . Letter to Shareholders T o O u r S h a r e h o l d e r s : A year ago, I said that we would continue to aggressively focus on growing our utility and non-utility operations by making acquisitions to sustain our historical growth rate. transformed it from a regional company with operations in the state of Texas and a customer base of 300,000 to a company with a multi-state In 2000, we did exactly that. In fact, the number presence, stretching east from of transactions that we have announced and com- the Rocky Mountains to the pleted this year is unparalleled in the history of Atlantic Seaboard and serving the Company. We also took important steps to more than one million cus- improve our profitability, despite the weather. tomers. In 2000, we proved Robert W. Best Chairman of the Board, President and Chief Executive Officer We were again challenged by weather in fiscal once again that Atmos is a 2000, but we did not sit idly by as warm weather successful acquirer and integrator of natural took its toll throughout our operating territories. gas utility operations. We were proactive and innovative and grew our In April, we announced our largest acquisi- earnings despite weather that was 18 percent tion since 1997 – the purchase of the assets of warmer than normal and two percent warmer Louisiana Gas Service Company, a division of than last year. As a result of the steps we took in Citizens Communications Company, and LGS 2000, net income more than doubled from $17.7 Natural Gas Company, a Citizens subsidiary, for Di vi dend Histor y 1985 1990 1995 2001* * Indicated Annual Dividend $365 million. When completed in fiscal 2001, this acquisition will add 279,000 meters to our current Louisiana operations and will make Atmos the largest natural gas distribution company in the state of Louisiana. In May, we completed the acquisition of Associated Natural Gas’ Missouri natural gas distribution properties at a cost of $667 per customer, million in 1999, to $35.9 million in 2000. Similarly, earnings per share also $1.20 grew from $0.58 per diluted share in 1999 to $1.14 in 2000. $1.00 $0.80 A Y e a r o f U n p r e c e d e n t e d $0.60 G r o w t h – U t i l i t y O p e r a t i o n s $0.40 Since 1986, Atmos’ tradition of growth has 2 . . . . . . . . a transaction cost much lower than the industry A Y e a r o f U n p r e c e d e n t e d average. The ANG operations were effectively integrated into our United Cities operations and the acquisition increased our presence in the state of Missouri by 48,000 customers. With these transactions, Atmos will have doubled its customer base in four years, becoming the fifth largest pure natural gas utility in the nation with approximately 1.4 million customers served. Atmos has grown from a regional company with a customer base of approximately 300,000 to a company with a multi-state presence and more than one million customers. In the future, we plan to continue our acquisi- tion strategy. We also believe it makes sense to divest assets in states where the Company does not have a significant presence or opportunity for growth, such as South Carolina, where we have G r o w t h – N o n - U t i l i t y O p e r a t i o n s We also took important steps in fiscal 2000 to grow and increase the profitability of our non- utility operations. Propane Operations. Our strategy has been to increase the scale, scope and profitability of the propane operations we acquired through United Cities Gas Company in 1997. In February 2000, Atmos and three other gas utility companies announced they would combine their propane assets to create a regional company, US Propane. In August, Atmos and its partners merged US Propane with Heritage Propane Partners, L.P. The combined company, which retained the Heritage name, is the nation’s fifth largest retail propane marketer. Atmos and its partners own, indirectly through their ownership of US Propane, all of the general partnership interest and a portion of the limited partnership interest of Heritage Propane Partners.Through this series of transactions, Atmos has leveraged its small and relatively unprofitable propane assets to gain an ownership interest in a highly respected and successful, NYSE listed, national propane company. reached an agreement to sell our operations. Woodward Marketing LLC. In August, Such selective divestitures will enable us to focus we also announced that Atmos will acquire the our time, attention and resources to more remaining 55 percent equity interest in Woodward strategic operations. Marketing LLC, a natural gas services company. Atmos currently owns a 45 percent equity interest 3 . . . . . . . . . . . . . . . . . . . . Letter to Shareholders c o n t i n u e d in Woodward, and we see a significant opportunity T a k i n g P r o a c t i v e S t e p s t o to increase Woodward’s profitability by acquiring the M i t i g a t e t h e E f f e c t s o f remaining interest in the Company. W e a t h e r o n E a r n i n g s Upon completion of the acquisition, J. D. We were successful in improving our earnings Woodward, President of Woodward Marketing, will in 2000 through a diligent regulatory strategy of join our senior management team as Senior Vice making timely rate requests and redesigning our President of Non-Utility Operations. J.D. and his rate structures to mitigate the effects of weather. team have made Woodward Marketing a highly We completed three regulatory proceedings successful company primarily due to the successful during the fiscal year and settled two others just relationships they have established with their after the close of the year that will result in more customers. We believe that Woodward Marketing’s than $16 million in additional annual revenues. ability to prosper will be enhanced both as the Rate proceedings are also pending in Virginia and core of Atmos’ non-utility operations and through Colorado. In December, we placed $2 million in the continued leadership of J. D. Woodward and new rates into effect under bond in Virginia while his Woodward Marketing team. awaiting a final January 2001 hearing in that case. Sale of Retail Products and Services. In 2000, we launched the sale of non-traditional retail products and services to a portion of our customer base.This venture seeks to increase our non-utility revenue by capitalizing on our local brand names and strong customer relationships. Atmos has not invested any capital in this venture but has instead partnered with successful national retail distribution We anticipate the Colorado rate case will be resolved during the 2001 fiscal year. During the 2000 fiscal year, Atmos successfully mitigated the effects of weather and established a floor for its earnings by redesigning rates and pur- chasing weather hedges. As a result of our success in redesigning our rate structures, approximately 34 percent of Atmos’ customer base will have weather companies. During 2000, we offered our customers normalized rates during the 2000 -2001 heating home protection products and discount buying club season compared to only 17 percent in 1999-2000. memberships. Initial results are promising and indicate To further reduce the impact of weather on earn- that our customers are interested in purchasing non- ings, Atmos purchased weather hedges for its Texas traditional products and services from us. and Louisiana operations for the 2000 -2001 heat- We will continue to look for ways to increase ing season.These hedges provide protection against the profitability of our non-utility operations. We weather that is at least seven percent warmer than expect the earnings growth rate of our non-utility normal while preserving any upside if the weather operations to exceed the growth rate of our utility approaches normal, or even colder than normal, operations, excluding acquisitions. 4 . . . . . . . . conditions. We believe these from last year’s average of 523 customers per steps have positioned the employee, and again better than the average of Company to deliver strong 390 customers per employee for our peer earnings growth going for- companies. ward, even when weather We continually work to improve our efficiency is warmer than normal. and customer service at our Customer Support S t r i v i n g f o r E x c e p t i o n a l C u s t o m e r S e r v i c e Center which provides customer call support 24 hours a day, seven days a week.The center now handles more than 7,000 calls per day collectively for our five utility business units. In addition to increasing the As we move into the future, technology will numbers of customers we serve, we have also continued our Cus t ome rs Per E mploye e efforts to deliver exceptional customer service at the lowest possible cost. By continually improving our technology systems and our business processes and training, we have remained among the most efficient operators in the industry. Our operating and maintenance costs of $135 per meter highlights our efficiency and was once again lower than the indus- 600 500 400 300 200 100 0 1996 1997 1998 1999 2000 continue to transform our business. More sophisticated technol- ogy has already made it possible to read our customers’ meters using hand-held elec- tronic meter reading equipment and to dis- patch service orders directly to the field try average of $220 per meter. In addition, we served through laptop computers located in our service 582 customers per employee, up significantly technicians’ vehicles. 5 . . . . . . . . Letter to Shareholders c o n t i n u e d Our investment in technology will drive and accommodate our future growth and, at the same time, enable us to mantain and enhance our reputa- tion as one of the most efficient companies in the natural gas industry.This technology should further serve as a platform for web-based customer account information and service requests, which we expect to add to our technology infrastructure in the near future. A B r i g h t F u t u r e f o r N a t u r a l G a s a n d f o r A t m o s The strong demand for natural gas and the recent dramatic increases in the price of natural gas have made headlines. We are sensitive to the impact of higher commodity prices on our customers. However, we believe that the unregulated price of natural gas at the wellhead and the strong resource base will eventually balance supply and demand. The outlook for natural gas demand is very bright. A recent study by Washington Policy and Analysis, with the support of the American Gas Foundation, forecasts that U.S. consumption of natural gas could rise by as much as 20 percent over the next 20 years.The study states that increased use of natural gas could improve air quality, conserve energy and reduce U.S. reliance on imported oil. As for Atmos, our fundamental strengths will drive our future growth: our ability to complete and capitalize on acquisitions, the strong relationships we have developed with our customers, our success in growing our non-utility operations and our use of technology to increase efficiency, lower costs and serve more customers in each of our markets. $200 $150 $100 $ 50 $ 0 Oper ati ng and Maint enance Expe nse Per Cus tome r Our 2000 fiscal moved our propane operation into a structure in year accomplishments which it can grow and prosper, and we are enhanc- would not have been ing Woodward’s profitability and growth potential possible without the by purchasing the remaining equity interest in the contributions of many Company. We remain one of the most efficient important people. First, I natural gas distribution companies in the nation would like to express my by virtue of our ability to leverage technology to thanks to our employees aggressively manage our operating costs, accom- 1996 1997 1998 1999 2000 for their dedication and modate future growth and provide exceptional commitment and for customer service. managing company operating expenses at 1998 With these accomplishments, we have gained levels.Their many accomplishments during fiscal strong momentum and have put the infrastructure 2000 are even more impressive when you consider in place to deliver solid earnings growth in 2001 the challenges they faced as the result of one of and beyond. Our vision and strategy for continuing the warmest winters on record. I also want our our tradition of growth are clear, and we have a customers to know how much we appreciate passion for achieving them. We intend to deliver them and their loyalty and support of our business. results that fulfill the great promise of our company. They are the reason we are in business and we know that we must continue to earn their trust Sincerely, Robert W. Best Chairman, President and Chief Executive Officer November 8, 2000 and respect every day. I also want to thank our Board of Directors for their unwavering commit- ment to Atmos’ long-term growth and for their guidance and support. Finally, and most importantly, I would like to offer my special thanks to our shareholders for their investment and for their continued confidence in our long-term strategy. In closing, I want to emphasize that although the past year was extremely challenging, we have accomplished a great deal. We have continued Atmos’ tradition of growth by acquiring both utility and non-utility operations. We have stabilized our utility earnings by redesigning rates, achieving rate increases and purchasing weather hedges. We 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . Running Our Utilities ExceptionallyWell N atural gas may be the energy 2000, or about 63 percent of total net income.This success story for the next 20 years. compares with utility net income of $10.8 million The American Gas Foundation on revenues of $621.2 million in 1999. Utility net and other organizations project income was higher in 2000 primarily due to the average annual U.S. natural gas consumption will positive impact of new rate designs and revenue increase from the current level of 22 quadrillion increases approved in recent regulatory proceed- Btus to 30 – 35 quadrillion Btus by 2020. Atmos ings, as well as the addition of approximately 48,000 is positioned to benefit from the bright future customers as the result of the closing of the ANG of natural gas. Missouri acquisition. Reduced operating costs in Atmos’ core business remains the distribution fiscal 2000 also contributed to improved net income. of natural gas through its five operating divisions: Energas Company, Greeley Gas Company,Trans E n h a n c i n g E f f i c i e n c y Louisiana Gas Company, United Cities Gas Company and Western Kentucky Gas Company. We intend to increase earnings by profitably a n d C o n v e n i e n c e A major part of Atmos’ strategy for increasing its earnings is managing costs through efficient oper- growing our residential, commercial and industrial ations. Atmos is one of the most efficient operators customer bases, improving our efficiency and in the industry, with operating and maintenance earning our allowed rates of return in each costs of $135 per meter compared to an average CUSTOMER SUPPORT CENTER state in which we operate. We will continue to of $220 per meter for strengthen our utility business by providing our peer group.We superior customer service and reliability, by are ahead of many providing competitive gas rates and by effective companies in having the cost management. F i n a n c i a l P e r f o r m a n c e Utility operations reported net income of $22.4 million on revenues of $740 million in technology that provides Atmos the foundation for delivering exceptional customer service while .8 8 . . . . . . . We’re using technology that enhances both customer convenience and our service efficiency. Experienced representatives at our Customer Support Center handle more than 7,000 customer calls each day through- out our company and dispatch work orders to computers located in the vehicles of our service technicians. . K E E W A S Y A D HOURS, . . . . . . . . . . . . Running Our Utilities Exceptionally Well improving our efficiency. In 2000, we continued In the near future, we plan to expand the Atmos to develop new ways to utilize the customer infor- website and enable our customers to access mation system that was implemented in 1999. account information and schedule service online. The customer information system integrates our Customer Support Center with other technology used in the field, including automated dispatching and the automated transmission of service orders to in-truck terminals and electronic meter reading devices. Atmos’ commitment to customer service is important because customers are being presented with more choices and have come to expect high quality service from all types of businesses, including natural gas utilities.To make it easy for customers to do business with Atmos, the Customer Support Center, now in its second full year of operation, handles customer calls from all five utility business units 24 hours a day, seven days a week.The Customer Support Center now handles an average of 7,000 calls each day. In addition, a network of nearly 300 payment centers, located in convenient retail locations, offers extended hours to customers. A new bill format C u s t o m e r A d d i t i o n s In 2000, Atmos added new meters through internal growth, with the greatest increases occur- ring in its Kansas City, Western Colorado, and Middle and East Tennessee service areas. Atmos has aggressive programs to make natural gas the fuel of choice for residential and commercial new con- struction, to convert existing customers from other sources of energy and to market other products and appliances such as gas logs and gas lights to residential customers and builders. During the past year, our marketing team successfully promoted the use of new natural gas applications such as gas- powered chilling technology for cooling large com- mercial buildings and dehumidification technology that reduces humidity and improves indoor air quality. Atmos added a total of almost 60,000 new meters to its operations in fiscal 2000, including the acquisition of Associated Natural Gas. provides more information to our customers while E a r n i n g O u r A l l o w e d also making more information available at the finger- tips of our customer support associates to enable them to handle customer inquiries more efficiently. R a t e s o f R e t u r n Atmos has confronted the challenge of warmer weather by successfully executing a regulatory strategy that includes filing for additional revenue 10 . . . . . . . . increases, seeking weather normalization where rate case in Colorado in November 2000, shortly appropriate, implementing performance-based after the close of the fiscal year. The Illinois rate regulation (PBR) and redesigning rate structures case was settled for $1.37 million in October 2000, to mitigate the effects of warm weather. and $2 million in new rates were put into effect In fiscal 2000, Atmos concluded three rate in Virginia under bond effective December 2000 proceedings for its Western Kentucky Gas, Amarillo, pending a final January 2001 hearing. Assuming and Trans La operations and received approval for these new rates are approved for Virginia, Atmos’ more than $12 million in additional annual revenue 2001 revenues will include more than $18 million increases. In addition to approving a revenue in additional annual revenue. increase for Western Kentucky Gas, the Kentucky With the addition of weather normalized Public Service Commission also agreed to a five- rates in Western Kentucky, combined with existing year pilot program for weather normalization which weather normalized customers in Tennessee and was implemented in November 2000. Atmos was Georgia, approximately 34 percent of Atmos’ also successful in redesigning its rate structures in customer base will be weather normalized in fiscal Louisiana, Western Kentucky and Amarillo to mitigate 2001, compared with 17 percent in 2000. the impact of warm weather on future earnings. Performance-based regulation (PBR) is in effect In November 2000, the Railroad Commission for our Kentucky,Tennessee and Georgia operations. of Texas approved a settlement in our Energas PBRs permit the Company and its customers to West Texas rate case which will result in an share in purchased gas cost savings when Atmos can increase in annual revenues of approximately $3 obtain gas supplies below certain benchmark indices. million. In addition to the revenue increase, the In addition to pursuing an aggressive regulatory Railroad Commission approved a new rate design strategy, the Company has purchased weather which provides more protection from warmer than hedges for its Texas and Louisiana operations.The normal weather. The new rates went into effect hedges are effective for the 2000 - 2001 heating December 1, 2000 and affect approximately 217,000 Energas customers in West Texas. season and provide protection against weather that is at least seven percent warmer than normal in both Atmos also filed rate proceedings in Illinois states, while preserving any upside opportunities. and Virginia during the 2000 fiscal year and filed a 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . Expanding Our Non-Utility Operations T he natural gas industry has never been more competitive.To continue to prosper during these competitive times, Atmos is developing new non-utility businesses that will increase revenues from our existing customer base. In fiscal 2000, we reported non-utility net income of $13.5 million or 37 percent of consolidated net income. Our non-utility operations included propane, the sale of natural gas for agricultural and industrial customers in West Texas, a 45 percent equity interest in Woodward Marketing LLC, the sale of retail products and services, and natural gas storage. P r o p a n e O p e r a t i o n s Net income for our propane operations increased in 2000 despite weather that was 18 percent warmer than normal and two percent warmer than a year ago. In February, Atmos announced a joint venture with three other gas utilities to combine its propane assets with the propane operations of those companies to form a limited partnership, US Propane. In June, Atmos and its US Propane partners announced they would merge operations with Heritage Propane Partners, L.P., to create the fifth largest retail propane mar- keter in the United States.The Heritage and US Propane transactions were completed in August and the combined company serves more than 480,000 customers in 28 states. Atmos’ ownership interest in 12 . . . . . . . . MARKETER A propane limited partnership formed by Atmos and three other gas utilities merged with Heritage Propane Partners, L.P., and now serves more than 480,000 customers in 28 states, including luxury homes in the Jacksonville Beach area of Florida. . . . . . . . . . . . . . Expanding Our Non-Utility Operations this partnership should result in increased quarterly supplying natural gas to West cash flow, a decrease in our dependency on weather Texas farmers for powering and allow us to maximize the value of our propane irrigation pumps. Enermart assets by becoming part of a larger national also promotes new natural organization. W o o d w a r d M a r k e t i n g L L C gas technologies, such as gas- powered electric generators. Woodward Marketing LLC’s contribution to A t m o s E n e r g y Atmos pre-tax earnings was $7.3 million in 2000, S e r v i c e s , I n c . compared to $7.2 million in 1999. Atmos currently Each day, more than one owns a 45 percent equity interest in Woodward and million customers rely on D R A W D O O W G N I T E K R A M announced in August 2000 that it will acquire the Atmos to provide them with safe and dependable remaining 55 percent equity interest. In addition to natural gas service. As an extension of that service, Atmos, the natural gas services company, headquar- Atmos is offering its customers an array of optional tered in Houston,Texas, serves industrial customers, services and products through Atmos Energy municipalities and natural gas utilities in the Southeast, Services, Inc. Midwest and in California. E n e r m a r t E n e r g y S e r v i c e s T r u s t Atmos is partnering with mass-marketing experts to offer customers home protection services and memberships in a discount buying club. The seasonal nature of natural gas sales for Customers who purchase products through the heating usually makes warm weather months unprofit- Company receive the added convenience of paying able for most natural gas utilities. However, through only one bill since the cost of selected products and Enermart Energy Services, Atmos serves agricultural services is included with the monthly gas bill. and industrial customers in West Texas during the spring and summer months. Enermart’s revenues N a t u r a l G a s S t o r a g e increased by approximately 76 percent in 2000 and Atmos owns 11 non-regulated underground were $67.2 million compared to $38.2 million in 1999. gas storage facilities in Kansas and Kentucky with Industrial customers include feedlots and cotton a total storage capacity of approximately 21 Bcf. In gins, as well as other non-agricultural large natural fiscal 2000, storage contributed $1.4 million to net gas users. Enermart’s agricultural operations include income, compared to $1.3 million in 1999. .14 14 . . . . . . . TOTAL OWNERSHIP Woodward Marketing has grown by providing natural gas services to industrial customers, natural gas utili- ties and municipalities, such as Loudon,Tennessee, known for its many recreational and historic attractions.This lovely Civil War era home is a Loudon landmark. Atmos currently owns 45 percent equity interest in Woodward. . . . . . . . . . . . . . . . . . . . Growing Through Acquisitions A tmos’ track record of growth through acquisitions continued in 2000. The geographic, economic and regulatory diversity created through acquisitions is a strength that sets Atmos apart from other natural gas utilities. Following the closing of the LGS acquisition, Atmos will be the fifth largest ASSOCIATED NATURAL GAS pure natural gas utility in the U.S. with 1.4 million customers. A s s o c i a t e d N a t u r a l G a s - M i s s o u r i In October 1999, Atmos announced that it would acquire from Southwestern Energy its Associated Natural Gas’ Missouri natural gas distribution properties, at a cost per customer of $667. The transaction closed on June 1, adding 48,000 customers in Missouri and significantly increasing Atmos’ presence in the state. 16 . . . . . . . . We increased our presence in Missouri, gaining new customers like Noranda Aluminum in New Madrid which employs 1,130 people and has produced more than 10 billion pounds of aluminum used in everything from window frames to automotive wheels and electrical wire. NEW CUSTOMERS . . . . . . . . . . . . Growing Through Acquisitions A c q u i s i t i o n o f L o u i s i a n a G a s S e r v i c e C o m p a n y A n n o u n c e d In April 2000, Atmos announced that it would acquire the assets of Louisiana Gas Service E C I V R E S S A G A N A I S I U O L Company, or LGS, and Louisiana Natural Gas Company, or LGSN, from Citizens Communications Com- pany. The acquisition will make Atmos the largest natural gas distribution company in Louisiana.The transaction is expected to be completed in 2001, subject to regulatory approval. LGS serves approximately 279,000 meters and its service territories include two of the fastest growing parishes in the state.The acquisition of LGS is a positive one for Atmos for a number of reasons including the existence of a success- ful and profitable non-utility business operation, the opportunity to in- crease efficiency through the use of technology and the proximity of the LGS operations to Atmos’ existing Trans Louisiana operations. 18 . . . . . . . . We’ll be the biggest fish in Louisiana, serving more than 360,000 total meters when we complete the acquisition of Louisiana Gas Service Company.The acquisition will make us the fifth largest pure natural gas utility in the U.S, with 1.4 million customers. NEW METERS . . . . . . . . . . . . Growing Through Acquisitions As part of the acquisition, Atmos will also acquire LGSN, an intrastate pipeline company that provides natural gas transportation service to about 200 industrial customers. LGSN also owns a 25 percent undivided interest in Acadian Gas Pipeline’s Napoleonville storage facility and a 19 percent undivided interest in Pine Pipeline in Northern Louisiana. LOUISIANA GAS SERVICE TRANS LA GAS COMPANY The acquisition of LGS will make Atmos the largest natural gas distribution company in the state of Louisiana. 20 . . . . . . . . P r o p a n e M e r g e r Growth through acquisitions is a key com- Early in 2000, Atmos and three other gas ponent of Atmos’ strategy for increasing earnings utility companies announced a plan to combine and building value for the Company. As a larger their propane assets and create a regional company, company, Atmos will have an even greater com- US Propane. In June 2000, the partners announced petitive advantage as the natural gas industry that they would combine the assets of US Propane continues toward unbundling of service and with Heritage Propane Partners, L.P. In August becomes even more competitive. 2000, the transaction was completed and Atmos is now an owner in the nation’s fifth largest retail propane marketer. D i v e s t i t u r e O p p o r t u n i t i e s We also believe it makes sense to divest the Company of assets in those states where Atmos A c q u i s i t i o n o f R e m a i n i n g has a small number of customers with little oppor- tunity for future growth. In October 2000, Atmos announced the sale of its Gaffney, South Carolina operations for approximately $5.8 million.The sale is expected to be completed in December 2000. I n t e r e s t i n W o o d w a r d M a r k e t i n g L L C In August 2000, the Company announced that it would acquire the remaining 55 percent equity interest in Woodward Marketing LLC in exchange for approximately 1.4 million restricted shares of Atmos common stock. Atmos currently owns a 45 percent equity interest in Woodward which it acquired through its acquisition of United Cities Gas Company in 1997. Woodward has a track record of strong growth accompanied by some of the highest customer satisfaction ratings in the industry.The purchase of the remaining equity inter- est in Woodward should increase the profitability, scale and scope of our non-utility operations. 21 . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Review Atmos at a Glance Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Income Condensed Consolidated Statements of Cash Flows Report of Independent Auditors Consolidated Financial and Statistical Summary (2000-1996) Consolidated Financial and Statistical Summary (1995-1991) 23 24 25 26 27 28 29 S u m m a r y A n n u a l R e p o r t The financial information presented in this report regarding Atmos Energy Corporation is condensed. Our complete financial statements (including notes) as well as management’s discussion and analysis of financial condition and results of operations are presented in our Annual Report on Form 10-K. Investors may request, without charge, our Annual Report on Form 10-K for the year ended September 30, 2000, by calling Investor Relations at 1-800-382-8667 7:30 a.m. – 4:30 p.m. CST. Form 10-K may also be viewed on Atmos’ website: http://www.atmosenergy.com. Additional investor information can be found on the inside back cover of this report. 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A T M O S E N E R G Y C O R P O R A T I O N A T M O S A T A G L A N C E Year Ended September 30, 2000 1999 Meters in Service Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industrial (including agricultural) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Public authority and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total meters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Propane customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970,873 104,019 14,259 7,448 1,096,599 — 919,012 98,268 14,329 6,386 1,037,995 39,539 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,096,599 1,077,534 Heating Degree Days Actual (weighted average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percent of normal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,302 82% 3,374 85% Sales Volumes (MMcf) Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industrial (including agricultural) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Public authority and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation Volumes (MMcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Throughput (MMcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Propane – Gallons (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating Revenues (000’s) Gas Revenues Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Industrial (including agricultural) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Public authority and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transportation revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other gas revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total gas revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Propane revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,285 30,707 38,687 5,520 138,199 59,365 197,564 19,329 $ 405,552 176,712 171,447 27,198 780,909 23,610 4,674 809,193 22,550 18,409 67,128 31,457 35,741 5,793 140,119 55,468 195,587 22,291 $ 349,691 144,836 117,382 22,330 634,239 23,101 4,500 661,840 22,944 5,412 Total Operating Revenues (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 850,152 $ 690,196 Other Statistics Gross plant (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net plant (000’s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miles of pipe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,579,803 $ 982,346 30,029 1,885 $ 1,549,258 $ 965,782 30,670 2,062 23 . . . . . . . . A T M O S E N E R G Y C O R P O R A T I O N C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T S September 30, 2000 1999 (Dollars in thousands) A S S E T S Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,546,569 $ 1,526,834 Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,234 Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . 1,579,803 597,457 Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 982,346 Current assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gas stored underground . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred charges and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,379 114,448 6,456 64,222 8,101 200,606 165,806 22,424 1,549,258 583,476 965,782 8,585 70,564 8,209 44,653 3,142 135,153 129,602 $ 1,348,758 $ 1,230,537 C A P I T A L I Z A T I O N A N D L I A B I L I T I E S Shareholders’ equity Common stock, no par value (stated at $.005 per share); issued and outstanding: 2000 – 31,952,340 shares, 1999 – 31,247,800 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160 $ Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customers’ deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred credits and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,887 83,154 2,265 392,466 363,198 755,664 17,566 250,047 73,031 10,844 9,923 21,085 382,496 131,619 78,979 156 293,359 83,231 917 377,663 377,483 755,146 17,848 168,304 64,167 848 9,657 25,951 286,775 112,610 76,006 $ 1,348,758 $ 1,230,537 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A T M O S E N E R G Y C O R P O R A T I O N C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E Year Ended September 30, 2000 1999 (Dollars in thousands, except per share data) Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 850,152 $ Purchased gas cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating expenses Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes, other than income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income Equity in earnings of unconsolidated investment . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ Weighted average shares outstanding: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524,446 325,706 140,249 7,648 63,855 28,638 240,390 85,316 7,307 7,437 14,744 43,823 56,237 20,319 35,918 1.14 1.14 1.14 31,461 31,594 $ $ $ $ 690,196 390,402 299,794 148,065 9,141 56,874 31,475 245,555 54,239 7,156 2,967 10,123 37,063 27,299 9,555 17,744 .58 .58 1.10 30,566 30,819 25 . . . . . . . . A T M O S E N E R G Y C O R P O R A T I O N C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S Year Ended September 30, 2000 1999 (Dollars in thousands) C A S H F L O W S F R O M O P E R A T I N G A C T I V I T I E S Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,918 $ 17,744 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization: Charged to depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . Charged to other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gain on sale of non-utility assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,855 3,065 18,251 (5,831) (61,062) 56,874 4,800 31,874 — (26,594) Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,196 84,698 C A S H F L O W S U S E D I N I N V E S T I N G A C T I V I T I E S Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of Missouri assets of ANG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retirements of property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from sale of assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75,557) (32,000) 957 6,467 (110,353) — 757 — Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (100,133) (109,596) C A S H F L O W S F R O M F I N A N C I N G A C T I V I T I E S Net increase in short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,743 (14,567) (35,995) 13,550 101,904 (61,000) (33,882) 21,726 Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,731 28,748 Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . (1,206) 8,585 3,850 4,735 Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,379 $ 8,585 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Report of Independent Auditors . . . . . . . . . . . . . . . . . . . T o S h a r e h o l d e r s o f A t m o s E n e r g y C o r p o r a t i o n : We have audited the consolidated balance sheets of Atmos Energy Corporation at September 30, 2000 and 1999, and the related consolidated statements of income, shareholders’ equity and cash flows for each of the three years in the period ended September 30, 2000 (not presented separately herein) and in our report dated November 8, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheets and statements of income and cash flows are fairly stated in all material respects in relation to the basic consolidated financial state- ments from which they have been derived. Dallas,Texas November 8, 2000 27 . . . . . . . . A T M O S E N E R G Y C O R P O R A T I O N C O N S O L I D A T E D F I N A N C I A L A N D S T A T I S T I C A L S U M M A R Y ( 2 0 0 0 - 1 9 9 6 ) Year Ended September 30, 2000 1999 1998 1997* 1996* (Dollars in thousands, except per share data) B A L A N C E S H E E T D A T A A T S E P T E M B E R 3 0 Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . Net property, plant and equipment . . . . . . . . . . . . . Working capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, excluding current maturities . . . . . Total capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . 75,557 982,346 (181,890) 1,348,758 392,466 363,198 755,664 $ 110,353 965,782 (151,622) 1,230,537 377,663 377,483 755,146 $ $ 134,989 917,860 (116,679) 1,141,390 371,158 398,548 769,706 $ 122,312 849,127 (169,518) 1,088,311 327,260 302,981 630,241 $ 117,589 770,211 (102,764) 1,010,610 329,582 276,162 605,744 I N C O M E S T A T E M E N T D A T A Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income per share – diluted . . . . . . . . . . . . . . . C O M M O N S T O C K D A T A Shares outstanding (in thousands) End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends per share . . . . . . . . . . . . . . . . . . . . . Shareholders of record . . . . . . . . . . . . . . . . . . . . . . Market price – High . . . . . . . . . . . . . . . . . . . . . . . . . Low . . . . . . . . . . . . . . . . . . . . . . . . . End of year . . . . . . . . . . . . . . . . . . . Book value per share at end of year . . . . . . . . . . . . Price/Earnings ratio at end of year. . . . . . . . . . . . . . Market/Book ratio at end of year . . . . . . . . . . . . . . Annualized dividend yield at end of year. . . . . . . . . $ 850,152 325,706 35,918 1.14 $ 690,196 299,794 17,744 .58 $ 848,208 331,836 55,265 1.84 $ 906,835 329,654 23,838 .81 $ 886,691 324,412 41,151 1.42 $ $ $ $ $ $ 31,952 31,594 1.14 32,394 25 $ 14 3⁄4 $ 20 5⁄8 $ $ 12.28 18.09 1.68 5.5% 31,248 30,819 1.10 35,179 30,398 30,031 1.06 36,949 29,642 29,422 1.01 29,867 $ $ $ 3211⁄16 $ 23 1⁄16 $ 24 1⁄8 $ $ 12.09 41.59 2.00 4.6% 31 1⁄16 $ 24 5⁄8 $ 28 9⁄16 $ $ 12.21 15.52 2.34 3.7% 27 7⁄8 $ 22 1⁄8 $ 24 7⁄8 $ $ 11.04 30.71 2.25 4.1% 29,242 28,994 .98 36,472 31 18 23 3⁄8 11.27 16.46 2.07 4.2% C U S T O M E R S A N D V O L U M E S ( A S M E T E R E D ) Gas sales volumes (MMcf) . . . . . . . . . . . . . . . . . . . . Gas transportation volumes (MMcf) . . . . . . . . . . . 138,199 59,365 140,119 55,468 Total throughput (MMcf) . . . . . . . . . . . . . . . . . . . . . Meters in service at end of year . . . . . . . . . . . . . . . Total meters and propane customers . . . . . . . . . . . Heating degree days . . . . . . . . . . . . . . . . . . . . . . . . Degree days as a % of normal . . . . . . . . . . . . . . . . Average gas sales price per Mcf sold. . . . . . . . . . . . Average purchased gas cost per Mcf sold . . . . . . . . Average transportation fee per Mcf . . . . . . . . . . . . S T A T I S T I C S Return on average shareholders’ equity . . . . . . . . . Number of employees . . . . . . . . . . . . . . . . . . . . . . . Net plant per meter . . . . . . . . . . . . . . . . . . . . . . . . . Operating, maintenance and administrative expense per meter . . . . . . . . . . . . . . . . . . . . . . . . Customers per employee . . . . . . . . . . . . . . . . . . . . Times interest earned before income taxes . . . . . . 197,564 1,096,599 1,096,599 3,302 195,587 1,037,995 1,077,534 3,374 159,373 56,224 215,597 1,004,532 1,041,932 3,799 164,208 48,800 213,008 985,448 1,014,545 3,909 178,293 44,146 222,439 976,308 1,002,416 4,043 $ $ $ $ $ $ $ $ $ $ 82% 5.65 3.79 .40 9.3% 1,885 896 135 582 2.28 $ $ $ $ $ 85% 4.53 2.79 .42 4.7% 2,062 930 146 523 1.56 $ $ $ $ $ 95% 4.87 3.24 .43 15.8% 2,193 914 136 475 3.09 $ $ $ $ $ 98% 5.11 3.51 .41 7.3% 2,679 862 183 379 2.04 101% 4.51 3.15 .43 13.0% 2,863 789 160 350 3.00 * Amounts for 1997 and 1996 have been restated for pooling of interests with United Cities in July 1997. 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A T M O S E N E R G Y C O R P O R A T I O N C O N S O L I D A T E D F I N A N C I A L A N D S T A T I S T I C A L S U M M A R Y ( 1 9 9 5 - 1 9 9 1 ) ( 1 ) Year Ended September 30, 1995 1994 1993 1992 1991 (Dollars in thousands, except per share data) B A L A N C E S H E E T D A T A A T S E P T E M B E R 3 0 Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . Net property, plant and equipment . . . . . . . . . . . . . . Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt, excluding current maturities . . . . . . Total capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103,904 697,287 (41,980) 900,948 304,349 294,463 598,812 $ 85,471 638,787 (32,340) 829,385 267,584 282,647 550,231 $ 74,110 592,887 (31,830) 786,739 251,317 257,696 509,013 $ 71,056 552,599 (16,398) 723,632 223,984 269,887 493,871 $ 69,247 522,234 (39,349) 701,185 197,582 243,891 441,473 I N C O M E S T A T E M E N T D A T A Operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income per share – diluted. . . . . . . . . . . . . . . . . C O M M O N S T O C K D A T A Shares outstanding (in thousands) End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends per share . . . . . . . . . . . . . . . . . . . . . . Shareholders of record . . . . . . . . . . . . . . . . . . . . . . . Market price – High . . . . . . . . . . . . . . . . . . . . . . . . . . Low . . . . . . . . . . . . . . . . . . . . . . . . . . End of year . . . . . . . . . . . . . . . . . . . . Book value per share at end of year . . . . . . . . . . . . . Price/Earnings ratio at end of year. . . . . . . . . . . . . . . Market/Book ratio at end of year . . . . . . . . . . . . . . . Annualized dividend yield at end of year. . . . . . . . . . $ 749,555 300,158 28,808 1.06 $ 826,302 297,020 26,772 1.05 $ 794,893 289,394 29,694 1.21 $ 708,968 264,098 21,216 .91 $ 672,265 243,211 17,487 .81 $ $ $ $ $ 28,246 27,208 .96 31,782 25,911 25,604 .91 27,005 25,183 24,535 .82 24,649 24,100 23,324 .79 12,989 $ $ 22,277 21,582 .75 11,064 $ $ 20 5⁄8 $ 15 7⁄8 $ 19 3⁄8 $ $ 10.77 18.28 1.80 21 1⁄8 $ 16 3⁄8 $ 17 3⁄4 $ $ 10.33 16.90 1.72 20 5⁄8 $ 13 1⁄2 $ 20 1⁄4 $ $ 9.98 16.74 2.03 5.0% 5.1% 4.1% 15 1⁄4 $ 12 5⁄8 $ 14 7⁄8 $ $ 9.29 16.35 1.60 5.3% 14 1⁄8 10 3⁄8 14 8.87 17.28 1.58 5.4% C U S T O M E R S A N D V O L U M E S ( A S M E T E R E D ) Gas sales volumes (MMcf) . . . . . . . . . . . . . . . . . . . . . Gas transportation volumes (MMcf) . . . . . . . . . . . . 166,656 47,647 170,691 47,882 Total throughput (MMcf) . . . . . . . . . . . . . . . . . . . . . . Meters in service at end of year . . . . . . . . . . . . . . . . Total meters and propane customers . . . . . . . . . . . . Heating degree days . . . . . . . . . . . . . . . . . . . . . . . . . Degree days as a % of normal . . . . . . . . . . . . . . . . . Average gas sales price per Mcf sold . . . . . . . . . . . . . Average purchased gas cost per Mcf sold . . . . . . . . . Average transportation fee per Mcf . . . . . . . . . . . . . S T A T I S T I C S Return on average shareholders’ equity . . . . . . . . . . Number of employees . . . . . . . . . . . . . . . . . . . . . . . . Net plant per meter . . . . . . . . . . . . . . . . . . . . . . . . . . Operating, maintenance and administrative expense per meter . . . . . . . . . . . . . . . . . . . . . . . . . Customers per employee . . . . . . . . . . . . . . . . . . . . . Times interest earned before income taxes . . . . . . . 214,303 949,213 972,572 3,706 218,573 943,728 965,421 3,855 166,065 51,665 217,730 888,315 908,813 4,080 151,316 43,320 194,636 876,142 897,262 3,676 $ $ $ $ $ $ $ $ $ $ 93% 4.07 2.70 .42 10.1% 2,944 735 163 330 2.44 $ $ $ $ $ 97% 4.41 3.10 .45 10.3% 3,052 677 169 316 2.45 $ $ $ $ $ 102% 4.32 3.04 .42 12.5% 3,105 645 169 293 2.47 $ $ $ $ $ 92% 4.20 2.94 .50 10.1% 3,102 611 163 289 2.07 (1) Amounts have been restated for poolings of interests with United Cities Gas Company in July 1997 and Greeley Gas Company in December 1993, and share data have been adjusted for a 3-for-2 stock split in May 1994. 151,060 44,685 195,745 863,089 887,569 3,583 90% 4.03 2.84 .52 9.4% 3,139 589 152 283 1.82 29 . . . . . . . . 30 . . . . . . . . Atmos Officers . . . . . . . . . . . . S e n i o r M a n a g e m e n t T e a m N o n - U t i l i t y B u s i n e s s U n i t s Robert W. Best Jack L. Mars Chairman, President and Chief Executive Officer President, Enermart Energy Trust J. Patrick Reddy Robert E. Mattingly Senior Vice President and Chief Financial Officer Vice President, New Business Ventures – R. Earl Fischer Senior Vice President, Utility Operations Ron W. McDowell Retail Services Vice President, New Business Ventures Louis P. Gregory Senior Vice President and General Counsel Wynn D. McGregor Vice President, Human Resources U t i l i t y B u s i n e s s U n i t s Thomas R. Blose, Jr. President, United Cities Gas Company Conrad E. Gruber S h a r e d S e r v i c e s Donald P. Burman Assistant Controller Cleaburne H. Fritz Vice President, Information Technology Shirley A. Hines Corporate Secretary President, Western Kentucky Gas Company Lynn L. Hord B. J. Hackler President,Trans Louisiana Gas Company Tom S. Hawkins, Jr. President, Energas Company Gary L. Schlessman President, Greeley Gas Company Vice President, Investor Relations and Corporate Communications Fred E. Meisenheimer Vice President and Controller Thomas J. Pearson Vice President, Customer Information and Technology Gordon J. Roy Vice President, Gas Supply Laurie M. Sherwood Vice President and Treasurer 31 . . . . . . . . . . . . . . . . . . . . Board of Directors T r a v i s W . B a i n I I Chairman,Texas Custom Pools, Inc. President, Bain Enterprises, Inc. Plano,Texas Board member since 1988 Committees: Work Session/Annual Meeting (Chairman), Audit, Human Resources R o b e r t W . B e s t Chairman of the Board, President and Chief Executive Officer Atmos Energy Corporation Dallas,Texas Board member since 1997 Committee: Executive D a n B u s b e e Attorney Dallas,Texas Board member since 1988 Committees: Audit (Chairman), Human Resources R i c h a r d W . C a r d i n Consultant, and retired partner of Arthur Andersen LLP Nashville,Tennessee Board member since 1997 Committees: Audit, Nominating T h o m a s J . G a r l a n d Chairman of the Tusculum Institute for Public Leadership and Policy Greeneville,Tennessee Board member since 1997 Committees: Human Resources, Work Session/Annual Meeting G e n e C . K o o n c e Formerly Chairman of the Board, President and Chief Executive Officer United Cities Gas Company Nashville,Tennessee Board member since 1997 Committees: Executive, Human Resources (Vice Chairman), Work Session/Annual Meeting V i n c e n t J . L e w i s Senior Vice President Legg Mason Wood Walker, Inc. Rutherford, New Jersey Board member since 1997 Committees: Audit, Nominating D r . T h o m a s C . M e r e d i t h Chancellor of the University of Alabama System Tuscaloosa, Alabama Board member since 1995 Committees: Audit, Nominating 32 . . . . . . . . T o p : Seated, from left Carl Quinn, Lee Schlessman (Honorary Director) Standing, from left Gene Koonce, Phillip Nichol, Richard Cardin,Thomas Meredith, Richard Ware B o t t o m : Seated Dan Busbee Standing, from left Vincent Lewis Travis Bain Charles Vaughan Thomas Garland Robert Best P h i l l i p E . N i c h o l Senior Vice President and Branch Manager PaineWebber Incorporated Dallas,Texas Board member since 1985 Committees: Nominating (Chairman), Human Resources, Work Session/Annual Meeting C a r l S . Q u i n n General Partner, Quinn Oil Company, Ltd. East Hampton, New York Board member since 1994 Committees: Human Resources (Chairman), Executive C h a r l e s K . V a u g h a n Formerly Chairman of the Board Atmos Energy Corporation Dallas,Texas Board member since 1983 Committee: Executive (Chairman) R i c h a r d W a r e I I President, Amarillo National Bank Amarillo,Texas Board member since 1994 Committees: Work Session/Annual Meeting, Nominating Honorary Director L e e E . S c h l e s s m a n President, Dolo Investment Company Denver, Colorado Retired from Board in 1998 Corporate Information . . . . . . . . . . . . Atmos Information by Phone Atmos Energy Corporation shareholder information is available by phone seven days a week, 24 hours a day through EquiServe, L.P.’s interactive voice response system. To perform stock transfers, listen to current company information and access daily stock quotes without the assistance of a customer service representative, call 1-800-543-3038 and have your Atmos Energy shareholder account number and Social Security or taxpayer ID number ready. Atmos on the Internet Information about Atmos and its business units may be accessed over the Internet. The Atmos home page, located at http://atmosenergy.com, includes current and historical financial reports and other investor information, management biographies, employment opportunities and information about the Company’s operations and service areas. Each business unit has its own home page, with details about products and services. You can reach the busi- ness units directly at the following web addresses: http://www.energas.com http://www.greeleygas.com http://www.transla.com http://www.westernkentuckygas.com http://www.unitedcitiesgas.com Please visit us on the worldwide web. Atmos Energy Corporation Contacts: Shareholder and Direct Stock Purchase Plan Information: 1-800-38-ATMOS (382-8667), 7:30 a.m. – 4:30 p.m. CST Financial Information for Securities Analysts, Investment Managers and General Information: Lynn Hord Vice President, Investor Relations and Corporate Communications (972) 855-3729 (office) (972) 855-3040 (fax) lynn.hord@atmosenergy.com Common Stock Listing New York Stock Exchange Trading Symbol ATO Stock Transfer Agent and Registrar Shareholder inquiries on stock transfers may be directed to Fleet National Bank, c/o EquiServe, P.O. Box 43010, Providence, RI 02940-3010. You may also call the interactive voice response system 24 hours a day at 1-800-543-3038, or to speak to a customer service representative, call between 9 a.m. and 6 p.m. EST, Monday through Friday. You may also send an e-mail through our agent’s website at http://www.equiserve.com and reference Atmos in your e-mail. Independent Auditors Ernst & Young LLP 2121 San Jacinto, Suite 1500 Dallas,Texas 75201 (214) 969-8000 Form 10-K The Atmos Energy Corporation Annual Report on Form 10-K is available upon request from Investor Relations, Atmos Energy Corporation, P.O. Box 650205, Dallas,Texas 75265-0205, or by calling 1-800-38-ATMOS (382-8667) 7:30 a.m. – 4:30 p.m. CST. Form 10-K may also be viewed on Atmos’ website: http://www.atmosenergy.com. Annual Meeting of Shareholders The Annual Meeting of Shareholders will be held at the Lafayette Hilton and Towers, 1521 Pinhook Road, Lafayette, Louisiana, 70505, at 11 a.m. CST on February 14, 2001. Direct Stock Purchase Plan Atmos Energy Corporation has a Direct Stock Purchase Plan that is available to all investors. For an initial Investment Form or Enrollment Author- ization Form and a Plan Prospectus, please call Atmos Shareholder Relations at 1-800-38-ATMOS (382-8667) 7:30 a.m. – 4:30 p.m. CST; or EquiServe at 1-800-543-3038. The Prospectus is also available on the Internet at http://www.atmosenergy.com. You may also obtain information by writing to Shareholder Relations, Atmos Energy Corporation, P.O. Box 650205, Dallas,Texas 75265-0205. This is not an offer to sell nor a solicitation to buy any securities of Atmos. Shares of Atmos common stock purchased through the Direct Stock Purchase Plan will be offered only by Prospectus. Atmos Energy Corporation P.O. Box 650205 Dallas, Texas 75265-0205 (972) 934-9227 3100-AR-2001