Atos Annual Report 2004 | Quarterlytics

Plain-text annual report

T R O P E R L A U N N A Y R A M M U S 4 0 0 2 N O I T A R O P R O C Y G R E N E S O M T A 2004 witnessed the most signiﬁcant growth in the history of our company. Yet one thing remains the same. at the beginning of 2004 1,672,798 45,267 2,905 1,012 49Bcf 5 at the beginning of 2005 3,161,136 80,209 4,208 1,565 84 Bcf 5* *Byany measure, it’s been a year of incredible growth. But we believe the most important number, by far, is the one that did not change — our five core values of customer focus, employee focus, enterprise thinking, value creation, and honesty and integrity. In fact, we believe our values made such growth possible. And that’s why, in this year’s summary annual report, we illustrate how each of these values shines in our employees and in our way of doing business. Since these core values are a constant, they help us — even in times of incredible growth and change — to maintain our focus and stability. After all, a company must fully understand where it comes from in order to know where it is going. The acquisition of TXU Gas was measured carefully against each of these core values. That’s because, while growth is important, it’s counterproductive if it’s haphazard or unmanaged. In our case, TXU Gas was not only a good ﬁt, but also an evolution— one that increases our resources and better prepares us for continued growth and strength. Atmos Energy embraces growth, knowing that it helps us better serve our customers and our investors in the coming years. But rest assured , we never will undertake growth just for the sake of achieving bigger numbers. 2 F I N A N C I A L H I G H L I G H T S L E T T E R T O S H A R E H O L D E R S 3 Y E A R E N D E D S E P T E M B E R 3 0 (Dollars in thousands, except per share data) 2004 2003 Change D E A R F E L L O W S H A R E H O L D E R : natural gas distribution and pipeline operations of TXU Operating revenues Gross profit Utility net income Natural gas marketing net income (loss) Other nonutility net income Total Total assets Total capitalization Net income per share – diluted Cash dividends per share Book value per share at end of year Consolidated utility segment throughput (MMcf) Consolidated natural gas marketing segment throughput (MMcf) Heating degree days Degree days as a percentage of normal Meters in service at end of year Return on average shareholders’ equity Shareholders’ equity as a percentage of total capitalization (including short-term debt) at end of year Shareholders of record Weighted average shares outstanding – diluted (000s) $ 2,920,037 $ 562,191 $ 2,799,916 $ 534,976 $ 63,096 $ 62,137 16,633 6,498 (970) 10,521 $ 86,227 $ 71,688 $ 2,869,883 $ 1,994,770 $ $ $ 1.58 1.22 18.05 246,033 222,572 3,271 $ 2,625,495 $ 1,720,017 $ $ $ 1.54 1.20 16.66 247,965 225,961 3,473 96% 101% 1,679,136 1,672,798 9.1% 9.9% 56.7% 27,555 54,416 46.4% 28,510 46,496 4.3% 5.1% 1.5% 1814.7% -38.2% 20.3% 9.3% 16.0% 2.6% 1.7% 8.3% -0.8% -1.5% -5.8% -5.0% 0.4% -8.1% 22.2% -3.3% 17.0% 3 Letter to Shareholders 18 Operations Review 22 Financial Review 30 Atmos Energy Ofﬁcers 31 Board of Directors 32 Corporate Information Our 2004 ﬁscal year will stand as one of the biggest years Gas Company. This acquisition added 1.5 million utility in Atmos Energy’s history. Not only did we do well customers in one of the more dynamic American growth financially, we virtually doubled in size to become the markets. It also placed us in an excellent position to largest pure-gas utility in America. However, size is beneﬁt in the future for the following reasons: only important if it is accompanied by performance, and Immediate contribution to 2005 earnings. We expect that Atmos Energy performed exceptionally well in 2004. the operations of our new Mid-Tex Division will con- Consolidated net income rose to $86.2 million, or tribute from 5 cents to 10 cents to earnings per share in $1.58 per diluted share, compared with $71.7 million, 2005. We are forecasting our earnings per diluted share or $1.54 per diluted share, in 2003. Our total return to in ﬁscal 2005 to be between $1.65 and $1.75. shareholders was an enviable 10.4 percent, including Above-average residential and commercial growth. Our cash dividends of $1.22 paid during fiscal 2004. Return new division serves rapidly growing communities in on average shareholders’ equity was 9.1 percent. the Dallas-Fort Worth Metroplex and northern suburbs Based on these strong results and our positive of Austin. The division’s net growth in customers forecast for 2005, the Board of Directors increased the is approximately 2 percent a year, almost double our annual indicated dividend rate by 2 cents to $1.24 per former growth rate. share. The increase marked our 17th consecutive annual Added value from new gas pipeline operations. The dividend increase. When adjusted for mergers and intrastate pipeline we acquired as part of the TXU Gas acquisitions, Atmos Energy has paid higher dividends every operations runs from one end of Texas to the other. year since its founding in 1983. Fewer than 2.5 percent It interconnects at three of the state’s major hubs, or gas of American corporations can match our dividend history. T X U G A S A C Q U I S I T I O N Our 2004 results were exceeded only by the leap we made in our regulated operations. On October 1, 2004, we completed our acquisition of the transfer points, with dozens of other intrastate and interstate gas pipelines. The 6,162-mile pipeline system delivers gas to the 550 cities served by the new division. Owning this asset gives us expansion opportunities to transport more natural gas for others besides our own utility operations. EARNINGS REVIEW$1.80(cid:13)1.50(cid:13)1.20(cid:13)0.90(cid:13)0.60(cid:13)0.30(cid:13)0.0020002001200220032004Earnings per diluted share4 L E T T E R T O S H A R E H O L D E R S L E T T E R T O S H A R E H O L D E R S 5 Dedicated and experienced employees. Our new division S U C C E S S F U L F I N A N C I N G S C O M P L E M E N T A R Y N O N U T I L I T Y O P E R A T I O N S intense focus on improving efﬁciency and managing costs, already was a well-run natural gas system. Its 1,344 gas Atmos Energy paid approximately $1.905 billion in cash Our nonutility operations achieved impressive results in mitigating the effects of weather on our utility operations professionals who transferred to Atmos Energy are work- for the TXU Gas operations. To finance the acquisition, fiscal 2004, building on initiatives begun in 2003 to and fostering productive relationships with the regulators ing to integrate the operations as soon as possible and we sold 9.9 million shares of common stock through reduce the risk from volatile natural gas prices. The con- in our operating jurisdictions. are contributing their “knowledge capital” to beneﬁt our a public offering in July. Because of strong interest, the tribution to net income from our nonutility operations We also have been successful because of our focus entire system. offering raised approximately $235.7 million in net in 2004 was 27 percent. We expect these contributions to on the basics. While many in the industry are claiming Prompt recovery of new capital investment. Texas law proceeds, with the purchasers mainly being retail holders. remain strong during the next ﬁve years. a return to the basics, we can conﬁdently say we never permits a utility to make annual adjustments for additions In October 2004, we made another public offering, One of the keys to our nonutility growth will left the basics. We always have been dedicated to natural to net plant, using its most recent return on investment, selling 16.1 million common shares to raise approximately be managing the pipeline and storage assets acquired with gas distribution as our core business. depreciation rate and tax rates. The law lets us recover our $382.5 million in net proceeds before other offering costs. TXU Gas. Although these assets remain regulated, we capital invest- ment in new pipelines and other facilities much faster without having to ﬁle a general Excellence in customer service stands as a key part of our corporate vision– we call it our Spirit of Service.SM The purchasers were mainly large institu- tional holders. In a separate offering at the same time, we expect to operate them to deliver more volumes to whole- K E E P I N G R A T E S C U R R E N T sale customers. We also are working on optimizing our In 2004, we added $16.2 million in net revenues through nonutility natural gas marketing and storage operations. rate increases. During the next ﬁve years, we expect to During 2004, for example, we made changes in the receive approximately $15 million to $20 million in average way we procure the billions of cubic feet of natural gas annual rate increases. One of our goals is to monitor our for our utility system to take better advantage of our rates of return in all jurisdictions to keep our actual nonutility operations’ expertise. returns as close as possible to our allowed rates of return. rate case. As we invest in our expanding Texas markets, also sold four series of senior unsecured notes to raise net In states that have warmer winters, we have sought we will be able to earn a return on our investment faster proceeds of approximately $1.39 billion. C O N C E N T R A T I O N O N P E R F O R M A N C E to adjust our rates using a weather normalization adjust- than in most of our other jurisdictions. We are gratified by the success of all three Our goal has been to provide an attractive rate of return ment. We now have WNA or higher base rates in our eight About 90 percent of earnings from regulated operations. offerings. We believe the prices that investors bid indicate through both capital appreciation and dividends. We largest states. Only about 17 percent of our margins Adding the TXU Gas properties has increased the propor- the market’s conﬁdence in our ability to integrate and expect earnings per share to grow between 3 percent and are exposed to weather in the 2004–2005 heating season. tion of our assets regulated by state commissions. Many operate the TXU Gas operations successfully. Within the 6 percent a year and our dividend yield to remain an We have proposed other rate adjustments to offset investors see this increase as positive because, although it next three to ﬁve years, we expect to apply some of the attractive 4 percent to 5 percent. the effects of declining natural gas consumption. Nationally, does not guarantee our profitability, it increases our additional cash flow from the new operations to return We expect to provide investors with a total annual gas consumption has been going down about 2 percent a opportunity for consistent, long-term earnings growth. to a 50 percent to 55 percent debt-to-capitalization return between 8 percent and 11 percent. We have done year during the past decade. We also have sought to recoup ratio, as we have done consistently after completing our this consistently in the past and expect to continue to do higher collection expenses and to recover bad debt expense nine previous major acquisitions. so in the future. We have accomplished this through an incurred during winter cutoff moratoriums. 6 L E T T E R T O S H A R E H O L D E R S L E T T E R T O S H A R E H O L D E R S 7 In addition, we have advocated that states adopt a major acquisitions into our operations, we have found Industry experts estimate that large F U T U R E E X P E C T A T I O N S measure similar to a Texas law that allows for faster that our values make a tangible difference. Having the resources of natural gas remain to be recognition in rates of essential capital investment needed right corporate culture guides us in dealing appropriately tapped. However, only when additional to maintain the system and serve new customers. The with business issues. Moreover, the right corporate Gas Reliability Infrastructure Program in Texas reduces culture emphasizes to our employees the values and the effects of regulatory lag on cash ﬂow and earnings. integrity on which we will continue to grow. C U S T O M E R S E R V I C E E X C E L L E N C E N E E D F O R A N A T I O N A L E N E R G Y P O L I C Y supplies come to market will gas com- modity prices moderate and reduce the volatility of gas price spikes that are hurting consumers, businesses and utilities alike. As we look to 2005, we are excited about the tremendous potential that we foresee. Our acquisition of TXU Gas has given us greater size and scale. Our existing utility operations continue to achieve exceptional results. Our non- utility operations are positioned to make Excellence in customer service stands as a key part of our With the contentious 2004 elections now past, we complementary contributions in the future. corporate vision—we call it our Spirit of Service.SM trust that Congress and the Administration can focus on B O A R D C H A N G E S We remain committed to keeping Atmos Energy a Our reputation in the community is directly influenced one of the most pressing national issues that received Two signiﬁcant milestones in our corporate governance ﬁnancially successful company by showing respect for by how we perform. During the past two years, we almost no attention during the campaign—the need for occurred during 2004. The ﬁrst was the retirement of one all who deal with us and by expecting the highest ethical have conducted extensive training efforts and intend to a comprehensive national energy policy. of our longtime directors, Carl S. Quinn. Carl’s service behavior of all who work for us. We anticipate growing expand the programs further in 2005. We also are Natural gas prices have continued to rise during to Atmos Energy was matched only by his legacy in the earnings at 3 percent to 6 percent a year and continuing organizing programs to help our employees better under- the past ﬁve years. In the 2004–2005 heating season, natural gas industry as one of its leading statesmen. to pay higher annual dividends. Being ﬁnancially successful stand the dynamics of our business as it grows. home heating bills will likely go up from 10 percent We shall miss his wise counsel, steady direction and is the best way we can reward our investors, serve our to 15 percent above bills of last winter. These price solid integrity. customers, invest in our employees and contribute to our I N V E S T M E N T I N A S T R O N G C O R P O R A T E C U L T U R E increases are the result of normal market responses. However, we were pleased in August when we 1,500 communities. Yet, that response is prompted by our nation’s lack marked a second milestone, the addition of our ﬁrst We intend to continue to operate the business Another intangible, but essential, investment that we are of a national energy policy. woman director, Nancy K. Quinn. Ms. Quinn brings a through a dedication to a strong ﬁnancial foundation, pursuing is to build a strong corporate culture. In 2004, we took additional steps to invest in our employees through expanded training, improved beneﬁts programs and increased communications. Instilling our core values through- out the organization is essential to our future success. As we have integrated We need a policy that permits additional drilling for natural gas in the United States and incentives to build new pipeline capacity, such as a pipeline to transport abundant natural gas supplies from the North Slope of Alaska to the contiguous 48 states. wealth of experience in investment banking and energy a disciplined attitude to operations, a successful approach industry financing. She also is a respected woman entre- to making and integrating acquisitions, a devotion to preneur and benefactor of the arts. We feel honored serve our customers exceptionally well and an adherence that she agreed to join our board. to our core values. Robert W. Best Chairman, President and Chief Executive Ofﬁcer November 19, 2004 NET INCOME$90.075.060.045.030.015.00.0020002001200220032004Consolidated net income (in millions)8 A N A I S I U O L , E T T E Y A F A L Anthony Ponter, Ph.D. University of Louisiana, Lafayette When you focus on your customers, right away you realize no two are exactly the same. That’s how we know our job is not just about supplying energy, it’s about helping our customers do their jobs better. Natural gas supplied by Atmos Energy is used by the University of Louisiana, Lafayette, to dehumidify the air so that Dean Ponter’s engineering students can conduct more precise science experiments. At Atmos Energy, our job is not just about getting more customers, it’s about getting to know our customers’ needs. Spirit of ServiceSM Training is designed to help our employees go beyond simply what our customers “expect” and focus on building customer relationships. Highly interactive and participative, Spirit of Service Training gives our employees the approach they need to effectively address customer needs. New payment kiosks allow customers to pay their bills 24 hours a day, seven days a week. Our kiosks accept cash or checks, operate in both English and Spanish, and are secure and fast. VALUE 11 T U P E L O , M I S S I S S I P P I Paid-time-off pools let employees donate, on a strictly voluntary basis, unused paid time off to a donation bank used by other Atmos Energy employees for personal or family illnesses that require extended time off work. It’s a simple way for all of us to help others in their time of need. Jack Britton At mos Ene r g y Custome r Se r v ic e Age nt When Jack Britton was called upon to serve his country in Iraq, he and his family were facing enough uncertainty. At Atmos Energy, we felt it was our responsibility not to add to that. So, even as he joined his engineering battalion in Fallujah, Jack knew he would have his job and full benefits. In fact, Jack’s fellow employees took care of the lawn and invited his wife to company functions. Now safely back in Mississippi, Jack says, “I was okay. Uncle Sam was going to take care of me. But Atmos Energy took care of my wife.” It was just our way of thanking Jack for his teamwork, with a little teamwork of our own. We’re proud of the many Atmos Energy employees who’ve served bravely and of all our employees at home who volunteered to help these soldiers’ families. Rising Spirit Award. Each year, Atmos Energy recognizes employees who’ve gone above and beyond in offering superior service to our customers. This past May, 13 employees were recognized for their commitment both to our customers and to our core values. VALUE 12 O D A R O L O C , G I A R C David Anglin Vice President of Operations —Colorado David Anglin had this crazy idea. Fortunately, David works for a company that encourages original thinking. He works for us. In his travels throughout Colorado, David kept seeing outdated satellite dishes just sitting in people’s yards. David suggested we offer to remove them and put them to good use once again as part of the company’s satellite network for training and employee broadcasts. Turns out, it wasn’t such a crazy idea after all. It makes us a lot more efﬁcient, saves us a lot of money and forever made us believe that sometimes the best ideas are the craziest ideas. Technology isn’t just a buzz word with us; it’s something we’re constantly seeking to improve upon. In addition to the big dishes David suggested we put to good use, you’ll also see small domes on our service trucks. They keep us in contact with cell towers or satellite dishes when cell coverage is intermit- tent. This allows us to update service orders to our trucks en route, saving time and money. Our Blueprint Program. A while back, we created a benchmark for stafﬁng in our utility divisions.This helps us keep a handle on staffing needs without layoffs or understafﬁng. Not only is it a job protection program, it’s an incentive program to move employees from overstaffed to under- staffed locations. VALUE 15 F O R T W O R T H , T E X A S Bob Davison Project Manager for New Const ruction Where some see wide open spaces, others see wide open opportunities. Bob Davison is one of the latter. As a manager of new construction in the Dallas-Fort Worth area, Bob helps guide the growth brought about by our acquisition of TXU Gas. At Sendera Ranch, a planned development of more than 20,000 lots, Atmos Energy will supply natural gas to a booming community. By adding natural gas appliances, builders increase the value and energy efficiency of their new homes. Growing by acquisitions is just one of the ways we assure our shareholders of growth in their investment for years to come. C B N C f o y s e t r u o C Atmos Energy’s commitment to value creation has been recognized all over the world, such as when CEO Bob Best appeared live on CNBC’s “Squawk Box” to announce the acquisition of TXU Gas on June 17, 2004. Increasing dividends is one of Atmos Energy’s commitments to value creation that has yielded tangible and consistent results over the years. We’re proud to have provided our shareholders 21 consecutive years of annual increases in dividends (adjusted for mergers and acquisitions). VALUE$1.24.40.20.60.801.001.20$1.40.0084858687888990919293949596979899000102030405 16 West Texas Rate Cases. In both 1999 and 2003, Atmos Energy was able to reach agreements with the City of Amarillo without litigation on rate increases. Settling without hearings saved time and money for the city and, ultimately, for our customers and shareholders. Don Cozart Cit y of Lebanon Gas Manager E E S S E N N E T , N O N A B E L Prices fluctuate. Markets constantly change. Your character shouldn’t. That’s how Don Cozart sees it. And that’s what he looks for in suppliers and associates. As the gas manager for the City of Lebanon, Tennessee, Don has been working with Atmos Energy since 1986. Ask him why, and he’ll tell you how in 1989, when cold weather in the Gulf froze out many gas wells, Atmos Energy was there honoring $3 contracts when prices had jumped to $28 per Mcf. Yes, markets can be erratic. Which is all the more reason why we refuse to be. In 2001, Atmos Energy received the inaugural Greater Dallas Business Ethics Award for demonstrating a commitment to ethical business practices. Our value system isn’t just a statement. It’s a way of life. “Our commitment to ethical behavior is not driven by the letter of the law but, more importantly, by the spirit of the law.” - Bob Best, Chairman, President and CEO VALUE 18 O P E R A T I O N S R E V I E W O P E R A T I O N S R E V I E W 19 R E S U L T S O F O P E R A T I O N S adjustments and the opportunity to deliver more W E A T H E R A N D T H R O U G H P U T R A T E A D J U S T M E N T S Atmos Energy’s consolidated net income for ﬁscal 2004 gas to wholesale customers through one of the largest Weather during ﬁscal 2004 was 6 percent warmer than in During 2004, we added $16.2 million in net revenues from was $86.2 million, or $1.58 per diluted share. That compares intrastate gas pipeline systems in Texas. ﬁscal 2003 and 4 percent warmer than normal, as adjusted rate ﬁlings in Kansas, Texas and Mississippi. We expect with $71.7 million, or $1.54 per diluted share, in ﬁscal Because of these factors, we estimate that the for jurisdictions with weather-normalized operations. to add $15 million to $20 million a year in average annual 2003. Utility operations contributed 73 percent of earnings, TXU Gas operations, since renamed our Mid-Tex Division, Primarily because of lower consumption, our rate increases over the next five years. To keep our and nonutility operations provided 27 percent. Return will contribute from 5 cents to 10 cents to earnings utility gas throughput in 2004 declined about 1 percent actual rates of return as close as possible to our allowed on average shareholders’ equity was 9.1 percent, and total per diluted share in fiscal 2005. Adding the TXU Gas from that in 2003 to 246.0 billion cubic feet (Bcf). Of returns, we are seeking other rate adjustments, as well. return to our shareholders was 10.4 percent. We paid operations increased Atmos Energy’s proportion of this total, utility gas transportation volumes were 72.8 We are proposing weather normalization in juris- cash dividends in 2004 of $1.22 per share for an annualized operating income from regulated operations to about Bcf. In our nonutility segment, natural gas marketing dictions with warmer weather, shifting more revenue dividend yield at year-end of 4.8 percent. 90 percent. T X U G A S A C Q U I S I T I O N O T H E R A C Q U I S I T I O N S A N D D I V E S T I T U R E S On June 17, Atmos Energy announced it would acquire In February, we acquired the natural gas distribution the natural gas distribution and pipeline operations of assets of ComFurT Gas, Inc., a privately held gas utility TXU Gas Company, the largest gas utility in Texas. After receiving the required approvals from three state utility regulatory commissions, we completed the transaction on October 1, 2004, paying an adjusted cash price of $1.905 billion. Adding TXU Gas’ 1.5 system in Buena Vista, Colorado. We paid $1.95 million cash for a 49-mile distribution system, serving approximately 1,800 utility customers. During 2004, we and three other utility partners completed the sale of our interests in the general partnership and limited sales volumes declined 1.5 percent from those in 2003 to 222.6 Bcf. In states with warmer Adding TXU Gas’1.5 million customers made Atmos Energy the largest natural- gas-only utility in the United States. from the gas commodity charge to base rates, improv- ing our rate design to miti- gate the effects winter weather, we have sought weather-normalization of declining usage per customer, recovering the gas adjustments in our rates. Weather normalization protects cost portion of bad debt expense and working to eliminate our customers from steep increases in their winter gas regulatory lag for capital spending on gas utility infra- bills when the weather turns unusually cold and it protects structure improvements. our earnings when the winter is unseasonably warm. We now have weather normalization or higher base N A T U R A L G A S P R I C E S rates in eight of our largest states. About 17 percent of our Natural gas prices continued to rise during fiscal 2004. million utility customers made Atmos Energy the largest partnerships of Heritage Propane Partners, L.P. We margins are exposed to weather in the 2004–2005 heating Our utility system’s average cost of gas purchased for natural-gas-only utility in the United States. The received cash proceeds of approximately $26.6 million season, an increase from 10 percent due to the addition customers was $6.55 per thousand cubic feet (Mcf), an operations also provide us above-average annual growth and recorded a $5.9 million pretax book gain, ending of the Mid-Tex operations. increase of 13.7 percent over the $5.76 per Mcf we paid in customer accounts, the ability to earn a return on our interest in the propane business. capital investments promptly through automatic rate in ﬁscal 2003. The increase was largely due to a tightening of natural gas supply and demand. Although gas resources CUSTOMER COMPARISONAtmos Energy(cid:13)AGL Resources(cid:13)ONEOK(cid:13)Southwest Gas(cid:13)WGL Holdings(cid:13)(cid:13)3.02.52.01.51.00.50.0Customers (millions)Customers before TXU Gas acquisition (millions)20 O P E R A T I O N S R E V I E W O P E R A T I O N S R E V I E W 21 remain abundant in North America, gas production has Hedging is good ﬁnancial management because it employee, compared to the industry peer group’s average A major development was the acquisition of not kept pace with the steady rise in demand. protects our capital and cash ﬂow. It also cushions the of 546 customers. the natural gas pipeline and storage assets of TXU Gas. During the 2004–2005 heating season, residential effects of higher gas prices on our customers’ winter bills, Our control of operating expenses is even more Although regulated, these assets will be managed heating bills will likely increase 10 percent to 15 percent on our receivables and, ultimately, on our collections. remarkable, considering that we have operated primarily under our nonutility operations. above bills of the previous heating season, according to the Despite rising natural gas prices, we have contin- in rural and smaller communities across 12 states. The The 6,162-mile pipeline extends across Texas to federal Energy Information Administration. Tight sup- ued to keep our utility bad-debt expense low. Our structure of our operations has made it more difﬁcult to transport natural gas to third parties. It has extensive plies also are causing greater volatility in natural gas prices. collection efforts, coupled with credit qualiﬁcation before achieve efﬁciencies, compared with a company serving connections in nine major gas-producing basins and three To help protect our customers, we offer budget reconnecting customers and expanded customer a large customer base in a metropolitan area or limited interconnection hubs to other major producing areas billing plans, assistance for low-income customers and payment options, helped us maintain our allowance for geographical area. and many interstate pipelines. Five underground gas storage information about lowering energy costs. We also doubtful accounts in 2004 at just 0.29 percent of reservoirs contain 39 Bcf of working storage, including have advocated vigorously for federal energy legislation residential and commercial revenues, which is consider- C U S T O M E R S A T I S F A C T I O N one salt-dome facility with higher delivery capabilities. to offer incentives for more natural gas production ably lower than our historical accrual rate. Customer service excellence is one of our major goals. We believe this pipeline and storage system is and for increased energy assistance to aid indigent and The most recent independent survey of our customers’ well situated to transport larger volumes of natural gas. low-income customers. O P E R A T I N G E F F I C I E N C Y attitudes, conducted in the fall of 2004, found an overall Its operations create additional gas marketing and Atmos Energy has earned a reputation for being one of satisfaction rating among residential and commercial other opportunities for our nonutility businesses. C O N T R O L L I N G K E Y E X P E N S E S the most efﬁcient natural gas utilities in the country. customers of 94 percent. Compared with other utility To control our purchased gas costs, we use a combination We continue to be an industry leader in two key indicators: service providers, Atmos Energy ranked among the F I S C A L 2 0 0 5 F O R E C A S T of gas storage, ﬁxed physical contracts and ﬁxed ﬁnancial operation and maintenance expense per customer and industry’s leaders in overall satisfaction. We anticipate our earnings will increase at 3 percent to contracts. We have ﬁxed the price for about 50 percent of customers served per employee. 6 percent a year, on average, during the next ﬁve years. We our expected 2004–2005 winter gas supply requirements. We benchmark our performance each year against N O N U T I L I T Y O P E R A T I O N S also expect to continue paying higher annual dividends. Of the total amount hedged, about 45 percent is a combination of our underground storage assets and con- tracted pipeline storage; this storage provides a natural hedge for our gas supply purchases. The other 55 per- cent of the quantity hedged is through ﬁnancial contracts. our industry peer group. Since 1997, we have reduced operating costs and expenses by about $57 per customer, Our nonutility operations during 2004 achieved major In fiscal 2005, we expect to earn between $1.65 improvements in margins and in reduced exposure to and $1.75 per diluted share and to pay an indicated risks from volatile gas commodity prices. Our natural gas dividend rate of $1.24 per share. Our capital expenditures or 31 percent. For ﬁscal 2004, our O&M- marketing business expanded into the Mobile Bay area are expected to approximate $340 million to $350 per-customer expense was $126, compared to our peer group’s average of $193, which is 53 percent higher than ours. We served 566 customers per of Alabama. In Kansas, nonutility gas storage facilities million, with about 60 percent of that total being spent were transferred to our Colorado-Kansas Division for on projects in our new Mid-Tex Division. utility operations. O&M EXPENSES$140(cid:13)$130(cid:13)$120(cid:13)$110(cid:13)$100Operation and maintenance(cid:13)expense per customer20002001200220032004 20 O P E R A T I O N S R E V I E W remain abundant in North America, gas production has Hedging is good ﬁnancial management because it not kept pace with the steady rise in demand. protects our capital and cash ﬂow. It also cushions the During the 2004–2005 heating season, residential effects of higher gas prices on our customers’ winter bills, heating bills will likely increase 10 percent to 15 percent on our receivables and, ultimately, on our collections. above bills of the previous heating season, according to the Despite rising natural gas prices, we have contin- federal Energy Information Administration. Tight sup- ued to keep our utility bad-debt expense low. Our plies also are causing greater volatility in natural gas prices. collection efforts, coupled with credit qualiﬁcation before To help protect our customers, we offer budget reconnecting customers and expanded customer billing plans, assistance for low-income customers and payment options, helped us maintain our allowance for information about lowering energy costs. We also doubtful accounts in 2004 at just 0.29 percent of have advocated vigorously for federal energy legislation residential and commercial revenues, which is consider- to offer incentives for more natural gas production ably lower than our historical accrual rate. and for increased energy assistance to aid indigent and low-income customers. O P E R A T I N G E F F I C I E N C Y Atmos Energy has earned a reputation for being one of C O N T R O L L I N G K E Y E X P E N S E S the most efﬁcient natural gas utilities in the country. To control our purchased gas costs, we use a combination We continue to be an industry leader in two key indicators: of gas storage, ﬁxed physical contracts and ﬁxed ﬁnancial operation and maintenance expense per customer and contracts. We have ﬁxed the price for about 50 percent of customers served per employee. our expected 2004–2005 winter gas supply requirements. We benchmark our performance each year against Of the total amount hedged, about 45 percent is a combination of our underground storage assets and con- tracted pipeline storage; this storage provides a natural hedge for our gas supply purchases. The other 55 per- cent of the quantity hedged is through ﬁnancial contracts. our industry peer group. Since 1997, we have reduced operating costs and expenses by about $57 per customer, or 31 percent. For ﬁscal 2004, our O&M- per-customer expense was $126, compared to our peer group’s average of $193, which is 53 percent higher than ours. We served 566 customers per From rural to urban communities, Atmos Energy spans the largest geographic area of any natural gas utility in the country. Diversity in economic conditions, weather patterns, regional climates and regulatory conditions allows us to accommodate extremes without signiﬁcant risk. A T M O S E N E R G Y A C Q U I R E D T E R R I T O R Y The acquisition of TXU Gas gives Atmos Energy the opportunity to serve 550 additional communities, including two within the Top-10 largest gas markets in the U.S. as well as several others equal to or larger than cities elsewhere in our territory.The acquisition also included a 6,162-mile intrastate pipeline in Texas and hubs with interstate lines to deliver gas to cities like Chicago and New York. Our acquisition of TXU Gas increased our miles of pipeline by approximately 68 percent. Our Texas intrastate system allows us to deliver more natural gas to wholesale customers, thereby bringing more revenue to our business. 47,616 miles 80,209 miles Waha HubKaty HubCarthageHubDALLASMid-Tex DivisionWest Texas DivisionIntrastate PipelineCorporate HeadquartersMajor Gas Delivery Hub LongviewBryanWacoRound RockSan AngeloAbileneWichita FallsFort WorthDentonALABAMAARKANSASCOLORADOGEORGIAILLINOISINDIANAIOWAKANSASKENTUCKYLOUISIANAMISSISSIPPIMISSOURIOHIOOKLAHOMATENNESSEETEXASVIRGINIAAtmos Energy HeadquartersStates with Both Utility and Nonutility OperationsStates with Only Nonutility OperationsUtility Service AreasAtmos Energy Utility Division OfficesAtmos Energy Marketing HeadquartersAtmos Energy Marketing Regional OfficesDENVERDALLASLUBBOCKHOUSTONJACKSONBATON ROUGENEW ORLEANSFRANKLINOWENSBOROSOUTHCAROLINAO&M EXPENSES$140(cid:13)$130(cid:13)$120(cid:13)$110(cid:13)$100Operation and maintenance(cid:13)expense per customer20002001200220032004 22 F I N A N C I A L R E V I E W A T M O S E N E R G Y A T A G L A N C E 23 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 about Atmos Energy Corporation is condensed. Our complete ﬁnancial statements, including notes as well as manage- ment’s discussion and analysis of ﬁnancial condition and results of operations, are presented in our Annual Report on Form 10-K. Atmos Energy’s chief executive ofﬁcer and its chief ﬁnancial ofﬁcer have complied with, and have executed, all certiﬁcations of these ﬁnancial statements required under the Sarbanes-Oxley Act of 2002 and all related rules of the Securities and Exchange Commission with respect to the ﬁnancial statements contained therein. Investors may request, without charge, our Annual Report on Form 10-K for the ﬁscal year ended September 30, 2004, by calling Shareholder Relations at (972) 855-3729 between 8 a.m. and 5 p.m. Central time. Our Form 10-K also is available on Atmos Energy’s Web site at www.atmosenergy.com. Additional investor information is presented on page 32 of this report. 23 24 25 26 27 28 29 Atmos Energy at a Glance Condensed Consolidated Balance Sheets Condensed Consolidated Statements of Income Condensed Consolidated Statementsof Cash Flows Report of Independent Registered Public Accounting Firm Consolidated Financial and Statistical Summary (2000-2004) Forward- Looking Statements Y E A R E N D E D S E P T E M B E R 3 0 2004 2003 Meters in service Residential Commercial Industrial Agricultural Public authority and other Total meters Heating degree days Actual (weighted average) Percent of normal Utility sales volumes (MMcf) Residential Commercial Industrial Agricultural Public authority and other Total Utility transportation volumes (MMcf) Total utility throughput (MMcf) Intersegment activity (MMcf) Consolidated utility throughput (MMcf) Consolidated natural gas marketing throughput (MMcf) Operating revenues (000s) Gas utility sales revenues Residential Commercial Industrial (including agricultural) Public authority and other Total gas sales revenues Transportation revenues Other gas revenues Total utility revenues Natural gas marketing revenues Other nonutility revenues Total operating revenues (000s) Other statistics Gross plant (000s) Net plant (000s) Miles of pipe Employees 1,506,777 151,381 2,436 8,397 10,145 1,679,136 1,498,586 151,008 3,799 9,514 9,891 1,672,798 3,271 96% 3,473 101% 92,208 44,226 22,330 4,642 9,813 173,219 87,746 260,965 97,953 45,611 23,738 7,884 9,326 184,512 70,159 254,671 (14,932) (6,706) 246,033 222,572 247,965 225,961 $ 923,773 400,704 187,187 77,178 1,588,842 30,622 17,172 1,636,636 1,279,424 3,977 $ 2,920,037 $ 2,633,651 $ 1,722,521 47,616 2,864 $ 873,375 367,961 192,676 65,921 1,499,933 29,583 23,341 1,552,857 1,234,447 12,612 $ 2,799,916 $ 2,480,139 $ 1,624,394 45,267 2,905 24 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 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 25 S E P T E M B E R 3 0 (Dollars in thousands, except share data) 2004 2003 S E P T E M B E R 3 0 (Dollars in thousands, except per share data) 2004 2003 2002 Assets Property, plant and equipment Construction in progress Less accumulated depreciation and amortization Net property, plant and equipment Current assets Cash and cash equivalents Cash held on deposit in margin account Accounts receivable, less allowance for doubtful accounts of $7,214 in 2004 and $13,051 in 2003 Gas stored underground Other current assets Total current assets Goodwill and intangible assets Deferred charges and other assets Capitalization and Liabilities Shareholders’ equity Common stock, no par value (stated at $.005 per share); 100,000,000 shares authorized, issued and outstanding: 2004 – 62,799,710 shares, 2003 – 51,475,785 shares Additional paid-in capital Retained earnings Accumulated other comprehensive loss Shareholders’ equity Long-term debt Total capitalization Current liabilities Accounts payable and accrued liabilities Other current liabilities Short-term debt Current maturities of long-term debt Total current liabilities Deferred income taxes Regulatory cost of removal obligation Deferred credits and other liabilities $ 2,595,374 38,277 2,633,651 911,130 1,722,521 201,932 — 211,810 200,134 63,236 677,112 238,272 231,978 $ 2,869,883 $ 314 1,005,644 142,030 (14,529) 1,133,459 861,311 1,994,770 185,295 223,265 — 5,908 414,468 213,930 103,579 143,136 $ 2,869,883 $ 2,463,992 16,147 2,480,139 855,745 1,624,394 15,683 17,903 216,783 168,765 38,863 457,997 273,499 269,605 $ 2,625,495 $ 257 736,180 122,539 (1,459) 857,517 862,500 1,720,017 179,852 133,957 118,595 9,345 441,749 223,350 102,371 138,008 $ 2,625,495 Operating revenues Utility segment Natural gas marketing segment Other nonutility segment Intersegment eliminations Purchased gas cost Utility segment Natural gas marketing segment Other nonutility segment Intersegment eliminations Gross profit Operating expenses Operation and maintenance Depreciation and amortization Taxes, other than income Total operating expenses Operating income Miscellaneous income (expense) Interest charges Income before income taxes and cumulative effect of accounting change Income tax expense Income before cumulative effect of accounting change Cumulative effect of accounting change, net of income tax benefit Net income Per share data Basic income per share: Income before cumulative effect of accounting change Cumulative effect of accounting change, net of income tax benefit Net income Diluted income per share: Income before cumulative effect of accounting change Cumulative effect of accounting change, net of income tax benefit Net income Weighted average shares outstanding: Basic Diluted $ 1,637,728 1,618,602 23,151 (359,444) 2,920,037 1,134,594 1,571,971 9,383 (358,102) 2,357,846 562,191 214,470 96,647 57,379 368,496 193,695 9,507 65,437 137,765 51,538 86,227 — 86,227 1.60 — 1.60 1.58 — 1.58 54,021 54,416 $ $ $ $ $ $ 1,554,082 1,668,493 21,630 (444,289) 2,799,916 1,062,679 1,644,328 1,540 (443,607) 2,264,940 534,976 205,090 87,001 55,045 347,136 187,840 2,191 63,660 126,371 46,910 79,461 (7,773) 71,688 1.72 (.17) 1.55 1.71 (.17) 1.54 46,319 46,496 $ $ $ $ $ $ 937,526 1,031,874 24,705 (343,141) 1,650,964 559,891 994,318 8,022 (342,407) 1,219,824 431,140 158,119 81,469 36,221 275,809 155,331 (1,321) 59,174 94,836 35,180 59,656 — 59,656 1.45 — 1.45 1.45 — 1.45 41,171 41,250 $ $ $ $ $ 26 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 R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M 27 Y E A R E N D E D S E P T E M B E R 3 0 (Dollars in thousands) 2004 2003 2002 Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting change, net of income tax benefit Gain on sales of assets Depreciation and amortization: Charged to depreciation and amortization Charged to other accounts Deferred income taxes Other Changes in assets and liabilities Net cash provided by operating activities Cash Flows Used in Investing Activities Capital expenditures Acquisitions, net of cash received Retirements of property, plant and equipment, net Assets for leasing activities Proceeds from sale of assets Net cash used in investing activities Cash Flows from Financing Activities Net decrease in short-term debt Net proceeds from issuance of long-term debt Proceeds from bridge loan Repayment of bridge loan Repayment of long-term debt Repayment of Mississippi Valley Gas debt Cash dividends paid Issuance of common stock Net proceeds from equity offering Net cash provided (used) by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ 86,227 $ 71,688 $ 59,656 — (6,700) 96,647 1,465 36,997 (1,772) 57,870 270,734 (190,285) (1,957) (570) — 27,919 (164,893) (118,595) 5,000 — — (9,713) — (66,736) 34,715 235,737 80,408 186,249 15,683 201,932 $ 7,773 — 87,001 2,193 53,867 (5,885) (167,186) 49,451 (159,439) (74,650) 704 — — (233,385) (27,196) 253,267 147,000 (147,000) (73,165) (70,938) (55,291) 25,720 99,229 151,626 (32,308) 47,991 15,683 $ — — 81,469 2,452 14,509 (3,371) 142,680 297,395 (132,252) (15,747) (1,725) (8,511) — (158,235) (55,456) — — — (20,651) — (48,646) 18,321 — (106,432) 32,728 15,263 47,991 $ B O A R D O F D I R E C T O R S 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, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Atmos Energy Corporation at September 30, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and cash ﬂows for each of the three years in the period ended September 30, 2004 (not presented herein) and in our report dated November 9, 2004, 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 statements from which they have been derived. Dallas, Texas November 9, 2004 28 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 - 2 0 0 4 ) F O R W A R D - L O O K I N G S T A T E M E N T S 29 Y E A R E N D E D S E P T E M B E R 3 0 2004 2003 2002 2001 2000 Balance Sheet Data at September 30 (000s) Capital expenditures Net property, plant and equipment Working capital Total assets Shareholders’ equity Long-term debt, excluding current maturities Total capitalization Income Statement Data Operating revenues* (000s) Gross profit* (000s) Net income (000s) Net income per diluted share Common Stock Data Shares outstanding (000s) End of year Weighted 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 Customers and Volumes (As metered) Consolidated utility gas sales volumes (MMcf) Consolidated utility gas transportation volumes (MMcf) Consolidated utility throughput (MMcf) Consolidated natural gas marketing throughput (MMcf) Meters in service at end of year Heating degree days# Degree days as a percentage of normal Utility average cost of gas per Mcf sold Utility average transportation fee per Mcf Statistics Return on average shareholders’ equity Number of employees Net utility plant per meter Utility operation, maintenance and administrative expense per meter Meters per employee – utility Times interest earned before income taxes $ 190,285 1,722,521 262,644 2,869,883 1,133,459 861,311 1,994,770 $ 2,920,037 562,191 86,227 1.58 $ $ $ $ $ $ $ $ $ 62,800 54,416 1.22 27,555 26.86 23.68 25.19 18.05 15.94 1.40 4.8% 173,219 72,814 246,033 222,572 1,679,136 3,271 96% 6.55 .36 9.1% 2,864 994 116 612 3.05 $ 159,439 1,624,394 16,248 2,625,495 857,517 862,500 1,720,017 $ 2,799,916 534,976 71,688 1.54 $ $ $ $ $ $ $ $ $ 51,476 46,496 1.20 28,510 25.45 20.70 23.94 16.66 15.55 1.44 5.0% 184,512 63,453 247,965 225,961 1,672,798 3,473 101% 5.76 .43 9.9% 2,905 930 115 594 2.75 $ 132,252 1,380,070 (139,150) 2,059,631 573,235 668,959 1,242,194 $ 1,650,964 431,140 59,656 1.45 $ $ $ $ $ $ $ $ $ 41,676 41,250 1.18 28,829 24.46 18.37 21.50 13.75 14.83 1.56 5.5% 145,488 63,053 208,541 204,027 1,389,341 3,368 94% 3.87 .41 9.9% 2,338 939 101 616 2.55 $ 113,109 1,409,432 (90,968) 2,108,841 583,864 691,026 1,274,890 $ 1,725,481 375,208 56,090 1.47 $ $ $ $ $ $ $ $ $ 40,792 38,247 1.16 30,524 26.25 19.31 21.60 14.31 14.69 1.51 5.4% 156,544 61,230 217,774 55,469 1,386,323 4,124 115% 6.82 .41 10.4% 2,361 977 130+ 603 2.83 $ $ $ $ $ $ $ $ $ $ $ 75,557 1,045,484 (185,267) 1,410,668 392,466 361,970 754,436 850,152 325,706 35,918 1.14 31,952 31,594 1.14 32,394 25.00 14.75 20.63 12.28 18.09 1.68 5.5% 119,470 59,365 178,835 — 1,096,599 2,096 82% 3.67 .37 9.3% 1,885 931 135 591 2.28 * In conjunction with the adoption of EITF 02-03 in fiscal 2003, energy trading contracts resulting in delivery of a commodity where we are the principal in the transaction are included as operating revenues or purchased gas cost. Fiscal years 2000-2002 have been reclassified to conform with this new presentation. # Heating degree days for ﬁscal years 2001-2004 are adjusted for service areas with weather-normalized operations. Heating degree days for 2000 are not adjusted for service areas with weather-normalized operations, as that information was not available. + Adjusted for partial-year results of Louisiana Gas Service Company, which was acquired in July 2001. The matters discussed or incorporated by reference in this Summary Annual Report may contain “forward- looking statements” within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this report are forward-looking statements made in good faith by the Company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this report or in any of the Company’s other documents or oral presentations, the words “anticipate,”“believes,”“estimate,” “expect,” “forecast,” “goal,” “intends,” “objective,” “plans,”“projection,”“seek,”“strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this report, including the successful integration of the Company’s acquisition of the operations of TXU Gas, the Company’s ability to continue to access the capital markets and other factors discussed in the Company’s SEC ﬁlings. These factors include the risks and uncertainties discussed in the Company’s Form 10-K for the fiscal year ended September 30, 2004. Although the Company believes 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. Further, the Company undertakes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise. 30 A T M O S E N E R G Y O F F I C E R S B O A R D O F D I R E C T O R S 31 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 Robert W. Best Richard A. Erskine Chairman, President and Chief Executive Ofﬁcer President, Atmos Pipeline and Storage, LLC J. Patrick Reddy Ron W. McDowell Senior Vice President and Chief Financial Ofﬁcer Vice President, New Business Ventures R. Earl Fischer Senior Vice President, Utility Operations, and President, Mid-Tex Division S H A R E D S E R V I C E S Verlon R. Aston, Jr. Vice President, Governmental Affairs JD Woodward Senior Vice President, Nonutility Operations Leslie H. Duncan Louis P. Gregory Senior Vice President and General Counsel Conrad E. Gruber Vice President and Chief Information Ofﬁcer Wynn D. McGregor Vice President, Human Resources U T I L I T Y D I V I S I O N S J. Kevin Akers President, Mississippi Valley Gas Division Thomas R. Blose, Jr. President, Mid-States Division Gary W. Gregory President, West Texas Division Tom S. Hawkins, Jr. President, Louisiana Division John A. Paris President, Kentucky Division Gary L. Schlessman President, Colorado-Kansas Division Vice President, Strategic Planning Susan C. Kappes Vice President, Investor Relations and Corporate Communications Dwala J. Kuhn Corporate Secretary Robert E. Mattingly Vice President, Gas Supply Fred E. Meisenheimer Vice President and Controller Gordon J. Roy Vice President, Security and Compliance Laurie M. Sherwood Vice President, Corporate Development, and Treasurer Travis W. Bain II Chairman, Texas Custom Pools, Inc. Plano, Texas Board member since 1988 Committees: Work Session/Annual Meeting (Chairman), Audit, Human Resources Robert W. Best Chairman, President and Chief Executive Ofﬁcer Atmos Energy Corporation Dallas, Texas Board member since 1997 Committee: Executive Dan Busbee Adjunct Professor, Dedman School of Law, Southern Methodist University; Senior Visiting Fellow, Centre for Commercial Law Studies, University of London Dallas, Texas Board member since 1988 Committees: Audit (Chairman), Human Resources Richard W. Cardin Retired partner of Arthur Andersen LLP Nashville, Tennessee Board member since 1997 Committees: Audit, Nominating and Corporate Governance Thomas J. Garland Chairman of the Tusculum Institute for Public Leadership and Policy Greeneville, Tennessee Board member since 1997 Committees: Human Resources, Work Session/Annual Meeting Richard K. Gordon General Partner Juniper Capital LP and Juniper Advisory LP Houston, Texas Board member since 2001 Committees: Human Resources, Nominating and Corporate Governance Gene C. Koonce Formerly Chairman of the Board, President and Chief Executive Ofﬁcer, United Cities Gas Company Nashville, Tennessee Board member since 1997 Committees: Human Resources (Chairman), Executive, Work Session/Annual Meeting Dr. Thomas C. Meredith Chancellor of the University System of Georgia Atlanta, Georgia Board member since 1995 Committees: Audit, Nominating and Corporate Governance Phillip E. Nichol Formerly Senior Vice President of Central Division Staff UBS PaineWebber Incorporated Dallas, Texas Board member since 1985 Committees: Nominating and Corporate Governance (Chairman), Human Resources, Work Session/Annual Meeting Nancy K. Quinn Principal, Hanover Capital, LLC East Hampton, New York Board member since 2004 Committees: Audit, Nominating and Corporate Governance Charles K. Vaughan Formerly Chairman of the Board Atmos Energy Corporation Dallas, Texas Board member since 1983 Committee: Executive (Chairman) Richard Ware II President, Amarillo National Bank Amarillo, Texas Board member since 1994 Committees: Nominating and Corporate Governance, Work Session/Annual Meeting Lee E. Schlessman Honorary Director President, Dolo Investment Company Denver, Colorado Retired from Board in 1998 32 C O R P O R A T E I N F O R M A T I O N C O M M O N S T O C K L I S T I N G A N N U A L M E E T I N G O F S H A R E H O L D E R S New York Stock Exchange. Trading symbol: ATO S T O C K T R A N S F E R A G E N T A N D R E G I S T R A R American Stock Transfer and Trust Company 59 Maiden Lane Plaza Level New York, New York 10038 (800) 543-3038 To inquire about your Atmos Energy stock, please call AST at the telephone number above. You may use the agent’s interactive voice response system 24 hours a day to learn about transferring stock or to check your recent account activity—all without the assistance of a customer service representative. Please have available your Atmos Energy shareholder account number and your Social Security or federal taxpayer ID number. To speak to an AST customer service representative, please call the same number between 8 a.m. and 7 p.m. Eastern time, Monday through Thursday, and 8 a.m. to 5 p.m. Eastern time on Friday. You also may send an e-mail message on our agent’s Web site at http://www.amstock.com. Please refer to Atmos Energy in your e-mail and include your Atmos Energy shareholder account number and your Social Security or federal taxpayer ID number. The Annual Meeting of Shareholders will be held in the Lincoln West Ballroom at the Hilton Hotel Lincoln Centre, 5410 Lyndon B. Johnson Freeway, Dallas, Texas 75240 on Wednesday, February 9, 2005, at 11 a.m. Central time. D I R E C T S T O C K P U R C H A S E P L A N Atmos Energy Corporation has a Direct Stock Purchase Plan that is available to all investors. For an Enrollment Application Form and a Plan Prospectus, please call AST at (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, or a solicitation to buy, any securities of Atmos Energy Corporation. Shares of Atmos Energy common stock purchased through the Direct Stock Purchase Plan will be offered only by Prospectus. A T M O S E N E R G Y O N T H E I N T E R N E T Information about Atmos Energy is available on the Internet at http://www.atmosenergy.com. Our Web site includes news releases, current and historical ﬁnancial reports, other investor data, corporate governance documents, management biographies, customer information and facts about Atmos Energy’s operations. I N D E P E N D E N T R E G I S T E R E D P U B L I C 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 T A C T S A C C O U N T I N G F I R M Ernst & Young LLP 2121 San Jacinto, Suite 1500 Dallas, Texas 75201 (214) 969-8000 F O R M 1 0 - K Atmos Energy Corporation’s Annual Report on Form 10-K is available upon request from Shareholder Relations, Atmos Energy Corporation, P.O. Box 650205, Dallas, Texas 75265-0205 or by calling (972) 855-3729 between 8 a.m. and 5 p.m. Central time. Atmos Energy’s Form 10-K may also be viewed on Atmos Energy’s Web site at http://www.atmosenergy.com. To contact Atmos Energy’s Shareholder Relations, call (972) 855-3729 between 8 a.m. and 5 p.m. Central time or send an e-mail message to InvestorRelations@atmosenergy.com. For ﬁnancial information for securities analysts and investment managers, contact: Susan C. Kappes Vice President, Investor Relations and Corporate Communications (972) 855-3729 (972) 855-3040 (fax) InvestorRelations@atmosenergy.com © 2004 by Atmos Energy Corporation. All rights reserved. Atmos Energy® is a registered trademark and Spirit of ServiceSM is a service mark of Atmos Energy Corporation. Video © 2004 NBC, Inc. All rights reserved. Atmos Energy Corporation P.O. Box 650205 Dallas, Texas 75265-0205 atmosenergy.com

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