Atos Annual Report 2005 | Quarterlytics

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FY2005 Annual Report · Atos

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2005
a LANDMARK year
in our HISTORY

A T M O S E N E R G Y C O R P O R A T I O N 2 0 0 5 S U M M A R Y A N N U A L R E P O R T

a year of INTEGR ATION and
u npr ecedented GROW TH

In a year of many notable successes, our acquisition

of TXU Gas stands out. Overnight, our customer base

and pipeline and storage capacity doubled, and our

company became a subject of greater interest in our

industry and the markets. When we accomplished

the TXU Gas integration both swiftly and efﬁciently,

some observers reacted with surprise. But we weren’t

surprised. We’ve always had great conﬁdence in the people

who make Atmos Energy work. In this year’s annual

report, we describe our expanded company and some

of the elements that, together, create our success.

Our shape changed signiﬁcantly in 2005. But our passion

and values—the values that have built Atmos Energy—

remained as strong as ever.

fi na nci a l highl ights

l et ter to sh a r ehol ders

oper ations r ev iew

2 0

fi na nci a l r ev iew

2 8

atmos en ergy officers

3 0

boa r d of dir ec tors

ibc

c or por ate i n for m ation

On the cover: Working together, Troy Duncan, Mike
McCann and their fellow employees made ﬁscal 2005 a year
of unprecedented growth and success for Atmos Energy.

At right: Overseen by Project Manager Mark Patterson,
the North Side Loop project is stockpiled with 30-inch
pipe on a 10-acre site in Denton County, Texas. The
loop’s initial capacity of 220,000 million Btu per day can
be more than doubled to 500,000 million Btu per day.

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

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)

2 0 0 5

2 0 0 4

C h a n g e

D E A R F E L L O W S H A R E H O L D E R :

Operating revenues
Gross proﬁt

Utility net income
Natural gas marketing net income
Pipeline and storage net income
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)
Consolidated pipeline and storage segment

transportation volumes (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)

* Total capitalization represents the sum of shareholders’ equity and long-term debt (excluding current maturities).

$ 4,973,326

$ 2,920,037

$ 1,129,090

81,117

23,404
30,599
665

135,785

562,191

63,096

16,633
2,767
3,731

86,227

$ 5,653,527

$ 2,912,627

$ 3,785,526

$ 1,994,770

1.72

1.24

19.90

1.58

1.22

18.05

411,134

238,097

246,033

222,572

375,604

2,587

89%

—

3,271

96%

3,157,840

1,679,136

9.0%

9.1%

40.7%

56.7%

26,242

79,012

27,555

54,416

70.3%

100.8%

28.6%

40.7%

1,005.9%

-82.2%

57.5%

94.1%

89.8%

8.9%

1.6%

10.2%

67.1%

7.0%

—

-20.9%

-7.3%

88.1%

-1.1%

-28.2%

-4.8%

45.2%

Our acquisition of the distribution and pipeline
operations of TXU Gas has created a powerful union—
which is the subject of much of this year’s report.

The acquisition, which closed on October 1, 2004,

has exceeded our best expectations, as measured on
several dimensions. It contributed to Atmos Energy’s
extraordinary ﬁnancial results in ﬁscal 2005. It
transformed Atmos Energy into the largest all-natural-
gas distribution company in the country, and it
created major opportunities for future growth.

Atmos Energy’s gross proﬁt in ﬁscal 2005 doubled

to exceed $1 billion for the ﬁrst time in our company’s
history. Net income increased 58 percent to a record
$135.8 million, and earnings per diluted share grew by
14 cents to $1.72.

Fiscal 2005 marked our ﬁfth year of consistently
improved performance. Our total return to shareholders
was 17.2 percent, and our return on average shareholders’
equity was 9.0 percent.

Recognizing these accomplishments, the Board of
Directors raised the dividend by 2 cents to an indicated
annual rate of $1.26 per share. This marked our 18th
consecutive annual increase. Moreover, when adjusted
for mergers and acquisitions, Atmos Energy’s dividend
has gone up every year since it was formed in 1983.

E X C E P T I O N A L P E R F O R M A N C E

Atmos Energy’s employees did more than just deliver on
the company’s promise of $1.65 to $1.75 in earnings per
diluted share for ﬁscal 2005. They overcame warmer-
than-normal weather that reduced earnings by 29 cents
per diluted share, dilution from a year-over-year
increase of 24.6 million more shares outstanding and
the ravages of two hurricanes that affected two-thirds
of our Louisiana operations and a portion of our
Mississippi territory.

The TXU Gas acquisition was a major contributor
to earnings. It was accretive in the ﬁrst year—adding
18 cents to earnings per diluted share. That result far
surpassed our original estimate of a contribution from
5 cents to 10 cents per diluted share.

The acquisition has nearly doubled the size of

our utility operations by adding 1.5 million gas
utility customers in Texas. Overall, the additional
territory exceeds national averages for customer
growth. In particular, the Dallas and Fort Worth
metropolitan areas as well as the northern suburbs
of Austin are experiencing strong residential and
commercial development.

Integrating the former TXU Gas employees and
operations has gone exceptionally well. Our integration
teams have exceeded goals and completed work well
ahead of deadlines. In particular, we are proud of the
conversion of all the former back-ofﬁce and information
technology systems. We no longer are using any
outsourced services for meter reading, customer billing
or telephone call centers. We expect that using our own
state-of-the-art systems will lead to improved customer
satisfaction and lower long-term operating costs.

$1.80

1.50

1.20

0.90

0.60

$1.72

$1.58

$1.54

$1.47

$1.45

E a r n i n g s R e v i e w
Net income per diluted share

2001

2002

2003

2004

2005

hurricanes PROVE
THE METTLE of the
atmos energy team

Across Louisiana to the Mississippi Delta, Atmos Energy

employees responded courageously to Hurricanes

Katrina and Rita. After Katrina devastated southern

Louisiana on August 29, Atmos Energy was the ﬁ rst

utility back into hard-hit Jefferson Parish. There and

elsewhere, employees—many of whom had lost their

own homes —worked tirelessly, some living for weeks

at company service centers in order to respond to

customers’ needs. Atmos Energy mobilized supplies

and manpower to aid its crews, displaced employees,

customers and neighbors. The second storm, Rita, delivered

a lesser blow to Atmos Energy’s operations in western

Louisiana. Disruption was further minimized thanks to

wise preparedness and fast response.

M I S S I S S I P P I

L O U I S I A N A

J AC KS ON

BAT ON R OUGE

NE W OR LE ANS

P I P E L I N E A N D S T O R A G E

An especially noteworthy part of the acquisition was
our addition of one of the largest intrastate natural gas
pipelines in Texas, which became the Atmos Pipeline–
Texas Division. This expansive pipeline system, shown
on page 9, supports our regulated utility operations by
carrying natural gas from producers and storage ﬁ elds to
our local distribution system. It crisscrosses the state,
with terminals at three major gas transportation hubs
where we can buy gas from other intrastate lines and
major interstate pipelines. It also transports volumes
from the state’s nine major gas-producing basins,
which hold a substantial portion of our country’s onshore
natural gas reserves.

Atmos Pipeline–Texas gives us new opportunities

to transport gas for producers to wider markets. In
ﬁ scal 2005, the pipeline added transportation volumes
of 375.6 billion cubic feet (Bcf). It contributed $149.5
million, or 95 percent, of the $157.9 million in gross proﬁ t
from our pipeline and storage segment. By comparison,
the segment’s gross proﬁ t last year before the acquisition
was just $10.4 million.
We are continuing to unlock added value from the
Texas pipeline. We currently have four pipeline projects
under way that we expect will add to earnings starting
in ﬁ scal 2006. The largest of these is a joint-venture project
to install 45 miles of 30-inch pipeline to serve the
northern suburbs of the Dallas-Fort Worth Metroplex.
This new pipeline will help Atmos Energy deliver
reliable natural gas supplies to one of the fastest-growing
consumer markets in the country. It also will provide
needed gas transmission capacity to serve natural gas
producers and shippers in the Texas intrastate
wholesale gas market.

N A T U R A L G A S M A R K E T I N G

Our natural gas marketing segment produced
exceptional results in ﬁ scal 2005, contributing 30 cents
per diluted share. The improvement largely was due
to achieving more favorable arbitrage spreads using our
underground natural gas storage facilities. It also
came from our marketing efforts that added customers
in new areas.

$1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00

$1.26

D i v i d e n d s
Atmos Energy has provided shareholders with 22
consecutive years of annual increases in dividends
(adjusted for mergers and acquisitions).
The indicated annual rate for ﬁ scal 2006 is $1.26 per share.

89 90

99 00

01 02

The TXU Gas acquisition opened up a large gas
marketing area in Texas with hundreds of prospective
customers, providing further conﬁ rmation that the
acquisition is a good ﬁ t with all segments of our business.
During ﬁ scal 2005, our nonutility operations
contracted for 9.0 Bcf of additional working gas storage
capacity and expanded our marketing efforts into
four more states. Altogether, our natural gas marketing
operations now serve more than 800 industrial,
municipal and other customers in 22 states.

R A T E S T R A T E G Y

We continue to be successful in maintaining our rates,
with $15 million to $25 million in average annual
additions to our utility revenues. Part of the increase in
ﬁ scal 2005 came from our GRIP ﬁ lings in Texas. GRIP,
the Gas Reliability Infrastructure Program, is a Texas
law that permits natural gas utilities to earn a timely
return of and on their basic investments. Without ﬁ ling
a lengthy rate case, a utility can raise rates annually
to pay for investments in pipelines and other facilities to
maintain reliability and safety and to meet customer
growth. The utility must ﬁ le a complete rate case at least
every ﬁ ve years to justify its GRIP expenditures.

Higher natural gas costs have intensiﬁ ed public

scrutiny of all utilities’ rates. As a result, regulatory
bodies in three of our states have been asked to review
our rate structures. We are cooperating fully in these
inquiries and believe our rates in all jurisdictions
remain fair and reasonable.

In our rate ﬁ lings, we are seeking to decouple the

recovery of our approved margins from customer
usage patterns that are affected by weather, declining
use and conservation. Because gas volumes ﬂ uctuate,
our earnings depend on consumption factors over which
we have little control. We are seeking to put more of
our costs into our basic monthly customer charge and
to add adjustments that help moderate the effects of
the rise and fall in our gas sales volumes.

Our most recent rate agreement in Mississippi,
for example, reﬂ ects our decoupling goals. The state’s
Public Service Commission allowed us to shift $10
million in annual margins from volume-based charges
to ﬁ xed customer charges. We also were granted an
improved weather normalization adjustment (WNA),
which adjusts our rates when winter weather turns
either unseasonably warm or cool, and we obtained a
GRIP-like mechanism in Mississippi to reduce the
regulatory lag for the investments we make on behalf of
our customers.

We have been successful in obtaining weather
normalization adjustments for about one-third of our
customer base. In our two largest jurisdictions, our
Mid-Tex and Louisiana Divisions, we do not have WNA.
In those areas, other rate-design features help offset the
lack of weather protection—up to a point. In ﬁ scal 2005,
our Mid-Tex Division had weather that was 20 percent
warmer than normal, and our Louisiana Division had
weather that was 22 percent warmer than normal. Overall,
weather was 11 percent warmer than normal in ﬁ scal
2005, reducing our net income by $22.8 million, or 29 cents
per diluted share.

In our rate ﬁ lings, we also are seeking to recover the

gas-cost portion of bad debt expense. As a public utility
that is obligated to serve everyone in the community, we
work to help the less-fortunate and other customers
who have difﬁ culty paying their energy bills. In return
for supporting the community’s social needs by not
disconnecting those who do not pay during the winter, we
are asking regulators to let us recover the sizable costs
we incur for gas supplies used by our indigent customers.

P A Y I N G D O W N D E B T

We ﬁ nanced our TXU Gas acquisition with two successful
equity offerings, which raised about $618 million in
net proceeds, and with a sale of $1.39 billion of senior
notes. Not unexpectedly, our debt level went up, which
has occurred in the past to ﬁ nance earlier transactions,
yet we maintained investment-grade ratings with all of
the major rating agencies.
We issued approximately 26 million new common
shares in connection with the acquisition. Our weighted
average number of common shares outstanding increased,
year over year, by 24.6 million shares, causing dilution
in our per-share earnings.

Our total debt as a percentage of total capitalization,

including short-term debt, was 59.3 percent at year-
end. We are committed to paying down debt to return
to the range of 50 percent to 55 percent during the
next three to ﬁ ve years. We are conﬁ dent we can do so
to continue our reliable record of reducing our debt-
to-equity ratio after major acquisitions.

$1,200

1,000

800

600

400

200

$1,129

$535

$562

$375

$431

G r o s s P r o f i t
Consolidated from 2001 to 2005 (in millions)

2001

2002

2003

2004

2005

In ﬁ scal 2005, we generated operating cash ﬂ ow
of $386.9 million, compared with $270.7 million in
ﬁ scal 2004. Our capital expenditures increased to
$333.2 million from $190.3 million in ﬁ scal 2004, with
virtually all the increase being spent on our Mid-Tex
and Atmos Pipeline–Texas Divisions.

O U T L O O K F O R 2 0 0 6

For ﬁ scal 2006, we see more opportunities than ever
before, largely because of the size and growth of our
added operations in Texas. Our goal is to continue to
grow our earnings at 4 percent to 6 percent a year on
average. We estimate that earnings per diluted share
in ﬁ scal 2006 will reach $1.80 to $1.90, assuming
normal weather and no material effect from marking
to market our storage and related ﬁ nancial hedges.
We are especially mindful of the effects that volatile,
high natural gas prices are having on our customers
everywhere. More of our customers could have difﬁ culty
paying their bills this winter, and our bad debt expense
could go up.

On April 1, 2006, JD Woodward will retire as senior
vice president, nonutility operations. He will be succeeded
by Mark H. Johnson, who recently was named vice
president, nonutility operations, and who also serves as
president of our natural gas marketing subsidiary. JD
founded Woodward Marketing, which became the core
of our natural gas marketing segment. He has led all
our nonutility operations since joining Atmos Energy
in 2001. I deeply thank him for his friendship, his
leadership and all he has done to serve our customers
and employees and to produce results that have
rewarded our shareholders.
We expect 2006 to be another prosperous year
for Atmos Energy. All of us appreciate your continuing
support as investors. We pledge to protect your
investment and to use it wisely to provide exceptional
service to our 3.2 million customers and 1,500
communities. That is the best way we can ensure future
ﬁ nancial success.

Robert W. Best

c h a i r m a n , p r e s i d e n t a n d c e o

n o v e m b e r 1 8 , 2 0 0 5

We have stepped up a broad range of programs to
help our customers as well as to seek increased natural
gas supplies. Actions by Congress are sorely needed—
to permit more gas exploration in coastal waters and
on Western public lands, to build a pipeline from the
abundant gas ﬁ elds in Alaska and to permit liqueﬁ ed
natural gas terminals on domestic shores. These actions
would help provide more natural gas and, in turn,
would help lower gas prices.

In 2006, we also must deal with the lingering aftermath

of Hurricanes Katrina and Rita. The hurricanes affected
up to 230,000 of our customers and reduced our ﬁ scal 2005
net income by $3.8 million, or 5 cents per diluted share.
To aid in the recovery, Atmos Energy and its employees
donated nearly $1.5 million to the hurricane relief efforts.
Today we estimate a semi-permanent loss of
about 40,000 meters in the four hardest hit parishes
where we serve. Our lost margins in ﬁ scal 2006 will
be between $10 million and $12 million. Nevertheless,
in surveying the region just days after the destruction,
I became convinced that the resilient spirit of Louisiana
residents and business owners will triumph over the
storms’ fury. Their desire to rebuild is evident everywhere.
It will just take time.
We estimate our capital expenditures in ﬁ scal 2006
will total $400 million to $415 million. Of that total,
about 60 percent will be spent on our growing Mid-Tex
and Atmos Pipeline–Texas Divisions. Our spending
reinforces our goal of investing growth capital to seek
the best returns. Although one of our key strategies
is to continue to grow through sound acquisitions, our
immediate goal is to reduce our debt with longer-
term plans for future acquisitions.

L E A D E R S H I P C H A N G E S

It was my pleasure this year to announce the addition
to the Board of Directors of Stephen R. Springer. I have
known Steve for nearly three decades and have worked
closely with him in the past. He brings an extensive
background in the natural gas industry and a steadfast
commitment to integrity and honesty. We are pleased
he agreed to join our board.

SEAMLESS integration
creates the NATION’S
LARGEST all-natural-
gas utility

The October 1, 2004, completion of our

TXU Gas acquisition doubled the size of

Atmos Energy and made it the nation’s

largest all-natural-gas utility. It also marked

one of the swiftest major utility acquisitions

in recent history. An innovative transition

agreement helped to cement the rapid

integration and secure regulatory approvals

from utility commissions in ﬁ ve states.

Financial markets were enthusiastic, with

investors subscribing to Atmos Energy’s

two offerings of common stock and a $1.39

billion debt offering at highly competitive

rates. Analysts also applauded the company’s

higher proportion of regulated customers,

delivering greater stability of earnings.

As part of the successful rebranding, TV
commercials assured the 1.5 million former
TXU Gas customers they would have the same
great gas service they’ve always counted on.

The historic Lone Star Gas Building, redundant
after the acquisition, became one of ﬁ ve downtown
buildings Atmos Energy donated to the City of Dallas.

Former TXU Gas operations moved from
downtown to the North Dallas headquarters.
The company’s new, higher proﬁ le includes
building signage.

Maria Chavez serves customers from the new
Atmos Energy call center in Waco, Texas.
The center added 240 new jobs to the local
economy. Keeping service personnel close
to the customers being served is a crucial
ingredient in the company’s success.

Existing Service Territory

Acquired Service Territory

Acquired Natural Gas Pipeline

Atmos Energy Headquarters

Major Gas Delivery Hub

Amarillo

Lubbock

Wichita Falls

Denton
Denton

Fort WoWortrthh

Plano
Plano

Midland

Abilene
Abilene

Arlington
Arlington

San Angelo

Brownwood
Brownwood

Wacoco

Waha Hub

Sherman

Richardson
Richardson
Garland
Garland

Dallas
Dallas

Longview

Carthage
Hub

Sunrise in Dallas, and Senior Construction Manager
Andre Brown and Crew Foreman Clayton Hunter are
already lining out the day’s work. Dallas-Fort Worth
alone added more than one million new customers
to the Atmos Energy system.

Bryan/College Station
Bryan/College Station

Round Rock
Round Rock
Austin
Austin

Katy Hub

Integrating a new service area larger than many entire states
required a massive conversion of customer billing and back-ofﬁ ce
systems. The Atmos Energy team won accolades for their deft
accomplishment of the task.

Keith Prewitt, an Atmos Energy manager of new construction
in Round Rock, Texas, inventories 8-inch distribution pipe that will
expand service to new communities growing in Central Texas.

Atmos Energy has earned national
attention – and customer kudos –
for its investment in service. East
Texas customers beneﬁt from the
new Palestine service center, one
of nine new facilities the company
has opened across the state.

Innovative thinking solved a rocky problem for Central
Texas developers. Atmos Energy engineers found ways to
run pipeline through the area’s terrain of hills, cliffs and
solid rock to serve homebuyers’ demand for natural gas.

Technician Doyce Wilson exempliﬁes the long tenure
of much of the workforce. He joined Lone Star Gas in 1972
and stayed through the transitions to TXU Gas and to
Atmos Energy. Such continuity helped make the change
from TXU Gas to Atmos Energy worry-free for customers.

a t m o s e n e r g y F U E L S T H E G R O W T H o f
o n e o f A M E R I C A ’ S m o s t V I B R A N T R E G I O N S

Along with 1.5 million new customers for Atmos Energy, the TXU Gas acquisition added

momentum to the growth of a region that includes the nation’s eighth largest metropolitan area,

Dallas-Fort Worth, as well as Austin suburbs that rank among the country’s fastest-growing

communities in housing and commercial expansion. To support its highly experienced workforce,

Atmos Energy has added nine new service centers to better serve its customers, who already

made the ﬁrst ﬁling under Texas’ Gas Reliability Infrastructure Program (GRIP), which reduces

the lag time on recovery of basic service investments.

1 1

Eddie Ortowski supervises compression and storage of natural
gas at the company’s Lake Dallas storage facility. Such facilities,
strategically placed, help stabilize supply during peak periods.

At City Gate Distribution Center in Mesquite, Texas,
Danny Bowman and Gerald Armstrong help supply customers
from Sherman, near the Red River, to Katy, near Houston.
A major hub, City Gate provides energy to six power plants.
Soon it will tie in to the company’s new North Side Loop.

Staff members at this Atmos Energy gas control center
in Dallas monitor weather, news events, next-day
prices and gas futures, advising buyers who trade gas
to serve 1.5 million Texas customers.

going to EXTRAORDINARY
LENGTHS to bring
gas where it’s NEEDED

Atmos Energy operates one of the largest

intrastate gas pipeline systems in Texas. This

system is growing significantly with

construction of the 45-mile North Side Loop

and related compressor stations in the

D-FW Metroplex. Jointly owned with Energy

Transfer Partners, L.P., the new pipeline

will ensure ample natural gas supplies for the

rapid residential and commercial growth of

Collin, Denton and northern Tarrant Counties.

It also will add transmission capacity to help

natural gas producers and shippers bring more

Texas natural gas to market, particularly

gas from the expanding production in the Fort

Worth Basin. In May, Atmos Energy entered

an agreement with Enbridge Energy Partners

to transport up to 100,000 million Btu per

day through the Atmos Energy system.

Pipe for the new North Side
Loop awaits welding outside
Krum, Texas. Pipeline crews
took advantage of unusually
dry fall weather to build at
a faster-than-expected pace.

1 2

atmos energy MARKETING finds LARGE-SCALE OPPORTUNITIES

The new territory added with the TXU Gas acquisition represents a vast ﬁeld of opportunity for Atmos Energy

Marketing, which develops relationships with industrial and municipal customers, such as manufacturing facilities,

hospitals and electric generation plants. Developers of new residential communities in fast-growing Central and

North Texas represent another signiﬁcant opportunity for growth. Atmos Energy has ample capacity for projected

customer needs. Large gas hubs in three major market centers—Waha in West Texas, Carthage in East Texas and

Katy, near Houston—connect with Texas intrastate pipelines and interstate pipelines at more than 100 points.

Among the new industrial customers
Atmos Energy has gained are
high-tech companies such as Dell
and Samsung in the Austin area.

The humble patio has evolved
into a full outdoor room.
Outdoor kitchens, living areas
and sleeping rooms are among
the new features most requested
by homeowners. How do you
fuel and heat an outdoor room?
Natural gas, of course.

Atmos Energy fuels production at GM’s
3 million-square-foot Arlington assembly
plant. Other major customers in North
Texas include Texas Instruments, Coca-Cola,
Pepsi and two Frito-Lay plants.

Louis Moya takes measurements at the
company’s Katy distribution hub, part of
Atmos Pipeline–Texas, one of the largest
intrastate gas pipeline networks in Texas.

As new neighborhoods
expand across Atmos
Energy’s territory, the
company markets to
homebuilders and developers,
promoting the beneﬁts
of natural gas for builder
and homebuyer alike.

1 4

o p e r a t i o n s r e v i e w

R E S U L T S O F O P E R A T I O N S

In ﬁscal 2005, consolidated net income increased 58
percent to $135.8 million from $86.2 million in ﬁscal
2004. Earnings per diluted share were $1.72, compared
with $1.58 in the previous year. Gross proﬁt was $1.1
billion on operating revenues of $5.0 billion. Return
on average shareholders’ equity was 9.0 percent. The
company paid total cash dividends of $1.24 per share and
provided a total return to shareholders of 17.2 percent.
Utility operations contributed 60 percent of
consolidated net income in ﬁscal 2005. Natural gas
marketing operations contributed 17 percent, and
pipeline and storage operations contributed 23 percent.

To better serve our Mid-Tex Division’s customers,
Atmos Energy took over the operation of a large customer
call center in Waco, Texas, and hired about 240 employees
to staff the center. We also assumed responsibility for
other services that had been outsourced by TXU Gas, such
as information technology, customer billing and meter
reading. By the beginning of the 2006 ﬁscal year, we had
completed the conversion of the former systems to
our own systems—nearly a year in advance of the time
typically needed for such conversions. We believe these
changes will provide long-term savings and help us be more
responsive to our customers’ needs.

T X U G A S A C Q U I S I T I O N

W E A T H E R A N D T H R O U G H P U T

A major factor supporting Atmos Energy’s record-setting
results in ﬁscal 2005 was the full year of contributions
from the acquired distribution and pipeline operations
of TXU Gas Company. As we forecast, the acquisition
proved accretive to earnings in its ﬁrst year, contributing
$52.7 million to consolidated net income, or 18 cents
per diluted share. We paid approximately $1.9 billion in
cash and financed the acquisition with two public
offerings of common stock, yielding net proceeds of
approximately $618 million, and a $1.39 billion public
offering of senior debt.

The acquisition added 1.5 million gas utility customers

in the north-central, eastern and western regions of
Texas to nearly double our size. The acquired operations
also included one of the largest intrastate natural gas
pipelines in Texas and ﬁve connected gas storage ﬁelds.
As part of the new Atmos Pipeline–Texas Division, the
6,162-mile pipeline system delivers natural gas to more
than 550 cities served by our new Mid-Tex Division.
It also transports natural gas from nine producing basins
across Texas and interconnects with several intrastate
and interstate gas pipelines at three major transportation
hubs in West Texas, East Texas and the Houston area.

Weather, overall, during ﬁscal 2005 was 11 percent
warmer than the 30-year normal averages, as adjusted
for our operations that have weather-normalized rates.
The warm winter heating season reduced our net
income by $22.8 million, or 29 cents per diluted share.
Consolidated utility throughput increased to
411.1 billion cubic feet (Bcf) in ﬁscal 2005 from 246.0
Bcf in fiscal 2004. The increase was largely due to
operations of the Mid-Tex Division, which added 174.3
Bcf in throughput for the year. Natural gas marketing
sales volumes increased about 15.5 Bcf to 238.1 Bcf, and
pipeline transportation volumes were 375.6 Bcf during
ﬁscal 2005.

N A T U R A L G A S P R I C E S

Wholesale natural gas prices continued rising during
ﬁscal 2005, following a ﬁve-year trend. Domestic natural
gas production barely kept pace with the growing
demand largely because clean-burning natural gas is
being used to fuel most new electric power plants. In
addition, Hurricanes Katrina and Rita damaged more
than 15 percent of the natural gas production capacity
in the Gulf of Mexico. Damage to offshore drilling and
producing platforms and the pipelines and processing
facilities needed to transport the gas to shore caused
natural gas prices to reach record levels during the
summer, when we typically inject large gas volumes into
storage to withdraw during the winter heating season.

1 6

Our average utility cost of natural gas for the 2005

ﬁscal year was $7.41 per thousand cubic feet (Mcf),
compared with $6.55 per Mcf for the 2004 ﬁscal year.
To help protect our customers from the volatility in
wholesale natural gas markets, we continue to hedge
gas prices for our customers in jurisdictions that
allow hedging programs. For the 2005–2006 heating
season, we have hedged approximately 46 percent
of our expected winter supply, using a combination of
underground storage and ﬁnancial contracts. We
project that our weighted average cost for storage gas
and ﬁnancial contracts will be about $9.11 per Mcf,
which is 46 percent more than we paid in the winter
of 2004–2005.

O P E R A T I N G E F F I C I E N C Y

Atmos Energy remains one of the utility industry’s
low-cost leaders in operation and
maintenance expense, as measured
by O&M expense per utility customer.

I O W A

For ﬁscal 2005, our
utility O&M expense

DEN VE R

C O L O R A D O

was $110 per customer, compared to our peer-group
average of $209 per customer. Another indicator,
customers per employee, also demonstrates Atmos
Energy’s leadership in productivity. In ﬁscal 2005,
we served 730 utility customers per utility employee,
compared with our peer-group average of 511
customers per employee.

A signiﬁcant achievement during ﬁscal 2005
was our ability to accelerate $12.4 million (net of tax)
of cost savings from the TXU Gas acquisition.
These savings

originally were
forecast for
ﬁscal 2006.

M I C H I G A N

P E N N S Y L V A N I A

I N D I A N A

O H I O

I L L I N O I S

W E S T
V I R G I N I A

K A N S A S

OWENS BORO

V I R G I N I A

M I S S O U R I

K E N T U C K Y

O K L A H O M A

A R K A N S A S

FRANK L IN

T E N N E S S E E

N O R T H
C A R O L I N A

S O U T H
C A R O L I N A

LUB BOCK

M I S S I S S I P P I

G E O R G I A

DA LL AS

JACK SON

A L A B A M A

L O U I S I A N A

T E X A S

HO UST ON

BAT ON ROUG E

NEW ORLEA NS

States with Both Utility
and Nonutility Operations

States with Only
Nonutility Operations

Utility Service Areas

Atmos Energy Headquarters

Atmos Energy Utility Division Headquarters

Atmos Energy Marketing Headquarters

Atmos Energy Marketing Regional Offices

Our consolidated operation and maintenance
expense for ﬁscal 2005 totaled $427.7 million, nearly
double our O&M expense for ﬁscal 2004 of $214.5
million. The increase was largely due to $206.6 million
in added O&M expense for the Mid-Tex and Atmos
Pipeline–Texas Divisions.

The provision for doubtful accounts also increased

by $14.9 million over the previous year’s amount to
$20.3 million in ﬁscal 2005. The large increase was due
to the added operations of the Mid-Tex Division and
to our decision to raise our provision to cover collection
risks caused by higher natural gas costs. Our utility
collection efforts have produced exceptional results,
keeping our actual bad-debt write-offs below our
target rate of 0.75 percent of utility revenues. Our
actual rate in ﬁscal 2005 was 0.58 percent.

Excluding increases in O&M expense due to the

acquired TXU Gas operations and the provision for
doubtful accounts, our O&M expense went up about
$2.0 million over the same period in ﬁscal 2004. The
increase resulted mainly from $2.3 million of expenses
from Hurricanes Katrina and Rita, partially offset
by cost-control efforts in our utility operations.

Hurricanes Katrina and Rita affected about 230,000

of our customers in Louisiana and Mississippi. Service
in Mississippi was restored promptly, but restoration has
been delayed in areas of Louisiana that were under
water or that sustained severe damage. We estimate that
the damages to our system are between $13 million
and $15 million. After discussions with the Louisiana
Public Service Commission and our insurance carriers,
we expect that we will recoup most of our losses although
the timing is uncertain.

The ﬁnancial effect of the hurricanes in ﬁscal
2005 was about $3.9 million in lost margin. We estimate
a semi-permanent loss of some 40,000 customers in
four Louisiana parishes that suffered the worst damages.
We expect our lost margin in ﬁscal 2006 will be
approximately $10 million to $12 million, or about
8 cents to 10 cents per diluted share.

$140.00

130.00

$130

120.00

110.00

100.00

90.00

$126

$122

$110

$101

O & M E x p e n s e s
Operation and maintenance expense per customer

2001

2002

2003

2004

2005

R A T E A D J U S T M E N T S

Our utility rate strategy is to minimize regulatory lag
and to provide stable, predictable margins by eliminating
the effects of weather and consumption on the recovery
of our margins. We also are seeking to recover the gas-
cost portion of our bad debt expense.

To reduce the sensitivity of our earnings to
weather, we have obtained weather-normalized rates
in nine jurisdictions, covering approximately one
million customers. Rates in our two largest jurisdictions,
the Mid-Tex and Louisiana Divisions, provide limited
protection from unseasonably warm winter weather,
which occurred in both jurisdictions in ﬁscal 2005.
We are pursuing rate-design alternatives in both divisions
to better safeguard margins.

During the 2004–2005 winter heating season,
approximately 48 percent of our margins were not sensitive
to weather or consumption ﬂuctuations; 35 percent
were weather-normalized; and 17 percent were weather-
sensitive. We expect similar margin percentages during
the winter heating season of 2005–2006.
We beneﬁted in ﬁscal 2005 from rate increases that
had been approved in West Texas and in Mississippi
in the latter half of 2004. We also completed ﬁlings for
2003 made under Texas’ Gas Reliability Infrastructure

Program and initiated our 2004 GRIP ﬁlings. GRIP
reduces regulatory lag by allowing Texas natural gas
utilities to earn a timely return on, and return of, their
basic investments needed to serve utility customers.
We forecast that rate requests will add, on average,
$15 million to $25 million annually to our utility
revenues. We project that most of our rate increases in
ﬁscal 2006 will result from our Texas GRIP ﬁlings.

N O N U T I L I T Y O P E R A T I O N S

Our natural gas marketing segment set a new company
record by contributing 30 cents per diluted share to
earnings. We beneﬁted from additional storage capacity
and greater market volatility. We also added new
customers in a number of areas and expanded into four
new states—Michigan, North Carolina, Pennsylvania
and West Virginia—all states close to our existing
operations with good prospects for new business. In
addition, we expanded our gas marketing activities
in Texas as a result of the TXU Gas acquisition.

Our new pipeline and storage segment combines
the regulated utility operations of our Atmos Pipeline–
Texas Division with those of our nonregulated pipeline
and storage operations. For ﬁscal 2005, Atmos Pipeline–
Texas contributed $149.5 million of the segment’s
gross proﬁt of $157.9 million. Our pipeline and storage
segment contributed 39 cents per diluted share to
earnings, due primarily to the operations of Atmos
Pipeline–Texas.

In a 50-50 joint venture with Energy Transfer Partners,

L.P., we began constructing a new pipeline to better
serve the northern counties of the Dallas-Fort Worth
Metroplex. We are building 45 miles of 30-inch pipeline
that will improve utility distribution reliability and
will transport more natural gas from Texas gas fields
to market. Called the North Side Loop, the ﬁrst phase
of this project should begin operations in December
2005, and the second phase should be completed by
March 2006.

We also entered into three other major pipeline
and storage projects in ﬁscal 2005. They include

• an agreement to transport up to 100,000 million
British thermal units (Btu) per day of natural gas
from the Fort Worth Basin producing area to a
major interstate pipeline company’s system using
new compression equipment that Atmos Energy
is installing;
• an agreement leveraging this added compression
to transport an additional 50,000 million Btu per day
of natural gas under a contract with another third-
party shipper;
• an agreement with three other shippers to transport
an additional 50,000 million Btu per day to the Katy
hub near Houston.

F I S C A L 2 0 0 6 F O R E C A S T

We forecast that our earnings in ﬁscal 2006 will continue
to grow at our stated goal of 4 percent to 6 percent a
year, on average. We expect that earnings per diluted share
will be between $1.80 and $1.90, assuming normal
weather and no material effect from marking to market
our storage and related ﬁnancial hedges.
We project that our capital expenditures in ﬁscal
2006 will range between $400 million and $415 million,
compared with $333 million expended in ﬁscal 2005.
About 60 percent of our capital spending in ﬁscal 2006
will be invested in our Mid-Tex and Atmos Pipeline–
Texas Divisions, reﬂecting our goal to invest in higher-
growth prospects.

A key goal is to lower the proportion of debt in our

capital structure to between 50 percent and 55 percent
within three to ﬁve years.

Atmos Energy’s Board of Directors approved an
increase in the annual dividend rate in November 2005
for the 18th consecutive year. The new indicated annual
rate is $1.26 per share, providing shareholders a yield of
approximately 5 percent. Adjusted for mergers and
acquisitions, our dividend has increased every year since
Atmos Energy’s founding.

1 8

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

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 management’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 executed all certifications with respect
to the financial statements contained therein and
have completed management’s report on internal
control over financial reporting, which are required
under the Sarbanes-Oxley Act of 2002 and all related
rules and regulations of the Securities and Exchange
Commission. Investors may request, without charge,
our Annual Report on Form 10-K for the fiscal year
ended September 30, 2005, 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 inside the
back cover of this report.

2 0

Y E A R E N D E D S E P T E M B E R 3 0

2 0 0 5

2 0 0 4

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)
Consolidated pipeline transportation volumes (MMcf)

Operating revenues (000s)
Gas utility sales revenues

Residential
Commercial
Industrial
Agricultural
Public authority and other
Total gas sales revenues

Transportation revenues
Other gas revenues

Total utility revenues

Natural gas marketing revenues
Pipeline and storage revenues
Other nonutility revenues
Total operating revenues (000s)

Other statistics
Gross plant (000s)
Net plant (000s)
Miles of pipe
Employees

2,862,822
274,536
2,715
9,639
8,128
3,157,840

1,506,777

151,381

2,436

8,397

10,145

1,679,136

2,587

89%

3,271

96%

162,016
92,401
29,434
3,348
9,084
296,283

122,098
418,381
(7,247)
411,134
238,097
375,604

92,208

44,226

22,330

4,642

9,813

173,219

87,746

260,965

(14,932)

246,033

222,572

—

$ 1,791,172
869,722
229,649
27,889
86,853
3,005,285
58,897
37,859
3,102,041
1,783,926
85,333
2,026
$ 4,973,326

923,773

400,704

155,336

31,851

77,178

1,588,842

30,622

17,172

1,636,636

1,279,424

1,617

2,360

$ 2,920,037

$ 4,765,610
$ 3,374,367
81,604
4,543

$ 2,633,651

$ 1,722,521

47,616

2,864

2 1

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

S E P T E M B E R 3 0 (Dollars in thousands, except share data)

2 0 0 5

2 0 0 4

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)

2 0 0 5

2 0 0 4

2 0 0 3

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 $15,613 in 2005

and $7,214 in 2004
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);

200,000,000 shares authorized, issued and outstanding:
2005 – 80,539,401 shares, 2004 – 62,799,710 shares

Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings

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

$ 4,631,684
133,926
4,765,610
1,391,243
3,374,367

$ 2,595,374

38,277

2,633,651

911,130

1,722,521

40,116
80,956

454,313
450,807
238,238
1,264,430
737,787
276,943
$ 5,653,527

201,932

—

211,810

200,134

99,319

713,195

245,528

231,383

$ 2,912,627

403
1,426,523
(3,341)
178,837
1,602,422
2,183,104
3,785,526

314

1,005,644

(14,529)

142,030

1,133,459

861,311

1,994,770

461,314
503,368
144,809
3,264
1,112,755
292,207
263,424
199,615

185,295

238,682

—

5,908

429,885

241,257

103,579

143,136

$ 5,653,527

$ 2,912,627

Operating revenues
Utility segment
Natural gas marketing segment
Pipeline and storage segment
Other nonutility segment
Intersegment eliminations

Purchased gas cost
Utility segment
Natural gas marketing segment
Pipeline and storage 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
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:

$ 3,103,140
2,106,278
164,742

5,302
(406,136)
4,973,326

2,195,774
2,044,305
6,811
—
(402,654)
3,844,236
1,129,090

$ 1,637,728

$ 1,554,082

1,618,602

1,668,493

19,758

3,393

(359,444)

2,920,037

1,134,594

1,571,971

9,383

—

20,298

2,853

(445,810)

2,799,916

1,062,679

1,644,328

3,061

—

(358,102)

(445,128)

2,357,846

562,191

2,264,940

534,976

427,734
178,005
174,696
780,435
348,655
2,021
132,658
218,018
82,233
135,785
—

214,470

96,647

57,379

368,496

193,695

9,507

65,437

137,765

51,538

86,227

—

205,090

87,001

55,045

347,136

187,840

2,191

63,660

126,371

46,910

79,461

(7,773)

135,785

86,227

71,688

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

1.73
—
1.73

1.72
—

1.72

1.60

—

1.60

1.58

—

1.58

1.72

(.17)

1.55

1.71

(.17)

1.54

Weighted average shares outstanding:
Basic
Diluted

78,508
79,012

54,021

54,416

46,319

46,496

2 2

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

T H E 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, 2005 and
2004, and the related consolidated statements of
income, shareholders’ equity, and cash ﬂows for each
of the three years in the period ended September 30,
2005 (not presented herein); and in our report dated
November 16, 2005, we expressed an unqualiﬁed
opinion on those consolidated ﬁnancial statements.
In our opinion, the information set forth in
the accompanying condensed consolidated ﬁnancial
statements is fairly stated, in all material respects, in
relation to the consolidated ﬁnancial statements from
which it has been derived.

(164,893)

(233,385)

Dallas, Texas
November 16, 2005

Y E A R E N D E D S E P T E M B E R 3 0 (Dollars in thousands)

2 0 0 5

2 0 0 4

2 0 0 3

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
Other, net
Proceeds from sale of assets

Net cash used in investing activities

Cash Flows from Financing Activities
Net increase (decrease) in short-term debt
Net proceeds from issuance of long-term debt
Settlement of Treasury lock agreements
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 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

135,785

86,227

71,688

—

178,005
791
12,669
11,522
48,172
386,944

(333,183)
(1,916,696)
(2,131)
—
(2,252,010)

144,809
1,385,847
(43,770)
—
—
(103,425)
—
(98,978)
37,183
381,584
1,703,250
(161,816)
201,932

—

(6,700)

96,647

1,465

36,997

(1,772)

57,870

270,734

(190,285)

(1,957)

(570)

27,919

7,773

—

87,001

2,193

53,867

(5,885)

(167,186)

49,451

(159,439)

(74,650)

704

—

(118,595)

5,000

—

(9,713)

—

(66,736)

34,715

235,737

80,408

186,249

15,683

(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

40,116

201,932

2 4

2 5

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 1 - 2 0 0 5 )

f o r w a r d - l o o k i n g s t a t e m e n t s

Y E A R E N D E D S E P T E M B E R 3 0

2 0 0 5

2 0 0 4

2 0 0 3

2 0 0 2

2 0 0 1

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

333,183
3,374,367
151,675
5,653,527
1,602,422
2,183,104
3,785,526

190,285
1,722,521
283,310
2,912,627
1,133,459
861,311
1,994,770

159,439
1,624,394
16,248
2,625,495
857,517
862,500
1,720,017

132,252
1,380,070
(139,150)
2,059,631
573,235
668,959
1,242,194

113,109
1,409,432
(90,968)
2,108,841
583,864
691,026
1,274,890

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

$ 4,973,326
1,129,090
135,785
1.72

$ 2,920,037
562,191
86,227
1.58

$ 2,799,916
534,976
71,688
1.54

$ 1,650,964
431,140
59,656
1.45

$ 1,725,481
375,208
56,090
1.47

$
$
$
$

80,539
79,012
1.24
26,242
29.76
24.85
28.25
19.90
16.42
1.42
4.4%

$
$
$
$

62,800
54,416
1.22
27,555
26.86
23.68
25.19
18.05
15.94
1.40
4.8%

$
$
$
$

51,476
46,496
1.20
28,510
25.45
20.70
23.94
16.66
15.55
1.44
5.0%

$
$
$
$

41,676
41,250
1.18
28,829
24.46
18.37
21.50
13.75
14.83
1.56
5.5%

$
$
$
$

40,792
38,247
1.16
30,524
26.25
19.31
21.60
14.31
14.69
1.51
5.4%

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

296,283

173,219

184,512

145,488

156,544

114,851
411,134

72,814
246,033

63,453
247,965

63,053
208,541

61,230
217,774

throughput (MMcf)

238,097

222,572

225,961

204,027

55,469

Consolidated pipeline transportation
volumes (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

$
$

375,604
3,157,840
2,587

—
1,679,136
3,271

—
1,672,798
3,473

—
1,389,341
3,368

—
1,386,323
4,124

89%

7.41
.49

9.0%

4,543
927

110
730
2.59

$
$

96%

6.55
.36

9.1%

2,864
994

116
612
3.05

$
$

101%
5.76
.43

9.9%

2,905
930

115
594
2.75

$
$

94%

3.87
.41

9.9%

2,338
939

101
616
2.55

$
$

115%
6.82
.41

10.4%
2,361
977

130+
603
2.83

* 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 2001-2002 have been reclassiﬁed to conform with this new presentation.
# Heating degree days are adjusted for service areas with weather-normalized operations.
+ 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 and 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 any other of the Company’s documents
or oral presentations, the words “anticipate,” “believe,”
“estimate,” “expect,” “forecast,” “goal,” “intend,”
“objective,” “plan,” “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. These risks and uncertainties are
discussed in the Company’s Form 10-K for the ﬁscal
year ended September 30, 2005. 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
any of its forward-looking statements, whether as a
result of new information, future events or otherwise.

2 6

a t m o s e n e r g y o f f i c e r s

S E N I O R M A N A G E M E N T T E A M

U T I L I T Y D I V I S I O N S

N O N U T I L I T Y B U S I N E S S

Robert W. Best
Chairman, President and
Chief Executive Ofﬁcer

J. Kevin Akers
President, Mississippi Division

Mark H. Johnson
Vice President, Nonutility Operations
President, Atmos Energy Marketing, LLC

Susan C. Kappes
Vice President, Investor Relations

J. Patrick Reddy
Senior Vice President and
Chief Financial Ofﬁcer

Richard A. Erskine
President, Mid-Tex Division
President, Atmos Pipeline–Texas Division

Ron W. McDowell
Vice President, New Business Ventures

Dwala J. Kuhn
Corporate Secretary

R. Earl Fischer
Senior Vice President,
Utility Operations

JD Woodward
Senior Vice President,
Nonutility Operations

Gary W. Gregory
President, West Texas Division

Verlon R. Aston, Jr.
Vice President, Governmental Affairs

Fred E. Meisenheimer
Vice President and Controller

S H A R E D S E R V I C E S

Tom S. Hawkins, Jr.
President, Louisiana Division

Leslie H. Duncan
Vice President and Chief Information Ofﬁcer

Laurie M. Sherwood
Vice President, Corporate Development,
and Treasurer

Louis P. Gregory
Senior Vice President and
General Counsel

John A. Paris
President, Kentucky Division
President, Mid-States Division

Cindy A. Foor
Vice President, Corporate Communications

Wynn D. McGregor
Senior Vice President,
Human Resources

Gary L. Schlessman
President, Colorado-Kansas Division

Conrad E. Gruber
Vice President, Strategic Planning

2 8

2 9

b o a r d o f d i r e c t o r s

c o r p o r a t e i n f o r m a t i o n

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
Retired 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

3 0

Dr. Thomas C. Meredith
Commissioner of Mississippi Institutions
of Higher Learning
Jackson, Mississippi
Board member since 1995
Committees: Audit, Nominating and
Corporate Governance

Phillip E. Nichol
Retired 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

Stephen R. Springer
Retired Senior Vice President and
General Manager, Mid-Stream Division
The Williams Companies, Inc.
Syracuse, Indiana
Board member since 2005
Committee: Work Session/Annual Meeting

Charles K. Vaughan
Retired 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

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, or 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.

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

Ernst & Young LLP
2100 Ross Avenue, 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.

The Annual Meeting of Shareholders will be held in the Rio
Grande Ballroom at the Ambassador Hotel, 3100 I-40 West,
Amarillo, Texas 79102 on Wednesday, February 8, 2006, 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 securi-
ties 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.

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

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.

Securities analysts and investment managers, please contact:
Susan C. Kappes
Vice President, Investor Relations
(972) 855-3729 (972) 855-3040 (fax)
InvestorRelations@atmosenergy.com

You can view this Summary Annual Report, our Annual
Report on Form 10-K and other financial documents
for fiscal 2005 and previous years on our Web site at
www.atmosenergy.com.

If you are a shareholder who would like to receive our
Summary Annual Report and other company documents in
the future electronically, please sign up for electronic
distribution. It’s convenient and easy and will save costs in
producing and distributing these materials.

To receive these documents over the Internet next year,
please visit www.amstock.com and access your account to
give your consent. Please remember that accessing the
Summary Annual Report and other company documents
over the Internet may result in charges to you from your
Internet service provider or telephone company.

Atmos Energy Corporation P.O. Box 650205 Dallas, Texas 75265-0205 www.atmosenergy.com (972) 934-9227