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 7 S U M M A R Y A N N U A L R E P O R T A T M O S E N E R G Y C O R P O R A T I O N P . O . B O X 6 5 0 2 0 5 D A L L A S , T E X A S 7 5 2 6 5 - 0 2 0 5 A T M O S E N E R G Y . C O M C E L E B R A T I N G T H E P A S T B R I D G I N G T H E F U T U R E D r a w i n g u p o n o u r r i c h h i s t o r y, A t m o s E n e r g y i s p r e p a r i n g f o r t h e f u t u r e b y t a p p i n g n e w o p p o r t u n i t i e s i n b o t h t h e r e g u l a t e d a n d n o n r e g u l a t e d m a r ke t s. 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 7 S U M M A R Y A N N U A L R E P O R T B R I D G I N G T H E F U T U R E A decade ago, an expanding Atmos Energy Corporation merged with United Cities Gas. That transaction was what analysts call a company-maker because it increased our size in every key measure: customer count, service area and earnings growth. In 2004, after completing four more major acquisitions, the company acquired TXU Gas, virtually doubling in size. Today, Atmos Energy is the largest all-natural-gas distribution company in the United States. It’s a new century for natural gas, but it’s our old-fashioned hard work and commitment to customers that continue to define Atmos Energy. As our company bridges from its past to its future, three key developments are shaping our success: 1. the rise of natural gas as America’s most valuable energy resource, 2. improvements in rates and rate design for our regulated distribution operations and 3. new contributions from our complementary nonregulated operations. F I N A N C I A L H I G H L I G H T S Year Ended September 30 Dollars in thousands, except per share data 2007 2006 Change $ 5,898,431 $ 1,250,082 $ 6,152,363 $ 1,216,570 $ $ 73,283 34,590 45,769 14,850 168,492 $ 5,896,917 $ 4,092,069 1.92 $ 1.28 $ 22.01 $ 427,869 505,493 370,668 2,879 $ $ 53,002 26,547 58,566 9,622 147,737 $ 5,719,547 $ 3,828,460 1.82 $ 1.26 $ 20.16 $ 393,995 410,505 283,962 2,527 100% 87% 3,187,127 3,181,199 8.8% 8.9% 46.3% 22,829 87,745 39.1% 24,690 81,390 (4.1)% 2.8% 38.3% 30.3% (21.9)% 54.3% 14.0% 3.1% 6.9% 5.5% 1.6% 9.2% 8.6% 23.1% 30.5% 13.9% 14.9% 0.2% (1.1)% 18.4% (7.5)% 7.8% 3 Operating revenues Gross profit Natural gas distribution net income Regulated transmission and storage net income Natural gas marketing net income Pipeline, storage and other 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 natural gas distribution throughput (MMcf) Consolidated regulated transmission and storage transportation volumes (MMcf) Consolidated natural gas marketing 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) * Total capitalization represents the sum of shareholders’ equity and long-term debt, excluding current maturities. Summary Annual Report 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 state- ments 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, 2007, by calling Investor Relations at 972-855-3729 between 8 a.m. and 5 p.m. Central time. Our Annual Report on Form 10-K also is available on Atmos Energy’s Web site at www.atmosenergy.com. Additional investor information is presented on pages 31 and 32 of this report. A 3,550-horsepower compressor, one of two, at our new Ponder, Texas, compressor station helps ensure reliable natural gas deliveries for our customers in North Texas. B R I D G I N G T H E F U T U R E U n i t e d b y O u r V i s i o n D e a r F e l l o w S h a r e h o l d e r : 4 Atmos Energy was founded by visionaries who saw limitless possibilities in providing energy to homes and businesses. As the natural gas industry has evolved, Atmos Energy has grown and prospered. Today, our commitment to our customers and shareholders is apparent in everything we do— from innovative ratemaking to technologies that improve perform- ance to investments for future growth. As we begin a second century, Atmos Energy is prepared to play an Senior Management Team Robert W. Best (seated) Chairman, President and Chief Executive Officer Left to right: Wynn D. McGregor Senior Vice President, Human Resources J. Patrick Reddy Senior Vice President and Chief Financial Officer Kim R. Cocklin Senior Vice President, Regulated Operations Louis P. Gregory Senior Vice President and General Counsel Mark H. Johnson Senior Vice President, Nonregulated Operations expanded role as the nation’s largest all-natural-gas distribution company. We are delivering, transporting, marketing, gathering and storing America’s most valuable fuel to create a better way of life for all. We are dedicated to producing stable, sustained and successful operating and financial results. For the past seven years, we have achieved our stated goal of increasing earnings per share, on average, by 4 percent to 6 percent. Earnings per diluted share in fiscal 2007 went up 5.5 percent, or 10 cents, to $1.92. The company paid cash dividends in fiscal 2007 of $1.28 per share. In November 2007, our board of directors again raised the annual dividend by 2 cents to an indicated rate of $1.30 per share. Taking into account our mergers and acquisitions, Atmos Energy has paid higher consecutive annual dividends every year since becoming a separate company in 1983. S T R AT E G I C S T R E N G T H Our business strategy combines three goals: to expand by making prudent acquisitions, to maximize earnings from our core regulated operations and to grow our complementary nonregulated operations. Besides yielding more stable earnings, our strategy is providing more opportunities for growth. 4 5 1 $ . 8 5 1 $ . 2 7 1 $ . 2 8 1 $ . 2 9 1 $ . 03 04 05 06 07 $2.00 1.60 1.20 .80 .40 0 EARNINGS REVIEW Net income per diluted share As we begin a second century, Atmos Energy is prepared to play an expanded role as the nation’s largest all-natural-gas distribution company. Atmos Energy was founded by visionaries who saw limitless possibilities in delivering natural gas. As the natural gas distribution business has evolved, Atmos Energy has In fiscal 2007, our regulated operations— which comprise our six natural gas distribution divisions become a national leader as a and our Texas intrastate pipeline and storage division—contributed 64 percent of consolidated net result of its commitment to income. Results were boosted by normal weather, increased revenues from rate filings and enhanced its shareholders, customers rate design, and higher pipeline throughput. and employees. B R I D G I N G T H E F U T U R E To better reflect how Atmos Energy operates, we realigned our organization and began reporting our results of operations under the following segments, effective September 1, 2007. >> Natural gas distribution segment, formerly the utility segment, includes our regulated natural gas distribution and related sales operations. >> Regulated transmission and storage segment includes the regulated natural gas pipeline and storage operations of our Atmos Pipeline–Texas Division; these operations previously were included in the former pipeline and storage segment. >> Natural gas marketing segment remains unchanged and includes our nonregulated natural gas marketing and gas management services. >> Pipeline, storage and other segment comprises primarily our nonregulated natural gas trans- mission and storage services, which formerly were in the pipeline and storage segment. Our nonregulated natural gas marketing, pipeline and storage operations contributed 36 percent of fiscal 2007 net income. Earnings from our gas marketing operations went down, year over year, because of lower unit margins, but earnings from our nonregulated pipeline and storage operations increased significantly. This strategic symmetry is increasingly important to our success. Most of our growth for the past 20 years has come from our disciplined approach to acquiring and integrating utility properties. Although we remain interested in future acquisition opportunities, we are now focusing on opportunities to invest in our existing regulated and nonregulated operations. REGULATED 43.5% Natural Gas Distribution 20.5% Regulated Transmission and Storage NONREGULATED 27.2% Natural Gas Marketing 8.8% Pipeline, Storage and Other FISCAL 2007 NET INCOME BY SEGMENT Contributions from regulated and nonregulated operations Above all, we are dedicated to ensuring the continued safety, reliability and efficiency of our operations. B R I D G I N G T H E F U T U R E Although we remain interested in future acquisition opportunities, we are now focusing on opportunities to invest in our existing regulated and nonregulated operations. A C H I E V E M E N T S I N R E G U L AT E D O P E R AT I O N S the Barnett Shale development, is providing more opportunity We achieved many improvements in our regulated operations to transport increasing volumes of gas production to market. during 2007. Net income from natural gas distribution grew approximately $20 million from a year ago to about $73 million, G R O W T H I N N O N R E G U L AT E D O P E R AT I O N S and total distribution throughput increased by 9 percent. Our nonregulated operations made impressive gains in natural Rate-design changes for our two largest distribution gas marketing volumes and in attracting new customers. Gas divisions in Texas and Louisiana helped stabilize and improve our sales volumes by Atmos Energy Marketing went up 31 percent recovery of authorized margins. We estimate we now have to 371 billion cubic feet. However, its contribution to 2007 weather normalization adjustments or similar rate designs to net income went down 22 percent, year over year, to about $46 stabilize margin recovery in about 97 percent of our markets. million. Declining natural gas price volatility, compared with In Missouri, we received approval to stabilize our revenues the extreme price volatility in 2006, reduced unit margins in from the effects of weather, conservation and declining use by these operations. 7 implementing “revenue decoupling.” This rate design raises our Contributions to net income from our nonregulated monthly service charge to pay operating expenses and decouples pipeline, storage and other segment increased by 54 percent to our revenues from volumetric charges assessed on customers’ about $15 million. Results benefited from asset-optimization usage. We are asking for full decoupling in all our rate filings activities involving gas storage and from increased pipeline and, in return, are offering to fund energy-efficiency programs transportation revenues. and to educate our customers about conservation measures. Our nonregulated operations are evaluating a number of We are proud of our efforts to minimize our bad-debt attractive growth projects, such as natural gas gathering expense. Since 2004, we have kept our expense for uncollectible systems, gas storage facilities and additional producer services. customer bills at about 0.6 percent of distribution revenues or Our Atmos Pipeline and Storage subsidiary expects to invest less, compared to an industry average of 1.9 percent. up to $33 million during fiscal 2008 in these projects through Above all, we are dedicated to ensuring the continued a combination of acquisitions, partnerships and “greenfield” safety, reliability and efficiency of our operations. In fiscal developments. 2007, we continued to invest in pipeline and other capital One of these projects now under construction is our Park improvements for our distribution system. We also launched City low-pressure gas gathering system in Edmonson County, an Advanced Metering Infrastructure pilot project. It will help Kentucky. It will encompass 23 miles of gathering lines to move determine the feasibility of installing automated metering production from 47 gas wells to a joint-venture nitrogen devices to read our meters as well as to provide customers treatment plant. When completed in early 2008, the project is with real-time consumption information. expected to increase the natural gas output from this area Earnings of our regulated transmission and storage opera- where production historically has been constrained. tions went up $8 million above those of fiscal 2006 to $35 mil- At year-end, we wrote off about $3 million of capitalized lion; the segment contributed 21 percent of consolidated net costs for an eastern Kentucky natural gas gathering project that income. Our regulated pipeline operations benefited from a 23 we had discussed in last year’s report. Although initial percent increase in throughput due to cooler weather and incre- indications about this project were highly favorable, natural gas mental capacity added by several expansion projects, including producers in the region were indecisive about dedicating our North Side Loop project completed in 2006. The unique volumes to this system. Even after we reduced the project’s scale, location of our Texas pipeline system, which virtually overlays the economics remained insufficient for us to proceed. B R I D G I N G T H E F U T U R E Our future looks bright; however, it rests not on our current assets or future projects. Our future is in the people who keep Atmos Energy financially strong and efficient. 8 F I N A N C I A L I M P R O V E M E N T S O U T L O O K F O R 2 0 0 8 Our overall financial condition improved significantly in fiscal We expect 2008 to be a challenging year. One of our highest 2007. We took advantage of a robust stock market to sell 6.3 priorities is to obtain adequate rate levels for all our distribution million shares of common stock in December 2006 in a public divisions, particularly our Mid-Tex Division in Texas. It is our offering and then used the net proceeds to reduce our short- largest division and serves almost half of our regulated term debt. That sale diluted earnings by approximately 5 cents distribution customers. per share but significantly strengthened our balance sheet. The division received a $4.8 million revenue increase in In June 2007, we made a public offering of $250 million fiscal 2007. However, with a current rate of return that is less of senior notes. We used the net proceeds plus available cash to than 6 percent a year, it is significantly underearning on its redeem $300 million of floating-rate senior notes in July to assets. Therefore, we have filed another request for $52 million further strengthen our balance sheet. in additional annual revenues. Because of the statutory length of At September 30, 2007, our debt-to-capitalization ratio stood time to resolve rate proceedings in Texas, we expect the at 53.7 percent—a 7.2 percentage-point improvement over a outcome of this case will not materially affect our 2008 results. year ago. We have solid investment-grade credit ratings and We do, however, expect improved results in our distribution ample liquidity from about $1.5 billion in commercial paper and operations as a result of $35 million of other revenue increases bank credit facilities. approved in 2007 and those we will seek in 2008. We also B R I D G I N G T H E F U T U R E expect continued strong results from our regulated intrastate Many of these ventures are extensions into closely related pipeline, Atmos Pipeline–Texas, due to the drilling boom in the operating areas, such as gas gathering systems, which have Barnett Shale and other gas basins in Texas. common characteristics with our pipeline operations. These In our nonregulated gas marketing business, we expect ventures can take advantage of our existing management and earnings in 2008 to be lower than in 2007. Volatile gas prices after technical skills and financial strength. In addition, they can Hurricanes Katrina and Rita helped our gas marketing operations add new services to expand our customer base. maximize margins and increase sales volumes in fiscal 2006 and We have strengthened our balance sheet by reducing our into 2007. With natural gas production in the Gulf of Mexico debt-to-capitalization ratio to below 55 percent. This has been now back to normal, spreads between what we pay for gas and our consistent practice after making acquisitions. Today we are what we sell it for are less. Therefore, the margins in our gas in an excellent position to acquire properties or invest in marketing business are likely to return to more historical levels. internal projects, regulated and nonregulated. Our nonregulated operations are continuing to add major new In only a decade’s time, we have grown to become a $6 billion customers. Our dedication to serving our customers over the company in both revenues and assets. Our board of directors years is helping us retain a high proportion of them year after has carefully guided our growth through the years and has year in a business based on competitive commodity pricing. prepared us for future opportunities. I thank them for their con- In addition, we are offering customers numerous services stant support and wise counsel that have brought us to this point. for asset optimization using our nonregulated pipeline and In November 2007, Richard W. Douglas joined our board storage operations. In these ways, we provide added value in of directors. Mr. Douglas is executive vice president and a our relationships with our nonregulated customers. member of the executive committee of The Staubach Company, a 9 For fiscal 2008, we estimate earnings per diluted share will global real estate advisory firm. He brings a wealth of expertise range from $1.95 to $2.05*. We expect our dividend to continue in commercial real estate, business investments, economic increasing annually, with a dividend payout ratio at about 65 development and municipal government. percent, which is consistent with our peers in the natural gas Our future looks bright; however, it rests not on our current utility industry. assets or future projects. Our future is in the people who keep Our capital investments in fiscal 2007 totaled $392 million. Atmos Energy financially strong and efficient. From our founding For fiscal 2008, we expect to invest between $445 million and a century ago, we have benefited from the loyalty of our $465 million. About 70 percent of our invested capital will go for shareholders and investors. Equally, our employees have exhibited maintenance projects and the other 30 percent for growth a deep sense of responsibility to serve the needs of both our projects, such as new pipeline expansion, gas gathering systems, customers and investors. Together, this immutable bond marketing operations or storage facilities. between capital and labor has created our success and it provides the bridge to our future. B R I D G I N G TO O U R F U T U R E Fiscal 2007 was a pivotal year for Atmos Energy. Not only did we maintain our pace of earnings growth in the face of some strong headwinds, but we also adjusted our course toward new opportunities. We’re now pursuing a number of ventures that Robert W. Best could deliver significant long-term benefits. Chairman, President and Chief Executive Officer November 27, 2007 * Our estimated earnings per share for fiscal 2008 are based on assumptions that include: less volatility in natural gas prices affecting our natural gas marketing seg- ment, successful rate cases and collection efforts, normal weather, bad-debt expense not exceeding $20 million, average annual short-term interest at 6.5%, average cost of natural gas ranging from $7.95 to $10.00 per thousand cubic feet (Mcf), and no mate- rial acquisitions. B R I D G I N G T H E F U T U R E T h e C e n t u r y o f N a t u r a l G a s Changing Times. In the latter years of the 20th century, people began to think of natural gas as a holdover from the past. For decades, from turn-of-the-century gaslights to 1960s home appliances, natural gas had been widely used. But by the 1970s, the energy of the future seemed to be electricity, with home builders touting the all-electric home. Today, all that has changed. With escalating prices of electricity, a renewed desire to reduce dependence on foreign oil and America’s search for cleaner energy, natural gas has taken on new importance as a smart, responsible energy source. 10 A N A M E R I C A N E N E R G Y S O U R C E 82-yearsupply The United States today has an estimated 82-year supply of natural gas, based on current exploration technologies, known gas reserves and present rates of production. Natural gas is America’s most valuable fuel, yielding more energy per unit than other fuels—with far less effect on the environ- ment. For all practical purposes, natural gas comes ready to use, requiring little processing. It’s also readily available, thanks to the gas industry’s highly reliable underground pipeline network. More than 2.2 million miles of pipelines deliver natural gas to 68 million American homes and businesses. Natural gas for new housing developments helps lower consumers’ energy bills as well as carbon dioxide emissions that contribute to global warming. Energy-efficient natural gas appliances, such as these Rinnai tankless gas water heaters, net an energy savings of 35 percent and assure that this family will never run out of hot water. Atmos Energy’s Gas Control Center in Franklin, Tennessee, makes decisions about natural gas supplies for five of our six natural gas distribution divisions. The center monitors the supply and demand on our distribution systems around the clock to ensure reliability and to keep gas costs down. A G R E E N E R F U T U R E warming. It’s so beneficial that a new Natural gas is essential for controlling the carbon dioxide emissions implicated in global home with natural gas appliances, compared to an all-electric use of natural gas. H2 home, cuts a home’s carbon footprint in half. World leaders are proposing to reduce CO2 emissions back to 1990 levels by 2020. Yet, no combination of conservation and alternative energy sources can lower greenhouse gases without the increased primary source of hydrogen, H2. Natural gas will be the feedstock of a future hydrogen economy thanks to the methane molecule, CH4, the Atmos Energy originated in Amarillo, Texas, at the turn of the last century. Today we are the largest all-natural-gas distribution company in the country, with regulated operations, shown in yellow, in 12 states and nonregulated operations in 22 states. B R I D G I N G T H E F U T U R E Natural gas homes are clean homes. Using efficient natural gas appliances produces about half as much carbon dioxide as a comparably sized home with all electrical appliances. A M U C H M O R E E F F I C I E N T F U E L energy losses at the power plant, along with losses in distribution lines and appliances. With and the conversion into electricity results in large When you use natural gas, you receive more than 90 percent of the total energy that came from the source. But, when you use electricity, you get only 27 percent of the total energy. That’s because generating electricity requires burning a fuel, often coal, natural gas, you get three times more energy. 3x=E 12 H O W M U C H E N E R G Y A C T UA L LY R E A C H E S T H E C U S TO M E R ? Electricity Natural Gas 27% Distribution 90% Energy Delivered to Customer 27% Energy Delivered to Customer 29% Conversion 88% Extraction, Processing & Transportation 90% Distribution NONE Conversion 100% MMBtu Source Energy 100% MMBtu Source Energy 92% Extraction, Processing & Transportation Source: American Gas Association B R I D G I N G T H E F U T U R E In this 6 million gallon double-walled tank, liquefied natural gas is stored at a company facility to provide up to 30 million cubic feet a day of fuel for our customers when demand rises. LNG is expected to provide a growing share of the U.S. natural gas supply. Atmos Energy’s gas marketing and nonregulated pipeline and storage operations are well positioned to support future LNG supplies for the United States. We will be ready to assist inter- national producers to reach domestic markets and to help utilities, municipalities and industries procure natural gas efficiently. G E N E R AT I N G N E W D E M A N D Not only have smart consumers and companies caught on to natural gas, but big power producers have, too. The power industry is helping meet the needs for more electricity and cleaner air standards by installing new natural-gas-fueled generating units. Power generation is the second-largest consumer of natural gas in the United States today. Those needs tomorrow will create a 20 percent increase in demand for natural gas by 2030. The world also is waking up to the benefits of natural gas. More supplies of natural gas are being shipped around the globe as liquefied natural gas (LNG) in special ocean-going tankers. New long-distance pipelines also are being built across North America, Europe and Asia to meet future demands. Major international oil companies are investing billions of dollars to develop natural gas as a globally traded resource. Researchers are now seeking to develop hydrogen power for widespread use, and experts see natural gas potentially displacing oil in the 21st century as the world’s primary fuel. The key component of natural gas— the methane molecule — would provide the source for a future hydrogen economy. B R I D G I N G T H E F U T U R E R e g u l a t e d O p e r a t i o n s Distributing Natural Gas in 1,600 Communities. Our roots and our passion for customer service spring from our community involvement. Our distribution business delivers natural gas to 3.2 million customers in more than 1,600 cities, big and small, that we serve. To us, our customers are much more than just consumers; they’re our neighbors. We share the same values, work for the same causes and raise our children together. At Atmos Energy, we are dedicated to being not only a responsible supplier, but also a valuable contributor to the communities we call home. 14 in1,600communities We take pride in our reputation as a good citizen and good neighbor. At South Elementary School in Jackson, Missouri, Manager of Public Affairs Steve Green talks with fourth-grade students about saving energy in their homes. By educating these future consumers as part of our revenue decoupling plan in Missouri, we are encouraging long-term energy efficiency and conservation. W E D O N ’ T S E T T H E P R I C E Our natural gas distribution business seeks fairness for both our regulated customers and keep our prices current. Our rates must pay for needed expansion, cover operating our shareholders. Because we don’t set our own prices, we must file revenue requests to expenses to ensure safe and reliable gas-delivery service and provide our investors Y L K N A R preserve our financial condition and to attract capital for future growth. Periodic rate reviews by regulators are necessary to keep our rates refreshed and our operations healthy. F adequate returns. Our ongoing goal is to deliver natural gas to customers as economically as possible. Yet, like any business, we must be allowed to earn sufficient profits to G N I K A E P S Atmos Energy has supported programs to help our customers in Louisiana rebuild their homes and lives after the disastrous Hurricanes Katrina and Rita in 2005. W E D O N ’ T M A R K U P T H E P R I C E O F N AT U R A L G A S Our natural gas distribution divisions are seeking an When natural gas prices are high, we feel it, too. We buy improved rate design known as “margin decoupling.” Under more than 400 billion cubic feet a year of natural gas for our this rate structure, we make no profit from the volumes of regulated distribution operations. We charge customers natural gas that our customers use. However, we are allowed the same amount we pay without any markup. to charge a higher basic service fee that helps insulate our About two-thirds of our consolidated earnings come from revenues from changes in customers’ use caused by weather, delivering natural gas, not from selling it. Therefore, controlling conservation and more-efficient appliances. In return, we’re the volatility of natural gas prices is vitally important to us able to provide more incentives for our customers to cut and to our customers. their natural gas consumption without hurting our business. B R I D G I N G T H E F U T U R E F I N D I N G B E T T E R WAY S TO S E R V E We are always seeking increased efficiencies, conservation opportunities and ways to improve community well-being. In Missouri, where we were one of the first natural gas distributors to adopt revenue decoupling, we’re underwriting programs to promote energy conservation. We’re offering our residential and commercial customers attractive rebates for replacing old gas furnaces and water heaters with new, high-efficiency equipment. We’re also funding programs to weatherize homes of many of our low- income customers since heating costs require a much larger proportion of their household income. A d d i n g i n s u l a t i o n C a u l k i n g w i n d o w s Without compromising safety or lowering service, we’re continually adding efficiencies in our own operations, as well. We have achieved an operation and maintenance expense per customer ratio that is half that of our industry peers. As an industry leader in adopting technologies, we’ve been able to achieve a ratio of customers served per employee that’s more than 30 percent higher than our peers’ average. With our new Advanced Metering Infrastructure project, for example, we’re now testing the use of radio transmitters in gas meters to automate R e p l a c i n g f u r n a c e s monthly meter reading and help keep our performance measures at industry-leading levels. 16 We are now testing new technologies to read our gas meters remotely using radio signals to increase efficiency and to serve our customers better. In March 2007, after a deadly F3 tornado tore through Holly, Colorado, killing a young mother and destroying about a fifth of this farming community, Atmos Energy teams from our Colorado- Kansas Division immediately responded to restore gas distribution service. Other employees from our Amarillo Customer Support Center brought cooking equipment and food to feed hundreds of families, emergency workers and public safety officers over a three-day period. As our technicians worked, they gave out bottled water to citizens, and we contributed extra food and water for the Red Cross to distribute. To safeguard the public, we conduct extensive pipeline integrity-management programs to help ensure the safety and reliability of our pipeline system. Near Decatur, Texas, an Atmos Energy specialist uses ultrasonic testing and magnetic- particle testing to check pipe conditions of an excavated 20-inch mainline. B R I D G I N G T H E F U T U R E We are investing in new pipeline and compression equipment for our Atmos Pipeline–Texas network to support the growing needs of our regulated customers and to transport natural gas to market for gas producers. One of the most active natural gas exploratory areas in the country today is the Barnett Shale in Texas. Much of this new gas production will eventually flow to market through Atmos Pipeline–Texas’ intrastate network. this is a fair bargain in order to meet critical social needs. Along with our natural gas distribution operations, we 17 own a regulated transmission and storage business in Texas. Our Atmos Pipeline–Texas Division transports natural gas for our Mid-Texas Division and ships gas from the major producing basins in the state. Our intrastate pipeline is one of the largest in Texas, with connections to interstate pipelines at three strategic pipeline hubs in West Texas, East Texas and the Houston area. It also owns five natural gas storage facilities that, As a regulated distribution business, we are responsible for like the pipeline, ensure reliable deliveries in the winter to serving the entire community under our franchise agreements. our regulated customers and help shippers when storage We realize that it’s difficult for many people on limited capacity is available at other times of the year. or fixed incomes to pay the increasing costs of energy. That’s Our intrastate pipeline is benefiting from the drilling why we support energy assistance programs in every state boom in the Barnett Shale, one of the most active natural gas we serve. We make matching contributions to assistance basins in the country. To enhance our distribution operations programs, offer special payment plans and ask our customers and increase our pipeline capacity, we have invested in major to donate a little extra to their local assistance program to expansion projects since acquiring the system in late 2004. help the less-fortunate in their communities. As a good These include a 45-mile pipeline loop on the north side of the steward of our shareholders’ assets, we also seek to recover Dallas-Fort Worth Metroplex, two large compressor stations the gas-cost portion of bills that are in arrears. We believe and other improvements. B R I D G I N G T H E F U T U R E N o n r e g u l a t e d O p e r a t i o n s Growing and Profitable. Complementing our regulated operations are our growing nonregulated operations. This sizable segment of our company markets natural gas to approximately 1,000 municipal gas systems and industrial customers, operates or manages natural gas pipelines and storage facilities outside Texas and is expanding into natural gas gathering systems and market services for natural gas producers. in22states This segment started through an equity investment by United 18 our regulated operations—have grown rapidly in scale and scope. Today they operate in 22 states and contribute about one-third of our consolidated net income. Atmos Energy Marketing has been growing at more than 12 percent each year by helping industries and communities Cities Gas, which Atmos Energy acquired in 1997. In 2001, we procure reliable, competitively priced supplies of natural acquired the remaining 55 percent interest that we did not gas. In a business defined mainly by low-cost commodity pricing, already own in Woodward Marketing, providing an excellent our natural gas marketing operations have built an industry- foundation on which to build. Since then, our nonregulated leading reputation for customer service. That has helped us operations—which overlay many of the geographic regions of retain customers year after year and attract new ones. GAF Materials Corporation, which makes roofing and building products, receives a reliable supply of natural gas at its plant in Dallas, Texas, provided by Atmos Energy Marketing. Twenty-three miles of natural gas gathering lines will be installed in trenches for a new gas gathering system we are building in a gas field near Bowling Green, Kentucky. Gas gathering systems are an area of expansion for our nonregulated operations. B R I D G I N G T H E F U T U R E We expect gas storage facilities near the Gulf of Mexico will become increasingly vital to America’s energy needs. As LNG tankers transport more supplies of gas to our shores, LNG suppliers will need to move large volumes of gas to inland markets. G A S G AT H E R I N G : A N E W A R E A F O R E X PA N S I O N gas producers in the area. When our gathering system is We recently entered the natural gas gathering business. completed in 2008, producers, utilities and individual Upstream gathering systems collect gas from wells in a customers will have a more reliable, profitable flow of gas producing field and move it to a processing and metering from the area. We expect this gathering project could facility. There, the gas can be compressed and transported to spur more drilling and production in the region because customers. Gas gathering systems employ many of the future production will be more marketable. 20 same management and financial strengths that characterize our other lines of business. In many producing areas, major pipelines have been unwilling to add the capacity to serve all producers, forcing them to shut in their wells for much of the year. We believe our success in this business can come from developing beneficial relationships with gas producers by offering them valuable additional services from our natural gas marketing and storage operations. We also expect that operating gathering systems will give our gas marketing operations options to buy large volumes of natural gas at better prices. In Kentucky, we are constructing a low-pressure gathering system near Bowling Green. The area historically has had gas gathering and trans- portation constraints that have burdened N AT U R A L G A S G AT H E R I N G S Y S T E M Treatment, Processing, Compression and Measurement Gas Producing Wells Delivery Point Interstate Pipeline Receipt Point Gas Producing Wells Gas Producing Wells Atmos Energy’s new gas gathering system in Edmonson County, Kentucky, will soon bring more natural gas to consumers and will benefit the area with wellhead sales revenues, severance taxes, property taxes, royalty-owner revenues and potential new natural gas exploration and production. B R I D G I N G T H E F U T U R E A F U T U R E I N S TO R A G E : H E L P I N G M E E T A M E R I C A ’ S D E M A N D F O R E N E R G Y In another new area of our nonregulated business, we are evaluating projects to buy or build natural gas storage facilities. We’re focusing mainly on salt-dome storage, which allows natural gas to be injected and withdrawn from giant underground caverns a number of times during the year. Traditional gas storage fields are limited in their number of “turns” in the injection-extraction cycle because of reservoir mechanics. Being able to buy and store natural gas when prices are lower and sell when demand goes up would allow us to meet the needs of many more large customers. We expect gas storage facilities near the Gulf of Mexico will become increasingly vital to America’s energy needs. As LNG tankers transport more supplies of gas to our shores, LNG suppliers will need to move large volumes of gas to inland markets. Atmos Energy Marketing already has a significant amount of gas-takeaway transportation capacity near the Gulf—giving us a major competitive advantage. Marketing LNG supplies from our own storage would further expand our nonregulated opportunities. S A LT- D O M E N AT U R A L G A S S TO R A G E 21 Salt-dome natural gas storage is built by leaching salt deposits from deep under the ground to create giant storage caverns. Salt dome projects will be especially valuable as storage buffers for natural gas delivered at LNG tanker terminals. Natural Gas Storage Caverns Salt Dome Formation A T M O S E N E R G Y A T A G L A N C E Year Ended September 30 Meters in service Residential Commercial Industrial Agricultural Public authority and other Total meters Heating degree days Actual (weighted average) Percent of normal Natural gas distribution sales volumes (MMcf) Residential Commercial Industrial Agricultural Public authority and other Total 22 Natural gas distribution transportation volumes (MMcf) Total natural gas distribution throughput (MMcf) Intersegment activity (MMcf) Consolidated natural gas distribution throughput (MMcf) Consolidated regulated transmission and storage transportation volumes (MMcf) Consolidated natural gas marketing throughput (MMcf) Operating revenues (000s) Natural gas distribution sales revenues Residential Commercial Industrial Agricultural Public authority and other Total gas distribution sales revenues Transportation revenues Other gas revenues Total natural gas distribution revenues Regulated transmission and storage revenues Natural gas marketing revenues Pipeline, storage and other revenues Total operating revenues (000s) Other statistics Gross plant (000s) Net plant (000s) Miles of pipe Employees 2007 2006 2,893,543 272,081 2,339 10,991 8,173 3,187,127 2,886,042 275,577 2,661 8,714 8,205 3,181,199 2,879 100% 2,527 87% 166,612 95,514 22,914 3,691 8,596 297,327 135,109 432,436 (4,567) 427,869 505,493 370,668 144,780 87,006 26,161 5,629 8,457 272,033 126,960 398,993 (4,998) 393,995 410,505 283,962 $ 1,982,801 970,949 195,060 28,023 86,275 3,263,108 59,195 35,844 3,358,147 84,344 2,432,280 23,660 $ 5,898,431 $ 2,068,736 1,061,783 276,186 40,664 103,936 3,551,305 61,475 37,071 3,649,851 69,582 2,418,856 14,074 $ 6,152,363 $ 5,396,070 $ 3,836,836 82,725 4,653 $ 5,101,308 $ 3,629,156 81,996 4,632 C O N D E N S E D C O N S O L I D A T E D B A L A N C E S H E E T S September 30 Dollars in thousands, except share data 2007 2006 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 $16,160 in 2007 and $13,686 in 2006 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: 2007 – 89,326,537 shares, 2006 – 81,739,516 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 $ 5,326,621 69,449 5,396,070 1,559,234 3,836,836 $ 5,026,478 74,830 5,101,308 1,472,152 3,629,156 60,725 — 75,815 35,647 380,133 515,128 112,909 1,068,895 737,692 253,494 $ 5,896,917 374,629 461,502 169,952 1,117,545 738,521 234,325 $ 5,719,547 $ 447 1,700,378 (16,198) 281,127 1,965,754 2,126,315 4,092,069 355,255 409,993 150,599 3,831 919,678 370,569 271,059 243,542 $ 5,896,917 $ 409 1,467,240 (43,850) 224,299 1,648,098 2,180,362 3,828,460 345,108 388,451 382,416 3,186 1,119,161 306,172 261,376 204,378 $ 5,719,547 23 C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E Year Ended September 30 Dollars in thousands, except per share data 2007 2006 2005 Operating revenues Natural gas distribution segment Regulated transmission and storage segment Natural gas marketing segment Pipeline, storage and other segment Intersegment eliminations Purchased gas cost Natural gas distribution segment Regulated transmission and storage segment Natural gas marketing segment Pipeline, storage and other segment Intersegment eliminations 24 Gross profit Operating expenses Operation and maintenance Depreciation and amortization Taxes, other than income Impairment of long-lived assets Total operating expenses Operating income Miscellaneous income, net Interest charges Income before income taxes Income tax expense Net income Per share data Basic net income per share Diluted net income per share Weighted average shares outstanding: Basic Diluted $ 3,358,765 163,229 3,151,330 33,400 (808,293) 5,898,431 $ 3,650,591 141,133 3,156,524 25,574 (821,459) 6,152,363 $ 3,103,140 142,952 2,106,278 15,639 (406,136) 4,961,873 2,406,081 — 3,047,019 792 (805,543) 4,648,349 1,250,082 2,725,534 — 3,025,897 1,080 (816,718) 4,935,793 1,216,570 2,195,774 4,918 2,044,305 1,893 (402,654) 3,844,236 1,117,637 463,373 198,863 182,866 6,344 851,446 398,636 9,184 145,236 262,584 94,092 168,492 1.94 1.92 86,975 87,745 $ $ $ 433,418 185,596 191,993 22,947 833,954 382,616 881 146,607 236,890 89,153 147,737 1.83 1.82 80,731 81,390 $ $ $ 416,281 178,005 174,696 — 768,982 348,655 2,021 132,658 218,018 82,233 135,785 1.73 1.72 78,508 79,012 $ $ $ C O N D E N S E D C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S Year Ended September 30 Dollars in thousands Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Impairment of long-lived assets Depreciation and amortization: Charged to depreciation and amortization Charged to other accounts Deferred income taxes Stock-based compensation Debt financing costs 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 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 Repayment of long-term debt Cash dividends paid Issuance of common stock Net proceeds from equity offering Net cash provided by (used in) 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 2007 2006 2005 $ 168,492 $ 147,737 $ 135,785 6,344 22,947 — 198,863 192 62,121 11,934 10,852 (1,516) 89,813 547,095 (392,435) — (10,436) (402,871) (213,242) 247,217 4,750 (303,185) (111,664) 24,897 191,913 (159,314) (15,090) 75,815 60,725 $ 185,596 371 86,178 10,234 11,117 (2,871) (149,860) 311,449 178,005 791 12,669 3,901 9,258 (1,637) 48,172 386,944 (425,324) — (5,767) (431,091) (333,183) (1,916,696) (2,131) (2,252,010) 25 237,607 — — (3,264) (102,275) 23,273 — 155,341 35,699 40,116 75,815 $ 144,809 1,385,847 (43,770) (103,425) (98,978) 37,183 381,584 1,703,250 (161,816) 201,932 40,116 $ 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 O N C O N D E N S E D F I N A N C I A L S T A T E M E N T S The Board of Directors Atmos Energy Corporation We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consoli- dated balance sheets of Atmos Energy Corporation at September 30, 2007 and 2006, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2007 (not presented herein); and in our report dated November 27, 2007, we expressed an unquali- fied 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. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Atmos Energy Corporation’s internal control over financial reporting as of September 30, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 27, 2007 (not presented separately herein) expressed an unqualified opinion thereon. Dallas, Texas November 27, 2007 26 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 3 – 2 0 0 7 Year Ended September 30 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 distribution gas sales volumes (MMcf) Consolidated distribution gas transportation volumes (MMcf) Consolidated distribution throughput (MMcf) Consolidated transmission and storage transportation volumes (MMcf) Consolidated natural gas marketing throughput (MMcf) Meters in service at end of year Heating degree days* Degree days as a percentage of normal Gas distribution average cost of gas per Mcf sold Gas distribution average transportation fee per Mcf Statistics Return on average shareholders’ equity Number of employees Net gas distribution plant per meter Gas distribution operation and maintenance expense per meter Meters per employee – gas distribution Times interest earned before income taxes *Heating degree days are adjusted for service areas with weather-normalized operations. 2007 2006 2005 2004 2003 $ 392,435 3,836,836 149,217 5,896,917 1,965,754 2,126,315 4,092,069 $ 425,324 3,629,156 (1,616) 5,719,547 1,648,098 2,180,362 3,828,460 $ 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 $ 5,898,431 1,250,082 168,492 1.92 $ 6,152,363 1,216,570 147,737 1.82 $ 4,961,873 1,117,637 135,785 1.72 $ 2,920,037 562,191 86,227 1.58 $ 2,799,916 534,976 71,688 1.54 $ $ $ $ $ $ $ $ $ 89,327 87,745 1.28 22,829 33.11 26.47 28.32 22.01 14.75 1.29 4.5% $ $ $ $ $ 81,740 81,390 1.26 24,690 29.11 25.79 28.55 20.16 15.69 1.42 4.4% $ $ $ $ $ 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% 27 297,327 272,033 296,283 173,219 184,512 130,542 427,869 121,962 393,995 114,851 411,134 72,814 246,033 63,453 247,965 505,493 410,505 373,879 — — 370,668 3,187,127 2,879 283,962 3,181,199 2,527 238,097 3,157,840 2,587 222,572 1,679,136 3,271 225,961 1,672,798 3,473 100% 8.09 .44 8.8% 4,653 1,020 119 713 2.75 $ $ $ $ 87% 10.02 .49 8.9% 4,632 969 112 723 2.55 $ $ $ $ 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 A T M O S E N E R G Y O F F I C E R S Senior Management Team Regulated Divisions 28 Robert W. Best Chairman, President and Chief Executive Officer J. Patrick Reddy Senior Vice President and Chief Financial Officer Kim R. Cocklin Senior Vice President, Regulated Operations Mark H. Johnson Senior Vice President, Nonregulated Operations Louis P. Gregory Senior Vice President and General Counsel Wynn D. McGregor Senior Vice President, Human Resources J. Kevin Akers President, Kentucky/Mid-States Division Richard A. Erskine President, Atmos Pipeline–Texas Division David E. Gates President, Mississippi Division Gary W. Gregory President, West Texas Division Tom S. Hawkins, Jr. President, Louisiana Division John A. Paris President, Mid-Tex Division Gary L. Schlessman President, Colorado-Kansas Division A T M O S E N E R G Y O F F I C E R S Nonregulated Operations Shared Services (continued) Conrad E. Gruber Vice President, Strategic Planning John J. Hardgrave Vice President, Customer Service Dwala J. Kuhn Corporate Secretary Fred E. Meisenheimer Vice President and Controller Laurie M. Sherwood Vice President, Corporate Development, and Treasurer 29 Shared Services Mark H. Johnson President, Atmos Energy Marketing, LLC Ronald W. McDowell Vice President, New Business Ventures Verlon R. Aston, Jr. Vice President, Governmental and Public Affairs Mark S. Bergeron Vice President, Gas Supply and Services Susan K. Giles Vice President, Investor Relations Richard J. Gius Vice President and Chief Information Officer 30 B O A R D O F D I R E C T O R S Travis W. Bain II Chairman, Texas Custom Pools, Inc. Plano, Texas Board member since 1988 Committees: Work Session/Annual Meeting (Chairman), Audit, Executive, Human Resources Robert W. Best Chairman, President and Chief Executive Officer Atmos Energy Corporation Dallas, Texas Board member since 1997 Dan Busbee Adjunct Professor, Dedman School of Law, Southern Methodist University Dallas, Texas Board member since 1988 Committees: Audit (Chairman), Executive, Human Resources Richard W. Cardin Retired partner of Arthur Andersen LLP Nashville, Tennessee Board member since 1997 Committees: Audit, Nominating and Corporate Governance Richard W. Douglas Executive Vice President, The Staubach Company Dallas, Texas Board member since 2007 Committees: Human Resources, Work Session/ Annual Meeting 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 Energy LP, Juniper Capital LP and Juniper Advisory LP Houston, Texas Board member since 2001 Committees: Human Resources (Chairman), Executive, Nominating and Corporate Governance 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), Executive, 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, Midstream 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 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 TO C K L I S T I N G New York Stock Exchange. Trading symbol: ATO S TO 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. A N N UA L M E E T I N G O F S H A R E H O L D E R S The 2008 Annual Meeting of Shareholders will be held in the Crystal Ballroom C at the Hilton Fort Worth Hotel, 815 Main Street, Fort Worth, Texas 76102 on Wednesday, February 6, 2008, at 11 a.m. Central time. D I R E C T S TO 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 Investor 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. AT 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. 31 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 AT M O S E N E R G Y C O R P O R AT I O N C O N TA C T S To contact Atmos Energy’s Investor 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: F O R M 1 0 - K Atmos Energy Corporation’s Annual Report on Form 10-K is avail- able at no charge from Investor 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 also may be viewed on Atmos Energy’s Web site at http://www.atmosenergy.com. Susan K. Giles Vice President, Investor Relations 972-855-3729 972-855-3040 (fax) InvestorRelations@atmosenergy.com Forward-Looking Statements Other Information 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, 2007. 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. 32 You can view this Summary Annual Report, our Annual Report on Form 10-K and other financial documents for fiscal 2007 and previous years on our Web site at http://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 saves costs to produce and distribute these materials. If you are a shareholder of record, to receive these documents over the Internet next year, please visit http://www.amstock.com and access your account to give your consent. However, if you hold your shares through a broker, please contact your broker 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. Inside front cover: New distribution pipeline will bring natural gas to a growing residential area of Southaven, Mississippi, one of the more than 1,600 American communities served by Atmos Energy. On the back cover: Atmos Energy Survey and Corrosion Specialist Rick Sulak is one of more than 4,600 Atmos Energy employees who are essential links in our bridge to the future. © 2007 by Atmos Energy Corporation. All rights reserved. Atmos Energy® is a registered trademark, and Atmos Energy–The Spirit of Service® is a registered service mark of Atmos Energy Corporation. 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 7 S U M M A R Y A N N U A L R E P O R T A T M O S E N E R G Y C O R P O R A T I O N P . O . B O X 6 5 0 2 0 5 D A L L A S , T E X A S 7 5 2 6 5 - 0 2 0 5 A T M O S E N E R G Y . C O M C E L E B R A T I N G T H E P A S T B R I D G I N G T H E F U T U R E D r a w i n g u p o n o u r r i c h h i s t o r y, A t m o s E n e r g y i s p r e p a r i n g f o r t h e f u t u r e b y t a p p i n g n e w o p p o r t u n i t i e s i n b o t h t h e r e g u l a t e d a n d n o n r e g u l a t e d m a r ke t s. 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 7 S U M M A R Y A N N U A L R E P O R T