Atos
Annual Report 2011

Plain-text annual report

Atmos Energy Corporation P.O. Box 650205 Dallas, Texas 75265-0205 atmosenergy.com Atmos Energy Corporation 2011 Summary Annual Report Ensuring Safety and Reliability Voices for Safety Atmos Energy vehicles display the national Call 811 logo to remind the public to always call 811 before digging to have natural gas pipelines and other buried utility lines marked at no charge. Graham Landell Perry Senior Engineer Dallas, TX “I’m involved in the design of natural gas pipelines, measurement stations and regulator stations,” explains Senior Engineer Landell Perry. “Our design of new state-of-the-art instrumentation and controls allows Atmos Energy to know immediately if there’s a pressure spike and shut a line down remotely. Our goal as engineers is to find effective and efficient solutions to help protect our customers and deliver highly reliable natural gas transmission and distribution service.” A s engineers, it’s our duty to design the most effective solutions for our customers and communities. Cover: Mid-Tex Division Senior Engineer Landell Perry (right), Field Construction Coordinator Robert Parker and Crew Leader Royce Sharp inspect the installation of an actuator on an existing remote control valve for an Atmos Pipeline–Texas transmission line. Above: The work involves close cooperation among teams from engineering and pipeline operations. N atural gas pipelines span 2.4 million miles across the United States—an extensive network that delivers the efficient, clean and abundant fuel we all rely on for economic strength and national security. In the Atmos Energy system alone, our employees are responsible for about 77,000 miles of natural gas pipe- lines, serving more than 1,600 communities of all sizes in 12 states. Ensuring safety and reliability of our gas transmission and distribution infrastructure stands as our highest goal. Our team understands the requirements of pipeline safety, and they diligently carry out our policies and programs to maintain and modernize our pipeline network. They work to protect our customers, our employees, the public and our underground pipeline assets at all times. In this report, 11 of our employees share how their attitudes and actions contribute to a culture of safety. These are our voices for safety—and they speak for the nearly 5,000 Atmos Energy team members who serve our customers and communities every day. AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 1 Danny Waguespack Compliance Manager Metairie, LA “All states have pipeline safety requirements that go beyond the federal regulations,” says Compliance Manager Danny Waguespack. “Compliance is responsible for making sure we meet or exceed the highest standard in each state we serve. Those codes include Operator Qualification, Pipeline Integrity Management, Public Awareness, Damage Prevention, Distribution Integrity Management, Control Room Management and more. The compliance world is always evolving and ever changing.” W e don’t just follow the letter of the law; we follow the spirit of the law. We’re constantly reviewing every aspect of our operations. If we see a better way of doing things, we pursue it. Louisiana Division Compli- ance Manager Danny Waguespack (left) and Survey Specialist Billy Bentel check the placement of re- quired warning signs along one of the company’s rights of way to alert the public to a buried pipeline and help prevent damage to it from excavation. Regan Hampton Lead Controller Dallas, TX “My team and I keep a constant watch on approximately 6,000 miles of pipeline,” explains Regan Hampton, lead controller at Atmos Pipeline–Texas’ control center. “Ours is one of the largest natural gas pipelines in Texas, and on a peak day more than 3.5 billion cubic feet of gas flows through the system. Our team is here 24 hours a day, seven days a week, monitoring pipeline pressures and flow rates and working with the engineering and integrity groups to schedule maintenance outages, so that our pipeline is as safe as we can make it.” O ur goal is zero incidents — and it has to be. In this type of business, there’s no room for error, so that our pipeline is safe and provides reliable service. Regan Hampton, lead controller for Atmos Pipeline–Texas, heads a team of highly experienced pipeline controllers who monitor the system around the clock at the division’s Dallas control center. 4 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 5 Kenny Compton Senior Service Technician Radford, VA “We’re the proactive guys,” explains Senior Service Technician Kenny Compton. “We’re out there clearly marking our buried gas lines, so that they don’t get cut by homeowners or com- mercial excavators laying electric, water or sewer lines. Field employees are required to be qualified to meet federal Operator Qualification rules. We can’t perform any task—marking a gas line, setting a gas meter, turning a customer’s service on or off, responding to a gas or carbon monoxide leak, nothing—unless our training and OQ are up to date.” W e’re out there to protect life and property. When we meet customers or go into their homes, safety is our No. 1 concern. 6 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 7 Senior Service Technician Kenny Compton in the Kentucky/Mid-States Division uses instruments to locate and mark a buried natural gas line to help prevent damage from excavation. James Sparks Corrosion Control Technician Madisonville, KY Age is only one factor that affects the integrity of a buried gas pipeline. Even more telling is how the pipe has been inspected and maintained. “There are thousands of miles of pipeline in the Atmos Energy network, and we are checking them constantly,” says Corrosion Control Technician James Sparks. “We put better corrosion-detection processes in place almost 20 years before the government required it. Because of our cathodic protection procedures, 50 years from now when we dig out a piece of pipe, it should look very similar to the way it did the day we put it in the ground.” I have been at this more than 40 years—long enough to see that our safety measures really work. Corrosion Control Technician James Sparks of the Kentucky/Mid-States Division, who is a recognized expert on cathodic protection, inspects our natural gas system in Kentucky. 8 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 9 Annie Stewart Senior Financial Analyst Flowood, MS “Over the past years, we have spent more money, both operating expense and capital dollars, to improve the safety of our employees, customers and the general public,” says Senior Financial Analyst Annie Stewart. Atmos Energy has invested more than $1.7 billion since 2007 to improve its pipeline and distribution system. “We’ve increased our allocations for pipeline replacements, technology upgrades, employee training, and safety advertising and bill inserts. Analysts like me help account for these projects correctly, to help keep them on budget and to assist others in making good decisions that support our commitment to safety.” S ome safety activities are mandated, but Atmos Energy invests to the highest standards of safety and compliance. Mississippi Division Senior Financial Analyst Annie Stewart (standing) reviews safety expenditures with Safety Manager Ed Johnson, Financial Analyst II Carolyn Knight and Revenue Systems Analyst Earl Lee. Francisco Javier Aguirre Welder 1 Odessa, TX “After I leave the house for work each morning, the first thing that comes to my mind is safety,” says Class I Welder Javier Aguirre. “The most important thing for me on a daily basis is to prevent any pipeline events that would endanger my life, the lives of my crew- mates or the community where we’re working. We check the system pressure maps and work closely with the engineering team and our supervisors to make sure we follow the safest procedures. We take great pride in our work.” B esides welding safely, we clear the area of any flammable brush or debris that could catch fire. Checking the conditions around a work site protects everyone. Welder Javier Aguirre of the West Texas Division measures a pipe joint on one of the division’s natural gas pipelines near Odessa, Texas, before making a repair. 12 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 13 Annie Estrada Customer Support Associate Waco, TX “We’re trained in many areas of customer assistance but especially customer safety,” says Annie Estrada, a customer support associate at Atmos Energy’s Waco Customer Contact Center. “Emergency calls are definitely our top priority. When customers suspect a gas leak, we help them stay calm and ask questions to gather information for our responding techni- cians. Inside or outside? Backyard or front yard? Is it near the gas meter? We direct our customers where to go to be safe and dispatch crews immediately, using the information to help our technicians investigate the leak and make the area safe.” W hen it comes to safety, we are highly trained to keep our customers safe, identify where a leak might be and send trained technicians quickly to investigate. Annie Estrada, customer support associate at Atmos Energy’s Waco Customer Support Center, and Melissa Hutyra, senior adminis- trative assistant, review the company’s online information about safety. 14 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 15 Senior Instructor Brian Crowder discusses natural gas fundamentals with a team of firefighters from the Richardson, Texas, Fire Department at the company’s Charles K. Vaughan Center. Although most of the center’s trainees are company employees, the staff works closely with emergency responders and public officials as part of a close alliance that protects our communities. Brian Crowder Senior Instructor, Charles K. Vaughan Center Plano, TX Technical knowledge is critical to safety because the nation’s natural gas network must meet hundreds of safety regulations and technical standards. “Atmos Energy actively develops its employees, and to do so it has built this advanced facility,” comments Senior Instructor Brian Crowder at the Charles K. Vaughan Center. “It’s not just a training facil- ity; it’s also a service center and a dispatch center. Its classrooms, equipment, technolo- gies and simulation training tools are truly impressive. All of our instructors have come up through the ranks; so, they bring a wealth of field experience to the classroom.” W e train employees from our entire service area and emergency responder teams. We make sure our training meets or exceeds the federal Department of Transportation regulations. 16 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 17 Brian Martens, Colorado manager of public affairs in the Colorado-Kansas Division, talks with enthusiastic sixth-graders at Mountain View Core Knowledge Charter School in Cañon City, Colorado. The students recently were recognized by Atmos Energy for their presentation about energy efficiency and natural gas safety. Brian Martens Manager of Public Affairs Greeley, CO “Besides working with public officials and the media, we visit schools to help students learn what this invisible thing, natural gas, is all about,” says Manager of Public Affairs Brian Martens. “On the Internet, we have lesson plans for teachers, fun experiments and a challenge to create a project about energy efficiency and safety. The sixth-graders at Mountain View Core Knowledge Charter School in Cañon City, Colorado, wrote and filmed a skit showing energy traveling through a pipe, into a home and heating the house, water and food. It was terrific.” W e help kids at school understand how natural gas works, what it smells like and what to do if they smell it. 18 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 19 Kim Cocklin, president and CEO of Atmos Energy Corporation, and Marvin Sweetin, senior vice president, utility operations, are joined by Virginia employees after one of the company’s quarterly employee broadcasts. The broadcasts, transmitted by satellite to company locations, provide an effective way to communicate with virtually every employee about Atmos Energy’s commitment to safety. Kim R. Cocklin President and CEO Dallas, TX “Staying incident-free every day is critically important to all of our employees, our customers and the communities we serve,” says Atmos Energy President and CEO Kim Cocklin. “The media generally define safety as “pipeline integrity,” but it’s so much more than that. It entails customers’ safety in their homes, consumer education, employee training, best-in- class engineering and the most reliable technologies. We expect our employees not only to work safely, but also to help their team members do so, as well.” W e train employees to “coach in the moment” both to point out when something could be done in a better way and to praise work done safely. 20 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 21 To Our Shareholders Atmos Energy Corporation achieved substantial results in fiscal 2011. Our track record of creating shareholder value continued through consistent earnings-per-share growth. We also marked 28 years of consecutive annual dividend increases, after including all mergers and acquisitions. Our strategy is focused on maximizing the value of our regulated assets. It seeks to • maximize our regulated earnings capability from our utility and pipeline operations, • complement our regulated operations with energy services provided by our nonregulated business unit, and • enhance shareholder value through prudent acquisitions and growing the rate base of our regulated companies. In fiscal 2011, we achieved the following highlights. • We enhanced the safety and reliability of our distribution system by replacing or adding more than 450 miles of natural gas pipelines. • With our customers, we successfully resolved 19 rate filings, which are expected to increase annual operating income by more than $72 million. • We strengthened our balance sheet going forward by impairing two natural gas gathering systems and a proposed natural gas storage project. • We moved to become more geographically efficient by agreeing to sell our Missouri, Illinois and Iowa distribution assets for approximately $124 million. • We benefited financially from unwinding two interest-rate agreements called Treasury locks, which we no longer needed, and from upgrades by two of the three major credit rating agencies. Financial Results Earnings per diluted share increased by 7 cents over the $2.20 earned in fiscal 2010 to $2.27, marking our ninth consecutive year of higher annual earnings. Consolidated net income rose from $205.8 million in fiscal 2010 to $207.6 million in fiscal 2011. Operating revenues for the fiscal year were $4.3 billion. We paid cash dividends of $1.36 per share, and in Novem- ber 2011 the board of directors raised the dividend by 2 cents a share for an annual indicated rate in fiscal 2012 of $1.38 per share. Our dividend payout ratio is 60 percent currently, as compared to 67 percent five years ago. Our capital expenditures increased by $80.4 million, year 22 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T Net Income per Diluted Share 1 9 1 $ . 9 9 1 $ . 7 0 2 $ . 0 2 2 $ . 7 2 2 $ . $2.40 $1.80 $1.20 $0.60 $0.00 ‘07 ‘08 ‘09 ‘10 ‘11 Earnings per diluted share have increased steadily during the pastἀfive years due to our commitment to invest in system modernization, which has added to our utility rate base. over year, to $623.0 million. Approximately 70 percent of that spending was invested to modernize our gas distribution infrastruc- ture and to enhance the safety and reliability of our pipeline system. We continued to improve our rate designs and to seek rate settlements to avoid costly litigation. Regulatory authorities approved approximately $72 million in annual operating income increases from rate filings. In one of the settlements, the Railroad Commission of Texas decided a base rate case filed in 2010 by our Atmos Pipeline–Texas Division, resulting in an increase in annual operating income of about $20 million. In our nonregulated operations, we recorded noncash charges of $30.3 million for operations that no longer offered reasonable prospects to meet our investment objectives. The cumulative adjustments lowered fiscal 2011 diluted earnings per share by about 21 cents. Offsetting these impairment charges was a one-time $27.8 million pre-tax cash gain from unwinding two Treasury lock agreements with a cumulative notional value of $250 million. The Treasury locks, which are financial agreements for locking in interest rates for future debt issuances, were no longer needed after we cancelled an anticipated debt offering. In addition, we recorded a $5 million one-time benefit from an administrative settlement of various income tax positions. These gains improved earnings per diluted share by about 24 cents. Shareholder value was further enhanced through our repur- chase in fiscal 2011 and fiscal 2010 of more than 3.3 million shares of Atmos Energy common stock at an effective price of $29.99. The repur- chased stock improved fiscal 2011 earnings per diluted share by about 8 cents a share. In addition, we plan to retire up to 5 million more shares over the next five years through our new share repurchase program. During fiscal 2011, we strength- ened our credit profile by reducing the company’s number of credit facilities, interest costs and weighted average cost of debt. We received credit rating upgrades by Moody’s Investors Service to Baa1 and by Fitch to A–, and Standard & Poor’s reaffirmed its rating of BBB+. In September, we opened Atmos Energy’s new Amarillo Customer Contact Center to help ensure excellence in serving our customers. Operational Developments Our focus on modernizing our distribution system to ensure contin- ued safety and reliability included many projects in all divisions to replace cast iron, steel mains and vintage distribution pipelines. The largest of these projects is a steel service line replace- ment program in the Mid-Tex Division. The division made steady progress on its plan to make 100,000 line replacements by Sep- tember 2012. Steel service lines installed from the 1940s through the 1960s are being converted to ½-inch-to-2-inch polyethylene pipe in more than 40 cities throughout the division. Along with safety, we invested in major projects to provide excellent customer service. Development advanced from the design phase to the build phase on a new customer service software system that will improve the handling of our customer relationships, billing and communication. About 250 employees are involved in the project, with conversion to the new system expected in May 2013. We also dedicated an $18.5 million customer contact center in Amarillo, Texas. The 52,500-square-foot facility replaced the company’s original Amarillo call center, which opened in 1998. The new center features advanced telecommunications and information technologies to help handle a peak of approximately 1,900 calls an hour, ergonomic workstations for the center’s 150 agents, a new dispatch arena and design features to increase energy performance and reduce waste. Atmos Energy is seeking LEED® silver certification* for the facility. In May 2011, we entered into a definitive agreement to sell all of our Missouri, Illinois and Iowa gas distribution assets for a cash price of approximately $124 million. These operations, which serve some 84,000 meters in 189 communities, are being purchased by Liberty Energy (Midstates) Corp., an affiliate of Algonquin Power & Utilities Corp. The sale is expected to close in 2012 after regulatory approvals are granted. Selling these assets will allow us to better focus our distribution operations in our remaining nine states. Today about three-fourths of our utility operations are located in Texas, Louisiana and Mississippi. In January and February 2011, hundreds of company em- ployees dealt with frigid cold and record snowfall. Many spent days away from home keeping regulator stations operating and assisting customers. We appreciate our employees’ dedication and concern for ensuring the safety and comfort of our customers. As a testament to its operations, engineering and foresighted improvements, Atmos Pipeline–Texas successfully handled one of the largest peak-day demands in its history. Transmission volumes on February 2 exceeded 3.6 billion cubic feet (Bcf), which equaled the previous historical high in 1996, as temperatures remained below freezing for nearly 10 days across North Texas. The pipeline, which is a primary transporter of natural gas to our Mid-Tex Division, met all its firm service obligations to human- needs gas customers during the cold wave. That same day, it also set a record of 2.5 Bcf in gas deliveries to our Mid-Tex Division and other North Texas local distribution companies. During 2011, our nonregulated operations experienced declines in margins caused by weak natural gas market funda- mentals, which provided fewer opportunities for favorable trading and asset optimization. Although nonregulated gas sales volumes increased in fiscal 2011 by 9 percent to 384.8 Bcf over fiscal 2010 volumes, unit margins trended lower due to increased competition, lower basis spreads and continued depressed conditions of the economy. Atmos Energy Marketing remains a strong, regional leader in gas marketing and large-user services, and its results typically supplement earnings from our regulated distribution operations. AEM markets gas through physical delivery and maintains a conservative trading portfolio. Employees in these operations worked diligently during the year to grow their customer base and sales volumes. We believe AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 23 that Atmos Energy Marketing is stronger today than most of its competitors because it has successfully retained customers and won new business even under difficult conditions. Board and Management Changes We express our deep appreciation to Richard W. Cardin and Phillip E. Nichol who both retired from the board of direc- tors in February 2011. Mr. Cardin, with 14 years of service as a director, also retired as chairman of the board’s Audit Committee, and Mr. Nichol, with nearly 26 years of service, also retired as chairman of the Nominating and Corporate Governance Commit- tee. These two directors contributed significantly to the company’s growth and success, and we thank them for their dedication and service to our shareholders, customers and employees. In November 2011, Marvin L. Sweetin was promoted to se- nior vice president, utility operations. Marvin joined Atmos Energy in 2000 after working for 13 years in the oil and gas industry. He has led our procurement, technical training and customer-service organizations as well as our enterprisewide Utility Operations Council. He has demonstrated a proven ability to control costs, improve operations and serve our customers well. In his new posi- tion, he serves on the company’s Management Committee. Favorable Future Outlook The predictable and stable contributions from our regulated operations remain the cornerstone of our earnings framework. Although our nonregulated operations suffered because of tight market conditions this past year, Atmos Energy Marketing retained virtually all of its major gas marketing customers and added new ones. Its future prospects continue to complement the company’s base earnings. We intend to continue to invest—and our regulators have long approved of this goal—large amounts of capital needed to continually modernize our gas delivery system and safeguard our communities. We expect our capital expenditures in fiscal 2012 will range between $630 million and $650 million. Our regulated utility rate base at the end of fiscal 2011 totaled about $4 billion. We expect the rate base will grow at a compound annual rate between 6.0 percent and 6.5 percent during the next five years. On average, this could add $50 million to $60 million annually in operating income. Investing in our Texas intrastate transmission and storage operations promises not only to benefit our regulated distribu- tion customers, but also to aid the state’s natural gas producers in bringing more gas to market in Texas and elsewhere. Atmos Pipeline –Texas’ approximately 6,000-mile system crosses the state from far West Texas to near the Louisiana border and from the Oklahoma border south to near Houston. It is strategically located to transport Barnett shale gas as well as more production from other shale gas basins now under development in the state. The competitive price of natural gas and its many other benefits—it’s clean, abundant, efficient and domestic—make our product the most likely fuel to meet the United States’ energy needs for decades to come. As the economy improves, we be- 24 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T Investments for Safety and Reliability ($ in millions) $700 $600 $500 $400 $300 $200 $100 $0 ‘07 ‘08 ‘09 ‘10 ‘11 Total Capital Expenditures Total Safety & Reliability On average during the past five years, 68 percent of Atmos Energy’s total capital expenditures have been dedicated to system modernization and expansion to provide safe and reliable distribution operations. lieve natural gas will become the fuel of choice for new housing, factories, power plants and alternative transportation. Growing through acquisitions will continue to be part of our future strategy. We have an enviable record of acquiring utility properties with little dilution and integrating them successfully. For example, during the past decade, most natural gas distribu- tion merger or acquisition transactions cost their acquirers about 10 times EBITDA†, but ours averaged 7 to 8.5 times EBITDA. We are a patient acquirer; we have made 10 major acquisi- tions since 1986. We also are one of the most efficient utility operators in the country, compared to our peers. We plan to pursue the acquisition of operations that we can run successfully and that make sense financially. Our balance sheet is strong, with 48 percent equity at Sep- tember 30, 2011. At fiscal year-end, we had $1.1 billion of total borrowing capacity, giving us ample liquidity for future needs and growth. Taken altogether, we believe these strong, positive factors signify a favorable future outlook for Atmos Energy. For fiscal 2012, we expect our earnings will increase to between $2.30 and $2.40 per diluted share, excluding unrealized margins. We appreciate the confidence shown by you, our investors, as well as by our 5,000 employees and our more than 3 million natural gas distribution customers. As Executive Chairman Robert W. Best has noted in previous annual reports, our purpose in business is to serve all our stakeholders—and to serve you well. That always stands as our No. 1 “blue chip” goal. Kim R. Cocklin President and Chief Executive Officer November 22, 2011 * LEED® stands for Leadership in Energy and Environmental Design and is a registered trademark of the nonprofit U.S. Green Building Council. † EBITDA, a common financial measure, stands for earnings before interest, taxes, depreciation and amortization. Financial Highlights Year Ended September 30 Dollars in thousands, except per share data Operating revenues Gross profit Natural gas distribution net income — continuing operations Natural gas distribution net income — discontinued operations Regulated transmission and storage net income Nonregulated net income (loss) Total Total assets Total capitalization* Net income per share from continuing operations — diluted Net income per share from discontinued operations — diluted Net income per share — diluted Cash dividends per share Book value per share at end of year Natural gas distribution throughput — continuing operations (MMcf) Natural gas distribution throughput — discontinued operations (MMcf) Consolidated natural gas distribution throughput (MMcf) Consolidated regulated transmission and storage transportation volumes (MMcf) Consolidated nonregulated delivered gas sales 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. † Heating degree days are adjusted for service areas with weather-normalized operations. 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 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, 2011, 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 website at www.atmosenergy.com. Additional investor information is presented on pages 35 and 36 of this report. 2011 2010 Change $ 4,347,634 $ 4,719,835 $ 1,327,241 $ 1,337,505 $ 154,001 $ 118,383 8,717 52,415 (7,532) 7,566 41,486 38,404 $ 207,601 $ 205,839 $ 7,282,871 $ 6,763,791 $ 4,461,538 $ 3,987,899 $ $ $ $ $ 2.17 $ 0.10 $ 2.27 $ 1.36 $ 24.98 $ 2.12 0.08 2.20 1.34 24.16 438,535 15,640 454,175 428,599 353,853 2,780 409,369 14,651 424,020 435,012 384,799 2,733 99% 3,213,191 9.1% (7.9)% (0.8)% 30.1% 15.2% 26.3% (119.6)% 0.9% 7.7% 11.9% 2.4% 25.0% 3.2% 1.5% 3.4% (6.7)% (6.3)% (6.6)% 1.5% 8.7% (1.7)% 102% (2.9)% 3,186,040 0.9% 9.1% — 48.3% 18,680 90,652 48.7% (0.8)% 19,738 92,422 (5.4)% (1.9)% AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 25 Atmos Energy at a Glance Year Ended September 30 Meters in service Residential Commercial Industrial Public authority and other Total meters Heating degree days* Actual (weighted average) Percent of normal Natural gas distribution sales volumes — continuing operations (MMcf) Residential Commercial Industrial Public authority and other Total Natural gas distribution transportation volumes — continuing operations (MMcf) Total natural gas distribution throughput — continuing operations (MMcf) Natural gas distribution sales volumes — discontinued operations (MMcf) Natural gas distribution transportation volumes — discontinued operations (MMcf) Intersegment activity (MMcf) Consolidated natural gas distribution throughput (MMcf) Consolidated regulated transmission and storage transportation volumes (MMcf) Consolidated nonregulated delivered gas sales volumes (MMcf) Operating revenues (000s) Natural gas distribution sales revenues Residential Commercial Industrial Public authority and other Total gas distribution sales revenues Transportation revenues Other gas revenues Total natural gas distribution revenues Regulated transmission and storage revenues Nonregulated revenues Total operating revenues (000s) Other statistics Gross plant (000s) Net plant (000s) Miles of pipe Employees * Heating degree days are adjusted for service areas with weather-normalized operations. 26 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 2011 2010 2,929,814 270,774 2,069 10,534 3,213,191 2,910,672 262,778 2,090 10,500 3,186,040 2,733 99% 2,780 102% 161,012 91,215 18,757 10,482 281,466 132,357 413,823 8,461 6,190 (4,454) 424,020 435,012 384,799 185,143 99,924 18,714 10,107 313,888 128,965 442,853 8,740 6,900 (4,318) 454,175 428,599 353,853 $ 1,570,723 698,366 106,569 69,176 2,444,834 59,547 26,599 2,530,980 87,141 $ 1,784,051 787,433 110,280 70,402 2,752,166 58,511 31,091 2,841,768 97,023 1,729,513 1,781,044 $ 4,347,634 $ 4,719,835 $ 6,816,794 $ 5,147,918 $ 6,542,318 $ 4,793,075 76,835 4,949 77,157 4,913 Condensed Consolidated Balance Sheets Year Ended September 30 Dollars in thousands, except share data Assets Property, plant and equipment Construction in progress Less accumulated depreciation and amortization Net property, plant and equipment Current assets Cash and cash equivalents Accounts receivable, less allowance for doubtful accounts of $7,440 in 2011 and $12,701 in 2010 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: 2011 – 90,296,482 shares, 2010 – 90,164,103 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 2011 2010 $ 6,607,552 209,242 6,816,794 1,668,876 5,147,918 $ 6,384,396 157,922 6,542,318 1,749,243 4,793,075 131,419 131,952 273,303 289,760 316,471 1,010,953 740,207 383,793 $ 7,282,871 273,207 319,038 150,995 875,192 740,148 355,376 $ 6,763,791 $ 451 1,732,935 (48,460) 570,495 2,255,421 2,206,117 4,461,538 291,205 367,563 206,396 2,434 867,598 960,093 428,947 564,695 $ 7,282,871 $ 451 1,714,364 (23,372) 486,905 2,178,348 1,809,551 3,987,899 266,208 413,640 126,100 360,131 1,166,079 829,128 350,521 430,164 $ 6,763,791 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 27 Condensed Consolidated Statements of Income Year Ended September 30 Dollars in thousands, except per share data Operating revenues Natural gas distribution segment Regulated transmission and storage segment Nonregulated segment Intersegment eliminations Purchased gas cost Natural gas distribution segment Regulated transmission and storage segment Nonregulated segment Intersegment eliminations Gross profit Operating expenses Operation and maintenance Depreciation and amortization Taxes, other than income Asset impairments Total operating expenses Operating income Miscellaneous income (expense), net Interest charges Income from continuing operations before income taxes Income tax expense Income from continuing operations Income from discontinued operations, net of tax ($5,502, $4,425 and $2,929) Net income Basic earnings per share Income per share from continuing operations Income per share from discontinued operations Net income per share — basic Diluted earnings per share Income per share from continuing operations Income per share from discontinued operations Net income per share — diluted Weighted average shares outstanding: Basic Diluted 2011 2010 2009 $ 2,531,863 219,373 2,024,893 (428,495) 4,347,634 1,487,499 — 1,959,893 (426,999) 3,020,393 1,327,241 $ 2,842,638 $ 2,884,796 203,013 209,658 2,146,658 2,283,988 (472,474) (509,331) 4,719,835 4,869,111 1,820,627 1,887,192 — — 2,032,567 2,169,880 (470,864) (507,639) 3,382,330 3,549,433 1,337,505 1,319,678 449,290 227,099 178,683 30,270 885,342 441,899 460,513 211,589 188,252 — 860,354 477,151 485,704 211,984 180,242 5,382 883,312 436,366 21,499 (156) (3,067) 150,825 312,573 113,689 198,884 8,717 207,601 154,360 322,635 124,362 198,273 7,566 152,638 280,661 97,362 183,299 7,679 $ 205,839 $ 190,978 2.18 0.10 2.28 2.17 0.10 2.27 $ $ $ $ 2.14 0.08 2.22 2.12 0.08 2.20 $ $ $ $ 1.99 0.09 2.08 1.98 0.09 2.07 90,201 90,652 91,852 92,422 91,117 91,620 $ $ $ $ $ 28 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T Condensed Consolidated Statements of Cash Flows 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: Asset impairments 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 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 Unwinding of Treasury lock agreements Repayment of long-term debt Cash dividends paid Repurchase of common stock Repurchase of equity awards Issuance of common stock 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 2011 2010 2009 $ 207,601 $ 205,839 $ 190,978 30,270 — 5,382 233,155 228 117,353 11,586 9,438 (961) (25,826) 582,844 216,960 173 196,731 12,655 11,908 (1,245) 83,455 726,476 217,208 94 129,759 14,494 10,364 (1,177) 352,131 919,233 (622,965) (4,421) (627,386) (542,636) (509,494) (66) (7,707) (542,702) (517,201) 83,306 394,466 20,079 27,803 (360,131) (124,011) — (5,299) 7,796 44,009 (533) 131,952 131,419 $ 54,268 — — — (131) (124,287) (100,450) (1,191) 8,766 (283,981) 445,623 1,938 — (407,353) (121,460) — — 27,687 (163,025) (337,546) 20,749 111,203 64,486 46,717 $ 131,952 $ 111,203 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 29 Report of Independent Registered Public Accounting Firm on Condensed Financial Statements The Board of Directors and Shareholders of Atmos Energy Corporation We have audited, in accordance with the standards of the Public Company Account- ing Oversight Board (United States), the consolidated balance sheets of Atmos Energy Corporation at September 30, 2011 and 2010, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2011 (not presented separately herein); and in our report dated November 22, 2011, we expressed an unqualified opinion on those consolidated finan- cial 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 Account- ing Oversight Board (United States), the effectiveness of Atmos Energy Corporation’s internal control over financial reporting as of September 30, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Spon- soring Organizations of the Treadway Commission and our report dated November 22, 2011 (not presented separately herein) expressed an unqualified opinion thereon. Dallas, Texas November 22, 2011 30 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T Consolidated Financial and Statistical Summary 2007–2011 Year Ended September 30 2011 2010 2009 2008 2007 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) Income from continuing operations (000s) Income from discontinued operations, net of tax (000s) Net income (000s) Income per share from continuing operations—diluted Income per share from discontinued operations—diluted 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 nonregulated delivered gas sales volumes (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 622,965 $ 5,147,918 143,355 7,282,871 2,255,421 2,206,117 4,461,538 $ 4,347,634 1,327,241 198,884 8,717 207,601 2.17 0.10 2.27 $ $ $ $ $ 90,296 90,652 1.36 18,680 34.98 28.87 32.45 24.98 14.30 1.30 $ 542,636 $ 509,494 $ 472,273 $ 392,435 4,793,075 4,439,103 4,136,859 3,836,836 (290,887) 91,519 78,017 149,217 6,763,791 6,367,083 6,386,699 5,895,197 2,178,348 2,176,761 2,052,492 1,965,754 1,809,551 2,169,400 2,119,792 2,126,315 3,987,899 4,346,161 4,172,284 4,092,069 $ 4,719,835 $ 4,869,111 $ 7,117,837 $ 5,803,177 1,337,505 1,319,678 1,293,922 1,221,078 198,273 7,566 205,839 2.12 0.08 2.20 183,299 7,679 190,978 1.98 0.09 2.07 173,485 6,846 180,331 1.91 0.08 1.99 160,828 7,664 168,492 1.82 0.09 1.91 $ $ $ $ $ 90,164 92,422 92,552 91,620 90,815 89,941 89,327 87,486 1.34 $ 1.32 $ 1.30 $ 1.28 19,738 20,790 21,756 $ $ $ $ 30.06 26.41 29.25 24.16 13.30 1.21 $ $ $ $ 28.80 20.20 28.18 23.52 13.61 1.20 29.46 25.09 26.62 22.60 13.38 1.18 $ $ $ $ 22,829 33.11 26.47 28.32 22.01 14.83 1.29 4.2% 4.6% 4.7% 4.9% 4.5% 289,927 322,628 282,117 292,676 297,327 134,093 424,020 131,547 454,175 126,768 408,885 136,678 429,354 130,542 427,869 435,012 428,599 528,689 595,542 505,493 384,799 3,213,191 2,733 $ $ $ $ 99% 5.30 .46 9.1% 4,949 1,362 111 676 3.13 $ $ $ $ 353,853 370,569 389,392 370,668 3,186,040 3,178,844 3,191,779 3,187,127 2,780 102% 2,713 100% 2,820 100% 5.77 .46 $ $ 6.95 .46 $ $ 9.05 .43 $ $ 9.1% 4,913 1,243 114 676 3.09 $ $ 8.9% 4,891 1,165 116 678 2.82 $ $ 8.8% 4,750 1,091 122 700 3.06 $ $ 2,879 100% 8.09 .44 8.8% 4,653 1,020 119 713 2.75 * Heating degree days are adjusted for service areas with weather-normalized operations. AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 31 Atmos Energy Officers Senior Management Team Regulated Divisions Robert W. Best Executive Chairman of the Board Kim R. Cocklin President and Chief Executive Officer Fred E. Meisenheimer Senior Vice President and Chief Financial Officer Louis P. Gregory Senior Vice President and General Counsel Michael E. Haefner Senior Vice President, Human Resources Marvin L. Sweetin Senior Vice President, Utility Operations 32 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 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 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 Atmos Energy Officers Nonregulated Operations Shared Services (continued) Mark S. Bergeron President, Atmos Energy Holdings, Inc. Shared Services Verlon R. Aston, Jr. Vice President, Governmental and Public Affairs Conrad E. Gruber Vice President, Strategic Planning Dwala J. Kuhn Corporate Secretary Kenneth M. Malter Vice President, Gas Supply and Services Christopher T. Forsythe Vice President and Controller Edward Pace McDonald IV Vice President, Tax Daniel M. Meziere Vice President and Treasurer Susan K. Giles Vice President, Investor Relations Richard J. Gius Vice President and Chief Information Officer AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 33 Board of Directors Robert W. Best Executive Chairman of the Board, Kim R. Cocklin President and Richard W. Douglas Ruben E. Esquivel Executive Vice President, Vice President for Chief Executive Officer, Jones Lang LaSalle LLC Community and Corporate Atmos Energy Corporation Atmos Energy Corporation Dallas, Texas Relations, The University Dallas, Texas Dallas, Texas Board member since 2007 of Texas Southwestern Board member since 1997 Board member since 2009 Committees: Human Medical Center at Dallas Resources, Work Session/ Dallas, Texas Annual Meeting Board member since 2008 Committees: Audit, Human Resources Richard K. Gordon Robert C. Grable General Partner, Juniper Partner, Kelly Hart & Energy LP, Juniper Capital LP Hallman LLP Dr. Thomas C. Meredith Retired, formerly Nancy K. Quinn Principal, Hanover Capital, LLC and Juniper Advisory LP Fort Worth, Texas Commissioner of Mississippi East Hampton, New York Houston, Texas Board member since 2009 Institutions of Higher Learning Board member since 2004 Board member since 2001 Committees: Audit, Jackson, Mississippi Committees: Audit (Chair), Committees: Human Human Resources Board member since 1995 Executive, Nominating and Resources (Chairman), Executive, Nominating and Corporate Governance Committees: Work Session/ Corporate Governance Annual Meeting (Chairman), Audit, Executive, Nominating and Corporate Governance Stephen R. Springer Charles K. Vaughan Richard Ware II Retired Senior Vice President Retired Chairman President, Amarillo and General Manager, of the Board, Midstream Division, Atmos Energy Corporation National Bank Amarillo, Texas The Williams Companies, Inc. Dallas, Texas Board member since 1994 Fort Myers Beach, Florida Board member since 1983 Committees: Nominating and Lee E. Schlessman Honorary Director President, Dolo Investment Company Denver, Colorado Board member since 2005 Lead Director since 2003 Corporate Governance Retired from Board in 1998 Committee: Work Session/ Committee: Executive (Chairman), Audit, Annual Meeting (Chairman) Executive, Work Session/ Annual Meeting 34 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T Corporate Information Common Stock Listing New York Stock Exchange. Trading symbol: ATO Stock Transfer Agent and Registrar American Stock Transfer & Trust Company, LLC Operations Center 620115th Avenue Brooklyn, New York 11219 800-543-3038 To inquire about your Atmos Energy common 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 email message on our agent’s website at www.amstock.com. Please refer to Atmos Energy in your email message and include your Atmos Energy shareholder account number. Independent Registered Public Accounting Firm Ernst & Young LLP One Victory Park Suite 2000 2323 Victory Avenue Dallas, Texas 75219 214-969-8000 Form 10-K Atmos Energy Corporation’s Annual Report on Form 10-K is avail- able at no charge from Investor Relations, Atmos Energy Corpora- tion, 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 website at www.atmosenergy.com. Annual Meeting of Shareholders The 2012 Annual Meeting of Shareholders will be held in the Lincoln Ballroom at the Hilton Hotel Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas 75240 on Wednesday, February 8, 2012, at 9:30 a.m. Central time. Direct Stock Purchase Plan 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 at www.atmosenergy.com. You may also obtain information by writing to Investor Relations, Atmos Energy Corpora- tion, 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. Atmos Energy on the Internet Information about Atmos Energy is available on the Internet at www. atmosenergy.com. Our website includes news releases, current and historical financial reports, other investor data, corporate gover- nance documents, management biographies, customer information and facts about Atmos Energy’s operations. Atmos Energy Corporation Contacts To contact Atmos Energy’s Investor Relations, call 972-855-3729 between 8 a.m. and 5 p.m. Central time or send an email message to InvestorRelations@atmosenergy.com. Securities analysts and investment managers, please contact: Susan K. Giles Vice President, Investor Relations 972-855-3729 (voice) 972-855-3040 (fax) InvestorRelations@atmosenergy.com AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T 35 Forward-looking Statements 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,” “projec- tion,” “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 Annual Report on Form 10-K for the fiscal year ended September 30, 2011. 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. Other Information You can view this Summary Annual Report, our Annual Report on Form 10-K and other financial documents for fiscal 2011 and previous years at www.atmosenergy.com. If you are a shareholder who would like to receive our Summary Annual Report and other company documents electronically in the future, please sign up for electronic distribution. It’s convenient and easy, and it saves the costs to produce and distribute 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 our Summary Annual Report and other company documents over the Internet may result in charges to you from your Internet service provider or telephone company. © 2011 Atmos Energy Corporation. All rights reserved. Atmos Energy® is a registered trademark of Atmos Energy Corporation. LEED® is a registered trademark owned by the U.S. Green Building Council. 36 AT M O S E N E R GY 2 011 S U M M A RY A N N UA L R E P O R T Atmos Energy vehicles display the national Call 811 logo to remind the public to always call 811 before digging to have natural gas pipelines and other buried utility lines marked at no charge. Atmos Energy Corporation P.O. Box 650205 Dallas, Texas 75265-0205 atmosenergy.com Atmos Energy Corporation 2011 Summary Annual Report Ensuring Safety and Reliability Voices for Safety 

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