NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2012
1. Nature of Business
Atmos Energy Corporation (Atmos Energy or the Company), headquartered in Dallas, Texas, is engaged primarily in the regulated natural gas distribution and transmission and storage
businesses as well as certain other nonregulated businesses. For the fiscal year ended September 30, 2012, our regulated businesses comprised over 95 percent of our consolidated net income.
Through our natural gas distribution business, we deliver natural gas through sales and transportation arrangements to over three million
residential, commercial, public authority and industrial customers through our six regulated natural gas distribution divisions which cover service areas located in nine states. In addition, we transport natural gas for others through our
distribution system. In August 2012, we announced that we had entered into a definitive agreement to sell our natural gas distribution operations in Georgia, representing approximately 64,000 customers. After the closing of this transaction, which
we currently anticipate will occur during the third quarter of fiscal 2013, we will operate in eight states. Our regulated activities also include our regulated pipeline and storage operations, which include the transportation of natural gas to our
distribution system and the management of our underground storage facilities. Our regulated businesses are subject to federal and state regulation and/or regulation by local authorities in each of the states in which our natural gas distribution
divisions operate.
Our nonregulated businesses operate primarily in the Midwest and Southeast through various wholly-owned
subsidiaries of Atmos Energy Holdings, Inc. (AEH). AEH is wholly owned by the Company and based in Houston, Texas. Through AEH, we provide natural gas management and transportation services to municipalities, natural gas distribution companies,
including certain divisions of Atmos Energy and third parties.
We operate the Company through the following three segments:
|
|
|
the
natural gas distribution segment
, which includes our regulated natural gas distribution and related sales operations,
|
|
|
|
the
regulated transmission and storage segment
, which includes the regulated pipeline and storage operations of our Atmos Pipeline Texas
Division and
|
|
|
|
the
nonregulated segment
, which includes our nonregulated natural gas management, nonregulated natural gas transmission, storage and other
services.
|
2. Unaudited Interim Financial Information
These consolidated interim-period financial statements have been prepared in accordance with accounting principles generally accepted in
the United States on the same basis as those used for the Companys audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. In the opinion of management, all
material adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been made to the unaudited consolidated interim-period financial statements. These consolidated interim-period financial statements are condensed
as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of Atmos Energy Corporation included in our Annual Report on Form 10-K for the fiscal year ended September 30,
2012. Because of seasonal and other factors, the results of operations for the three-month period ended December 31, 2012 are not indicative of our results of operations for the full 2013 fiscal year, which ends September 30, 2013.
We have evaluated subsequent events from the December 31, 2012 balance sheet date through the date these financial
statements were filed with the Securities and Exchange Commission (SEC). Except as discussed in Note 3, Note 6 and Note 9, no events have occurred subsequent to the balance sheet date that would require recognition or disclosure in the condensed
consolidated financial statements.
6
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant accounting policies
Our accounting policies are described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal
year ended September 30, 2012.
Due to the pending sale of our distribution operations in our Georgia service area, the
financial results for this service area are shown in discontinued operations. Accordingly, certain prior-year amounts have been reclassified to conform with the current-year presentation.
Due to accounting guidance that became effective for us on October 1, 2012, we have begun presenting the components of other
comprehensive income and total comprehensive income in a separate condensed consolidated statement of comprehensive income immediately following the condensed consolidated statement of income. During the three months ended December 31, 2012,
there were no other significant changes to our accounting policies.
Regulatory assets and liabilities
Accounting principles generally accepted in the United States require cost-based, rate-regulated entities that meet
certain criteria to reflect the authorized recovery of costs due to regulatory decisions in their financial statements. As a result, certain costs are permitted to be capitalized rather than expensed because they can be recovered through rates. We
record certain costs as regulatory assets when future recovery through customer rates is considered probable. Regulatory liabilities are recorded when it is probable that revenues will be reduced for amounts that will be credited to customers
through the ratemaking process. Substantially all of our regulatory assets are recorded as a component of deferred charges and other assets and substantially all of our regulatory liabilities are recorded as a component of deferred credits and other
liabilities. Deferred gas costs are recorded either in other current assets or liabilities and the regulatory cost of removal obligation is reported separately.
Significant regulatory assets and liabilities as of December 31, 2012 and September 30, 2012 included the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2012
|
|
|
September 30,
2012
|
|
|
|
(In thousands)
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
Pension and postretirement benefit costs
(1)
|
|
$
|
295,277
|
|
|
$
|
296,160
|
|
Merger and integration costs, net
|
|
|
5,628
|
|
|
|
5,754
|
|
Deferred gas costs
|
|
|
28,351
|
|
|
|
31,359
|
|
Regulatory cost of removal asset
|
|
|
10,401
|
|
|
|
10,500
|
|
Rate case costs
|
|
|
5,726
|
|
|
|
4,661
|
|
Deferred franchise fees
|
|
|
819
|
|
|
|
2,714
|
|
Texas Rule 8.209
(2)
|
|
|
9,734
|
|
|
|
5,370
|
|
APT annual adjustment mechanism
|
|
|
3,973
|
|
|
|
4,539
|
|
Other
|
|
|
6,973
|
|
|
|
7,262
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
366,882
|
|
|
$
|
368,319
|
|
|
|
|
|
|
|
|
|
|
Regulatory liabilities:
|
|
|
|
|
|
|
|
|
Deferred gas costs
|
|
$
|
8,290
|
|
|
$
|
23,072
|
|
Regulatory cost of removal obligation
|
|
|
450,968
|
|
|
|
459,688
|
|
Other
|
|
|
5,534
|
|
|
|
5,637
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
464,792
|
|
|
$
|
488,397
|
|
|
|
|
|
|
|
|
|
|
7
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
(1)
|
Includes $11.5 million and $7.6 million of pension and post-retirement expense deferred in our Texas service areas pursuant to the Texas Gas Utility
Regulatory Act.
|
|
(2)
|
Texas Rule 8.209 is a Railroad Commission rule that allows for the deferral of all expenses associated with capital expenditures incurred pursuant to
this rule, including the recording of interest on the deferred expenses until the next rate proceeding (rate case or annual rate filing) at which time investment and costs would be recovered through base rates.
|
The amounts above do not include regulatory assets and liabilities related to our Georgia service area, which are classified as assets
held for sale as discussed in Note 5.
Currently authorized rates do not include a return on certain of our merger and
integration costs; however, we recover the amortization of these costs. Merger and integration costs, net, are generally amortized on a straight-line basis over estimated useful lives ranging up to 20 years.
Accumulated Other Comprehensive Income
Accumulated other comprehensive loss, net of tax, as of December 31, 2012 and September 30, 2012 consisted of the following unrealized gains (losses):
|
|
|
|
|
|
|
|
|
|
|
December 31,
2012
|
|
|
September 30,
2012
|
|
|
|
(In thousands)
|
|
Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
Unrealized holding gains on available-for-sale securities
|
|
$
|
5,288
|
|
|
$
|
5,661
|
|
Interest rate agreements
|
|
|
(32,009
|
)
|
|
|
(44,273
|
)
|
Commodity cash flow hedges
|
|
|
(9,360
|
)
|
|
|
(8,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(36,081
|
)
|
|
$
|
(47,607
|
)
|
|
|
|
|
|
|
|
|
|
3. Financial Instruments
We use financial instruments to mitigate commodity price risk and interest rate risk. The objectives and strategies for using financial
instruments have been tailored to our regulated and nonregulated businesses. The accounting for these financial instruments is fully described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year
ended September 30, 2012. During the first quarter, there were no changes in our objectives, strategies and accounting for these financial instruments. Currently, we utilize financial instruments in our natural gas distribution and nonregulated
segments. We currently do not manage commodity price risk with financial instruments in our regulated transmission and storage segment.
Our financial instruments do not contain any credit risk-related or other contingent features that could cause payments to be accelerated when our financial instruments are in net liability positions.
Regulated Commodity Risk Management Activities
Although our purchased gas cost adjustment mechanisms essentially insulate our natural gas distribution segment from commodity price risk,
our customers are exposed to the effects of volatile natural gas prices. We manage this exposure through a combination of physical storage, fixed-price forward contracts and financial instruments, primarily over-the-counter swap and option
contracts, in an effort to minimize the impact of natural gas price volatility on our customers during the winter heating season.
Our natural gas distribution gas supply department is responsible for executing this segments commodity risk management activities in conformity with regulatory requirements. In jurisdictions where
we are permitted to mitigate commodity price risk through financial instruments, the relevant regulatory authorities may establish
8
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the level of heating season gas purchases that can be hedged. Historically, if the regulatory authority does not establish this level, we seek to hedge between 25 and 50 percent of anticipated
heating season gas purchases using financial instruments. For the 2012-2013 heating season (generally October through March), in the jurisdictions where we are permitted to utilize financial instruments, we anticipate hedging approximately 33
percent, or 22.6 Bcf of the winter flowing gas requirements. We have not designated these financial instruments as hedges for accounting purposes.
The costs associated with and the gains and losses arising from the use of financial instruments to mitigate commodity price risk are included in our purchased gas costs adjustment mechanisms in
accordance with regulatory requirements. Therefore, changes in the fair value of these financial instruments are initially recorded as a component of deferred gas costs and recognized in the consolidated statement of income as a component of
purchased gas costs when the related costs are recovered through our rates and recognized in revenue in accordance with applicable authoritative accounting guidance. Accordingly, there is no earnings impact on our natural gas distribution segment as
a result of the use of financial instruments.
Nonregulated Commodity Risk Management Activities
Our nonregulated operations aggregate and purchase gas supply, arrange transportation and/or storage logistics and ultimately deliver gas
to our customers at competitive prices. To provide these services, we utilize proprietary and customer-owned transportation and storage assets to provide the various services our customers request. In an effort to offset the demand fees paid to
contract for storage capacity and to maximize the value of this capacity, AEH sells financial instruments to earn a gross profit margin through the arbitrage of pricing differences in various locations and by recognizing pricing differences that
occur over time.
As a result of these activities, our nonregulated segment is exposed to risks associated with changes in the
market price of natural gas. We manage our exposure to such risks through a combination of physical storage and financial instruments, including futures, over-the-counter and exchange traded options and swap contracts with counterparties. Future
contracts provide the right, but not the obligation, to buy or sell the commodity at a fixed price. Option contracts provide the right, but not the requirement, to buy or sell the commodity at a fixed price. Swap contracts require receipt of payment
for the commodity based on the difference between a fixed price and the market price on the settlement date.
We use financial
instruments, designated as cash flow hedges of anticipated purchases and sales at index prices, to mitigate the commodity price risk in our nonregulated operations associated with deliveries under fixed-priced forward contracts to deliver gas to
customers. These financial instruments have maturity dates ranging from one to 60 months. We use financial instruments, designated as fair value hedges, to hedge our natural gas inventory used in asset optimization activities in our nonregulated
segment.
Our nonregulated operations also use storage swaps and futures to capture additional storage arbitrage opportunities
that arise subsequent to the execution of the original fair value hedge associated with our physical natural gas inventory, basis swaps to insulate and protect the economic value of our fixed price and storage books and various over-the-counter and
exchange-traded options. These financial instruments have not been designated as hedges for accounting purposes.
Interest Rate Risk Management Activities
We have periodically managed interest rate risk by entering into financial instruments to fix the Treasury yield component of the interest cost associated with anticipated financings. Prior to fiscal
2012, we used Treasury locks to mitigate interest rate risk; however, beginning in the fourth quarter of fiscal 2012 we started utilizing interest rate swaps and forward starting interest rate swaps to manage this risk.
In August 2011, we entered into three Treasury lock agreements to fix the Treasury yield component of the interest cost associated with
$350 million of a total $500 million of senior notes that were issued on January 11,
9
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2013. This offering is discussed in Note 6. We designated these Treasury locks as cash flow hedges. The Treasury locks were settled on January 8, 2013 with the payment of $66.7 million to
the counterparties due to a decrease in the 30-year Treasury lock rates between inception of the Treasury locks and settlement. Because the Treasury locks were effective, the $66.7 million unrealized loss was recorded as a component of accumulated
other comprehensive income and will be recognized as a component of interest expense over the 30-year life of the senior notes.
In the fourth quarter of fiscal 2012, we entered into an interest rate swap to fix the LIBOR component of our $260 million short-term
financing facility that terminated on December 27, 2012. We recorded an immaterial loss upon settlement of the swap, which was recorded as a component of interest expense as we did not designate the interest rate swap as a hedge.
In October 2012, we entered into forward starting interest rate swaps to fix the Treasury yield component associated with the anticipated
issuance of $500 million and $250 million unsecured senior notes in fiscal 2015 and fiscal 2017, which we designated as cash flow hedges at the time the agreements were executed. Accordingly, unrealized gains and losses associated with the forward
starting interest rate swaps will be recorded as a component of accumulated other comprehensive income (loss). When the forward starting interest rate swaps settle, the realized gain or loss will be recorded as a component of accumulated other
comprehensive income (loss) and recognized as a component of interest expense over the life of the related financing arrangement. Hedge ineffectiveness to the extent incurred will be reported as a component of interest expense.
In prior years, we entered into Treasury lock agreements to fix the Treasury yield component of the interest cost of financing various
issuances of long-term debt and senior notes. The gains and losses realized upon settlement of these Treasury locks were recorded as a component of accumulated other comprehensive income (loss) when they were settled and are being recognized as a
component of interest expense over the life of the associated notes from the date of settlement. As of December 31, 2012, the remaining amortization periods for the settled Treasury locks extend through fiscal 2041.
Quantitative Disclosures Related to Financial Instruments
The following tables present detailed information concerning the impact of financial instruments on our condensed consolidated balance
sheet and income statements.
As of December 31, 2012, our financial instruments were comprised of both long and short
commodity positions. A long position is a contract to purchase the commodity, while a short position is a contract to sell the commodity. As of December 31, 2012, we had net long/(short) commodity contracts outstanding in the following
quantities:
|
|
|
|
|
|
|
|
|
|
|
Contract Type
|
|
Hedge Designation
|
|
Natural
Gas
Distribution
|
|
|
Nonregulated
|
|
|
|
|
|
Quantity (MMcf)
|
|
Commodity contracts
|
|
Fair Value
|
|
|
|
|
|
|
(26,450
|
)
|
|
|
Cash Flow
|
|
|
|
|
|
|
28,718
|
|
|
|
Not designated
|
|
|
12,479
|
|
|
|
55,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,479
|
|
|
|
58,183
|
|
|
|
|
|
|
|
|
|
|
|
|
10
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impact of Financial Instruments on the Balance Sheet
The following tables present the fair value and balance sheet classification of our financial instruments by operating segment as of
December 31, 2012 and September 30, 2012. As required by authoritative accounting literature, the fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the
terms of our master netting arrangements. Further, the amounts below do not include $16.6 million and $23.7 million of cash held on deposit as of December 31, 2012 and September 30, 2012 to collateralize certain financial instruments.
Therefore, these gross balances are not indicative of either our actual credit exposure or net economic exposure. Additionally, the amounts below will not be equal to the amounts presented on our condensed consolidated balance sheet, nor will they
be equal to the fair value information presented for our financial instruments in Note 4.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Natural
Gas
Distribution
|
|
|
Nonregulated
|
|
|
Total
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
$
|
|
|
|
$
|
20,103
|
|
|
$
|
20,103
|
|
Noncurrent commodity
contracts
|
|
Deferred charges and other assets
|
|
|
10,849
|
|
|
|
699
|
|
|
|
11,548
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
|
|
|
(77,078
|
)
|
|
|
(17,995
|
)
|
|
|
(95,073
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
|
|
|
|
(4,084
|
)
|
|
|
(4,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
(66,229
|
)
|
|
|
(1,277
|
)
|
|
|
(67,506
|
)
|
Not Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
|
1,773
|
|
|
|
94,168
|
|
|
|
95,941
|
|
Noncurrent commodity
contracts
|
|
Deferred charges and other assets
|
|
|
761
|
|
|
|
59,791
|
|
|
|
60,552
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
(1)
|
|
|
(502
|
)
|
|
|
(94,978
|
)
|
|
|
(95,480
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
|
|
|
|
(59,266
|
)
|
|
|
(59,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
2,032
|
|
|
|
(285
|
)
|
|
|
1,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Instruments
|
|
|
|
$
|
(64,197)
|
|
|
$
|
(1,562
|
)
|
|
$
|
(65,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Other current liabilities not designated as hedges in our natural gas distribution segment include $0.1 million related to risk management liabilities
that were classified as assets held for sale at December 31, 2012.
|
11
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location
|
|
Natural
Gas
Distribution
|
|
|
Nonregulated
|
|
|
Total
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
|
|
$
|
|
|
|
$
|
19,301
|
|
|
$
|
19,301
|
|
Noncurrent commodity contracts
|
|
Deferred charges and other assets
|
|
|
|
|
|
|
1,923
|
|
|
|
1,923
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
|
|
|
(85,040
|
)
|
|
|
(23,787
|
)
|
|
|
(108,827
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
|
|
|
|
(4,999
|
)
|
|
|
(4,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
(85,040
|
)
|
|
|
(7,562
|
)
|
|
|
(92,602
|
)
|
Not Designated As Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current assets
(1)
|
|
|
7,082
|
|
|
|
98,393
|
|
|
|
105,475
|
|
Noncurrent commodity contracts
|
|
Deferred charges and other assets
|
|
|
2,283
|
|
|
|
60,932
|
|
|
|
63,215
|
|
Liability Financial Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current commodity contracts
|
|
Other current liabilities
(2)
|
|
|
(585
|
)
|
|
|
(99,824
|
)
|
|
|
(100,409
|
)
|
Noncurrent commodity contracts
|
|
Deferred credits and other liabilities
|
|
|
|
|
|
|
(67,062
|
)
|
|
|
(67,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
8,780
|
|
|
|
(7,561
|
)
|
|
|
1,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Financial Instruments
|
|
|
|
$
|
(76,260)
|
|
|
$
|
(15,123
|
)
|
|
$
|
(91,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Other current assets not designated as hedges in our natural gas distribution segment include $0.1 million related to risk management assets that were
classified as assets held for sale at September 30, 2012.
|
|
(2)
|
Other current liabilities not designated as hedges in our natural gas distribution segment include $0.3 million related to risk management liabilities
that were classified as assets held for sale at September 30, 2012.
|
Impact of Financial Instruments
on the Income Statement
Hedge ineffectiveness for our nonregulated segment is recorded as a component of unrealized gross
profit and primarily results from differences in the location and timing of the derivative instrument and the hedged item. Hedge ineffectiveness could materially affect our results of operations for the reported period. For the three months ended
December 31, 2012 and 2011 we recognized a gain arising from fair value and cash flow hedge ineffectiveness of $16.1 million and $8.4 million. Additional information regarding ineffectiveness recognized in the income statement is included in
the tables below.
12
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Hedges
The impact of our nonregulated commodity contracts designated as fair value hedges and the related hedged item on our condensed
consolidated income statement for the three months ended December 31, 2012 and 2011 is presented below.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(In thousands)
|
|
Commodity contracts
|
|
$
|
7,314
|
|
|
$
|
24,064
|
|
Fair value adjustment for natural gas inventory designated as the hedged item
|
|
|
8,818
|
|
|
|
(15,249
|
)
|
|
|
|
|
|
|
|
|
|
Total decrease in purchased gas cost
|
|
$
|
16,132
|
|
|
$
|
8,815
|
|
|
|
|
|
|
|
|
|
|
The decrease in purchased gas cost is comprised of the following:
|
|
|
|
|
|
|
|
|
Basis ineffectiveness
|
|
$
|
(241
|
)
|
|
$
|
841
|
|
Timing ineffectiveness
|
|
|
16,373
|
|
|
|
7,974
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,132
|
|
|
$
|
8,815
|
|
|
|
|
|
|
|
|
|
|
Basis ineffectiveness arises from natural gas market price differences between the locations of the hedged
inventory and the delivery location specified in the hedge instruments. Timing ineffectiveness arises due to changes in the difference between the spot price and the futures price, as well as the difference between the timing of the settlement of
the futures and the valuation of the underlying physical commodity. As the commodity contract nears the settlement date, spot-to-forward price differences should converge, which should reduce or eliminate the impact of this ineffectiveness on
purchased gas cost.
To the extent that the Companys natural gas inventory does not qualify as a hedged item in a
fair-value hedge, or has not been designated as such, the natural gas inventory is valued at the lower of cost or market. We did not record a writedown for nonqualifying natural gas inventory for the three months ended December 31, 2012. During
the three months ended December 31, 2011, we recorded a $1.7 million charge to write down nonqualifying natural gas inventory to market.
13
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash Flow Hedges
The impact of cash flow hedges on our condensed consolidated income statements for the three months ended December 31, 2012 and 2011
is presented below. Note that this presentation does not reflect the financial impact arising from the hedged physical transaction. Therefore, this presentation is not indicative of the economic gross profit we realized when the underlying physical
and financial transactions were settled.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2012
|
|
|
|
Natural
Gas
Distribution
|
|
|
Nonregulated
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Loss reclassified from AOCI into purchased gas cost for effective portion of commodity contracts
|
|
$
|
|
|
|
$
|
(5,160
|
)
|
|
$
|
(5,160
|
)
|
Loss arising from ineffective portion of commodity contracts
|
|
|
|
|
|
|
(19
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on purchased gas cost
|
|
|
|
|
|
|
(5,179
|
)
|
|
|
(5,179
|
)
|
Loss on settled interest rate agreements reclassified from AOCI into interest expense
|
|
|
(502
|
)
|
|
|
|
|
|
|
(502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impact from Cash Flow Hedges
|
|
$
|
(502
|
)
|
|
$
|
(5,179
|
)
|
|
$
|
(5,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2011
|
|
|
|
Natural
Gas
Distribution
|
|
|
Nonregulated
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Loss reclassified from AOCI into purchased gas cost for effective portion of commodity contracts
|
|
$
|
|
|
|
$
|
(11,642
|
)
|
|
$
|
(11,642
|
)
|
Loss arising from ineffective portion of commodity contracts
|
|
|
|
|
|
|
(430
|
)
|
|
|
(430
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on purchased gas cost
|
|
|
|
|
|
|
(12,072
|
)
|
|
|
(12,072
|
)
|
Loss on settled interest rate agreements reclassified from AOCI into interest expense
|
|
|
(502
|
)
|
|
|
|
|
|
|
(502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impact from Cash Flow Hedges
|
|
$
|
(502
|
)
|
|
$
|
(12,072
|
)
|
|
$
|
(12,574
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes the gains and losses arising from hedging transactions
that were recognized as a component of other comprehensive income (loss), net of taxes, for the three months ended December 31, 2012 and 2011. The amounts included in the table below exclude gains and losses arising from ineffectiveness because
those amounts are immediately recognized in the income statement as incurred.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(In thousands)
|
|
Increase (decrease) in fair value:
|
|
|
|
|
|
|
|
|
Interest rate agreements
|
|
$
|
11,945
|
|
|
$
|
(1,403
|
)
|
Forward commodity contracts
|
|
|
(3,513
|
)
|
|
|
(23,678
|
)
|
Recognition of losses in earnings due to settlements:
|
|
|
|
|
|
|
|
|
Interest rate agreements
|
|
|
319
|
|
|
|
316
|
|
Forward commodity contracts
|
|
|
3,148
|
|
|
|
7,103
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss) from hedging, net of tax
(1)
|
|
$
|
11,899
|
|
|
$
|
(17,662
|
)
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Utilizing an income tax rate ranging from 37 percent to 39 percent comprised of the effective rates in each taxing jurisdiction.
|
Deferred gains (losses) recorded in accumulated other comprehensive income (AOCI) associated with our
Treasury lock and interest rate swap agreements are recognized in earnings as they are amortized over the terms of the underlying debt instruments, while deferred gains (losses) associated with commodity contracts are recognized in earnings upon
settlement. The following amounts, net of deferred taxes, represent the expected recognition in earnings of the deferred gains (losses) recorded in AOCI associated with our financial instruments, based upon the fair values of these financial
instruments as of December 31, 2012. However, the table below does not include the expected recognition in earnings of our outstanding Treasury lock and interest rate swap agreements as those instruments have not yet settled.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Rate
Agreements
|
|
|
Commodity
Contracts
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Next twelve months
|
|
$
|
(1,276
|
)
|
|
$
|
(7,342
|
)
|
|
$
|
(8,618
|
)
|
Thereafter
|
|
|
11,322
|
|
|
|
(2,018
|
)
|
|
|
9,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(1)
|
|
$
|
10,046
|
|
|
$
|
(9,360
|
)
|
|
$
|
686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Utilizing an income tax rate ranging from 37 percent to 39 percent comprised of the effective rates in each taxing jurisdiction.
|
Impact of Financial Instruments Not Designated as Hedges
The impact of financial instruments that have not been designated as hedges on our condensed consolidated income statement for the three
months ended December 31, 2012 and 2011 was a decrease in revenue of $0.1 million and $2.2 million. Note that this presentation does not reflect the expected gains or losses arising from the underlying physical transactions associated with
these financial instruments. Therefore, this presentation is not indicative of the economic gross profit we realized when the underlying physical and financial transactions were settled.
As discussed above, financial instruments used in our natural gas distribution segment are not designated as hedges. However, there is no
earnings impact on our natural gas distribution segment as a result of the use of
15
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
these financial instruments because the gains and losses arising from the use of these financial instruments are recognized in the consolidated statement of income as a component of purchased gas
cost when the related costs are recovered through our rates and recognized in revenue. Accordingly, the impact of these financial instruments is excluded from this presentation.
4. Fair Value Measurements
We report certain assets
and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We record cash and cash
equivalents, accounts receivable and accounts payable at carrying value, which substantially approximates fair value due to the short-term nature of these assets and liabilities. For other financial assets and liabilities, we primarily use quoted
market prices and other observable market pricing information to minimize the use of unobservable pricing inputs in our measurements when determining fair value. The methods used to determine fair value for our assets and liabilities are fully
described in Note 2 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. During the first quarter of fiscal 2013, there were no changes in these methods.
Fair value measurements also apply to the valuation of our pension and post-retirement plan assets. Current accounting guidance requires
employers to annually disclose information about fair value measurements of the assets of a defined benefit pension or other postretirement plan. The fair value of these assets is presented in Note 9 to the financial statements in our Annual
Report on Form 10-K for the fiscal year ending September 30, 2012.
16
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Quantitative Disclosures
Financial Instruments
The classification of our fair value measurements requires judgment regarding the degree to which market data are observable or corroborated by observable market data. Authoritative accounting literature
establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to unadjusted quoted prices
in active markets for identical assets and liabilities (Level 1), with the lowest priority given to unobservable inputs (Level 3). The following table summarizes, by level within the fair value hierarchy, our assets and liabilities that were
accounted for at fair value on a recurring basis as of December 31, 2012 and September 30, 2012. As required under authoritative accounting literature, assets and liabilities are categorized in their entirety based on the lowest level of
input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
(1)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
|
Netting
and
Cash
Collateral
(2)
|
|
|
December 31,
2012
|
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
13,383
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
13,383
|
|
Nonregulated segment
|
|
|
1,043
|
|
|
|
173,718
|
|
|
|
|
|
|
|
(156,904
|
)
|
|
|
17,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments
|
|
|
1,043
|
|
|
|
187,101
|
|
|
|
|
|
|
|
(156,904
|
)
|
|
|
31,240
|
|
|
|
|
|
|
|
Hedged portion of gas stored underground
|
|
|
87,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87,401
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
|
|
|
801
|
|
|
|
|
|
|
|
|
|
|
|
801
|
|
Registered investment companies
|
|
|
39,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,499
|
|
Bonds
|
|
|
|
|
|
|
23,565
|
|
|
|
|
|
|
|
|
|
|
|
23,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
|
39,499
|
|
|
|
24,366
|
|
|
|
|
|
|
|
|
|
|
|
63,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
127,943
|
|
|
$
|
211,467
|
|
|
$
|
|
|
|
$
|
(156,904
|
)
|
|
$
|
182,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
77,580
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
77,580
|
|
Nonregulated segment
|
|
|
1,261
|
|
|
|
175,062
|
|
|
|
|
|
|
|
(173,463
|
)
|
|
|
2,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
1,261
|
|
|
$
|
252,642
|
|
|
$
|
|
|
|
$
|
(173,463
|
)
|
|
$
|
80,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
(1)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
|
Netting
and
Cash
Collateral
(3)
|
|
|
September 30,
2012
|
|
|
|
(In thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
9,365
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,365
|
|
Nonregulated segment
|
|
|
714
|
|
|
|
179,835
|
|
|
|
|
|
|
|
(162,776
|
)
|
|
|
17,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments
|
|
|
714
|
|
|
|
189,200
|
|
|
|
|
|
|
|
(162,776
|
)
|
|
|
27,138
|
|
|
|
|
|
|
|
Hedged portion of gas stored underground
|
|
|
67,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,192
|
|
Available-for-sale securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
1,634
|
|
Registered investment companies
|
|
|
40,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,212
|
|
Bonds
|
|
|
|
|
|
|
22,552
|
|
|
|
|
|
|
|
|
|
|
|
22,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available-for-sale securities
|
|
|
40,212
|
|
|
|
24,186
|
|
|
|
|
|
|
|
|
|
|
|
64,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
108,118
|
|
|
$
|
213,386
|
|
|
$
|
|
|
|
$
|
(162,776
|
)
|
|
$
|
158,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas distribution segment
|
|
$
|
|
|
|
$
|
85,625
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
85,625
|
|
Nonregulated segment
|
|
|
4,563
|
|
|
|
191,109
|
|
|
|
|
|
|
|
(186,451
|
)
|
|
|
9,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
4,563
|
|
|
$
|
276,734
|
|
|
$
|
|
|
|
$
|
(186,451
|
)
|
|
$
|
94,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Our Level 2 measurements consist of over-the-counter options and swaps, which are valued using a market-based approach in which observable market
prices are adjusted for criteria specific to each instrument, such as the strike price, notional amount or basis differences, municipal and corporate bonds, which are valued based on the most recent available quoted market prices and money market
funds which are valued at cost.
|
|
(2)
|
This column reflects adjustments to our gross financial instrument assets and liabilities to reflect netting permitted under our master netting
agreements and the relevant authoritative accounting literature. In addition, as of December 31, 2012, we had $16.6 million of cash held in margin accounts to collateralize certain financial instruments, which amount is classified as current
risk management assets.
|
|
(3)
|
This column reflects adjustments to our gross financial instrument assets and liabilities to reflect netting permitted under our master netting
agreements and the relevant authoritative accounting literature. In addition, as of September 30, 2012 we had $23.7 million of cash held in margin accounts to collateralize certain financial instruments. Of this amount, $5.9 million was used to
offset current risk management liabilities under master netting arrangements and the remaining $17.8 million is classified as current risk management assets.
|
18
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Available-for-sale securities are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gain
|
|
|
Gross
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
|
(In thousands)
|
|
As of December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity mutual funds
|
|
$
|
25,645
|
|
|
$
|
7,209
|
|
|
$
|
|
|
|
$
|
32,854
|
|
Foreign equity mutual funds
|
|
|
5,568
|
|
|
|
1,077
|
|
|
|
|
|
|
|
6,645
|
|
Bonds
|
|
|
23,387
|
|
|
|
180
|
|
|
|
(2
|
)
|
|
|
23,565
|
|
Money market funds
|
|
|
801
|
|
|
|
|
|
|
|
|
|
|
|
801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
55,401
|
|
|
$
|
8,466
|
|
|
$
|
(2
|
)
|
|
$
|
63,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic equity mutual funds
|
|
$
|
25,779
|
|
|
$
|
8,183
|
|
|
$
|
|
|
|
$
|
33,962
|
|
Foreign equity mutual funds
|
|
|
5,568
|
|
|
|
682
|
|
|
|
|
|
|
|
6,250
|
|
Bonds
|
|
|
22,358
|
|
|
|
196
|
|
|
|
(2
|
)
|
|
|
22,552
|
|
Money market funds
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
1,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
55,339
|
|
|
$
|
9,061
|
|
|
$
|
(2
|
)
|
|
$
|
64,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2012 and September 30, 2012, our available-for-sale securities included $40.3
million and $41.8 million related to assets held in separate rabbi trusts for our supplemental executive benefit plans. At December 31, 2012, we maintained investments in bonds that have contractual maturity dates ranging from January 2013
through July 2016.
These securities are reported at market value with unrealized gains and losses shown as a component of
accumulated other comprehensive income (loss). We regularly evaluate the performance of these investments on a fund by fund basis for impairment, taking into consideration the funds purpose, volatility and current returns. If a determination
is made that a decline in fair value is other than temporary, the related fund is written down to its estimated fair value and the other-than-temporary impairment is recognized in the income statement.
Other Fair Value Measures
Our debt is recorded at carrying value. The fair value of our debt is determined using third party market value quotations, which are considered Level 1 fair value measurements for debt instruments with a
recent, observable trade or Level 2 fair value measurements for debt instruments where fair value is determined using the most recent available quoted market price. The following table presents the carrying value and fair value of our debt as of
December 31, 2012:
|
|
|
|
|
|
|
December 31,
2012
|
|
|
|
(In thousands)
|
|
Carrying Amount
|
|
$
|
1,960,131
|
|
Fair Value
|
|
$
|
2,403,501
|
|
5. Discontinued Operations
On August 8, 2012, we entered into a definitive agreement to sell substantially all of our natural gas distribution assets located in
Georgia to Liberty Energy (Georgia) Corp., an affiliate of Algonquin Power & Utilities Corp. for a cash price of approximately $141 million. The agreement contains terms and conditions customary
19
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
for transactions of this type, including typical adjustments to the purchase price at closing, if applicable. The closing of the transaction is subject to the satisfaction of customary conditions
including the receipt of applicable regulatory approvals. We currently anticipate the transaction will close during the third quarter of fiscal 2013.
As required under generally accepted accounting principles, the operating results of our discontinued operations have been aggregated and reported on the consolidated statements of income as income from
discontinued operations, net of income tax. For the three months ended December 31, 2012, net income for discontinued operations includes the operating results of our Georgia operations. For the three months ended December 31, 2011, net
income from discontinued operations includes the operating results of our Georgia operations and the operating results of our Missouri, Illinois and Iowa operations that were sold on August 1, 2012. Expenses related to general corporate
overhead and interest expense allocated to the operations of these service areas are not included in discontinued operations.
The tables below set forth selected financial and operational information related to net assets and operating results related to
discontinued operations. Additionally, assets and liabilities related to our Georgia operations are classified as held for sale in other current assets and liabilities in our consolidated balance sheets at December 31, 2012 and
September 30, 2012. Prior period revenues and expenses associated with these assets have been reclassified into discontinued operations. This reclassification had no impact on previously reported net income.
The following table presents statement of income data related to discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(In thousands)
|
|
Operating revenues
|
|
$
|
16,284
|
|
|
$
|
40,630
|
|
Purchased gas cost
|
|
|
8,967
|
|
|
|
24,640
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
7,317
|
|
|
|
15,990
|
|
Operating expenses
|
|
|
2,820
|
|
|
|
6,728
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
4,497
|
|
|
|
9,262
|
|
Other nonoperating income
|
|
|
348
|
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before income taxes
|
|
|
4,845
|
|
|
|
9,639
|
|
Income tax expense
|
|
|
1,728
|
|
|
|
3,516
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,117
|
|
|
$
|
6,123
|
|
|
|
|
|
|
|
|
|
|
20
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table presents balance sheet data related to assets held for sale.
|
|
|
|
|
|
|
|
|
|
|
December 31,
2012
|
|
|
September 30,
2012
|
|
|
|
(In thousands)
|
|
Net plant, property & equipment
|
|
$
|
141,850
|
|
|
$
|
142,865
|
|
Gas stored underground
|
|
|
5,320
|
|
|
|
4,688
|
|
Other current assets
|
|
|
11,605
|
|
|
|
6,931
|
|
Deferred charges and other assets
|
|
|
45
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale
|
|
$
|
158,820
|
|
|
$
|
154,571
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
3,705
|
|
|
$
|
2,114
|
|
Other current liabilities
|
|
|
3,265
|
|
|
|
3,776
|
|
Regulatory cost of removal obligation
|
|
|
3,525
|
|
|
|
3,257
|
|
Deferred credits and other liabilities
|
|
|
417
|
|
|
|
2,426
|
|
|
|
|
|
|
|
|
|
|
Liabilities held for sale
|
|
$
|
10,912
|
|
|
$
|
11,573
|
|
|
|
|
|
|
|
|
|
|
6. Debt
The nature and terms of our debt instruments and credit facilities are described in detail in Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2012. Except as discussed below, there were no material changes in the terms of our debt instruments during the three months ended December 31, 2012.
Long-term debt
Long-term debt at December 31, 2012 and
September 30, 2012 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2012
|
|
|
September 30,
2012
|
|
|
|
(In thousands)
|
|
Unsecured 4.95% Senior Notes, due 2014
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
Unsecured 6.35% Senior Notes, due 2017
|
|
|
250,000
|
|
|
|
250,000
|
|
Unsecured 8.50% Senior Notes, due 2019
|
|
|
450,000
|
|
|
|
450,000
|
|
Unsecured 5.95% Senior Notes, due 2034
|
|
|
200,000
|
|
|
|
200,000
|
|
Unsecured 5.50% Senior Notes, due 2041
|
|
|
400,000
|
|
|
|
400,000
|
|
Medium term notes
|
|
|
|
|
|
|
|
|
Series A, 1995-1, 6.67%, due 2025
|
|
|
10,000
|
|
|
|
10,000
|
|
Unsecured 6.75% Debentures, due 2028
|
|
|
150,000
|
|
|
|
150,000
|
|
Rental property term note due in installments through 2013
|
|
|
131
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
1,960,131
|
|
|
|
1,960,131
|
|
Less:
|
|
|
|
|
|
|
|
|
Original issue discount on unsecured senior notes and debentures
|
|
|
3,624
|
|
|
|
3,695
|
|
Current maturities
|
|
|
131
|
|
|
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,956,376
|
|
|
$
|
1,956,305
|
|
|
|
|
|
|
|
|
|
|
Our $250 million Unsecured 5.125% Senior Notes were originally scheduled to mature in January 2013. On
August 28, 2012 we redeemed these notes with proceeds received through the issuance of commercial paper. On
21
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 27, 2012, we entered into a $260 million short-term financing facility that was scheduled to mature on February 1, 2013 to repay the commercial paper borrowings utilized to
redeem the Unsecured 5.125% Senior Notes. The short-term facility was repaid with the proceeds received through the issuance of 30-year unsecured senior notes on January 11, 2013, as discussed below.
We issued $500 million Unsecured 4.15% Senior Notes on January 11, 2013. The effective interest rate of these notes is 4.64 percent,
after giving effect to offering costs and the settlement of the associated Treasury locks discussed in Note 3. Of the net proceeds of approximately $494 million, $260 million was used to repay our short-term financing facility. The remaining $234
million of net proceeds was used to partially repay our commercial paper borrowings and for general corporate purposes.
Short-term debt
Our short-term debt is utilized to fund ongoing working capital needs, such as our seasonal requirements for gas supply, general corporate liquidity and capital expenditures. Our short-term borrowing
requirements are affected by the seasonal nature of the natural gas business. Changes in the price of natural gas and the amount of natural gas we need to supply our customers needs could significantly affect our borrowing requirements. Our
short-term borrowings typically reach their highest levels in the winter months.
We currently finance our short-term borrowing
requirements through a combination of a $750 million commercial paper program, four committed revolving credit facilities and one uncommitted revolving credit facility with third-party lenders. On December 7, 2012, we amended the terms of our
former $750 million unsecured credit facility to increase the borrowing capacity to $950 million, with an accordion feature, which, if utilized, would increase the borrowing capacity to $1.2 billion. The amendment also permits us to obtain same-day
funding on base rate loans. There were no other material changes to the credit facility. These facilities provide approximately $1.0 billion of working capital funding. At December 31, 2012 and September 30, 2012, there was $570.9 million
and $310.9 million outstanding under our commercial paper program. We also use intercompany credit facilities to supplement the funding provided by these third-party committed credit facilities.
Regulated Operations
We fund our regulated operations as needed, primarily through our commercial paper program and three committed revolving credit facilities with third-party lenders that provide approximately $989 million
of working capital funding, including a five-year $950 million unsecured facility, a $25 million unsecured facility and a $14 million revolving credit facility, which is used primarily to issue letters of credit. Due to outstanding letters of
credit, the total amount available to us under our $14 million revolving credit facility was $2.5 million at December 31, 2012.
In addition to these third-party facilities, our regulated operations have a $500 million intercompany revolving credit facility with AEH, which bears interest at the lower of (i) the Eurodollar rate
under the five-year revolving credit facility or (ii) the lowest rate outstanding under the commercial paper program. Applicable state regulatory commissions have approved our use of this facility through December 31, 2013.
Nonregulated Operations
Prior to December 5, 2012, Atmos Energy Marketing, LLC (AEM), which is wholly-owned by AEH, had a three-year $200 million committed revolving credit facility, expiring in December 2014, with a
syndicate of third-party lenders with an accordion feature that could increase AEMs borrowing capacity to $500 million. The credit facility was primarily used to issue letters of credit and, on a less frequent basis, to borrow funds for gas
purchases and other working capital needs. This facility was collateralized by substantially all of the assets of AEM and was guaranteed by AEH. AEM terminated the committed revolving credit facility on December 5, 2012, primarily in order to
reduce external credit expense. AEM incurred no penalties in connection with the
22
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
termination. This facility was replaced with two $25 million, 364-day bilateral credit facilities, one of which is a committed facility. These facilities will be used primarily to issue letters
of credit. Due to outstanding letters of credit, the total amount available to us under these bilateral credit facilities was $40.0 million at December 31, 2012.
AEH has a $500 million intercompany demand credit facility with AEC. This facility bears interest at a rate equal to the greater of (i) the one-month LIBOR rate plus 3.00 percent or (ii) the
rate for AEMs borrowings under its committed credit facility plus 0.75 percent. Applicable state regulatory commissions have approved our use of this facility through December 31, 2013.
Shelf Registration
We have an effective shelf registration statement with the Securities and Exchange Commission (SEC) that permits us to issue a total of $1.3 billion in common stock and/or debt securities. The shelf
registration statement has been approved by all requisite state regulatory commissions. At December 31, 2012, $900 million remained available for issuance under the shelf until it expires on March 31, 2013. However, with the issuance of
$500 million of long-term debt on January 11, 2013, as described above, our remaining availability has been reduced to $400 million. We intend to file a new shelf registration statement with the SEC for $1.75 billion prior to the expiration of
the current shelf registration statement.
Debt Covenants
The availability of funds under our regulated credit facilities is subject to conditions specified in the respective credit agreements,
all of which we currently satisfy. These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in these agreements. We are required by the financial covenants in each of
these facilities to maintain, at the end of each fiscal quarter, a ratio of total debt to total capitalization of no greater than 70 percent. At December 31, 2012, our total-debt-to-total-capitalization ratio, as defined in the agreements, was
55 percent. In addition, both the interest margin and the fee that we pay on unused amounts under each of these facilities are subject to adjustment depending upon our credit ratings.
In addition to these financial covenants, our credit facilities and public debt indentures contain usual and customary covenants for our
business, including covenants substantially limiting liens, substantial asset sales and mergers.
Additionally, our public debt
indentures relating to our senior notes and debentures, as well as our revolving credit agreements, each contain a default provision that is triggered if outstanding indebtedness arising out of any other credit agreements in amounts ranging from in
excess of $15 million to in excess of $100 million becomes due by acceleration or is not paid at maturity.
We were in
compliance with all of our debt covenants as of December 31, 2012. If we were unable to comply with our debt covenants, we would likely be required to repay our outstanding balances on demand, provide additional collateral or take other
corrective actions.
23
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Earnings Per Share
Since we have non-vested share-based payments with a nonforfeitable right to dividends or dividend equivalents (referred to as
participating securities) we are required to use the two-class method of computing earnings per share. The Companys non-vested restricted stock units, for which vesting is predicated solely on the passage of time granted under the 1998
Long-Term Incentive Plan, are considered to be participating securities. The calculation of earnings per share using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive
impact of those shares from the denominator. Basic and diluted earnings per share for the three months ended December 31, 2012 and 2011 are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(In thousands, except
per share amounts)
|
|
Basic Earnings Per Share from continuing operations
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
77,348
|
|
|
$
|
62,384
|
|
Less: Income from continuing operations allocated to participating securities
|
|
|
260
|
|
|
|
650
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common shareholders
|
|
$
|
77,088
|
|
|
$
|
61,734
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,359
|
|
|
|
90,254
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per share Basic
|
|
$
|
0.85
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share from discontinued operations
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$
|
3,117
|
|
|
$
|
6,123
|
|
Less: Income from discontinued operations allocated to participating securities
|
|
|
10
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations available to common shareholders
|
|
$
|
3,107
|
|
|
$
|
6,059
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,359
|
|
|
|
90,254
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations per share Basic
|
|
$
|
0.04
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Net income per share Basic
|
|
$
|
0.89
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
24
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(In thousands, except
per share amounts)
|
|
Diluted Earnings Per Share from continuing operations
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common shareholders
|
|
$
|
77,088
|
|
|
$
|
61,734
|
|
Effect of dilutive stock options and other shares
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common shareholders
|
|
$
|
77,090
|
|
|
$
|
61,735
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,359
|
|
|
|
90,254
|
|
Additional dilutive stock options and other shares
|
|
|
950
|
|
|
|
292
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
91,309
|
|
|
|
90,546
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations per share Diluted
|
|
$
|
0.85
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
Diluted Earnings Per Share from discontinued operations
|
|
|
|
|
|
|
|
|
Income from discontinued operations available to common shareholders
|
|
$
|
3,107
|
|
|
$
|
6,059
|
|
Effect of dilutive stock options and other shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations available to common shareholders
|
|
$
|
3,107
|
|
|
$
|
6,059
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
90,359
|
|
|
|
90,254
|
|
Additional dilutive stock options and other shares
|
|
|
950
|
|
|
|
292
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
91,309
|
|
|
|
90,546
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations per share Diluted
|
|
$
|
0.03
|
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
Net income per share Diluted
|
|
$
|
0.88
|
|
|
$
|
0.75
|
|
|
|
|
|
|
|
|
|
|
There were no out-of-the-money stock options excluded from the computation of diluted earnings per share
for the three months ended December 31, 2012 and 2011 as their exercise price was less than the average market price of the common stock during that period.
25
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Interim Pension and Other Postretirement Benefit Plan Information
The components of our net periodic pension cost for our pension and other postretirement benefit plans for the three
months ended December 31, 2012 and 2011 are presented in the following table. Most of these costs are recoverable through our gas distribution rates; however, a portion of these costs is capitalized into our gas distribution rate base. The
remaining costs are recorded as a component of operation and maintenance expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
(In thousands)
|
|
Components of net periodic pension cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
5,202
|
|
|
$
|
4,298
|
|
|
$
|
4,700
|
|
|
$
|
4,088
|
|
Interest cost
|
|
|
6,025
|
|
|
|
6,677
|
|
|
|
3,241
|
|
|
|
3,465
|
|
Expected return on assets
|
|
|
(5,739
|
)
|
|
|
(5,368
|
)
|
|
|
(997
|
)
|
|
|
(652
|
)
|
Amortization of transition asset
|
|
|
|
|
|
|
|
|
|
|
270
|
|
|
|
378
|
|
Amortization of prior service cost
|
|
|
(35
|
)
|
|
|
(35
|
)
|
|
|
(362
|
)
|
|
|
(362
|
)
|
Amortization of actuarial loss
|
|
|
5,561
|
|
|
|
4,142
|
|
|
|
1,049
|
|
|
|
662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
11,014
|
|
|
$
|
9,714
|
|
|
$
|
7,901
|
|
|
$
|
7,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The assumptions used to develop our net periodic pension cost for the three months ended December 31,
2012 and 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Discount rate
|
|
|
4.04
|
%
|
|
|
5.05
|
%
|
|
|
4.04
|
%
|
|
|
5.05
|
%
|
Rate of compensation increase
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Expected return on plan assets
|
|
|
7.75
|
%
|
|
|
7.75
|
%
|
|
|
4.70
|
%
|
|
|
4.70
|
%
|
The discount rate used to compute the present value of a plans liabilities generally is based on
rates of high-grade corporate bonds with maturities similar to the average period over which the benefits will be paid. Generally, our funding policy has been to contribute annually an amount in accordance with the requirements of the Employee
Retirement Income Security Act of 1974. We contributed $6.2 million to our pension plans during the three months ended December 31, 2012. In accordance with the Pension Protection Act of 2006 (PPA), we determined the funded status of our plans
as of January 1, 2013. We expect to contribute a total of between $30 million and $40 million to our pension plans during fiscal 2013.
We contributed $6.2 million to our other post-retirement benefit plans during the three months ended December 31, 2012. We expect to contribute a total of between $25 million and $30 million to these
plans during fiscal 2013.
9. Commitments and Contingencies
Litigation and Environmental Matters
With respect to the specific litigation and environmental-related matters or claims that were disclosed in Note 13 to the financial statements in our Annual Report on Form 10-K for the fiscal
year ended September 30, 2012, except as noted below, there were no material changes in the status of such litigation and environmental-related matters or claims during the three months ended December 31, 2012.
26
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Since September 2009, Atmos Energy and two subsidiaries of AEH, Atmos Energy Marketing,
LLC (AEM) and Atmos Gathering Company, LLC (AGC) (collectively, the Atmos Entities), have been involved in a lawsuit filed in the Circuit Court of Edmonson County, Kentucky related to our Park City Gathering Project. The dispute which gave rise to
the litigation involves the amount of royalties due from a third party producer to landowners (who own the mineral rights) for natural gas produced from the landowners properties. The third party producer was operating pursuant to leases
between the landowners and certain investors/working interest owners. The third party producer filed a petition in bankruptcy, which was subsequently dismissed due to the lack of meaningful assets to reorganize or liquidate.
Although certain Atmos Energy companies entered into contracts with the third party producer to gather, treat and ultimately sell natural
gas produced from the landowners properties, no Atmos Energy company had a contractual relationship with the landowners or the investors/working interest owners. After the lawsuit was filed, the landowners were successful in terminating for
non-payment of royalties the leases related to the production of natural gas from their properties. Subsequent to termination, the investors/working interest owners under such leases filed additional claims against us for the termination of the
leases.
During the trial, the landowners and the investors/working interest owners requested an award of compensatory damages
plus punitive damages against us. On December 17, 2010, the jury returned a verdict in favor of the landowners and investor/working interest owners and awarded compensatory damages of $3.8 million and punitive damages of $27.5 million payable
by Atmos Energy and the two AEH subsidiaries.
A hearing was held on February 28, 2011 to hear a number of motions,
including a motion to dismiss the jury verdict and a motion for a new trial. The motions to dismiss the jury verdict and for a new trial were denied. However, the total punitive damages award was reduced from $27.5 million to $24.7 million. On
October 17, 2011, we filed our brief of appellants with the Kentucky Court of Appeals (Court), appealing the verdict of the trial court. The appellees in this case subsequently filed their appellees brief with the Court on
January 16, 2012, with our reply brief being filed with the Court on March 19, 2012. Oral arguments were held in the case on August 27, 2012.
In an opinion handed down on January 25, 2013, the Kentucky Court of Appeals overturned the $28.5 million jury verdict returned against the Atmos Entities. In a unanimous decision by a three-judge
panel, the Court of Appeals reversed the claims asserted by the landowners and investors/working interest owners. The Court of Appeals concluded that all of such claims that the Atmos Entities appealed should have been dismissed by the trial court
as a matter of law. The Court of Appeals let stand the jury verdict on one claim that Atmos Energy and our subsidiaries chose not to appeal, which was a trespass claim. The jury had awarded a total of $10,000 in compensatory damages to one landowner
on that claim. The Court of Appeals vacated all of the other damages awarded by the jury and remanded the case to the trial court for a new trial, solely on the issue of whether punitive damages should be awarded to that landowner and, if so, in
what amount.
The landowners and investors/working interest owners may seek discretionary review from the Supreme Court of
Kentucky. The decision of the Court of Appeals will not become final until that process is completed. We had previously accrued what we believed to be an adequate amount for the anticipated resolution of this matter and we will continue to maintain
this amount in legal reserves until the appellate process in this case has been completed. We continue to believe that the final outcome will not have a material adverse effect on our financial condition, results of operations or cash flows.
In addition, in a related development, on July 12, 2011, the Atmos Entities filed a lawsuit in the United States District
Court, Western District of Kentucky,
Atmos Energy Corporation et al.vs. Resource Energy Technologies, LLC and Robert Thorpe and John F. Charles
, against the third party producer and its affiliates to recover all costs, including
attorneys fees, incurred by the Atmos Entities, which are associated with the defense and appeal of the case discussed above as well as for all damages awarded to the plaintiffs in such case against the Atmos Entities. The total amount of
damages being claimed in the lawsuit is open-ended since the appellate
27
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
process and related costs are ongoing. This lawsuit is based upon the indemnification provisions agreed to by the third party producer in favor of Atmos Gathering that are contained in an
agreement entered into between Atmos Gathering and the third party producer in May 2009. The defendants filed a motion to dismiss the case on August 25, 2011, with Atmos Energy filing a brief in response to such motion on September 19,
2011. On March 27, 2012 the court denied the motion to dismiss. Since that time, we have continued to be engaged in discovery activities in this case.
We are a party to other litigation and environmental-related matters or claims that have arisen in the ordinary course of our business. While the results of such litigation and response actions to such
environmental-related matters or claims cannot be predicted with certainty, we continue to believe the final outcome of such litigation and matters or claims will not have a material adverse effect on our financial condition, results of operations
or cash flows.
Purchase Commitments
AEH has commitments to purchase physical quantities of natural gas under contracts indexed to the forward NYMEX strip or fixed price contracts. At December 31, 2012, AEH was committed to purchase
67.2 Bcf within one year, 25.1 Bcf within one to three years and 26.5 Bcf after three years under indexed contracts. AEH is committed to purchase 3.7 Bcf within one year and less than 0.1 Bcf within one to three years under fixed price contracts
with prices ranging from $2.98 to $6.36 per Mcf. Purchases under these contracts totaled $289.5 million and $312.1 million for the three months ended December 31, 2012 and 2011.
Our natural gas distribution divisions, except for our Mid-Tex Division, maintain supply contracts with several vendors that generally
cover a period of up to one year. Commitments for estimated base gas volumes are established under these contracts on a monthly basis at contractually negotiated prices. Commitments for incremental daily purchases are made as necessary during the
month in accordance with the terms of the individual contract.
Our Mid-Tex Division maintains long-term supply contracts to
ensure a reliable source of gas for our customers in its service area which obligate it to purchase specified volumes at market and fixed prices. The estimated commitments under these contracts as of December 31, 2012 are as follows (in
thousands):
|
|
|
|
|
2013
|
|
$
|
174,615
|
|
2014
|
|
|
73,682
|
|
2015
|
|
|
|
|
2016
|
|
|
|
|
2017
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
$
|
248,297
|
|
|
|
|
|
|
Our nonregulated segment maintains long-term contracts related to storage and transportation. The
estimated contractual demand fees for contracted storage and transportation under these contracts are detailed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. There were no material changes to the estimated
storage and transportation fees for the quarter ended December 31, 2012.
Regulatory Matters
In July 2010, the Dodd-Frank Act was enacted, representing an extensive overhaul of the framework for regulation of U.S. financial
markets. The Dodd-Frank Act calls for various regulatory agencies, including the SEC and the Commodities Futures Trading Commission (CFTC) to establish rules and regulations for implementation of many of the provisions of the Dodd-Frank Act.
Although the CFTC and SEC have issued a
28
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
number of rules and regulations, we expect additional rules and regulations to be adopted, which should provide additional clarity regarding the extent of the impact of this legislation on us.
The costs of participating in financial markets for hedging certain risks inherent in our business have been increased as a result of the new legislation and related rules and regulations. We also anticipate additional reporting and disclosure
obligations will be imposed through the adoption of additional rules and regulations.
As of December 31, 2012, rate
proceedings were in progress in our Kansas, Colorado, Louisiana and Georgia service areas. These regulatory proceedings are discussed in further detail below in
Managements Discussion and Analysis Recent Ratemaking Developments
.
10. Concentration of Credit Risk
Information regarding our concentration of credit risk is disclosed in Note 15 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. During the
three months ended December 31, 2012, there were no material changes in our concentration of credit risk.
11. Segment Information
As discussed in Note 1 above, we operate the Company through the following three segments:
|
|
|
The
natural gas distribution segment
, which includes our regulated natural gas distribution and related sales operations,
|
|
|
|
The
regulated transmission and storage segment
, which includes the regulated pipeline and storage operations of our Atmos Pipeline Texas
Division and
|
|
|
|
The
nonregulated segment
, which is comprised of our nonregulated natural gas management, nonregulated natural gas transmission, storage and
other services.
|
Our determination of reportable segments considers the strategic operating units under which
we manage sales of various products and services to customers in differing regulatory environments. Although our natural gas distribution segment operations are geographically dispersed, they are reported as a single segment as each natural gas
distribution division has similar economic characteristics. The accounting policies of the segments are the same as those described in the summary of significant accounting policies found in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2012. We evaluate performance based on net income or loss of the respective operating units.
29
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income statements for the three month periods ended December 31, 2012 and 2011 by
segment are presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2012
|
|
|
|
Natural
Gas
Distribution
|
|
|
Regulated
Transmission
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Operating revenues from external parties
|
|
$
|
665,549
|
|
|
$
|
18,699
|
|
|
$
|
349,907
|
|
|
$
|
|
|
|
$
|
1,034,155
|
|
Intersegment revenues
|
|
|
1,238
|
|
|
|
41,982
|
|
|
|
49,987
|
|
|
|
(93,207
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
666,787
|
|
|
|
60,681
|
|
|
|
399,894
|
|
|
|
(93,207
|
)
|
|
|
1,034,155
|
|
Purchased gas cost
|
|
|
387,156
|
|
|
|
|
|
|
|
377,435
|
|
|
|
(92,798
|
)
|
|
|
671,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
279,631
|
|
|
|
60,681
|
|
|
|
22,459
|
|
|
|
(409
|
)
|
|
|
362,362
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
83,736
|
|
|
|
16,320
|
|
|
|
6,882
|
|
|
|
(411
|
)
|
|
|
106,527
|
|
Depreciation and amortization
|
|
|
50,060
|
|
|
|
8,390
|
|
|
|
1,129
|
|
|
|
|
|
|
|
59,579
|
|
Taxes, other than income
|
|
|
36,751
|
|
|
|
3,949
|
|
|
|
634
|
|
|
|
|
|
|
|
41,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
170,547
|
|
|
|
28,659
|
|
|
|
8,645
|
|
|
|
(411
|
)
|
|
|
207,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
109,084
|
|
|
|
32,022
|
|
|
|
13,814
|
|
|
|
2
|
|
|
|
154,922
|
|
Miscellaneous income (expense)
|
|
|
(131
|
)
|
|
|
(127
|
)
|
|
|
1,667
|
|
|
|
(711
|
)
|
|
|
698
|
|
Interest charges
|
|
|
23,563
|
|
|
|
6,871
|
|
|
|
797
|
|
|
|
(709
|
)
|
|
|
30,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
85,390
|
|
|
|
25,024
|
|
|
|
14,684
|
|
|
|
|
|
|
|
125,098
|
|
Income tax expense
|
|
|
32,297
|
|
|
|
8,919
|
|
|
|
6,534
|
|
|
|
|
|
|
|
47,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
53,093
|
|
|
|
16,105
|
|
|
|
8,150
|
|
|
|
|
|
|
|
77,348
|
|
Income from discontinued operations, net of tax
|
|
|
3,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
56,210
|
|
|
$
|
16,105
|
|
|
$
|
8,150
|
|
|
$
|
|
|
|
$
|
80,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
145,871
|
|
|
$
|
43,831
|
|
|
$
|
325
|
|
|
$
|
|
|
|
$
|
190,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2011
|
|
|
|
Natural
Gas
Distribution
|
|
|
Regulated
Transmission
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
Operating revenues from external parties
|
|
$
|
675,889
|
|
|
$
|
19,440
|
|
|
$
|
388,665
|
|
|
$
|
|
|
|
$
|
1,083,994
|
|
Intersegment revenues
|
|
|
224
|
|
|
|
37,319
|
|
|
|
55,511
|
|
|
|
(93,054
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
676,113
|
|
|
|
56,759
|
|
|
|
444,176
|
|
|
|
(93,054
|
)
|
|
|
1,083,994
|
|
Purchased gas cost
|
|
|
392,518
|
|
|
|
|
|
|
|
428,771
|
|
|
|
(92,687
|
)
|
|
|
728,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
283,595
|
|
|
|
56,759
|
|
|
|
15,405
|
|
|
|
(367
|
)
|
|
|
355,392
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operation and maintenance
|
|
|
91,996
|
|
|
|
16,965
|
|
|
|
6,051
|
|
|
|
(368
|
)
|
|
|
114,644
|
|
Depreciation and amortization
|
|
|
49,982
|
|
|
|
7,651
|
|
|
|
733
|
|
|
|
|
|
|
|
58,366
|
|
Taxes, other than income
|
|
|
38,192
|
|
|
|
3,784
|
|
|
|
935
|
|
|
|
|
|
|
|
42,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
180,170
|
|
|
|
28,400
|
|
|
|
7,719
|
|
|
|
(368
|
)
|
|
|
215,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
103,425
|
|
|
|
28,359
|
|
|
|
7,686
|
|
|
|
1
|
|
|
|
139,471
|
|
Miscellaneous income (expense)
|
|
|
(1,897
|
)
|
|
|
(280
|
)
|
|
|
36
|
|
|
|
125
|
|
|
|
(2,016
|
)
|
Interest charges
|
|
|
28,139
|
|
|
|
7,209
|
|
|
|
252
|
|
|
|
126
|
|
|
|
35,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
73,389
|
|
|
|
20,870
|
|
|
|
7,470
|
|
|
|
|
|
|
|
101,729
|
|
Income tax expense
|
|
|
28,888
|
|
|
|
7,456
|
|
|
|
3,001
|
|
|
|
|
|
|
|
39,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
44,501
|
|
|
|
13,414
|
|
|
|
4,469
|
|
|
|
|
|
|
|
62,384
|
|
Income from discontinued operations, net of tax
|
|
|
6,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
50,624
|
|
|
$
|
13,414
|
|
|
$
|
4,469
|
|
|
$
|
|
|
|
$
|
68,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
128,733
|
|
|
$
|
24,120
|
|
|
$
|
1,541
|
|
|
$
|
|
|
|
$
|
154,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Balance sheet information at December 31, 2012 and September 30, 2012 by
segment is presented in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Natural
Gas
Distribution
|
|
|
Regulated
Transmission
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
4,523,922
|
|
|
$
|
1,007,904
|
|
|
$
|
63,468
|
|
|
$
|
|
|
|
$
|
5,595,294
|
|
Investment in subsidiaries
|
|
|
771,387
|
|
|
|
|
|
|
|
(2,096
|
)
|
|
|
(769,291
|
)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
77,136
|
|
|
|
|
|
|
|
47,465
|
|
|
|
|
|
|
|
124,601
|
|
Assets from risk management activities
|
|
|
1,773
|
|
|
|
|
|
|
|
17,857
|
|
|
|
|
|
|
|
19,630
|
|
Other current assets
|
|
|
770,366
|
|
|
|
14,632
|
|
|
|
471,582
|
|
|
|
(236,177
|
)
|
|
|
1,020,403
|
|
Intercompany receivables
|
|
|
624,637
|
|
|
|
|
|
|
|
|
|
|
|
(624,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,473,912
|
|
|
|
14,632
|
|
|
|
536,904
|
|
|
|
(860,814
|
)
|
|
|
1,164,634
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
|
|
153
|
|
Goodwill
|
|
|
573,550
|
|
|
|
132,422
|
|
|
|
34,711
|
|
|
|
|
|
|
|
740,683
|
|
Noncurrent assets from risk management activities
|
|
|
11,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,610
|
|
Deferred charges and other assets
|
|
|
429,252
|
|
|
|
15,787
|
|
|
|
6,805
|
|
|
|
|
|
|
|
451,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,783,633
|
|
|
$
|
1,170,745
|
|
|
$
|
639,945
|
|
|
$
|
(1,630,105
|
)
|
|
$
|
7,964,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
$
|
2,424,005
|
|
|
$
|
344,266
|
|
|
$
|
427,121
|
|
|
$
|
(771,387
|
)
|
|
$
|
2,424,005
|
|
Long-term debt
|
|
|
1,956,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,956,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
4,380,381
|
|
|
|
344,266
|
|
|
|
427,121
|
|
|
|
(771,387
|
)
|
|
|
4,380,381
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
131
|
|
Short-term debt
|
|
|
1,045,180
|
|
|
|
|
|
|
|
|
|
|
|
(214,289
|
)
|
|
|
830,891
|
|
Liabilities from risk management activities
|
|
|
77,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,500
|
|
Other current liabilities
|
|
|
590,710
|
|
|
|
13,470
|
|
|
|
152,141
|
|
|
|
(19,792
|
)
|
|
|
736,529
|
|
Intercompany payables
|
|
|
|
|
|
|
573,006
|
|
|
|
51,631
|
|
|
|
(624,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,713,390
|
|
|
|
586,476
|
|
|
|
203,903
|
|
|
|
(858,718
|
)
|
|
|
1,645,051
|
|
Deferred income taxes
|
|
|
823,073
|
|
|
|
238,285
|
|
|
|
4,915
|
|
|
|
|
|
|
|
1,066,273
|
|
Noncurrent liabilities from risk management activities
|
|
|
|
|
|
|
|
|
|
|
2,860
|
|
|
|
|
|
|
|
2,860
|
|
Regulatory cost of removal obligation
|
|
|
371,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
371,608
|
|
Deferred credits and other liabilities
|
|
|
495,181
|
|
|
|
1,718
|
|
|
|
1,146
|
|
|
|
|
|
|
|
498,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,783,633
|
|
|
$
|
1,170,745
|
|
|
$
|
639,945
|
|
|
$
|
(1,630,105
|
)
|
|
$
|
7,964,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
|
Natural
Gas
Distribution
|
|
|
Regulated
Transmission
and Storage
|
|
|
Nonregulated
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
4,432,017
|
|
|
$
|
979,443
|
|
|
$
|
64,144
|
|
|
$
|
|
|
|
$
|
5,475,604
|
|
Investment in subsidiaries
|
|
|
747,496
|
|
|
|
|
|
|
|
(2,096
|
)
|
|
|
(745,400
|
)
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
12,787
|
|
|
|
|
|
|
|
51,452
|
|
|
|
|
|
|
|
64,239
|
|
Assets from risk management activities
|
|
|
6,934
|
|
|
|
|
|
|
|
17,773
|
|
|
|
|
|
|
|
24,707
|
|
Other current assets
|
|
|
546,187
|
|
|
|
11,788
|
|
|
|
404,097
|
|
|
|
(223,056
|
)
|
|
|
739,016
|
|
Intercompany receivables
|
|
|
636,557
|
|
|
|
|
|
|
|
|
|
|
|
(636,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,202,465
|
|
|
|
11,788
|
|
|
|
473,322
|
|
|
|
(859,613
|
)
|
|
|
827,962
|
|
Intangible assets
|
|
|
|
|
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
164
|
|
Goodwill
|
|
|
573,550
|
|
|
|
132,422
|
|
|
|
34,711
|
|
|
|
|
|
|
|
740,683
|
|
Noncurrent assets from risk management activities
|
|
|
2,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,283
|
|
Deferred charges and other assets
|
|
|
417,893
|
|
|
|
24,353
|
|
|
|
6,733
|
|
|
|
|
|
|
|
448,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,375,704
|
|
|
$
|
1,148,006
|
|
|
$
|
576,978
|
|
|
$
|
(1,605,013
|
)
|
|
$
|
7,495,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
$
|
2,359,243
|
|
|
$
|
328,161
|
|
|
$
|
419,335
|
|
|
$
|
(747,496
|
)
|
|
$
|
2,359,243
|
|
Long-term debt
|
|
|
1,956,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,956,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
4,315,548
|
|
|
|
328,161
|
|
|
|
419,335
|
|
|
|
(747,496
|
)
|
|
|
4,315,548
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
131
|
|
|
|
|
|
|
|
131
|
|
Short-term debt
|
|
|
782,719
|
|
|
|
|
|
|
|
|
|
|
|
(211,790
|
)
|
|
|
570,929
|
|
Liabilities from risk management activities
|
|
|
85,366
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
85,381
|
|
Other current liabilities
|
|
|
526,089
|
|
|
|
12,478
|
|
|
|
90,116
|
|
|
|
(9,170
|
)
|
|
|
619,513
|
|
Intercompany payables
|
|
|
|
|
|
|
584,578
|
|
|
|
51,979
|
|
|
|
(636,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,394,174
|
|
|
|
597,056
|
|
|
|
142,241
|
|
|
|
(857,517
|
)
|
|
|
1,275,954
|
|
Deferred income taxes
|
|
|
789,288
|
|
|
|
220,647
|
|
|
|
5,148
|
|
|
|
|
|
|
|
1,015,083
|
|
Noncurrent liabilities from risk management activities
|
|
|
|
|
|
|
|
|
|
|
9,206
|
|
|
|
|
|
|
|
9,206
|
|
Regulatory cost of removal obligation
|
|
|
381,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
381,164
|
|
Deferred credits and other liabilities
|
|
|
495,530
|
|
|
|
2,142
|
|
|
|
1,048
|
|
|
|
|
|
|
|
498,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,375,704
|
|
|
$
|
1,148,006
|
|
|
$
|
576,978
|
|
|
$
|
(1,605,013
|
)
|
|
$
|
7,495,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33