Filed Pursuant to Rule 424(b)(2)
Registration No. 333-75576
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 30, 2002)
$250,000,000
(ATMOS ENERGY CORP. LOGO)
ATMOS ENERGY CORPORATION
5 1/8% SENIOR NOTES DUE 2013
---------------------
The notes will bear interest at the rate of 5 1/8% per year. Interest on
the notes will be payable on January 15 and July 15 of each year, beginning July
15, 2003. The notes will mature on January 15, 2013. We may redeem the notes at
any time prior to maturity, in whole or in part, at a redemption price described
in this prospectus supplement. See "Description of the Notes -- Optional
Redemption."
The notes are unsecured and rank equally with all of our other existing and
future unsubordinated debt. The notes will be issued only in registered form in
denominations of $1,000 and integral multiples of $1,000.
The notes will not be listed on any securities exchange or included in any
automated quotation system.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL AND COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
PRICE TO UNDERWRITING PROCEEDS, BEFORE
INVESTORS(1) DISCOUNT EXPENSES, TO US
------------ ------------ ----------------
Per Note................................ 99.915% 0.650% 99.265%
Total................................... $249,787,500 $1,625,000 $248,162,500
---------------
(1) Plus accrued interest from January 16, 2003, if settlement occurs after that
date.
The notes are expected to be delivered in book-entry form through The
Depository Trust Company on or about January 16, 2003.
---------------------
BANC ONE CAPITAL MARKETS, INC.
---------------------
SG COWEN
SUNTRUST ROBINSON HUMPHREY
WACHOVIA SECURITIES
BANC OF AMERICA SECURITIES LLC
KBC FINANCIAL PRODUCTS USA INC.
U.S. BANCORP PIPER JAFFRAY
HIBERNIA SOUTHCOAST CAPITAL, INC.
---------------------
The date of this prospectus supplement is January 13, 2003.
We have not, and the underwriters have not, authorized any other person to
provide you with any information or to make any representations not contained in
this prospectus supplement or the accompanying prospectus. If anyone provides
you with different or inconsistent information, you should not rely on it. We
are not, and the underwriters are not, making an offer of any securities other
than the notes. This document is in two parts. The first is this prospectus
supplement, which describes specific terms of the notes we are currently
offering and other matters relating to us and our financial condition. The
second part is the accompanying prospectus dated January 30, 2002, which gives
more general information about securities we may offer from time to time, some
of which may not apply to the notes we are currently offering. If the
description of the offering or our operations varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement. You should assume that the information appearing
in this prospectus supplement and the accompanying prospectus, as well as the
information contained in any document incorporated by reference, is accurate as
of the date of such document only.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Incorporation by Reference.................................. ii
Cautionary Statement Regarding Forward-Looking Statements... iii
Prospectus Supplement Summary............................... S-1
Use of Proceeds............................................. S-4
Ratio of Earnings to Fixed Charges.......................... S-4
Capitalization.............................................. S-5
Business.................................................... S-6
Description of the Notes.................................... S-13
Underwriting................................................ S-16
Legal Matters............................................... S-17
Experts..................................................... S-17
PROSPECTUS
Cautionary Statement Regarding Forward-Looking Statements... ii
Atmos Energy Corporation.................................... 1
Use of Proceeds............................................. 1
Ratio of Earnings to Fixed Charges.......................... 2
Securities We May Issue..................................... 2
Description of Debt Securities.............................. 3
Description of Common Stock................................. 18
Plan of Distribution........................................ 20
Legal Matters............................................... 21
Experts..................................................... 21
Where You Can Find More Information......................... 21
Incorporation of Certain Documents by Reference............. 22
---------------------
The distribution of this prospectus supplement and the accompanying
prospectus, and the offering of the notes, may be restricted by law in certain
jurisdictions. You should inform yourself about, and observe, any of these
restrictions. This prospectus supplement and the accompanying prospectus do not
constitute, and may not be used in connection with, an offer or solicitation by
anyone in any jurisdiction in which the offer or solicitation is not authorized,
or in which the person making the offer or solicitation is not qualified to do
so, or to any person to whom it is unlawful to make the offer or solicitation.
i
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus supplement and the accompanying prospectus that we have filed with
it. This means that we can disclose important information to you by referring
you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus supplement
and the accompanying prospectus, except for any information that is superseded
by information that is included directly in this document. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
prior to the termination of our offering of securities.
This prospectus supplement and the accompanying prospectus incorporate by
reference our annual report on Form 10-K for the year ended September 30, 2002,
our current reports on Form 8-K and Form 8-K/A filed with the SEC on December
16, 2002 and December 18, 2002, respectively, and our proxy statement dated
December 27, 2002, each of which we have previously filed with the SEC but have
not included or delivered with this document. These documents contain important
information about us and our financial condition.
You may obtain a copy of any of these filings from us without charge by
requesting it in writing or by telephone from us at the following address or
telephone number:
ATMOS ENERGY CORPORATION
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Attention: Susan C. Kappes
(972) 934-9227
ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus supplement that are not statements
of historical fact are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933. Forward-looking statements are based
on management's beliefs as well as assumptions made by, and information
currently available to, management. Because such statements are based on
expectations as to future economic performance and are not statements of fact,
actual results may differ materially from those stated. Important factors that
could cause future results to differ include, but are not limited to:
- warmer than normal weather in our service territories, or other weather
conditions, that would be adverse to our business;
- national, regional and local economic conditions;
- competition from other energy suppliers and alternative forms of energy;
- regulatory and business trends and decisions, including the impact of
pending rate proceedings before various state regulatory commissions;
- successful completion, financing and integration of acquisitions;
- inflation and the volatility of commodity prices for natural gas;
- hedging and market risk factors;
- further deregulation or "unbundling" of the natural gas distribution
industry; and
- other factors discussed in this prospectus supplement and our other
filings with the SEC.
All of these factors are difficult to predict and many are beyond our control.
Accordingly, while we believe 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. When used in our documents
or oral presentations, the words "anticipate," "believe," "estimate," "expect,"
"objective," "projection," "forecast," "goal," "strategy" or similar words are
intended to identify forward-looking statements. We undertake no obligation to
update or revise our forward-looking statements, whether as a result of new
information, future events or otherwise. For further factors you should
consider, please refer to the Management's Discussion and Analysis of Financial
Condition and Results of Operations in our annual report on Form 10-K for the
fiscal year ended September 30, 2002.
---------------------
The terms "we", "our" and "us" refer to Atmos Energy Corporation unless the
context suggests otherwise. The term "you" refers to a prospective investor. The
abbreviations "Mcf", "MMcf" and "Bcf" mean thousand cubic feet, million cubic
feet and billion cubic feet, respectively.
iii
PROSPECTUS SUPPLEMENT SUMMARY
You should read the following summary in conjunction with the more detailed
information contained elsewhere in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference in this prospectus
supplement and the accompanying prospectus.
ATMOS ENERGY
We distribute and sell natural gas to approximately 1.7 million
residential, commercial, public authority and industrial customers. We operate
through six divisions covering service areas located in Colorado, Georgia,
Illinois, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Tennessee,
Texas and Virginia. In addition, we transport natural gas for others through our
distribution system.
We provide natural gas management and marketing services to industrial
customers, municipalities and other local distribution companies. We own or hold
an interest in natural gas storage fields in Kansas, Kentucky, Louisiana and
Mississippi to supplement natural gas used by our customers. We also market
natural gas to industrial and agricultural customers primarily in West Texas and
to industrial customers in Louisiana. In addition, we construct electrical power
generating plants and associated facilities and sell or lease them to
municipalities and industrial customers.
Our operations are divided into three segments:
- the utility operations segment, which includes our related natural gas
distribution and sales operations, which, for the year ended September
30, 2002, represented approximately 72.1% of our net income;
- the natural gas marketing segment, which includes a variety of natural
gas management services, which, for the year ended September 30, 2002,
represented approximately 21.1% of our net income; and
- our other non-utility segment, which includes all of our other
non-utility operations, which, for the year ended September 30, 2002,
represented approximately 6.8% of our net income.
Our utility operations segment currently operates in 12 states. Our natural
gas marketing and other non-utility segments currently operate in 20 states.
RECENT DEVELOPMENTS
National Brand. On October 1, 2002, we united all of our utility
operations under the "Atmos Energy" brand. Five of our utility divisions now
conduct operations as regional divisions under the common Atmos Energy brand,
and our sixth division, the recently acquired Mississippi Valley Gas Company
division, continues to operate under the Mississippi Valley Gas Company name.
Completion of Acquisition of Mississippi Valley Gas Company. On December
3, 2002, we completed our acquisition of Mississippi Valley Gas Company, a
privately held natural gas utility, for approximately $150 million, which
consisted of approximately $74.7 million in cash and 3,386,287 shares of our
common stock. In addition, we paid approximately $71.8 million to repay long and
short-term debt of Mississippi Valley Gas Company. Mississippi Valley Gas
Company provides natural gas distribution service to approximately 261,500
residential, commercial, industrial and other customers located primarily in the
northern and central regions of Mississippi. Mississippi Valley Gas Company has
a 5,500 mile distribution system and 335 miles of intrastate pipeline. It also
has two underground storage facilities with combined 2.05 Bcf of working gas
capacity.
Changes in Accounting for Natural Gas Transactions and Inventory. As a
result of the recent rescission of Emerging Issues Task Force Nos. 98-10 and
00-17, we will not be permitted to mark-to-market some of our unregulated
natural gas sales, storage and transportation contracts and our natural gas
storage inventory. The cumulative effect of this change in accounting will
depend on the number and
S-1
the valuation of our sales, storage and transportation contracts and our natural
gas storage inventory level and valuation at the time we adopt the new rules.
This change in accounting rules is effective for new contracts entered into and
natural gas inventory purchased after October 25, 2002 and for fiscal periods
(quarters) beginning after December 15, 2002. We may, however, elect to adopt
the change in accounting as of October 1, 2002. We are currently evaluating the
impact of this change on our financial condition, results of operations and cash
flows and the date that we will elect to adopt the change in accounting.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents our selected consolidated financial data as of
the dates and the periods indicated. The selected consolidated financial data
for our fiscal years 2002, 2001, 2000, 1999 and 1998 are derived from our
audited consolidated financial statements. Some prior year amounts have been
reclassified to conform with the current year presentation.
The information in the following table is only a summary and does not
provide all of the information contained in our financial statements. Therefore,
you should read the information presented below in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
in our annual report for the fiscal year ended September 30, 2002, which is
incorporated by reference in this prospectus supplement.
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
Operating revenues............... $ 950,849 $1,442,275 $ 850,152 $ 690,196 $ 848,208
Net income....................... 59,656 56,090 35,918 17,744 55,265
Operating expenses............... 275,809 244,927 240,390 245,555 218,957
Operating income................. 155,331 130,281 85,316 54,239 112,879
Total assets..................... $1,980,221 $2,036,180 $1,348,758 $1,230,537 $1,141,390
Debt
Long-term debt.............. $ 670,463 $ 692,399 $ 363,198 $ 377,483 $ 398,548
Short-term debt............. 167,771 221,942 267,613 186,152 124,183
---------- ---------- ---------- ---------- ----------
Total debt..................... $ 838,234 $ 914,341 $ 630,811 $ 563,635 $ 522,731
S-2
THE OFFERING
Issuer........................ Atmos Energy Corporation
Securities Offered............ $250,000,000 in principal amount of 5 1/8%
senior notes due 2013.
Maturity...................... January 15, 2013.
Interest...................... 5 1/8% per annum payable on January 15 and July
15 of each year, beginning July 15, 2003.
Ranking....................... The notes will be unsecured unsubordinated debt
of Atmos and will rank equally with all of our
existing and future unsubordinated debt. All
our secured debt will have a prior claim with
respect to the assets securing that debt.
Optional Redemption........... We may redeem the notes, in whole or in part,
at any time prior to maturity, at a redemption
price equal to the greater of the principal
amount of the notes being redeemed and the
"make-whole" redemption price, plus in each
case, accrued and unpaid interest, if any, to
the redemption date, as described in
"Description of the Notes -- Optional
Redemption" on page S-14.
Covenants of the Indenture.... We will issue the notes under the indenture
which will, among other things, restrict our
ability to create liens and to enter into sale
and leaseback transactions. See "Description of
Debt Securities -- Covenants" in the
accompanying prospectus on page 8.
Use of Proceeds............... We intend to use the net proceeds from the
offering to prepay outstanding long-term debt,
to repay debt we recently incurred in
connection with our acquisition of Mississippi
Valley Gas Company and for other general
corporate purposes including repayment of
short-term debt. See "Use of Proceeds" on page
S-4.
Denominations................. The notes will be in denominations of $1,000
and integral multiples of $1,000.
S-3
USE OF PROCEEDS
We expect that we will receive net proceeds from this offering of
approximately $248 million, after deducting the underwriting discount and
commissions and estimated offering expenses payable by us. We will use the net
proceeds of this offering as follows:
- Approximately $69 million, which includes approximately $15 million of
make-whole premiums and accrued interest, will be used to prepay
unsecured senior notes held by institutional lenders. The notes have
annual interest rates that range from 7.95% to 9.76% and have maturity
dates ranging from 2004 to 2014.
- $147 million will be used to repay all outstanding debt under an
acquisition credit facility used to finance the Mississippi Valley Gas
Company acquisition. The debt has an annual interest rate of 2.045% and
must be repaid upon the completion of this offering.
- Approximately $32 million will be used for general corporate purposes,
including repayment of short-term debt under our commercial paper
program. As of January 10, 2003, we had $168.6 million of such commercial
paper outstanding. The commercial paper had a weighted average annual
interest rate of 1.624% and had a weighted average maturity of 14 days.
Affiliates of each of the underwriters are lenders under our acquisition
credit facility and will, therefore, be receiving proceeds from this offering
from us as repayment of the acquisition credit facility. See "Underwriting" on
page S-16.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated:
YEAR ENDED SEPTEMBER 30,
--------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Ratio of earnings to fixed charges.................. 2.46 2.48 2.20 1.53 2.94
For purposes of computing the ratio of earnings to fixed charges, earnings
consists of the sum of our pretax income from continuing operations and fixed
charges. Fixed charges consist of interest expense, amortization of debt
discount, premium and expense, capitalized interest and a portion of lease
payments considered to represent an interest factor.
S-4
CAPITALIZATION
The following table presents our short-term debt and capitalization as of
September 30, 2002:
- on an actual basis, and
- on an adjusted basis, which gives effect to the acquisition of
Mississippi Valley Gas Company in December 2002, the issuance and sale of
the notes in this offering and the application of the estimated net
proceeds of the offering, as if the acquisition, the issuance and sale of
the notes and the application of the net proceeds of the offering all
occurred on September 30, 2002.
You should read this table in conjunction with the audited consolidated
financial statements and related notes included in our annual report for the
fiscal year ended September 30, 2002, which is incorporated by reference in this
prospectus supplement.
AS OF SEPTEMBER 30, 2002
---------------------------------
ACTUAL AS ADJUSTED
------------- --------------
(IN THOUSANDS, EXCEPT SHARE DATA)
Short-term debt
Current portion of long-term debt......................... $ 21,980 $ 11,980
Other short-term debt..................................... 145,791 113,800
---------- ----------
Total short-term debt.................................. $ 167,771 $ 125,780
========== ==========
Long-term debt
Notes offered hereby...................................... -- $ 250,000
Other long-term debt, less current portion................ $ 670,463 619,463
---------- ----------
Total long-term debt................................... 670,463 869,463
---------- ----------
Shareholders' equity
Common stock, no par value (stated at $.005 per share);
100,000,000 shares authorized; 41,675,932 shares issued
and outstanding at September 30, 2002 before the
Mississippi Valley Gas Company acquisition and
45,062,219 shares issued and outstanding after the
Mississippi Valley Gas Company acquisition............. 208 225
Additional paid-in capital................................ 508,265 582,882
Retained earnings......................................... 106,142 106,142
Accumulated other comprehensive income (loss)............. (41,380) (41,380)
---------- ----------
Shareholders' equity................................. 573,235 647,869
---------- ----------
Total capitalization.............................. $1,243,698 $1,517,332
========== ==========
Total capitalization excludes short-term debt. The acquisition credit facility
used to finance the Mississippi Valley Gas Company acquisition, which we will
repay with a portion of the proceeds of this offering, was incurred on December
4, 2002, and, therefore, is not reflected as debt in the "Actual" column. This
table does not include 1,557,606 shares of our common stock issuable upon
exercise of outstanding options and up to 232,547 shares of our common stock,
not including dividend adjustments, which are potentially issuable in connection
with our acquisition of Woodward Marketing in April 2001.
S-5
BUSINESS
We distribute and sell natural gas to approximately 1.7 million
residential, commercial, public authority and industrial customers. We operate
through six divisions covering service areas located in Colorado, Georgia,
Illinois, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Tennessee,
Texas and Virginia. In addition, we transport natural gas for others through our
distribution system.
We provide natural gas management and marketing services to industrial
customers, municipalities and other local distribution companies. We own or hold
an interest in natural gas storage fields in Kansas, Kentucky, Louisiana and
Mississippi to supplement natural gas used by our customers. We also market
natural gas to industrial and agricultural customers primarily in West Texas and
to industrial customers in Louisiana. In addition, we construct electrical power
generating plants and associated facilities, and lease or sell them to
municipalities and industrial customers.
Our operations are divided into three segments:
- the utility operations segment, which includes our related natural gas
distribution and sales operations, which, for the year ended September
30, 2002, represented approximately 72.1% of our net income;
- the natural gas marketing segment, which includes a variety of natural
gas management services, which, for the year ended September 30, 2002,
represented approximately 21.1% of our net income; and
- our other non-utility segment, which includes all of our other
non-utility operations, which, for the year ended September 30, 2002,
represented approximately 6.8% of our net income.
Our utility operations segment currently operates in 12 states. Our natural
gas marketing and other non-utility segments currently operate in 20 states.
STRATEGY
Our overall strategy is to:
- continue to manage our utility operations efficiently,
- profitably grow our non-utility operations to complement our utility
operations,
- profitably grow our business through acquisitions, and
- deliver superior shareholder value.
We have run our operations efficiently by managing our operating and
maintenance expenses; leveraging our technology, such as our 24 hour call
center, to achieve more efficient operations; focusing on regulatory rate
proceedings to increase revenue; mitigating weather-related risks through
weather normalized rates in some jurisdictions and purchasing weather insurance
in others and disposing of non-growth assets.
We have grown our non-utility operations by increasing our non-regulated
gas sales and entering into new non-utility businesses, such as construction of
electrical power generation facilities for municipalities and industrial
customers.
We have grown our utility business by acquiring natural gas operations,
such as our recently completed acquisition of Mississippi Valley Gas Company.
S-6
FINANCIAL OVERVIEW OF SEGMENTS
The following table summarizes certain information regarding the operation
of our utility, natural gas marketing and other non-utility segments for each of
the three years ended September 30, 2002, 2001 and 2000. The information is net
of intersegment eliminations.
NATURAL GAS OTHER NON-
UTILITY MARKETING UTILITY TOTAL
---------- ----------- ---------- ----------
(IN THOUSANDS)
2002
Operating revenues.................... $ 936,054 $ 404 $ 14,391 $ 950,849
Gas trading margin.................... -- 38,538 -- 38,538
Operating income...................... 125,506 20,610 9,215 155,331
Net income............................ 42,994 12,614 4,048 59,656
Identifiable assets................... 1,666,845 242,340 71,036 1,980,221
2001
Operating revenues.................... $1,378,159 $ 7,946 $ 56,170 $1,442,275
Gas trading margin.................... -- 488 -- 488
Operating income (loss)............... 127,980 (3,122) 5,423 130,281
Net income............................ 49,881 2,551 3,658 56,090
Identifiable assets................... 1,732,296 251,238 52,646 2,036,180
2000
Operating revenues.................... $ 734,835 $ 929 $114,388 $ 850,152
Gas trading margin.................... -- -- -- --
Operating income...................... 77,207 155 7,954 85,316
Net income............................ 22,459 5,344 8,115 35,918
Identifiable assets................... 1,246,782 37,621 64,355 1,348,758
UTILITY OPERATIONS SEGMENT OVERVIEW
Our utility operations segment is operated through our six regulated
natural gas divisions:
- Atmos Energy Colorado-Kansas Division (formerly Greeley Gas Company),
- Atmos Energy Kentucky Division (formerly Western Kentucky Gas Company),
- Atmos Energy Louisiana Division (formerly Atmos Energy Louisiana Gas
Company),
- Atmos Energy Mid-States Division (formerly United Cities Gas Company),
- Atmos Energy Texas Division (formerly Energas Company), and
- Mississippi Valley Gas Company Division (beginning in December 2002).
Atmos Energy Colorado-Kansas Division. Our Colorado-Kansas division
operates in Colorado, Kansas and a portion of Missouri and is regulated by the
public service commissions of those states with respect to accounting, rates and
charges, operating matters and the issuance of securities. We operate under
terms of non-exclusive franchises granted by the various cities. At September
30, 2002 and 2001, our Colorado-Kansas division had 216,980 and 212,484 utility
meters in service. For the years ended September 30, 2002 and 2001, this
division had total throughput of 33,554 and 37,797 MMcf.
Atmos Energy Kentucky Division. Our Kentucky division operates in Kentucky
and is regulated by the Kentucky Public Service Commission with respect to
utility services, rates, issuance of securities and other matters. We operate in
the various incorporated cities under non-exclusive franchises granted by these
cities. Sales of natural gas for use as vehicle fuel in Kentucky are
unregulated. We have been operating under a performance-based rate program since
July 1998. We also have weather normalization
S-7
adjustments to our rates in Kentucky. At September 30, 2002 and 2001, our
Kentucky division had 178,379 and 182,275 utility meters in service. For the
years ended September 30, 2002 and 2001, this division had total throughput of
43,721 and 46,530 MMcf.
Atmos Energy Louisiana Division. Our Louisiana division includes the
operations of the assets of Louisiana Gas Service Company acquired in July 2001
and our previously existing Trans La division. Our Louisiana division operates
in Louisiana and is regulated by the Louisiana Public Service Commission with
respect to regulated utility services, rates and other matters. In most of the
areas in which we operate in Louisiana, we do so under non-exclusive franchises
granted by the governing authorities. Direct sales of natural gas to industrial
customers in Louisiana, who use gas for fuel or in manufacturing processes, and
sales of natural gas for vehicle fuel are exempt from regulation. Since the
Louisiana Gas Service acquisition, we have been operating under a rate structure
that requires us to share cost savings resulting from the acquisition with our
customers. We are also subject to a purchase gas adjustment order that allows
the pass through of gas costs and rate stabilization orders that allow us to
earn returns on equity within certain ranges that are monitored annually. Recent
tariff revisions have increased revenue and decreased our overall weather
sensitivity in Louisiana. At September 30, 2002 and 2001, our Louisiana division
had 370,012 and 368,436 utility meters in service. For the years ended September
30, 2002 and 2001, this division had total throughput of 30,435 and 12,578 MMcf.
The increase in throughput from 2001 to 2002 resulted from throughput from the
acquired Louisiana Gas Service assets.
Atmos Energy Mid-States Division. Our Mid-States division operates in
Georgia, Illinois, Iowa, Missouri, Tennessee and Virginia. Our rates, services
and operations as a natural gas distribution company are subject to general
regulation by each state's public service commission. We operate in each
community, where necessary, under a franchise granted by the municipality for a
fixed term of years. In Tennessee and Georgia, we have performance-based rates,
which provide incentives for us to find ways to lower costs. Any cost savings
are then shared with our customers. We also have weather normalization
adjustments to our rates in Tennessee and Georgia. At September 30, 2002 and
2001, our Mid-States division had 310,630 and 308,394 utility meters in service.
For the years ended September 30, 2002 and 2001, this division had total
throughput of 57,144 and 64,924 MMcf.
Atmos Energy Texas Division. Our Texas division operates in Texas. The
governing body of each municipality we serve has original jurisdiction over all
utility rates, operations and services within its city limits, except with
respect to sales of natural gas for vehicle fuel and agricultural use. We
operate under non-exclusive franchises granted by the municipalities we serve,
which are subject to renewal from time to time. The Railroad Commission of Texas
has exclusive appellate jurisdiction over all rate and regulatory orders and
ordinances of the municipalities and exclusive original jurisdiction over rates
and services to customers not located within the limits of a municipality. At
September 30, 2002 and 2001, our Texas division had 313,340 and 314,734 utility
meters in service. For the years ended September 30, 2002 and 2001, this
division had total throughput of 49,279 and 53,586 MMcf.
Mississippi Valley Gas Company. Our Mississippi Valley Gas Company
division, acquired in December 2002, operates in Mississippi and is regulated by
the Mississippi Public Service Commission with respect to rates, services and
operations. We operate under non-exclusive franchises granted by the
municipalities we serve. Since the acquisition, we have been operating under a
rate structure that will allow us over a five year period to recover a portion
of our integration costs associated with the acquisition, and operations and
maintenance costs in excess of an agreed-upon benchmark. We also have weather
normalization adjustments to our rates in Mississippi.
NATURAL GAS MARKETING SEGMENT OVERVIEW
Atmos Energy Marketing provides a variety of natural gas management
services to natural gas utility systems, municipalities and industrial natural
gas consumers primarily in the southeastern and midwestern states and to our
Colorado-Kansas, Kentucky, Louisiana and Mid-States divisions. These services
consist primarily of the furnishing of natural gas supplies at fixed and
market-based prices, load forecasting and management, gas storage and
transportation services, peaking sales and balancing services and gas price
S-8
hedging through the use of derivative products. In addition, through Trans
Louisiana Industrial Gas Company, it markets natural gas primarily to commercial
customers in Louisiana. For the year ended September 30, 2002, Atmos Energy
Marketing realized $49.0 million in gas trading margin from the sale of 273.8
Bcf of natural gas to its gas management service customers.
Atmos Energy Marketing's management of natural gas requirements involves
the sale of natural gas and the management of storage and transportation
contracts under contracts with customers generally having one to two-year terms.
At September 30, 2002, Atmos Energy Marketing had a total of 101 municipal
customers and 641 industrial customers. Atmos Energy Marketing also sells
natural gas to some of its industrial customers on a delivered burner tip basis
under contract terms from 30 days to two years. In addition, Atmos Energy
Marketing supplies our regulated operations with a portion of our natural gas
requirements on a competitive bid basis.
In providing other gas related services, Atmos Energy Marketing generates
income through negotiated prices based on the volume of gas supplied to the
customer. Atmos Energy Marketing also generates income by taking advantage of
the difference between near-term gas prices and prices for future delivery as
well as the daily movement of gas prices by utilizing storage and transportation
capacity that it controls.
In managing the natural gas requirements for municipal and other local
utilities, Atmos Energy Marketing sells physical natural gas to its customers
for future delivery and manages the associated price risk through the use of
financial instruments, including gas futures, forwards, over-the-counter and
exchange-traded options, and swap contracts with counterparties. Atmos Energy
Marketing links gas derivative financial instruments to physical delivery of
natural gas and typically balances its derivative positions at the end of each
trading day. Although it seeks to manage margins and limit overall price
exposure through these activities, Atmos Energy Marketing may not have
completely hedged its price risk at any point in time. In addition, with regard
to its physical trading business, Atmos Energy Marketing engages in limited
speculative natural gas trading for its own account primarily related to its
storage activity, subject to management policy limiting overall exposure and
bank credit facility limits.
OTHER NON-UTILITY SEGMENT OVERVIEW
Our subsidiary Atmos Pipeline and Storage owns or has an interest in
underground storage fields in Kansas, Kentucky and Louisiana and provides
storage services to our Colorado-Kansas, Mid-States and Louisiana divisions and
to other non-utility customers. Our total storage capacity in Atmos Pipeline and
Storage is approximately 26.1 Bcf.
Our subsidiary Atmos Power Systems constructs electrical power generating
plants and associated facilities which it leases or sells to municipalities and
industrial customers.
GAS SALES
Our natural gas utility distribution business is seasonal and highly
dependent on weather conditions in our service areas. Gas sales to residential
and commercial customers are greater during the winter months than during the
remainder of the year. The volumes of gas sales during the winter months will
vary with the temperatures during these months. The seasonal nature of our sales
to residential and commercial customers is partially offset by our sales in the
spring and summer months to our agricultural customers in Texas, Colorado and
Kansas who use natural gas to operate irrigation equipment. In addition to
weather, our revenues are affected by the cost of natural gas and economic
conditions in the areas that we serve. Higher gas costs, which we are generally
able to pass through to our customers under purchased gas adjustment clauses,
may cause customers to conserve, or, in the case of industrial customers, to use
alternative energy sources.
To protect against volatility in gas prices, we are hedging gas costs for
the 2002-2003 heating season by using a combination of storage, financial hedges
and fixed forward contracts to stabilize gas prices. For the 2002-2003 heating
season, we have covered between 45% and 50% of our anticipated flowing gas
S-9
requirements through storage and financial instruments. The gas hedges should
help to moderate the effects of higher customer accounts receivable caused by
potentially higher gas prices.
We also have weather normalization adjustments in our rate jurisdictions in
Tennessee, Georgia, Kentucky and Mississippi which protect against earnings
volatility. We purchased a three-year weather insurance policy for our Texas and
Louisiana operations commencing with the 2001-2002 heating season, with an
option to cancel in the third year if we obtain weather protection in our rate
structures. The policy covers the entire heating season of October through
March.
GAS SUPPLY
We receive gas deliveries through 36 pipeline transportation companies,
both interstate and intrastate, to satisfy our firm sales market requirements.
The pipeline transportation agreements are firm and many of them have pipeline
no-notice storage service, which provides for daily balancing between system
requirements and nominated flowing supplies. These agreements have generally
been negotiated with the shortest term available while still maintaining our
right to roll over the term. The agreements reduce the risk of paying fixed fees
to reserve pipeline capacity on a long-term basis.
Our natural gas storage facilities help meet customer requirements during
peak demand periods and reduce the need to contract for additional pipeline
capacity to meet peak demand periods. We normally inject gas into pipeline
storage systems and our own storage facilities during the summer months and
withdraw it in the winter months.
We purchase our gas supply from various producers and marketers. Supply
arrangements are contracted on a firm basis with various terms at market prices.
The firm supply consists of both base load and swing supply quantities. Base
load quantities flow at a constant level throughout the month, and swing supply
quantities provide the flexibility to change daily quantities to match increases
or decreases in requirements related to weather conditions. Except for local
production purchases, we select suppliers through a competitive bidding process
by requesting proposals from suppliers that have demonstrated reliable service.
We select suppliers based on their ability to deliver gas supply to our
designated firm pipeline receipt points at the best cost. We do not anticipate
problems with obtaining gas supply as needed for our customers.
PROPERTIES
We own 44,992 miles of underground distribution and transmission mains
throughout our gas distribution systems, including the recently acquired
Mississippi Valley Gas Company system. These mains are located on easements or
rights-of-way which generally provide for perpetual use. We maintain our mains
through a program of continuous inspection and repair and believe that our
system of mains is in good condition. We also own and operate one propane peak
shaving plant with a total capacity of approximately 180,000 gallons that can
produce an equivalent of approximately 3,300 Mcf daily. We own a liquefied
natural gas storage facility with a capacity of 500,000 Mcf which can inject a
daily volume of 30,000 Mcf into the system, as well as underground storage
fields that are used to supplement the supply of natural gas in periods of peak
demand.
We have seven underground gas storage facilities in Kentucky, four in
Kansas and two in Mississippi. Our total storage capacity is approximately 30.6
Bcf. However, approximately 14.7 Bcf of gas in the storage facilities must be
retained as cushion gas to maintain reservoir pressure. The maximum daily
delivery capability of these storage facilities is approximately 311,000 Mcf.
We also own a 25% interest in a gas storage facility in Napoleonville,
Louisiana. Our 25% usable capacity at this facility is 364,782 Mcf. In addition
to the usable capacity, we maintain 332,917 Mcf of cushion gas to maintain
reservoir pressure. The Napoleonville facility has a maximum daily delivery
capability of approximately 56,000 Mcf. We also have a contract through March
2003 for 250,000 Mcf of usable storage capacity in a storage facility in
Sorrento, Louisiana. The Sorrento facility has a maximum daily delivery
capability of approximately 25,000 Mcf.
S-10
We hold franchises granted by the incorporated cities and towns that we
serve. We hold 649 franchises having terms generally ranging from five to 25
years, other than the Mississippi Valley Gas Company franchises, which are
perpetual. We believe that each of our franchises will be renewed.
Our administrative offices are consolidated in Dallas, Texas under one
lease. We also maintain field offices throughout our distribution system, the
majority of which are located in leased facilities. Our non-utility operations
are headquartered in Houston, Texas, with offices in Houston and other
locations, primarily in leased facilities.
REGULATION
Each of our utility divisions is regulated by various state or local public
utility authorities. We are also subject to regulation by the United States
Department of Transportation with respect to safety requirements in the
operation and maintenance of our gas distribution facilities. Our distribution
operations are also subject to various state and federal laws regulating
environmental matters. From time to time we receive inquiries regarding various
environmental matters and become party to environmental claims in the ordinary
course of our business. We have been involved in investigations and remediation
of former manufactured gas plant sites in Tennessee, Iowa and Missouri and
mercury contamination at gas pipeline sites in Kansas that utilize or formerly
utilized mercury meter equipment. We believe, however, that any additional
expenditures related to these matters can be recovered through rates, shared
with other parties or covered by insurance. We believe that our properties and
operations substantially comply with and are operated in substantial conformity
with applicable safety and environmental statutes and regulations. There are no
administrative or judicial proceedings arising under environmental quality
statutes pending or known to be contemplated by governmental agencies which
would have a material adverse effect on us.
RATES
The method of determining regulated rates varies among the states in which
our utility divisions operate. The regulators have the responsibility of
ensuring that utilities under their jurisdiction operate in the best interests
of customers while providing the utilities the opportunity to earn a reasonable
return on investment. In a general rate case, the applicable regulatory
authority, which is typically the state public utility commission, establishes a
base margin, which is the amount of revenue authorized to be collected from
customers to recover authorized operating expense (other than the cost of gas),
depreciation, interest, taxes and return on rate base. The divisions in our
utility operations segment perform annual deficiency studies for each rate
jurisdiction to determine when to file rate cases. We typically file rate cases
in a jurisdiction every two to five years.
Substantially all of our sales to our customers fluctuate with the cost of
gas that we purchase. Rates established by regulatory authorities are adjusted
for increases and decreases in our purchased gas cost through purchased gas
adjustment mechanisms. Purchased gas adjustment mechanisms provide us a method
of recovering purchased gas costs on an ongoing basis without the necessity of a
rate case addressing all of our non-gas costs. These purchased gas adjustment
mechanisms are not designed to allow us to earn a profit but are designed to
allow a dollar-for-dollar recovery of fuel costs. Therefore, while our operating
revenues may fluctuate, gross profit (operating revenues less purchased gas
cost) is generally not eroded or enhanced because of gas cost increases or
decreases.
Approximately 98% of our revenues in the fiscal year ended September 30,
2002, and approximately 96% of our revenues in fiscal 2001 were derived from
sales at rates set by or subject to approval by local or state authorities.
Generally, the regulatory authority reviews our rate request and establishes a
rate structure intended to generate revenue sufficient to cover our costs of
doing business and provide a reasonable return on invested capital.
COMPETITION
Our utility operations are not currently in significant direct competition
with any other distributors of natural gas to residential and commercial
customers within our service areas. However, we do compete
S-11
with other natural gas suppliers and suppliers of alternative fuels for sales to
industrial and agricultural customers. We compete in all aspects of our business
with alternative energy sources, including, in particular, electricity.
Competition for residential and commercial customers is increasing. Promotional
incentives, improved equipment efficiencies and promotional rates all contribute
to the acceptability of electrical equipment. Electric utilities offer
electricity as a rival energy source and compete for the space heating, water
heating and cooking markets. The principal means to compete against alternative
fuels is lower prices, and natural gas historically has maintained its price
advantage in the residential, commercial and industrial markets. In addition,
our natural gas marketing segment competes with other natural gas brokers in
obtaining natural gas supplies for customers.
S-12
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued under an indenture entered into with SunTrust
Bank, as trustee. Information about the indenture and the general terms and
provisions of the notes are included in the accompanying prospectus under
"Description of Debt Securities."
The notes will be unsecured and unsubordinated obligations of Atmos Energy
Corporation. All our secured debt will have a prior claim with respect to the
assets securing that debt. As of September 30, 2002, after giving effect to the
acquisition of Mississippi Valley Gas Company, the issuance and sale of the
notes in this offering and the application of the net proceeds of this offering,
we would have had approximately $103.6 million of such secured debt outstanding.
The notes will rank equally with all of our other existing and future
unsubordinated debt. As of September 30, 2002, after giving effect to the
acquisition of Mississippi Valley Gas Company, the sale of notes in this
offering and the application of the net proceeds of this offering, we would have
had approximately $888.1 million of unsecured and unsubordinated debt, which
does not include approximately $3.6 million of our non-utility subsidiaries'
debt which is not guaranteed by Atmos Energy Corporation. The notes are not
guaranteed by, and are not the obligation of, any of our subsidiaries. The notes
will not be listed on any securities exchange or included in any automated
quotation system.
The notes are subject to defeasance and discharge of debt or to defeasance
of some restrictive covenants, as described under "Description of Debt
Securities -- Defeasance and Covenant Defeasance" in the accompanying
prospectus.
The notes will be issued in book-entry form as one or more global notes
registered in the name of the nominee of The Depository Trust Company, or DTC,
which will act as a depository, in minimum denominations of $1,000 and integral
multiples of $1,000. Beneficial interests in book-entry notes will be shown on,
and transfers of the notes will be made only through, records maintained by DTC
and its participants. The provisions set forth under "Description of Debt
Securities -- Global Securities" in the accompanying prospectus will apply to
the notes.
We may, at any time, without the consent of the holders of the notes, issue
additional notes having the same ranking, interest rate, maturity and other
terms as the notes being offered by this prospectus supplement. Any such
additional notes, together with the notes being offered by this prospectus
supplement, will be taken to constitute the same series of notes under the
indenture.
PAYMENT OF PRINCIPAL AND INTEREST
The notes will mature on January 15, 2013. The interest rate on the notes
will be 5 1/8% per year. We will pay interest in arrears on January 15 and July
15 of each year, beginning July 15, 2003. Interest will accrue from January 16,
2003 or from the most recent interest payment date to which we have paid or
provided for the payment of interest to the next interest payment date or the
scheduled maturity date, as the case may be. We will pay interest computed on
the basis of a 360-day year of twelve 30-day months.
We will pay interest on the notes in immediately available funds to the
persons in whose names the notes are registered at the close of business on
January 1 or July 1 preceding the respective interest payment date. At maturity,
we will pay the principal of the notes in immediately available funds upon
delivery of the notes to the trustee.
S-13
OPTIONAL REDEMPTION
The notes will be redeemable, in whole or in part, at our option, at any
time at a redemption price equal to the greater of:
- 100% of the principal amount of the notes, and
- as determined by the Quotation Agent, the sum of the present values of
the Remaining Scheduled Payments of principal and interest on the notes
discounted to the redemption date on a semi-annual basis assuming a
360-day year consisting of twelve 30-day months at the Adjusted Treasury
Rate plus 15 basis points;
plus, in each case, accrued and unpaid interest on the principal amount of notes
being redeemed to the redemption date.
"Adjusted Treasury Rate" means, for any redemption date, the rate per annum
equal to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, assuming a price of the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
that redemption date.
"Comparable Treasury Issue" means the United States treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the notes to be redeemed that would be used, at the time of a selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
notes.
"Comparable Treasury Price" means, for any redemption date, the Reference
Treasury Dealer Quotation for that redemption date.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
"Reference Treasury Dealer" means Banc One Capital Markets, Inc. and its
successors; provided, however, if Banc One Capital Markets, Inc. ceases to be a
primary U.S. government securities dealer in New York City, we will replace Banc
One Capital Markets, Inc. as Reference Treasury Dealer with an entity that is a
primary U.S. government securities dealer in New York City.
"Reference Treasury Dealer Quotation" means, with respect to any redemption
date, the average, as determined by the Trustee, of the bid and asked prices for
the Comparable Treasury Issue (expressed, in each case, as a percentage of its
principal amount) quoted in writing to the trustee by the Reference Treasury
Dealer by 5:00 p.m. on the third business day preceding the redemption date.
"Remaining Scheduled Payments" means, with respect to each note to be
redeemed, the remaining scheduled payments of the principal and interest on such
note that would be due after the related redemption date but for such
redemption; provided, however, that if such redemption date is not an interest
payment date, the amount of the next succeeding scheduled interest payment on
such note will be reduced by the amount of interest accrued on such note to such
redemption date.
In the case of a partial redemption where the notes are represented by a
global security, the notes to be redeemed shall be selected by DTC. If the notes
are not represented by a global security, the notes to be redeemed will be
selected by the trustee, using a method the trustee deems to be fair and
appropriate. No notes of a principal amount of $1,000 or less will be redeemed
in part. Notice of any redemption will be mailed by first class mail at least 30
days but not more than 60 days before the redemption date to each holder of the
notes to be redeemed at its registered address. If any note is to be redeemed in
part only, the notice of redemption that relates to the note will state the
portion of the principal amount of the note to be redeemed. A new note in a
principal amount equal to the unredeemed portion of the note will be issued in
the name of the holder of the note upon surrender for cancellation of the
original note. Unless we default in payment of the redemption price, on and
after the redemption date, interest will cease to accrue on the notes or the
portions of the notes called for redemption.
S-14
MANDATORY REDEMPTION
We will not be required to redeem any of the notes before maturity.
NO SINKING FUND
We will not be required to make any sinking fund payments with regard to
the notes.
RESTRICTED SUBSIDIARIES
As of the date of this prospectus supplement, none of our subsidiaries
would be considered a "Restricted Subsidiary" under the terms of the indenture.
GOVERNING LAW
The notes will be governed by and construed in accordance with the laws of
the State of New York.
S-15
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
dated January 13, 2003, among us and the underwriters named below, for whom Banc
One Capital Markets, Inc. is acting as representative, we have agreed to sell to
each of the underwriters and each of the underwriters has severally agreed to
purchase from us the principal amount of the notes set forth opposite its name
below. The obligations of the underwriters, including their agreement to
purchase notes from us, are several and not joint. The underwriting agreement
provides that the obligations of the underwriters are subject to certain
conditions and that the underwriters will be obligated to purchase all of the
notes if any are purchased.
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
Banc One Capital Markets, Inc. ............................. $150,000,000
SG Cowen Securities Corporation............................. 25,000,000
SunTrust Capital Markets, Inc. ............................. 25,000,000
Wachovia Securities, Inc. .................................. 25,000,000
Banc of America Securities LLC.............................. 7,500,000
KBC Financial Products USA Inc. ............................ 7,500,000
U.S. Bancorp Piper Jaffray Inc. ............................ 7,500,000
Hibernia Southcoast Capital, Inc. .......................... 2,500,000
------------
Total................................................ $250,000,000
============
The underwriters initially propose to offer the notes to the public at the
public offering price that appears on the cover page of this prospectus
supplement. The underwriters may offer the notes to selected dealers at the
public offering price less a concession of up to 0.40% of the principal amount.
In addition, the underwriters may allow, and those selected dealers may reallow,
a concession of up to 0.25% of the principal amount to certain other dealers.
After the initial offering, the underwriters may change the public offering
price and any other selling terms.
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on any national securities
exchange or for quotation of the notes on any automated dealer quotation system.
The underwriters have advised us that they intend to make a market in the notes
after the offering, although they are under no obligation to do so. The
underwriters may discontinue any market-making activities at any time without
any notice. We can give no assurance as to the liquidity of the trading market
for the notes or that a public trading market for the notes will develop. If no
active public trading market develops, the market price and liquidity of the
notes may be adversely affected. If the notes are traded, they may trade at a
discount from their initial offering price, depending on factors such as
prevailing interest rates, the market for similar securities and the performance
of our company, as well as other factors not listed here.
The underwriters, as well as dealers and agents, may purchase and sell
notes in the open market. These transactions may include stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the offering. Stabilizing transactions consist of bids and
purchases made to prevent or slow a decline in the market price of the notes.
Syndicate short positions arise when the underwriters sell more notes than we
are required to sell to them in the offering. The underwriters may also impose
penalty bids whereby the underwriting syndicate may reclaim selling concessions
allowed either syndicate members or broker-dealers who sell notes in the
offering for their own account if the syndicate repurchases the notes in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the notes, which may be higher as a
result of these activities than it might otherwise be in the open market. These
activities, if commenced, may be discontinued at any time without notice.
S-16
We and the underwriters make no representation or prediction as to the
direction or magnitude of any effect that the transactions described in the
preceding two paragraphs may have on the price of the notes. In addition, we and
the underwriters make no representation that the underwriters will engage in
those types of transactions or that those transactions, once commenced, will not
be discontinued without notice.
It is expected that delivery of the notes will be made against payment of
the notes on or about the date for delivery of the notes specified on the cover
page of this prospectus supplement, which will be the third business day
following the date hereof or as soon as practicable thereafter.
We have agreed to indemnify the underwriters against, or to contribute to
payments that the underwriters may be required to make with respect to, certain
liabilities, including liabilities under the Securities Act of 1933. We have
also agreed to pay the printing, rating agency, trustee, legal, accounting and
other expenses related to this offering, which we estimate will be $162,500.
Some of the underwriters and certain of their affiliates have provided, and
may continue to provide, investment banking, financial advisory, commercial
banking or other services to us and our affiliates, for which they have received
and are expected to continue to receive customary fees and commissions. In
addition, affiliates of each of the underwriters are lenders under our revolving
credit facility and affiliates of each of the underwriters are also lenders
under our acquisition credit facility that was used to finance the Mississippi
Valley Gas Company acquisition which will be repaid with the proceeds of this
offering. Banc One is a dealer under our commercial paper program and SunTrust
Capital Markets is an affiliate of the trustee.
This offering is being conducted in compliance with the requirements of
Rule 2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP, Dallas, Texas, and Hunton & Williams,
Richmond, Virginia, will opine for us as to the validity of the offered
securities. Shearman & Sterling, New York, New York, will pass upon certain
legal matters related to the offered securities for the underwriters.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our annual report on Form 10-K for
the year ended September 30, 2002, as set forth in their report, which is
incorporated by reference in this prospectus supplement and elsewhere in the
prospectus. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
S-17
PROSPECTUS
(ATMOS ENERGY CORP. LOGO)
ATMOS ENERGY CORPORATION
BY THIS PROSPECTUS, WE OFFER UP TO
$600,000,000
OF DEBT SECURITIES AND COMMON STOCK
---------------------
We will provide specific terms of these securities in supplements to this
prospectus. This prospectus may not be used to sell securities unless
accompanied by a prospectus supplement. You should read this prospectus and the
prospectus supplement carefully before you invest.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------
This prospectus is dated January 30, 2002.
TABLE OF CONTENTS
PAGE
----
ATMOS ENERGY CORPORATION.................................... 1
USE OF PROCEEDS............................................. 1
RATIO OF EARNINGS TO FIXED CHARGES.......................... 2
SECURITIES WE MAY ISSUE..................................... 2
DESCRIPTION OF DEBT SECURITIES.............................. 3
DESCRIPTION OF COMMON STOCK................................. 18
PLAN OF DISTRIBUTION........................................ 20
LEGAL MATTERS............................................... 21
EXPERTS..................................................... 21
WHERE YOU CAN FIND MORE INFORMATION......................... 21
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 22
We have not authorized any other person to provide you with any information
or to make any representations about us that is different from, or in addition
to, the information and representations contained in this prospectus or in any
of the documents that are incorporated by reference into this prospectus. If
anyone provides you with different or inconsistent information, you should not
rely on it. You should assume that the information appearing in this prospectus,
as well as the information incorporated by reference, is accurate as of the
dates on the front cover of this prospectus or of the incorporated document
only, unless the information specifically indicates that another date applies.
The distribution of this prospectus may be restricted by law in certain
jurisdictions. You should inform yourself about and observe these restrictions.
This prospectus does not constitute, and may not be used in connection with, an
offer or solicitation by anyone in any jurisdiction in which the offer or
solicitation is not authorized, or in which the person making the offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make the offer or solicitation.
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus and the documents incorporated by
reference that are not historical facts are "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933. Forward-looking
statements are based on management's beliefs as well as assumptions made by, and
information currently available to, management. Because such statements are
based on expectations as to future economic performance and are not statements
of fact, actual results may differ materially from those projected. Important
factors that could cause future results to differ include, but are not limited
to:
- warmer or drier than normal weather in our service territories, or other
weather conditions that would be adverse to our business;
- national, regional and local economic conditions;
- impact of any future terrorist attacks;
- regulatory and business trends and decisions, including the impact of
pending rate proceedings before state regulatory commissions;
- successful completion, financing and integration of acquisitions;
- inflation and the volatility of commodity prices for natural gas;
- competition from other energy suppliers and alternative forms of energy;
- further deregulation or "unbundling" of the natural gas distribution
industry;
- hedging and market risk activities; and
- other factors discussed in this prospectus and our other filings with the
SEC.
All of these factors are difficult to predict and many are beyond our control.
Accordingly, while we believe 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. When used in our documents
or oral presentations, the words "anticipate," "believe," "estimate," "expect,"
"objective," "projection," "forecast," "goal" or similar words are intended to
identify forward-looking statements. We undertake no obligation to update or
revise our forward-looking statements, whether as a result of new information,
future events or otherwise. For further factors you should consider, please
refer to the Management's Discussion and Analysis of Financial Condition and
Results of Operations in our annual report on Form 10-K for the fiscal year
ended September 30, 2001.
---------------------
The terms "we," "our" and "us" refer to Atmos Energy Corporation unless the
context suggests otherwise. The term "you" refers to a prospective investor.
ii
ATMOS ENERGY CORPORATION
We distribute and sell natural gas to approximately 1.4 million
residential, commercial, industrial, agricultural and other customers. We
operate through five divisions in service areas located in Colorado, Georgia,
Illinois, Iowa, Kansas, Kentucky, Louisiana, Missouri, Tennessee, Texas and
Virginia. In addition, we transport natural gas for others through our
distribution system.
We provide natural gas storage services and own or hold an interest in
natural gas storage fields in Kansas, Kentucky and Louisiana to supplement
natural gas used by customers in Kansas, Kentucky, Tennessee, Louisiana and
other states. We also provide energy management and gas marketing services to
industrial customers, municipalities and other local distribution companies. We
also provide electrical power generation to meet peak load demands for a
municipality regulated by the Tennessee Valley Authority. In addition, we market
natural gas to industrial and agricultural customers primarily in West Texas and
to industrial customers in Louisiana.
In September 2001, we entered into a definitive agreement to acquire
Mississippi Valley Gas Company, a privately held natural gas utility, for $150.0
million, consisting of $75.0 million cash and $75.0 million of our common stock.
In addition, we will assume outstanding debt of Mississippi Valley Gas, net of
working capital, of approximately $45.0 million. Mississippi Valley Gas provides
natural gas distribution service to more than 261,500 residential, commercial,
industrial and other customers located primarily in the northern and central
regions of Mississippi. The acquisition is subject to state and federal
regulatory approvals.
HISTORY
We were organized under the laws of Texas in 1983 as Energas Company, a
subsidiary of Pioneer Corporation, for the purposes of owning and operating
Pioneer's natural gas distribution business in Texas. Immediately following the
transfer by Pioneer to us of its gas distribution business, which Pioneer and
its predecessors operated since 1906, Pioneer distributed our outstanding stock
to its shareholders. In September 1988, we changed our name from Energas Company
to Atmos Energy Corporation. As a result of our merger with United Cities Gas
Company in July 1997, we also became incorporated in Virginia.
LOCATION OF EXECUTIVE OFFICES
Our address is 1800 Three Lincoln Centre, 5430 LBJ Freeway, Dallas, Texas
75240, and our telephone number is (972) 934-9227.
USE OF PROCEEDS
Except as may otherwise be stated in the applicable prospectus supplement,
we intend to use the net proceeds from the sale of the securities for general
corporate purposes, acquisitions, in our business and related businesses, and
the repayment of indebtedness.
1
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the periods indicated:
YEARS ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Ratio....................................................... 2.48 2.20 1.53 2.94 1.95
For purposes of computing the ratio of earnings to fixed charges, earnings
consists of the sum of our pretax income from continuing operations and fixed
charges. Fixed charges consist of interest expense, amortization of debt
discount, premium and expense, capitalized interest and a portion of lease
payments considered to represent an interest factor.
SECURITIES WE MAY ISSUE
TYPES OF SECURITIES
The types of securities that we may offer and sell from time to time by
this prospectus are:
- debt securities, which we may issue in one or more series; and
- common stock.
The aggregate initial offering price of all securities sold will not exceed
$600,000,000. We will determine when we sell securities, the amounts of
securities we will sell and the prices and other terms on which we will sell
them. We may sell securities to or through underwriters, through agents or
dealers or directly to purchasers.
PROSPECTUS SUPPLEMENTS
This prospectus provides you with a general description of the debt
securities and common stock we may offer. Each time we offer securities, we will
provide a prospectus supplement that will contain specific information about the
terms of the offering. The prospectus supplement may also add to or change
information contained in this prospectus. In that case, the prospectus
supplement should be read as superseding this prospectus.
In each prospectus supplement, which will be attached to the front of this
prospectus, we will include the following information:
- the type and amount of securities which we propose to sell;
- the initial public offering price of the securities;
- the names of the underwriters, agents or dealers, if any, through or to
which we will sell the securities;
- the compensation, if any, of those underwriters, agents or dealers;
- the securities exchanges or automated quotation systems on which the
securities will be listed or traded;
- United States federal income tax considerations applicable to the
securities; and
- any other material information about the offering and sale of the
securities.
For more details on the terms of the securities, you should read the
exhibits filed with our registration statement. You should also read both this
prospectus and any prospectus supplement, together with additional information
described under the heading "Where You Can Find More Information."
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DESCRIPTION OF DEBT SECURITIES
We may issue debt securities from time to time in one or more distinct
series. This section summarizes the material terms of the debt securities that
we anticipate will be common to all series. Most of the financial and other
terms of any series of debt securities that we offer and any differences from
the common terms will be described in the prospectus supplement to be attached
to the front of this prospectus.
As required by U.S. federal law for all bonds and notes of companies that
are publicly offered, a document called an "indenture" will govern any debt
securities that we issue. An indenture is a contract between us and a financial
institution acting as trustee on your behalf. We have entered into an indenture
with SunTrust Bank, which acts as trustee, relating to the debt securities that
are offered by this prospectus. The indenture is subject to the Trust Indenture
Act of 1939. The trustee has the following two main roles:
- the trustee can enforce your rights against us if we default; there are
some limitations on the extent to which the trustee acts on your behalf,
which are described later in this prospectus; and
- the trustee will perform certain administrative duties for us, which
include sending you interest payments and notices.
As this section is a summary of the material terms of the debt securities
being offered by this prospectus, it does not describe every aspect of the debt
securities. We urge you to read the indenture and the other documents we file
with the SEC relating to the debt securities because the indenture and those
other documents, and not this description, will define your rights as a holder
of our debt securities. We have filed the indenture as an exhibit to the
registration statement that we have filed with the SEC, and we will file any
such other document as an exhibit to an annual, quarterly or other report that
we file with the SEC. See "Where You Can Find More Information," for information
on how to obtain copies of the indenture and any such other document. References
to the "indenture" mean the indenture and any other document that defines your
rights as a holder of debt securities that we have filed as an exhibit to the
registration statement relating to this offering or will file as an exhibit to
an annual, quarterly or other report that we file with the SEC.
GENERAL
The debt securities will be our unsecured obligations and will rank equally
with all of our other unsecured and unsubordinated Indebtedness.
You should read the prospectus supplement for the following terms of the
series of debt securities offered by the prospectus supplement. Our board of
directors will establish the following terms before issuance of the series:
- the title of the debt securities;
- the aggregate principal amount of the debt securities, the percentage of
their principal amount at which the debt securities will be issued, and
the date or dates when the principal of the debt securities will be
payable or how those dates will be determined;
- the interest rate or rates, which may be fixed or variable, that the debt
securities will bear, if any, and how the rate or rates will be
determined;
- the date or dates from which any interest will accrue or how the date or
dates will be determined, the date or dates on which any interest will be
payable, any regular record dates for these payments or how these dates
will be determined and the basis on which any interest will be
calculated, if other than on the basis of a 360-day year of twelve 30-day
months;
- the place or places, if any, other than or in addition to New York City,
of payment, transfer or exchange of the debt securities, and where
notices or demands to or upon us in respect of the debt securities may be
served;
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- any optional redemption provisions;
- any sinking fund or other provisions that would obligate us to repurchase
or redeem the debt securities;
- whether the amount of payments of principal of, any premium on, or
interest on the debt securities will be determined with reference to an
index, formula or other method, which could be based on one or more
commodities, equity indices or other indices, and how these amounts will
be determined;
- any changes or additions to the events of default or our covenants with
respect to the debt securities;
- if not the principal amount of the debt securities, the portion of the
principal amount that will be payable upon acceleration of the maturity
of the debt securities or how that portion will be determined;
- any changes or additions to the provisions concerning defeasance and
covenant defeasance contained in the indenture that will be applicable to
the debt securities;
- any provisions granting special rights to the holders of the debt
securities upon the occurrence of specified events;
- if other than the trustee, the name of the paying agent, security
registrar or transfer agent for the debt securities;
- if we do not issue the debt securities in book-entry form only to be held
by The Depository Trust Company, as depository, whether we will issue the
debt securities in certificated form or the identity of any alternative
depository;
- the person to whom any interest in a debt security will be payable, if
other than the registered holder at the close of business on the regular
record date;
- the denomination or denominations in which the debt securities will be
issued, if other than denominations of $1,000 or any integral multiples;
- any provisions requiring us to pay Additional Amounts on the debt
securities to any holder who is not a United States person in respect of
any tax, assessment or governmental charge and, if so, whether we will
have the option to redeem the debt securities rather than pay the
Additional Amounts; and
- any other material terms of the debt securities or the indenture, which
may not be consistent with the terms set forth in this prospectus.
For purposes of this prospectus, any reference to the payment of principal
of, any premium on, or interest on the debt securities will include Additional
Amounts if required by the terms of the debt securities.
The indenture does not limit the amount of debt securities that we are
authorized to issue from time to time. The indenture also provides that there
may be more than one trustee thereunder, each for one or more series of debt
securities. If a trustee is acting under the indenture with respect to more than
one series of debt securities, the debt securities for which it is acting would
be treated as if issued under separate indentures. If there is more than one
trustee under the indenture, the powers and trust obligations of each trustee
will apply only to the debt securities of the separate series for which it is
trustee.
We may issue debt securities with terms different from those of debt
securities already issued. Without the consent of the holders of the outstanding
debt securities, we may reopen a previous issue of a series of debt securities
and issue additional debt securities of that series unless the reopening was
restricted when we created that series.
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There is no requirement that we issue debt securities in the future under
the indenture, and we may use other indentures or documentation, containing
different provisions in connection with future issues of other debt securities.
We may issue the debt securities as "original issue discount securities,"
which are debt securities, including any zero-coupon debt securities, that are
issued and sold at a discount from their stated principal amount. Original issue
discount securities provide that, upon acceleration of their maturity, an amount
less than their principal amount will become due and payable. We will describe
the U.S. federal income tax consequences and other considerations applicable to
original issue discount securities in any prospectus supplement relating to
them.
HOLDERS OF DEBT SECURITIES
BOOK-ENTRY HOLDERS. We will issue debt securities in book-entry form only,
unless we specify otherwise in the applicable prospectus supplement. This means
debt securities will be represented by one or more global securities registered
in the name of a financial institution that holds them as depository on behalf
of other financial institutions that participate in the depository's book-entry
system. These participating institutions, in turn, hold beneficial interests in
the debt securities on behalf of themselves or their customers.
Under the indenture, we will recognize as a holder only the person in whose
name a debt security is registered. Consequently, for debt securities issued in
global form, we will recognize only the depository as the holder of the debt
securities and we will make all payments on the debt securities to the
depository. The depository passes along the payments it receives to its
participants, which in turn pass the payments along to their customers who are
the beneficial owners.
The depository and its participants do so under agreements they have made
with one another or with their customers; they are not obligated to do so under
the terms of the debt securities.
As a result, you will not own debt securities directly. Instead, you will
own beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depository's book-entry system or
holds an interest through a participant. As long as the debt securities are
issued in global form, you will be an indirect holder, and not a holder, of the
debt securities.
STREET NAME HOLDERS. In the future we may terminate a global security or
issue debt securities initially in non-global form. In these cases, you may
choose to hold your debt securities in your own name or in "street name." Debt
securities held in street name would be registered in the name of a bank, broker
or other financial institution that you choose, and you would hold only a
beneficial interest in those debt securities through an account you maintain at
that institution.
For debt securities held in street name, we will recognize only the
intermediary banks, brokers and other financial institutions in whose names the
debt securities are registered as the holders of those debt securities, and we
will make all payments on those debt securities to them. These institutions pass
along the payments they receive to their customers who are the beneficial
owners, but only because they agree to do so in their customer agreements or
because they are legally required to do so. If you hold debt securities in
street name you will be an indirect holder, and not a holder, of those debt
securities.
LEGAL HOLDERS. Our obligations, as well as the obligations of the trustee
and those of any third parties employed by us or the trustee, run only to the
legal holders of the debt securities. We do not have obligations to you if you
hold beneficial interests in global securities, in street name or by any other
indirect means. This will be the case whether you choose to be an indirect
holder of a debt security or have no choice because we are issuing the debt
securities only in global form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for the payment or notice even if that holder is
required, under agreements with depository participants or customers or by law,
to pass it along to the indirect holders but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose (for example, to
amend the indenture or to
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relieve us of the consequences of a default or of our obligation to comply with
a particular provision of the indenture) we would seek the approval only from
the holders, and not the indirect holders, of the debt securities. Whether and
how the holders contact the indirect holders is up to the holders.
When we refer to you, we mean those who invest in the debt securities being
offered by this prospectus, whether they are the holders or only indirect
holders of those debt securities. When we refer to your debt securities, we mean
the debt securities in which you hold a direct or indirect interest.
SPECIAL CONSIDERATIONS FOR INDIRECT HOLDERS. If you hold debt securities
through a bank, broker or other financial institution, either in book-entry form
or in street name, you should check with your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- how it would handle a request for the holders' consent, if ever required;
- whether and how you can instruct it to send you debt securities
registered in your own name so you can be a holder, if that is permitted
in the future;
- how it would exercise rights under the debt securities if there were a
default or other event triggering the need for holders to act to protect
their interests; and
- if the debt securities are in book-entry form, how the depository's rules
and procedures will affect these matters.
GLOBAL SECURITIES
WHAT IS A GLOBAL SECURITY? We will issue each debt security under the
indenture in book-entry form only, unless we specify otherwise in the applicable
prospectus supplement. A global security represents one or any other number of
individual debt securities. Generally, all debt securities represented by the
same global securities will have the same terms. We may, however, issue a global
security that represents multiple debt securities that have different terms and
are issued at different times. We call this kind of global security a master
global security.
Each debt security issued in book-entry form will be represented by a
global security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we
select for this purpose is called the depository. Unless we specify otherwise in
the applicable prospectus supplement, The Depository Trust Company, New York,
New York, known as DTC, will be the depository for all debt securities issued in
book-entry form.
A global security may not be transferred to or registered in the name of
anyone other than the depository or its nominee, unless special termination
situations arise. We describe those situations below under "Special Situations
When a Global Security Will Be Terminated." As a result of these arrangements,
the depository, or its nominee, will be the sole registered owner and holder of
all debt securities represented by a global security, and investors will be
permitted to own only beneficial interests in a global security. Beneficial
interests must be held by means of an account with a broker, bank or other
financial institution that in turn has an account with the depository or with
another institution that does. Thus, if your security is represented by a global
security, you will not be a holder of the debt security, but only an indirect
holder of a beneficial interest in the global security.
SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES. We do not recognize an
indirect holder as a holder of debt securities and instead deal only with the
depository that holds the global security. The account rules of your financial
institution and of the depository, as well as general laws relating to
securities transfers, will govern your rights relating to a global security.
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If we issue debt securities only in the form of a global security, you
should be aware of the following:
- you cannot cause the debt securities to be registered in your name, and
cannot obtain non-global certificates for your interest in the debt
securities, except in the special situations that we describe below;
- you will be an indirect holder and must look to your own bank or broker
for payments on the debt securities and protection of your legal rights
relating to the debt securities, as we describe under "Holders of Debt
Securities" above;
- you may not be able to sell interests in the debt securities to some
insurance companies and to other institutions that are required by law to
own their securities in non-book-entry form;
- you may not be able to pledge your interest in a global security in
circumstances where certificates representing the debt securities must be
delivered to the lender or other beneficiary of the pledge in order for
the pledge to be effective;
- the depository's policies, which may change from time to time, will
govern payments, transfers, exchanges and other matters relating to your
interest in a global security. We and the trustee have no responsibility
for any aspect of the depository's actions or for its records of
ownership interests in a global security. We and the trustee also do not
supervise the depository in any way;
- DTC requires, and other depositories may require, that those who purchase
and sell interests in a global security within its book-entry system use
immediately available funds and your broker or bank may require you to do
so as well; and
- financial institutions that participate in the depository's book-entry
system, and through which you hold your interest in a global security,
may also have their own policies affecting payments, notices and other
matters relating to the debt security. Your chain of ownership may
contain more than one financial intermediary. We do not monitor and are
not responsible for the actions of any of those intermediaries.
SPECIAL SITUATIONS WHEN A GLOBAL SECURITY WILL BE TERMINATED. In a few
special situations described below, a global security will be terminated and
interests in it will be exchanged for certificates in non-global form
representing the debt securities it represented. After that exchange, you will
be able to choose whether to hold the debt securities directly or in street
name. You must consult your own bank or broker to find out how to have your
interests in a global security transferred on termination to your own name, so
that you will be a holder. We have described the rights of holders and street
name investors above under "Holders of Debt Securities."
The special situations for termination of a global security are as follows:
- if the depository notifies us that it is unwilling, unable or no longer
qualified to continue as depository for that global security and we do
not appoint another institution to act as depository within 60 days;
- if we notify the trustee that we wish to terminate that global security;
or
- if an event of default has occurred with regard to debt securities
represented by that global security and has not been cured or waived; we
discuss defaults later under "Events of Default."
If a global security is terminated, only the depository, and not we or the
trustee, is responsible for deciding the names of the intermediary banks,
brokers and other financial institutions in whose names the debt securities
represented by the global security are registered, and, therefore, who will be
the holders of those debt securities.
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COVENANTS
This section summarizes the material covenants in the indenture. Please
refer to the prospectus supplement for information about any changes to our
covenants, including any addition or deletion of a covenant.
LIMITATIONS ON LIENS. We covenant in the indenture that we will not, and
will not permit any of our Restricted Subsidiaries to, create, incur, issue or
assume any Indebtedness secured by any Lien on any Principal Property, or on
shares of stock or Indebtedness of any Restricted Subsidiary, known as
Restricted Securities, without making effective provision for the outstanding
debt securities, other than any outstanding debt securities not entitled to this
covenant, to be secured by the Lien equally and ratably with, or prior to, the
Indebtedness and obligations secured or to be secured thereby for so long as the
Indebtedness or obligations are so secured, except that the foregoing
restriction does not apply to:
- any Lien existing on the date of the first issuance of debt securities
under the indenture, including the Liens on property or after-acquired
property of ours or our Subsidiaries under the Greeley Indenture or the
United Cities Indenture, or such other date as may be specified in a
prospectus supplement for an applicable series of debt securities;
- any Lien on any Principal Property or Restricted Securities of any person
existing at the time that person is merged or consolidated with or into
us or a Restricted Subsidiary, or this person becomes a Restricted
Subsidiary, or arising thereafter otherwise than in connection with the
borrowing of money arranged thereafter and pursuant to contractual
commitments entered into prior to and not in contemplation of the
person's becoming a Restricted Subsidiary;
- any Lien on any Principal Property existing at the time we or a
Restricted Subsidiary acquire the Principal Property, whether or not the
Lien is assumed by us or the Restricted Subsidiary, provided that this
Lien may not extend to any other Principal Property of ours or any
Restricted Subsidiary;
- any Lien on any Principal Property, including any improvements on an
existing Principal Property, of ours or any Restricted Subsidiary, and
any Lien on the shares of stock of a Restricted Subsidiary that was
formed or is held for the purpose of acquiring and holding the Principal
Property, in each case to secure all or any part of the cost of
acquisition, development, operation, construction, alteration, repair or
improvement of all or any part of the Principal Property, or to secure
Indebtedness incurred by us or a Restricted Subsidiary for the purpose of
financing all or any part of that cost, provided that the Lien is created
prior to, at the time of, or within 12 months after the latest of, the
acquisition, completion of construction or improvement or commencement of
commercial operation of that Principal Property and, provided further,
that the Lien may not extend to any other Principal Property of ours or
any Restricted Subsidiary, other than any currently unimproved real
property on which the Principal Property has been constructed or
developed or the improvement is located;
- any Lien on any Principal Property or Restricted Securities to secure
Indebtedness owed to us or to a Restricted Subsidiary;
- any Lien in favor of a governmental body to secure advances or other
payments under any contract or statute or to secure Indebtedness incurred
to finance the purchase price or cost of constructing or improving the
property subject to the Lien;
- any Lien created in connection with a project financed with, and created
to secure, Non-Recourse Indebtedness;
- any Lien required to be placed on any of our property or any of the
property of our Subsidiaries under the provisions of the Greeley
Indenture, the United Cities Indenture or the Note Purchase Agreements;
- any extension, renewal, substitution or replacement, or successive
extensions, renewals, substitutions or replacements, in whole or in part,
of any Lien referred to in any of the bullet points above,
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provided that the Indebtedness secured may not exceed the principal
amount of Indebtedness that is secured at the time of the renewal or
refunding, and that the renewal or refunding Lien must be limited to all
or any part of the same property and improvements, shares of stock or
Indebtedness that secured the Lien that was renewed or refunded; or
- any Lien not permitted above securing Indebtedness that, together with
the aggregate outstanding principal amount of other secured Indebtedness
that would otherwise be subject to the above restrictions, excluding
Indebtedness secured by Liens permitted under the above exceptions, and
the Attributable Debt in respect of all Sale and Leaseback Transactions,
not including Attributable Debt in respect of any Sale and Leaseback
Transactions described in the last two bullet points in the next
succeeding paragraph, would not then exceed 15% of our Consolidated Net
Tangible Assets.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. We covenant in the
indenture that we will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Leaseback Transaction unless:
- we or a Restricted Subsidiary would be entitled, without securing the
Outstanding Securities, to incur Indebtedness secured by a Lien on the
Principal Property that is the subject of the Sale and Leaseback
Transaction;
- the Attributable Debt associated with the Sale and Leaseback Transaction
would be in an amount permitted under the last bullet point of the
preceding paragraph;
- the proceeds received in respect of the Principal Property so sold and
leased back at the time of entering into the Sale and Leaseback
Transaction are used for our business and operations or the business and
operations of any Subsidiary; or
- within 12 months after the sale or transfer, an amount equal to the
proceeds received in respect of the Principal Property sold and leased
back at the time of entering into the Sale and Leaseback Transaction is
applied to the prepayment, other than mandatory prepayment, of any
Outstanding Securities or any Funded Indebtedness owed by us or a
Restricted Subsidiary, other than Funded Indebtedness that is held by us
or any Restricted Subsidiary or our Funded Indebtedness that is
subordinate in right of payment to any Outstanding Securities.
DEFINITIONS. Following are definitions of some of the terms used in the
covenants described above.
"ATTRIBUTABLE DEBT" means, as to any lease under which a person is at the
time liable for rent, at a date that liability is to be determined, the total
net amount of rent required to be paid by that person under the lease during the
remaining term, excluding amounts required to be paid on account of maintenance
and repairs, services, insurance, taxes, assessments, water rates and similar
charges and contingent rents, discounted from the respective due dates thereof
at the weighted average of the rates of interest, or Yield to Maturity, in the
case of Original Issue Discount Securities, borne by the then Outstanding
Securities, compounded annually.
"CAPITAL STOCK" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests, however
designated, in stock issued by a corporation.
"CONSOLIDATED NET TANGIBLE ASSETS" means the aggregate amount of assets,
less applicable reserves and other properly deductible items, after deducting:
- all current liabilities, excluding any portion thereof constituting
Funded Indebtedness; and
- all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles,
all as set forth on our most recent consolidated balance sheet contained in our
latest quarterly or annual report filed with the SEC under the Securities
Exchange Act of 1934 and computed in accordance with generally accepted
accounting principles.
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"FUNDED INDEBTEDNESS" means, as applied to any person, all Indebtedness of
the person maturing after, or renewable or extendible at the option of the
person beyond, 12 months from the date of determination.
"GREELEY INDENTURE" means the Indenture of Mortgage and Deed of Trust,
dated as of March 1, 1957, from Greeley Gas Company to U.S. Bank National
Association, formerly The Central Bank and Trust Company, as Trustee, as amended
and supplemented through December 1, 1993, the Indenture of Mortgage and Deed of
Trust through the Tenth Supplemental Indenture by Atmos to U.S. Bank National
Association, formerly The Central Bank and Trust Company, as Trustee, as
amended, supplemented or otherwise modified from time to time.
"INDEBTEDNESS" means obligations for money borrowed, evidenced by notes,
bonds, debentures or other similar evidences of indebtedness.
"LIEN" means any lien, mortgage, pledge, encumbrance, charge or security
interest securing Indebtedness; provided, however, that the following types of
transactions will not be considered, for purposes of this definition, to result
in a Lien:
- any acquisition by us or any Restricted Subsidiary of any property or
assets subject to any reservation or exception under the terms of which
any vendor, lessor or assignor creates, reserves or excepts or has
created, reserved or excepted an interest in oil, gas or any other
mineral in place or the proceeds of that interest;
- any conveyance or assignment whereby we or any Restricted Subsidiary
conveys or assigns to any person or persons an interest in oil, gas or
any other mineral in place or the proceeds of that interest;
- any Lien upon any property or assets either owned or leased by us or a
Restricted Subsidiary or in which we or any Restricted Subsidiary owns an
interest that secures for the benefit of the person or persons paying the
expenses of developing or conducting operations for the recovery,
storage, transportation or sale of the mineral resources of the property
or assets, or property or assets with which it is unitized, the payment
to the person or persons of our proportionate part or the Restricted
Subsidiary's proportionate part of the development or operating expenses;
- any hedging arrangements entered into in the ordinary course of business,
including any obligation to deliver any mineral, commodity or asset; or
- any guarantees that we make for the repayment of Indebtedness of any
Subsidiary or guarantees by any Subsidiary of the repayment of
Indebtedness of any entity, including Indebtedness of Woodward Marketing,
L.L.C.
"NON-RECOURSE INDEBTEDNESS" means, at any time, Indebtedness incurred after
the date of the indenture by us or a Restricted Subsidiary in connection with
the acquisition of property or assets by us or a Restricted Subsidiary or the
financing of the construction of or improvements on property, whenever acquired,
provided that, under the terms of this Indebtedness and under applicable law,
the recourse at the time and thereafter of the lenders with respect to this
Indebtedness is limited to the property or assets so acquired, or the
construction or improvements, including Indebtedness as to which a performance
or completion guarantee or similar undertaking was initially applicable to the
Indebtedness or the related property or assets if the guarantee or similar
undertaking has been satisfied and is no longer in effect. Indebtedness which is
otherwise Non-Recourse Indebtedness will not lose its character as Non-Recourse
Indebtedness because there is recourse to the borrower, any guarantor or any
other person for (a) environmental representations, warranties or indemnities or
(b) indemnities for and liabilities arising from fraud, misrepresentation,
misapplication or non-payment of rents, profits, insurance and condemnation
proceeds and other sums actually received from secured assets to be paid to the
lender, waste and mechanics' liens or similar matters.
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"NOTE PURCHASE AGREEMENTS" refers to the following note purchase
agreements, as amended, supplemented or otherwise modified from time to time,
between us and the following parties:
- John Hancock Mutual Life Insurance Company, dated December 21, 1987;
- Mellon Bank, N.A., Trustee under Master Trust Agreement of AT&T
Corporation, dated January 1, 1984, for Employee Pension
Plans--AT&T--John Hancock--Private Placement, dated December 21, 1987,
which agreement is identical to the Hancock agreement listed above except
for the parties and the amounts;
- John Hancock Mutual Life Insurance Company, dated October 11, 1989;
- The Variable Annuity Life Insurance Company, dated August 29, 1991;
- The Variable Annuity Life Insurance Company, dated August 31, 1992; and
- New York Life Insurance Company, New York Life Insurance and Annuity
Corporation, The Variable Annuity Life Insurance Company, American
General Life Insurance Company and Merit Life Insurance Company, dated
November 14, 1994.
"PRINCIPAL PROPERTY" means any natural gas distribution property located in
the United States, except any property that in the opinion of our board of
directors is not of material importance to the total business conducted by us
and of our consolidated Subsidiaries.
"RESTRICTED SUBSIDIARY" means any Subsidiary the amount of Consolidated Net
Tangible Assets of which constitutes more than 10% of the aggregate amount of
Consolidated Net Tangible Assets of us and our Subsidiaries.
"SALE AND LEASEBACK TRANSACTION" means any arrangement with any person in
which we or any Restricted Subsidiary leases any Principal Property that has
been or is to be sold or transferred by us or the Restricted Subsidiary to that
person, other than:
- a lease for a term, including renewals at the option of the lessee, of
not more than three years or classified as an operating lease under
generally accepted accounting principles;
- leases between us and a Restricted Subsidiary or between Restricted
Subsidiaries; and
- leases of a Principal Property executed by the time of, or within 12
months after the latest of, the acquisition, the completion of
construction or improvement, or the commencement of commercial operation,
of the Principal Property.
"SUBSIDIARY" of ours means:
- a corporation, a majority of whose Capital Stock with rights, under
ordinary circumstances, to elect directors is owned, directly or
indirectly, at the date of determination, by us, by one or more of our
Subsidiaries or by us and one or more of our Subsidiaries; or
- any other person, other than a corporation, in which at the date of
determination we, one or more of our Subsidiaries or we and one or more
of our Subsidiaries, directly or indirectly, have at least a majority
ownership and power to direct the policies, management and affairs of
that person.
"UNITED CITIES INDENTURE" means the Indenture of Mortgage, dated as of July
15, 1959, from United Cities Gas Company to U.S. Bank Trust National
Association, formerly First Trust of Illinois, National Association, and M.J.
Kruger, as Trustees, as amended, supplemented or otherwise modified from time to
time, the Indenture of Mortgage through the Twenty-Second Supplemental Indenture
by us to U.S. Bank Trust National Association, formerly First Trust National
Association, and Russell C. Bergman, as Trustees, as amended, supplemented, or
otherwise modified from time to time.
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CONSOLIDATION, MERGER OR SALE OF ASSETS
Under the terms of the indenture, we are generally permitted to consolidate
with or merge into another entity. We are also permitted to sell or transfer our
assets substantially as an entirety to another entity. However, we may not take
any of these actions unless all of the following conditions are met:
- the resulting entity must agree to be legally responsible for all our
obligations under the debt securities and the indenture;
- the transaction must not cause a default or an Event of Default;
- the resulting entity must be organized under the laws of the United
States or one of the states or the District of Columbia; and
- we must deliver an officers' certificate and legal opinion to the trustee
with respect to the transaction.
In the event that we engage in one of these transactions and comply with
the conditions listed above, we would be discharged from all our obligations and
covenants under the indenture and all obligations under the Outstanding
Securities, with the successor corporation or person succeeding to our
obligations and covenants.
In the event that we engage in one of these transactions, the indenture
provides that, if any Principal Property or Restricted Securities would
thereupon become subject to any Lien, the debt securities, other than any debt
securities not entitled to the benefit of specified covenants, must be secured,
as to such Principal Property or Restricted Securities, equally and ratably
with, or prior to, the indebtedness or obligations that upon the occurrence of
such transaction would become secured by the Lien, unless the Lien could be
created under the indenture without equally and ratably securing the debt
securities.
MODIFICATION OR WAIVER
There are two types of changes that we can make to the indenture and the
debt securities.
CHANGES REQUIRING APPROVAL. With the approval of the holders of at least a
majority in principal amount of all outstanding debt securities of each series
affected, we may make any changes, additions or deletions to any provisions of
the indenture applicable to the affected series, or modify the rights of the
holders of the debt securities of the affected series. However, without the
consent of each holder affected, we cannot:
- change the stated maturity of the principal of, any premium on, or the
interest on a debt security;
- change any of our obligations to pay Additional Amounts;
- reduce the amount payable upon acceleration of maturity following the
default of an Indexed Indenture security or an Original Issue Discount
Security;
- adversely affect any right of repayment at your option;
- change the place of payment of a debt security;
- impair your right to sue for payment;
- adversely affect any right to convert or exchange a debt security;
- reduce the percentage of holders of debt securities whose consent is
needed to modify or amend the indenture;
- reduce the percentage of holders of debt securities whose consent is
needed to waive compliance with any provisions of the indenture or to
waive any defaults; and
- modify any of the provisions of the indenture dealing with modification
and waiver in any other respect, except to increase any percentage of
consents required to amend the indenture or for any
12
waiver or to add to the provisions that cannot be modified without the
approval of each affected holder.
CHANGES NOT REQUIRING APPROVAL. The second type of change does not require
any vote by the holders of the debt securities. This type is limited to
clarifications and certain other changes that would not adversely affect holders
of the outstanding debt securities in any material respect. Nor do we need any
approval to make any change that affects only debt securities to be issued under
the indenture after the changes take effect.
FURTHER DETAILS CONCERNING VOTING. When taking a vote, we will use the
following rules to decide how much principal amount to attribute to a debt
security:
- for Original Issue Discount Securities, we will use the principal amount
that would be due and payable on the voting date if the maturity of the
debt securities were accelerated to that date because of a default; and
- for debt securities whose principal amount is not known (for example,
because it is based on an index) we will use a special rule for that debt
security described in the prospectus supplement.
Debt securities will not be considered outstanding, and therefore not
eligible to vote, if we have deposited or set aside in trust money for their
payment or redemption. Debt securities will also not be eligible to vote if they
have been fully defeased as described later under "Defeasance and Covenant
Defeasance."
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW APPROVAL MAY BE GRANTED OR DENIED IF WE SEEK TO CHANGE
THE INDENTURE OR THE DEBT SECURITIES OR REQUEST A WAIVER.
EVENTS OF DEFAULT
You will have special rights if an Event of Default occurs as to the debt
securities of your series that is not cured, as described later in this
subsection. Please refer to the prospectus supplement for information about any
changes to the Events of Default or our covenants, including any addition of a
covenant or other provision providing event risk or similar protection.
WHAT IS AN EVENT OF DEFAULT? The term "Event of Default" as to the debt
securities of your series means any of the following:
- we do not pay interest on a debt security of the series within 30 days of
its due date;
- we do not pay the principal of or any premium, if any, on a debt security
of the series on its due date;
- we do not deposit any sinking fund payment when and as due by the terms
of any debt securities requiring such payment;
- we remain in breach of a covenant or agreement in the indenture, other
than a covenant or agreement for the benefit of less than all of the
holders of the debt securities, for 60 days after we receive written
notice stating that we are in breach from the trustee or the holders of
at least 25% of the principal amount of the debt securities of the
series;
- we or a Restricted Subsidiary of ours is in default under any matured or
accelerated agreement or instrument under which we have outstanding
Indebtedness for borrowed money or guarantees, which individually are in
excess of $25,000,000, and we have not cured any acceleration within 15
days after we receive notice of this default from the trustee or the
holders of at least 25% of the principal amount of the debt securities of
the series, unless prior to the entry of judgment for the trustee, we or
the Restricted Subsidiary remedy the default or the default is waived by
the holders of the indebtedness;
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- we file for bankruptcy or other events of bankruptcy, insolvency or
reorganization occur; or
- any other Event of Default provided for the benefit of debt securities of
the series.
An Event of Default for a particular series of debt securities will not
necessarily constitute an Event of Default for any other series of debt
securities issued under the indenture.
The trustee may withhold notice to the holders of debt securities of a
particular series of any default if it considers its withholding of notice to be
in the interest of the holders of that series, except that the trustee may not
withhold notice of a default in the payment of the principal of, any premium on,
or the interest on the debt securities.
REMEDIES IF AN EVENT OF DEFAULT OCCURS. If an event of default has
occurred and is continuing, the trustee or the holders of at least 25% in
principal amount of the debt securities of the affected series may declare the
entire principal amount of all the debt securities of that series to be due and
immediately payable by notifying us, and the trustee, if the holders give
notice, in writing. This is called a declaration of acceleration of maturity.
If the maturity of any series of debt securities is accelerated and a
judgment for payment has not yet been obtained, the holders of a majority in
principal amount of the debt securities of that series may cancel the
acceleration if all events of default other than the non-payment of principal or
interest on the debt securities of that series that have become due solely by a
declaration of acceleration are cured or waived, and we deposit with the trustee
a sufficient sum of money to pay:
- all overdue interest on outstanding debt securities of that series;
- all unpaid principal of any outstanding debt securities of that series
that has become due otherwise than by a declaration of acceleration, and
interest on the unpaid principal;
- all interest on the overdue interest; and
- all amounts paid or advanced by the trustee for that series and
reasonable compensation of the trustee.
Except in cases of default, where the trustee has some special duties, the
trustee is not required to take any action under the indenture at the request of
any holders unless the holders offer the trustee reasonable protection from
expenses and liability. This is called an indemnity. If reasonable indemnity is
provided, the holders of a majority in principal amount of the outstanding debt
securities of the relevant series may direct the time, method and place of
conducting any lawsuit or other formal legal action seeking any remedy available
to the trustee. The trustee may refuse to follow those directions if the
directions conflict with any law or the indenture or expose the trustee to
personal liability. No delay or omission in exercising any right or remedy will
be treated as a waiver of that right, remedy or Event of Default.
Before you are allowed to bypass the trustee and bring your own lawsuit or
other formal legal action or take other steps to enforce your rights or protect
your interest relating to the debt securities, the following must occur:
- you must give the trustee written notice that an Event of Default has
occurred and remains uncured;
- the holders of at least 25% in principal amount of all outstanding debt
securities of the relevant series must make a written request that the
trustee take action because of the default and must offer reasonable
indemnity to the trustee against the cost and other liabilities of taking
that action;
- the trustee must not have instituted a proceeding for 60 days after
receipt of the above notice and offer of indemnity; and
- the holders of a majority in principal amount of the debt securities must
not have given the trustee a direction inconsistent with the above notice
during the 60-day period.
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However, you are entitled at any time to bring a lawsuit for the payment of
money due on your debt securities on or after the due date without complying
with the foregoing.
Holders of a majority in principal amount of the debt securities of the
affected series may waive any past defaults other than the following:
- the payment of principal, any premium, interest or Additional Amounts on
any debt security or related coupon; or
- in respect of a covenant that under the indenture cannot be modified or
amended without the consent of each holder affected.
Each year, we will furnish the trustee with a written statement of two of
our officers certifying that, to their knowledge, we are in compliance with the
indenture and the debt securities, or else specifying any default.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW TO GIVE NOTICE OR DIRECTION TO OR MAKE A REQUEST OF THE
TRUSTEE AND HOW TO DECLARE OR CANCEL AN ACCELERATION.
DEFEASANCE AND COVENANT DEFEASANCE
Unless we provide otherwise in the applicable prospectus supplement, the
provisions for full defeasance and covenant defeasance described below apply to
each series of debt securities. In general, we expect these provisions to apply
to each debt security that is not a floating rate or indexed debt security.
FULL DEFEASANCE. If there is a change in U.S. federal tax law, as
described below, we can legally release ourselves from all payment and other
obligations on the debt securities, called "full defeasance," if we put in place
the following arrangements for you to be repaid:
- we must deposit in trust for the benefit of all holders of the debt
securities a combination of money and obligations issued or guaranteed by
the U.S. government that will generate enough cash to make interest,
principal and any other payments on the debt securities on their various
due dates; and
- we must deliver to the trustee a legal opinion confirming that there has
been a change in current federal tax law or an IRS ruling that lets us
make the above deposit without causing you to be taxed on the debt
securities any differently than if we did not make the deposit and just
repaid the debt securities ourselves at maturity. Under current federal
tax law, the deposit and our legal release from the debt securities would
be treated as though we paid you your share of the cash and notes or
bonds at the time the cash and notes or bonds are deposited in trust in
exchange for your debt securities, and you would recognize gain or loss
on the debt securities at the time of the deposit.
If we ever did accomplish defeasance, as described above, you would have to
rely solely on the trust deposit for repayment of the debt securities. You could
not look to us for repayment in the event of any shortfall. Conversely, the
trust deposit would most likely be protected from claims of our lenders and
other creditors if we ever become bankrupt or insolvent. If we accomplish a
defeasance, we would retain only the obligations to register the transfer or
exchange of the debt securities, to maintain an office or agency in respect of
the debt securities and to hold moneys for payment in trust.
COVENANT DEFEASANCE. Under current federal tax law, we can make the same
type of deposit described above and be released from the restrictive covenants
in the indenture discussed above and specified in a prospectus supplement. This
is called "covenant defeasance." In that event, you would lose the protection of
those covenants but would gain the protection of having money and obligations
issued or
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guaranteed by the U.S. government set aside in trust to repay the debt
securities. In order to achieve covenant defeasance, we must do the following:
- deposit in trust for your benefit and the benefit of all other direct
holders of the debt securities a combination of money and obligations
issued or guaranteed by the U.S. government that will generate enough
cash to make interest, principal and any other payments on the debt
securities on their various due date; and
- deliver to the trustee a legal opinion of our counsel confirming that,
under current federal income tax law, we may make the above deposit
without causing you to be taxed on the debt securities any differently
than if we did not make the deposit and just repaid the debt securities
ourselves at maturity.
If we accomplish covenant defeasance, you can still look to us for
repayment of the debt securities if there were a shortfall in the trust deposit
or the trustee is prevented from making payment. In fact, if one of the
remaining Events of Default occurred, such as our bankruptcy, and the debt
securities became immediately due and payable, there may be a shortfall.
Depending on the event causing the default, you may not be able to obtain
payment of the shortfall.
DEBT SECURITIES ISSUED IN NON-GLOBAL FORM
If the debt securities cease to be issued in global form, they will be
issued:
- only in fully registered form;
- without interest coupons; and
- unless we indicate otherwise in the prospectus supplement, in
denominations of $1,000 and amounts that are integral multiples of
$1,000.
Holders may exchange their debt securities that are not in global form for
debt securities of smaller denominations or combined into fewer debt securities
of larger denominations, as long as the total principal amount is not changed.
Holders may exchange or transfer their debt securities at the office of the
trustee. We may appoint the trustee to act as our agent for registering debt
securities in the names of holders transferring debt securities, or we may
appoint another entity to perform these functions or perform them ourselves.
Holders will not be required to pay a service charge to transfer or
exchange their debt securities, but they may be required to pay for any tax or
other governmental charge associated with the transfer or exchange. The transfer
or exchange will be made only if our transfer agent is satisfied with the
holder's proof of legal ownership.
If we have designated additional transfer agents for your debt security,
they will be named in your prospectus supplement. We may appoint additional
transfer agents or cancel the appointment of any particular transfer agent. We
may also approve a change in the office through which any transfer agent acts.
If any debt securities are redeemable and we redeem less than all those
debt securities, we may stop the transfer or exchange of those debt securities
during the period beginning 15 days before the day we mail the notice of
redemption and ending on the day of that mailing, in order to freeze the list of
holders to prepare the mailing. We may also refuse to register transfers or
exchanges of any debt securities selected for redemption, except that we will
continue to permit transfers and exchanges of the unredeemed portion of any debt
security that will be partially redeemed.
If a debt security is issued as a global security, only the depository will
be entitled to transfer and exchange the debt security as described in this
section, since it will be the sole holder of the debt security.
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PAYMENT MECHANICS
WHO RECEIVES PAYMENT? If interest is due on a debt security on an interest
payment date, we will pay the interest to the person or entity in whose name the
debt security is registered at the close of business on the regular record date,
discussed below, relating to the interest payment date. If interest is due at
maturity but on a day that is not an interest payment date, we will pay the
interest to the person or entity entitled to receive the principal of the debt
security. If principal or another amount besides interest is due on a debt
security at maturity, we will pay the amount to the holder of the debt security
against surrender of the debt security at a proper place of payment, or, in the
case of a global security, in accordance with the applicable policies of the
depository.
PAYMENTS ON GLOBAL SECURITIES. We will make payments on a global security
in accordance with the applicable policies of the depository as in effect from
time to time. Under those policies, we will pay directly to the depository, or
its nominee, and not to any indirect holders who own beneficial interests in the
global security. An indirect holder's right to those payments will be governed
by the rules and practices of the depository and its participants, as described
under "What Is a Global Security?".
PAYMENTS ON NON-GLOBAL SECURITIES. For a debt security in non-global form,
we will pay interest that is due on an interest payment date by check mailed on
the interest payment date to the holder at his or her address shown on the
trustee's records as of the close of business on the regular record date. We
will make all other payments by check, at the paying agent described below,
against surrender of the debt security. We will make all payments by check in
next-day funds; for example, funds that become available on the day after the
check is cashed.
Alternatively, if a non-global security has a face amount of at least
$1,000,000 and the holder asks us to do so, we will pay any amount that becomes
due on the debt security by wire transfer of immediately available funds to an
account at a bank in New York City on the due date. To request wire payment, the
holder must give the paying agent appropriate transfer instructions at least
five business days before the requested wire payment is due. In the case of any
interest payment due on an interest payment date, the instructions must be given
by the person who is the holder on the relevant regular record date. In the case
of any other payment, we will make payment only after the debt security is
surrendered to the paying agent. Any wire instructions, once properly given,
will remain in effect unless and until new instructions are given in the manner
described above.
REGULAR RECORD DATES. We will pay interest to the holders listed in the
trustee's records as the owners of the debt securities at the close of business
on a particular day in advance of each interest payment date. We will pay
interest to these holders if they are listed as the owner even if they no longer
own the debt security on the interest payment date. That particular day, usually
about two weeks in advance of the interest payment date, is called the "regular
record date" and will be identified in the prospectus supplement.
PAYMENT WHEN OFFICES ARE CLOSED. If any payment is due on a debt security
on a day that is not a business day, we will make the payment on the next
business day. Payments postponed to the next business day in this situation will
be treated under the indenture as if they were made on the original due date. A
postponement of this kind will not result in a default under any debt security
or the indenture, and no interest will accrue on the postponed amount from the
original due date to the next business day.
PAYING AGENTS. We may appoint one or more financial institutions to act as
our paying agents, at whose designated offices debt securities in non-global
form may be surrendered for payment at their maturity. We call each of those
offices a paying agent. We may add, replace or terminate paying agents from time
to time. We may also choose to act as our own paying agent. Initially, we have
appointed the trustee, at its corporate trust office in New York City, as the
paying agent. We must notify you of changes in the paying agents.
BOOK-ENTRY AND OTHER INDIRECT HOLDERS SHOULD CONSULT THEIR BANKS OR BROKERS
FOR INFORMATION ON HOW THEY WILL RECEIVE PAYMENTS ON THEIR DEBT SECURITIES.
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THE TRUSTEE UNDER THE INDENTURE
SunTrust Bank is the trustee under the indenture. SunTrust is also a lender
in our $300 million revolving credit facility.
The trustee may resign or be removed with respect to one or more series of
indenture securities and a successor trustee may be appointed to act with
respect to these series.
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 100,000,000 shares of common
stock, of which 41,018,637 shares were outstanding on December 17, 2001. Each of
our shares of common stock is entitled to one vote on all matters voted upon by
shareholders. Our shareholders do not have cumulative voting rights. Our issued
and outstanding shares of common stock are fully paid and nonassessable. There
are no redemption or sinking fund provisions applicable to the shares of our
common stock, and such shares are not entitled to any preemptive rights. Since
we are incorporated in both Texas and Virginia, we must comply with the laws of
both states when issuing shares of our common stock.
Holders of our shares of common stock are entitled to receive such
dividends as may be declared from time to time by our board of directors from
our assets legally available for the payment of dividends and, upon our
liquidation, a pro rata share of all of our assets available for distribution to
our shareholders.
Under the provisions of some of our debt agreements, we have agreed to
restrictions on the payment of cash dividends. Under these restrictions, our
cumulative cash dividends paid after December 31, 1988 may not exceed the sum of
our and our Subsidiaries' accumulated consolidated net income for periods after
December 31, 1988, plus approximately $15.0 million. As of September 30, 2001,
approximately $56.7 million was available for the declaration of dividends.
The registrar and transfer agent for our common stock is EquiServe Trust
Company, N.A.
Some provisions of our restated articles of incorporation and bylaws may be
deemed to have an "anti-takeover" effect. The following description of these
provisions is only a summary, and we refer you to our restated articles of
incorporation and bylaws for more information since their terms affect your
rights as a shareholder.
CLASSIFICATION OF THE BOARD. Our board of directors is divided into three
classes, each of which consists, as nearly as may be possible, of one-third of
the total number of directors constituting the entire board. There are currently
12 directors serving on the board. Each class of directors serves a three-year
term. At each annual meeting of our shareholders, successors to the class of
directors whose term expires at the annual meeting are elected for three-year
terms. Our restated articles of incorporation prohibit cumulative voting. In
general, in the absence of cumulative voting, one or more persons who hold a
majority of our outstanding shares can elect all of the directors who are
subject to election at any meeting of shareholders.
The classification of directors could have the effect of making it more
difficult for shareholders, including those holding a majority of the
outstanding shares, to force an immediate change in the composition of our
board. Two shareholder meetings, instead of one, generally will be required to
effect a change in the control of our board. Our board believes that the longer
time required to elect a majority of a classified board will help to ensure the
continuity and stability of our management and policies since a majority of the
directors at any given time will have had prior experience as our directors.
REMOVAL OF DIRECTORS. Our restated articles of incorporation and bylaws
also provide that our directors may be removed only for cause and upon the
affirmative vote of the holders of at least 75% of the shares then entitled to
vote at an election of directors.
FAIR PRICE PROVISIONS. Article VII of our restated articles of
incorporation provides certain "Fair Price Provisions" for our shareholders.
Under Article VII, a merger, consolidation, sale of assets, share exchange,
recapitalization or other similar transaction, between us or a company
controlled by or under
18
common control with us and any individual, corporation or other entity which
owns or controls 10% or more of our voting capital stock, would be required to
satisfy the condition that the aggregate consideration per share to be received
in the transaction for each class of our voting capital stock be at least equal
to the highest per share price, or equivalent price for any different classes or
series of stock, paid by the 10% shareholder in acquiring any of its holdings of
our stock. If a proposed transaction with a 10% shareholder does not meet this
condition, then the transaction must be approved by the holders of at least 75%
of the outstanding shares of voting capital stock held by our shareholders other
than the 10% shareholder unless a majority of the directors who were members of
our board immediately prior to the time the 10% shareholder involved in the
proposed transaction became a 10% shareholder have either:
- expressly approved in advance the acquisition of the outstanding shares
of our voting capital stock that caused the 10% shareholder to become a
10% shareholder; or
- approved the transaction either in advance of or subsequent to the 10%
shareholder becoming a 10% shareholder.
The provisions of Article VII may not be amended, altered, changed, or
repealed except by the affirmative vote of at least 75% of the votes entitled to
be cast thereon at a meeting of our shareholders duly called for consideration
of such amendment, alteration, change, or repeal. In addition, if there is a 10%
shareholder, such action must also be approved by the affirmative vote of at
least 75% of the outstanding shares of our voting capital stock held by the
shareholders other than the 10% shareholder.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS. Our shareholders can
submit shareholder proposals and nominate candidates for the board of directors
if the shareholders follow the advance notice procedures described in our
bylaws.
Shareholder proposals must be submitted to our corporate secretary at least
60 days, but not more than 85 days, before the annual meeting. The notice must
include a description of the proposal, the shareholder's name and address and
the number of shares held, and all other information which would be required to
be included in a proxy statement filed with the SEC if the shareholder were a
participant in a solicitation subject to the SEC proxy rules. To be included in
our proxy statement for an annual meeting, we must receive the proposal at least
120 days prior to the anniversary of the date we mailed the proxy statement for
the prior year's annual meeting.
To nominate directors, shareholders must submit a written notice to our
corporate secretary at least 60 days, but not more than 85 days, before a
scheduled meeting. The notice must include the name and address of the
shareholder and of the shareholder's nominee, the number of shares held by the
shareholder, a representation that the shareholder is a holder of record of
common stock entitled to vote at the meeting, and that the shareholder intends
to appear in person or by proxy to nominate the persons specified in the notice,
a description of any arrangements between the shareholder and the shareholder's
nominee, information about the shareholder's nominee required by the SEC, and
the written consent of the shareholder's nominee to serve as a director.
Shareholder proposals and director nominations that are late or that do not
include all required information may be rejected. This could prevent
shareholders from bringing certain matters before an annual or special meeting
or making nominations for directors.
SHAREHOLDER RIGHTS PLAN. On November 12, 1997, our board of directors
declared a dividend distribution of one right for each outstanding share of our
common stock to shareholders of record at the close of business on May 10, 1998.
Each right entitles the registered holder to purchase from us one share of our
common stock at a purchase price of $80 per share, subject to adjustment. The
description and terms of the rights are set forth in a rights agreement between
us and EquiServe Trust Company, N.A., as rights agent.
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Subject to exceptions specified in the rights agreement, the rights will
separate from our common stock and a distribution date will occur upon the
earlier of:
- ten business days following a public announcement that a person or group
of affiliated or associated persons has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares
of our common stock, other than as a result of repurchases of stock by us
or specified inadvertent actions by institutional or other shareholders;
- ten business days, or such later date as our board of directors shall
determine, following the commencement of a tender offer or exchange offer
that would result in a person or group having acquired, or obtained the
right to acquire, beneficial ownership of 15% or more of the outstanding
shares of our common stock; or
- ten business days after our board of directors shall declare any person
to be an adverse person within the meaning of the rights plan.
The rights expire at 5:00 P.M., Boston, Massachusetts time on May 10, 2008,
unless extended prior thereto by our board or earlier if redeemed by us.
The rights will not have any voting rights. The exercise price payable and
the number of shares of our common stock or other securities or property
issuable upon exercise of the rights are subject to adjustment from time to time
to prevent dilution. We issue rights when we issue our common stock until the
rights have separated from the common stock. After the rights have separated
from the common stock, we may issue additional rights if the board of directors
deems such issuance to be necessary or appropriate.
The rights have anti-takeover effects and may cause substantial dilution to
a person or entity that attempts to acquire us on terms not approved by our
board of directors except pursuant to an offer conditioned upon a substantial
number of rights being acquired. The rights should not interfere with any merger
or other business combination approved by our board of directors because, prior
to the time that the rights become exercisable or transferable, we can redeem
the rights at $.01 per right.
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus and a prospectus
supplement as follows:
- through agents;
- to or through underwriters; or
- directly to other purchasers.
We will identify any underwriters or agents and describe their compensation
in a prospectus supplement.
We, directly or through agents, may sell, and the underwriters may resell,
the offered securities in one or more transactions, including negotiated
transactions. These transactions may be:
- at a fixed public offering price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to the prevailing market prices; or
- at negotiated prices.
In connection with the sale of offered securities, the underwriters or
agents may receive compensation from us or from purchasers of the offered
securities for whom they may act as agents. The underwriters may sell offered
securities to or through dealers, who may also receive compensation from
purchasers of the offered securities for whom they may act as agents.
Compensation may be in the form of discounts, concessions or commissions.
Underwriters, dealers and agents that participate in the distribution of the
offered securities may be underwriters as defined in the Securities Act, and any
discounts or commissions
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received by them from us and any profit on the resale of the offered securities
by them may be treated as underwriting discounts and commissions under the
Securities Act of 1933.
We will indemnify the underwriters and agents against certain civil
liabilities, including liabilities under the Securities Act of 1933.
Underwriters, dealers and agents or their affiliates may engage in
transactions with us or perform services for us.
If we indicate in the prospectus supplement relating to a particular series
or issue of offered securities, we will authorize underwriters, dealers or
agents to solicit offers by institutions to purchase the offered securities from
us under delayed delivery contracts providing for payment and delivery at a
future date. These contracts will be subject only to those conditions that we
specify in the prospectus supplement, and we will specify in the prospectus
supplement the commission payable for solicitation of these contracts.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP, Dallas, Texas, and Hunton & Williams,
Richmond, Virginia, have each rendered an opinion with respect to the validity
of the securities being offered by this prospectus. We filed these opinions as
exhibits to the registration statement of which this prospectus is a part.
Shearman & Sterling, New York, New York, will pass upon certain matters related
to the securities being offered by this prospectus for any underwriters, dealers
or agents.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended September 30, 2001, as set forth in their report dated November 2, 2001,
which is incorporated by reference in this prospectus. Our financial statements
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act. You may read and
copy this information at the following locations of the SEC:
Judiciary Plaza, Room 1024 The Woolworth Building Citicorp Center
450 Fifth Street, N.W. Street 233 Broadway 500 West Madison Street
Washington, D.C. 20549 New York, NY 10279 Suite 1400
Chicago, Illinois 60661
You can also obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. You may obtain information on the operation of the
Public Reference Room by calling the SEC at (800) SEC-0330.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who file
electronically with the SEC. The address of that site is http://www.sec.gov.
Our common stock is listed on the New York Stock Exchange and you can
inspect reports, proxy statements and other information about us at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
We have filed with the SEC a registration statement on Form S-3 that
registers the securities we are offering. The registration statement, including
the attached exhibits and schedules, contains additional
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relevant information about us and the securities offered. The rules and
regulations of the SEC allow us to omit certain information included in the
registration statement from this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
that is subsequently filed with the SEC automatically updates and supercedes the
previously filed information. The information incorporated by reference is
considered to be part of this prospectus, except for any information that is
superseded by information that is included directly in this prospectus or
subsequently filed document.
This prospectus incorporates by reference our Annual Report on Form 10-K
for the fiscal year ended September 30, 2001, which we have previously filed
with the SEC and which is not included in or delivered with this document. It
contains important information about our company and its financial condition.
We also incorporate by reference any future filings with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
between the date of this prospectus and the date of the closing of each
offering. These documents include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (other
than information furnished under Item 9), as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document from us without charge, excluding any exhibits to those documents
unless the exhibit is specifically incorporated by reference in this prospectus.
You can obtain documents incorporated by reference in this prospectus by
requesting them in writing or by telephone from us at the following address:
ATMOS ENERGY CORPORATION
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas, Texas 75240
Attention: Louis P. Gregory
(972) 934-9227
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(ATMOS ENERGY)
ATMOS ENERGY CORPORATION
$250,000,000
5 1/8% SENIOR NOTES DUE 2013
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PROSPECTUS SUPPLEMENT
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BANC ONE CAPITAL MARKETS, INC.
SG COWEN
SUNTRUST ROBINSON HUMPHREY
WACHOVIA SECURITIES
BANC OF AMERICA SECURITIES LLC
KBC FINANCIAL PRODUCTS USA INC.
U.S. BANCORP PIPER JAFFRAY
HIBERNIA SOUTHCOAST CAPITAL, INC.
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January 13, 2003
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