May 15 – Atmos Energy Corporation reported net income of $41.4 million, or $1.01 per diluted share, for its fiscal 2002 second quarter ended March 31, 2002, compared with net income of $44.1 million, or $1.13 per diluted share, for the quarter ended March 31, 2001.

For the six months ended March 31, 2002, Atmos Energy reported net income of $62.0 million, or $1.51 per diluted share, compared with net income of $67.0 million, or $1.87 per diluted share, for the same period last year.

“We are pleased with our solid financial performance for the 2002 second quarter and the first half of our 2002 fiscal year,” said Robert W. Best, Atmos Energy chairman, president and chief executive officer. “Compared with the winter of 2001 — which was one of the coldest on record, Atmos Energy’s 2002 second quarter performance demonstrates the Company’s ability to achieve strong financial results despite varying weather conditions. Our performance reflects a growing earnings base, highlighted by the solid results produced by the LGS assets acquired in 2001. Underscoring our financial strength in 2002 is our success in managing and restoring bad debt expense to levels below historical norms. As always, the hallmark of our financial strength is our commitment and continuing passion for aggressively controlling our operating expenses.

“Atmos forecasts it will report between breakeven and a net loss of $0.02 per diluted share for its 2002 third quarter and $1.43 per diluted share for its 2002 fiscal year,” Best said. “The Company’s forecasts are in line with recent Wall Street estimates.”

Results for the 2002 Second Quarter Ended March 31, 2002

For the second quarter ended March 31, 2002, earnings per diluted share were reduced due to a year-over-year increase of approximately 2.2 million shares.

Gross profit for the 2002 second quarter was $149.9 million, compared with $138.3 million for the same period last year. Total throughput in the 2002 second quarter was 82.6 billion cubic feet (Bcf), compared with 79.4 Bcf for the same period a year ago. The increase in throughput resulted primarily from volumes associated with the assets of Louisiana Gas Service (LGS) acquired in July 2001. The LGS assets generated gross profit of $25.4 million. Partially offsetting the increase in 2002 gross profit was a $10.2 million reduction primarily due to weather that was 12 percent warmer than the same quarter last year and 2 percent warmer than normal, as adjusted for weather-normalized operations.

Atmos Energy’s net income from nonutility operations was $4.7 million during the second quarter of 2002, compared with $8.1 million a year ago. Nonutility net income was lower in the 2002 second quarter primarily due to warmer than normal weather and a relative lack of volatility in natural gas commodity prices. Nonutility operations in the 2002 second quarter contributed 11 percent of Atmos Energy’s consolidated net income.
Operation and maintenance expense for the 2002 second quarter was $42.3 million, compared with $35.0 million in 2001. Excluding year-over-year operating expense related to assets and interests acquired since the second quarter last year, operation and maintenance expense for the 2002 second quarter declined $3.8 million.

Acquisition-related operation and maintenance expense, excluding the provision for doubtful accounts, for the 2002 second quarter included $6.3 million for the LGS assets acquired in July 2001 and a $4.8 million increase for the April 2001 acquisition of the remaining 55 percent interest in Woodward Marketing, L.L.C. Offsetting the additional acquisition-related expense for 2002 was a year-over-year decrease of $3.9 million in the provision for doubtful accounts. The provision for doubtful accounts in 2002 was $0.3 million, compared with $4.2 million for the same period a year ago. The decrease was a result of lower gas commodity prices in 2002 and successful recovery of customer receivable balances. The average cost of gas for the 2002 second quarter was $3.65 per million cubic feet (Mcf), compared with $8.53 per Mcf for the 2001 period.

Depreciation and amortization expense for the 2002 second quarter was $20.0 million, compared with $15.9 million for the first quarter of 2001. The $4.1 million increase in the 2002 second quarter was primarily attributable to the acquired LGS assets.

Miscellaneous expense for the 2002 second quarter was $6.1 million, compared with miscellaneous income of $0.3 million for the same period in 2001. The $6.4 million change was primarily due to $5.9 million recognized for the Company’s weather insurance policy covering its Texas and Louisiana operations. Weather for the covered operations during the October-through- March heating season did not meet or exceed the 7 percent warmer than normal threshold required to yield income from the insurance. Weather for the 2001- 2002 heating season was 6 percent warmer than normal and 20 percent warmer than last year.

Interest expense increased $4.7 million during the 2002 second quarter, compared with the same period last year, primarily due to interest expense associated with Atmos’ $350 million debt offering in May 2001 used to finance the purchase of the LGS assets.
Results for the Six Months Ended March 31, 2002
For the six months ended March 31, 2002, earnings per diluted share were reduced by a year-over-year increase of approximately 5.1 million shares.
Gross profit during the six months ended March 31, 2002, increased $10.9 million to $259.2 million, compared with $248.3 million for the same period last year.

The increase was primarily the result of $43.3 million in gross profit related to the LGS assets purchased in July 2001. Partially offsetting the increase in 2002 gross profit was a $34.5 million reduction primarily due to weather that was 20 percent warmer than the same period last year and 6 percent warmer than normal, as adjusted for weather-normalized operations. Total throughput delivered in the 2002 period was 139.7 Bcf, compared with 147.4 Bcf for the same period last year. The decline in 2002 throughput was primarily the result of lower gas service volumes due to the effects of weather.

Atmos’ nonutility segment, which operates under Atmos Energy Holdings, Inc., contributed net income of $8.5 million during the six months ended March 31, 2002, compared with $8.3 million in the same period last year. Nonutility operations for the six months ended March 31, 2002, contributed approximately 14 percent of the Company’s consolidated net income.

Operation and maintenance expense for the six months ended March 31, 2002, was $84.8 million, compared with $70.9 million last year. Excluding year- over-year operating expense related to assets and interests acquired since the six months ended last year, operation and maintenance expense for the 2002 period declined $8.9 million. Acquisition-related operation and maintenance expense, excluding the provision for doubtful accounts, for the 2002 period included $15.5 million for the LGS assets acquired in July 2001 and a $7.3 million increase for the April 2001 acquisition of the remaining 55 percent interest in Woodward Marketing, L.L.C. Offsetting the additional acquisition-related expense for 2002, was a year-over-year decrease of $11.1 million in the provision for doubtful accounts.

The provision for doubtful accounts in the first six months of 2002 was $1.5 million, compared with $12.6 million for the same period a year ago. The decrease was attributable to lower gas commodity prices in 2002 and the successful recovery of customer receivable balances. For the six months ended March 31, 2002, the average cost of gas was $3.75 per Mcf, compared with $7.50 per Mcf for the six months ended March 31, 2001.
Depreciation and amortization expense for the six months of 2002 was $40.5 million, compared with $31.7 million last year. The $8.8 million year- over-year increase was primarily attributable to the acquired LGS assets.

Interest expense during the six months ended March 31, 2002, increased $8.4 million, compared with the same period last year, primarily due to interest expense associated with the Company’s $350 million debt offering in May 2001 used to finance the purchase of the LGS assets.


Highlights of the 2002 Second Quarter

Atmos Power Systems, Inc. and Woodward Marketing, L.L.C. Selected for New Power Plant
Atmos Power Systems, Inc. is building for lease a 21 megawatt natural-gas- fired electric power plant for an industrial customer in Tennessee. The plant, with an approximate cost to construct of $8 million, will be leased to the customer for 10 years with an option to purchase after five years. Operation is expected to begin in July 2002. Fuel requirements for the power plant will be managed by Woodward Marketing, L.L.C., which already provides natural gas for the customer’s existing load. The plant will operate primarily during periods of curtailment by the Tennessee Valley Authority and will consume more than 200 Mcf of natural gas per hour at maximum output. The plant is also expected to operate whenever it is economical to replace TVA- supplied power at lower costs.

Six of Seven Utility Commissions Approve Mississippi Valley Gas Acquisition
Atmos Energy’s pending acquisition of Mississippi Valley Gas Company has received six of the seven required approvals from state utility regulatory commissions. Atmos is continuing to respond to data requests from the Mississippi Public Service Commission, which is the seventh state commission that must approve the transaction. Atmos expects to close the acquisition by the end of its 2002 fiscal year.

Four of Five States Approve New $600 Million Shelf Registration
Atmos Energy filed a shelf registration statement in December 2001 with the Securities and Exchange Commission for authorization to issue up to $600 million of new debt or equity financing. Using this shelf registration, Atmos plans to issue long-term debt to permanently fund the $75 million cash it will pay as partial consideration to acquire Mississippi Valley Gas Company and to refinance about $45 million of Mississippi Valley’s existing debt. The remainder of the authorization could be used over time to issue financing for other corporate purposes. Four of five state regulatory commissions have approved the filing, and the fifth commission’s approval is expected in the