Background
Atmos Energy Corporation is an old company that specializes in the drilling and distribution of natural gas. The history of this company dates back to the 1960s when it became known as Pioneer Corporation located in West Texas. This company merged and acquired other related investments to expand its operations and control a large market. However, these acquisitions were minor and did not have a significant impact on its financial position. Pioneer Corporation had numerous subsidiaries that started to break away from it in the 1980s. Energas, a subsidiary of Pioneer changed its corporate name to Atmos Energy Corporation in 1988 and this marked the beginning of major transformations in the company. Charles K. Vaughn joined this company in 1941 and transformed its image and operations after working for 56 years. Atmos has expanded its operations beyond Texas and today it is the United States’ largest natural gas distributor.
The split from Pioneer Corporation was an important step towards making Atmos a public company. Vaughn served Atmos in different capacities starting from a typist and rising through the ranks to become its chairman. He is known for making significant decisions that prompted this company to start trading its stock on the New York Stock Exchange in October 1988. Today, its shares are trading at $ 54.20 as of Feb 11th, 2015, 09:14 a.m. The company generates annual revenue at about $ 3.886 billion according to the financial report of 2013. In addition, its operating income, net income, and total equity values were $501.879 million, 243.194 million, and $2.580 billion respectively in 2013. Atmos has sufficient capital with an asset value of $7.940 billion that enables it to counter the effects of inflation without affecting the value of its stock.
The company has 4, 720 permanent employees working in its subsidiaries located in 31 states. Its financial report of 2012 showed that this company controlled a large market base with about 3, 047. 024 customers located in more than 1, 426 communities. In addition, it’s more than 3, 500 service vehicles enabled the company to monitor its 73, 875 miles of pipeline and serve its customers without delay. The company delivered more than 1,190 billion cubic feet of natural gas in the same year and this marked a significant improvement from the initial 82 billion cubic feet supplied in 1983.
Major Competitors
All companies specializing in the drilling, processing, and distribution of energy sources face stiff competition due to the high demand for this product. Atmos faces completion from local and international companies and this means that it has to use effective strategies to remain in the market. The Natural Gas Supply Association of America (NGSA) has more than 60 registered members located in different states in America. Texas has more than 10 companies specializing in the distribution of natural gas and other sources of energy.
Internal completion in the distribution of natural gas in the United States is a major threat facing Atmos. America has created a convenient environment for all investors to enjoy healthy competition in this industry. The high returns on the stocks of these companies compel them to offer competitive rates to shareholders to increase their operating capital. Cheniere Energy Corporation is Atmos’ greatest competitor whose shares traded at $74.161 on February 11th, 2015 at 11.19 am. The company trade volume was estimated at 582,231 against Atmos’ 192, 562. Atmos’ shares rank at position six in Texas and this means that this company has a long way to go to attract more investors.
Additionally, other sources of energy like electricity, steam, solar, and wind offer competition to this company. However, most companies in the United States do not use energy sources that pollute the environment. Unfortunately, most of them use electricity, wind, or solar energy because they are reliable and affordable. Atmos supplies gas to large companies and this means that it does not other sources of energy used for domestic purposes do not offer competition to it.
External competition from other countries has not been a serious problem facing Atmos and other American natural gas distributing companies. America has unfriendly policies that make it uneconomical to import natural gas and other sources of energy. In addition, the documentation process of acquiring import permits and the heavy taxation policies create room for only a handful of investors to import natural gas. Therefore, Atmos and other natural gas distributing companies are cushioned from the stiff multinational competitors. Moreover, terrorism and other illegal activities have forced America to scrutinize and evaluate the activities of all multinationals to ensure they adhere to its trade standards. The government offers subsidies to local investors and this means that foreigners pay higher taxes that discourage them from investing in this country. The United States’ foreign policy enables its investors to import goods or services that are essential and which it does not have the capacity or resources to produce.
Uniqueness
Atmos is a unique company and this gives it a competitive advantage over other companies. First, it specializes in the distribution of natural gas. Specialization enables this company to focus on one commodity and this assures its customers that it will offer the best services. Additionally, the company has a long history of more than 100 years, specializing in the distribution of natural gas. The experience it has gained enables it to navigate through the challenges of this industry without feeling the impacts of serious challenges. For instance, the economic recession of 2007/2008 devastated most companies, especially those that had floated a lot of shares in the New York stock exchange. However, Atmos was not affected very much and the value of its shares remained stable at between $21.06 and 22.31 throughout 2007. The high investment in the stock market in 2005 could have dealt a serious financial blow to this company, but its management was alert to cover the unexpected risk of inflation.
Secondly, this company established the Charles K. Vaughn Center under the leadership of Charles K. Vaughn as its chairman. The facility trains new technicians and veterans to ensure their skills are compatible with the requirements of the company. The idea of establishing this center was informed by the need to have employees that understand the specific needs of this company. In addition, it was motivated by the need to ensure that veterans acquired new skills that were compatible with modern technology. Vaughn realized that employees can perform optimally when their skills are compatible with the policies, equipment, and practices of the company. The Gas City located within this facility enables employees to practice and perfect their safety and professional skills and offer high-quality services to the company. The employees of this company feel at home because they do not have to travel long distances to and from work. The scarcity of housing facilities is a serious problem that affects the performance of most employees in the United States. However, Atmos solved this problem and its employees do not have to worry about where to rest after work.
Company Assumptions and Beliefs
Atmos believes in growing through acquiring utility assets and regulating its operations in its outlets that include Mississippi, Texas, Colorado, Kansas, Louisiana, Kentucky, and Virginia. This company believes that diversification of its tributaries enables it to enjoy a favorable work environment in terms of economic, regulatory climates like weather, taxation policies, and consumer behavior.
The company believes that it has a responsibility of providing natural gas to the community, but this does not mean that it ignores the need to provide safe and reliable natural gas. The corporate social responsibility of this company involves sending its employees to spend hours at charitable organizations to support programs like Meals on Wheels, Habitats for Humanity, and United Way among other initiatives to improve the lives of the locals. Atmos believes that the community is not just a place but an environment to do business, live and volunteer its resources to support local communities. The company provides financial assistance to low-income families to enable them to afford natural gas bills. It is driven by the belief that its responsibility involves doing the right thing while distributing natural gas. Individuals or organizations willing to do business with this company must adhere to its continuous improvement and value-based procurement strategy. Business partners that support its values and enable it to improve its service and quality are offered incentives and value-added services for their loyalty.
Financial Ratios and the Future Prospects
Atmos has performed well in the last five years as is evident in its financial ratios of between 2009 and 2013. The following data explains the steady change of Atmos’ financial ratios and the impacts of this improvement on its operations.
The working capital of this company increased from $ 92 million in 2009 to $ 152 million in 2013. This means that the additional capital injected by new shareholders continued to generate revenue through the high value of its stock that was traded at between $92 and $98 in 2009 and 2013 respectively. The dividend that shareholders earned per share was $ 1.32 in 2009 and $1.48 in 2013. The operating cash flow reduced by a third to $ 740 million from 4 919 million. This means that there was less money in circulation due to the adverse effects of the 2007 economic crisis. Most investors were apprehensive and wanted to invest in stocks that had a slow growth margin yet were stable and reliable. The asset and fixed asset turnover continued to decline due to the heavy investments by private shareholders.
The ratios above show that the company has a bright future. For instance, its financial forecasts estimate that the company will trade almost double its existing shares in the next four years. In addition, the value of dividends payable to shareholders is likely to increase by 30% to almost $2 per share. However, the company is not ready to offer more than 20% of the possible public offer to ensure its initial shareholders enjoy the value of their investments.