Segment Information

Atmos Energy Corporation and its subsidiaries are engaged primarily in the regulated natural gas distribution and pipeline business as well as other nonregulated businesses. We distribute natural gas through sales and transportation arrangements to over three million residential, commercial, public authority and industrial customers through our six regulated distribution divisions, which cover service areas located in eight states. In addition, we transport natural gas for others through our distribution system.

Through our nonregulated business, we provide natural gas management and transportation services to municipalities, regulated distribution companies, including certain divisions of Atmos Energy and third parties.

We operate the Company through the following three segments:


•	The regulated distribution segment, includes our regulated distribution and related sales operations.


•	The regulated pipeline segment, includes the regulated pipeline and storage operations of our Atmos Pipeline — Texas Division.


•	The nonregulated segment, is comprised of our nonregulated natural gas management, nonregulated natural gas transmission, storage and other services.

Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. Although our regulated distribution segment operations are geographically dispersed, they are reported as a single segment as each regulated distribution division has similar economic characteristics. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. We evaluate performance based on net income or loss of the respective operating units. Interest expense is allocated pro rata to each segment based upon our net investment in each segment. Income taxes are allocated to each segment as if each segment’s taxes were calculated on a separate return basis.

Summarized income statements and capital expenditures by segment are shown in the following tables.



	Year Ended September 30, 2014
	Regulated Distribution			Regulated Pipeline			Nonregulated		Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	3,056,212		$	92,166		$	1,792,538	$	—		$	4,940,916
Intersegment revenues	5,334			226,293			274,754		(506,381		)	—
	3,061,546			318,459			2,067,292		(506,381		)	4,940,916
Purchased gas cost	1,885,031			—			1,979,337		(505,878		)	3,358,490
Gross profit	1,176,515			318,459			87,955		(503		)	1,582,426
Operating expenses
Operation and maintenance	387,228			91,466			26,963		(503		)	505,154
Depreciation and amortization	208,376			41,031			4,580		—			253,987
Taxes, other than income	196,343			13,143			2,450		—			211,936
Total operating expenses	791,947			145,640			33,993		(503		)	971,077
Operating income	384,568			172,819			53,962		—			611,349
Miscellaneous income (expense)	(381		)	(3,181		)	2,216		(3,889		)	(5,235		)
Interest charges	94,918			36,280			1,986		(3,889		)	129,295
Income before income taxes	289,269			133,358			54,192		—			476,819
Income tax expense	117,684			47,167			22,151		—			187,002
Net income	$	171,585		$	86,191		$	32,041	$	—		$	289,817
Capital expenditures	$	584,065		$	249,347		$	1,839	$	—		$	835,251



	Year Ended September 30, 2013
	Regulated Distribution		Regulated Pipeline			Nonregulated			Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	2,394,418	$	89,011		$	1,392,031		$	—		$	3,875,460
Intersegment revenues	5,075		179,889			195,883			(380,847		)	—
	2,399,493		268,900			1,587,914			(380,847		)	3,875,460
Purchased gas cost	1,318,257		—			1,524,583			(379,430		)	2,463,410
Gross profit	1,081,236		268,900			63,331			(1,417		)	1,412,050
Operating expenses
Operation and maintenance	375,188		76,686			37,569			(1,423		)	488,020
Depreciation and amortization	195,581		35,302			4,196			—			235,079
Taxes, other than income	167,374		17,059			2,639			—			187,072
Total operating expenses	738,143		129,047			44,404			(1,423		)	910,171
Operating income	343,093		139,853			18,927			6			501,879
Miscellaneous income (expense)	2,535		(2,285		)	2,316			(2,763		)	(197		)
Interest charges	98,296		30,678			2,168			(2,757		)	128,385
Income from continuing operations before income taxes	247,332		106,890			19,075			—			373,297
Income tax expense	96,476		38,630			7,493			—			142,599
Income from continuing operations	150,856		68,260			11,582			—			230,698
Income from discontinued operations, net of tax	7,202		—			—			—			7,202
Gain (loss) on sale of discontinued operations, net of tax	5,649		—			(355		)	—			5,294
Net income	$	163,707	$	68,260		$	11,227		$	—		$	243,194
Capital expenditures	$	528,599	$	313,230		$	3,204		$	—		$	845,033



	Year Ended September 30, 2012
	Regulated Distribution			Regulated Pipeline			Nonregulated		Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	2,144,376		$	92,604		$	1,199,182	$	—		$	3,436,162
Intersegment revenues	954			154,747			149,800		(305,501		)	—
	2,145,330			247,351			1,348,982		(305,501		)	3,436,162
Purchased gas cost	1,122,587			—			1,293,858		(304,022		)	2,112,423
Gross profit	1,022,743			247,351			55,124		(1,479		)	1,323,739
Operating expenses
Operation and maintenance	353,879			71,521			29,697		(1,484		)	453,613
Depreciation and amortization	202,026			31,438			4,061		—			237,525
Taxes, other than income	162,377			15,568			3,128		—			181,073
Asset impairments	—			—			5,288		—			5,288
Total operating expenses	718,282			118,527			42,174		(1,484		)	877,499
Operating income	304,461			128,824			12,950		5			446,240
Miscellaneous income (expense)	(12,657		)	(1,051		)	1,035		(1,971		)	(14,644		)
Interest charges	110,642			29,414			3,084		(1,966		)	141,174
Income from continuing operations before income taxes	181,162			98,359			10,901		—			290,422
Income tax expense	57,314			35,300			5,612		—			98,226
Income from continuing operations	123,848			63,059			5,289		—			192,196
Income from discontinued operations, net of tax	18,172			—			—		—			18,172
Gain on sale of discontinued operations, net of tax	6,349			—			—		—			6,349
Net income	$	148,369		$	63,059		$	5,289	$	—		$	216,717
Capital expenditures	$	546,818		$	175,768		$	10,272	$	—		$	732,858

The following table summarizes our revenues by products and services for the fiscal year ended September 30.



	2014		2013		2012
	(In thousands)
Regulated distribution revenues:
Gas sales revenues:
Residential	$	1,933,099	$	1,512,495	$	1,351,479
Commercial	876,042		661,930		587,651
Industrial	90,536		81,155		71,960
Public authority and other	64,779		60,557		54,334
Total gas sales revenues	2,964,456		2,316,137		2,065,424
Transportation revenues	64,049		55,938		53,924
Other gas revenues	27,707		22,343		25,028
Total regulated distribution revenues	3,056,212		2,394,418		2,144,376
Regulated pipeline revenues	92,166		89,011		92,604
Nonregulated revenues	1,792,538		1,392,031		1,199,182
Total operating revenues	$	4,940,916	$	3,875,460	$	3,436,162

Balance sheet information at September 30, 2014 and 2013 by segment is presented in the following tables.



	September 30, 2014
	Regulated Distribution		Regulated Pipeline		Nonregulated			Eliminations			Consolidated
	(In thousands)
ASSETS
Property, plant and equipment, net	$	5,202,761	$	1,464,572	$	58,573		$	—		$	6,725,906
Investment in subsidiaries	952,171		—		(2,096		)	(950,075		)	—
Current assets
Cash and cash equivalents	33,303		—		8,955			—			42,258
Assets from risk management activities	23,102		—		22,725			—			45,827
Other current assets	490,408		14,009		526,161			(342,823		)	687,755
Intercompany receivables	790,442		—		—			(790,442		)	—
Total current assets	1,337,255		14,009		557,841			(1,133,265		)	775,840
Goodwill	574,816		132,502		34,711			—			742,029
Noncurrent assets from risk management activities	13,038		—		—			—			13,038
Deferred charges and other assets	309,965		21,826		6,100			—			337,891
	$	8,390,006	$	1,632,909	$	655,129		$	(2,083,340	)	$	8,594,704
CAPITALIZATION AND LIABILITIES
Shareholders’ equity	$	3,086,232	$	482,612	$	469,559		$	(952,171	)	$	3,086,232
Long-term debt	2,455,986		—		—			—			2,455,986
Total capitalization	5,542,218		482,612		469,559			(952,171		)	5,542,218
Current liabilities
Short-term debt	522,695		—		—			(326,000		)	196,695
Liabilities from risk management activities	1,730		—		—			—			1,730
Other current liabilities	559,765		24,790		142,397			(14,727		)	712,225
Intercompany payables	—		763,635		26,807			(790,442		)	—
Total current liabilities	1,084,190		788,425		169,204			(1,131,169		)	910,650
Deferred income taxes	913,260		361,688		11,668			—			1,286,616
Noncurrent liabilities from risk management activities	20,126		—		—			—			20,126
Regulatory cost of removal obligation	445,387		—		—			—			445,387
Pension and postretirement liabilities	340,963		—		—			—			340,963
Deferred credits and other liabilities	43,862		184		4,698			—			48,744
	$	8,390,006	$	1,632,909	$	655,129		$	(2,083,340	)	$	8,594,704



	September 30, 2013
	Regulated Distribution		Regulated Pipeline		Nonregulated			Eliminations			Consolidated
	(In thousands)
ASSETS
Property, plant and equipment, net	$	4,719,873	$	1,249,767	$	61,015		$	—		$	6,030,655
Investment in subsidiaries	831,136		—		(2,096		)	(829,040		)	—
Current assets
Cash and cash equivalents	4,237		—		61,962			—			66,199
Assets from risk management activities	1,837		—		10,129			—			11,966
Other current assets	428,366		11,709		452,126			(293,233		)	598,968
Intercompany receivables	783,738		—		—			(783,738		)	—
Total current assets	1,218,178		11,709		524,217			(1,076,971		)	677,133
Goodwill	574,190		132,462		34,711			—			741,363
Noncurrent assets from risk management activities	109,354		—		—			—			109,354
Deferred charges and other assets	347,687		19,227		8,849			—			375,763
	$	7,800,418	$	1,413,165	$	626,696		$	(1,906,011	)	$	7,934,268
CAPITALIZATION AND LIABILITIES
Shareholders’ equity	$	2,580,409	$	396,421	$	434,715		$	(831,136	)	$	2,580,409
Long-term debt	2,455,671		—		—			—			2,455,671
Total capitalization	5,036,080		396,421		434,715			(831,136		)	5,036,080
Current liabilities
Short-term debt	645,984		—		—			(278,000		)	367,984
Liabilities from risk management activities	1,543		—		—			—			1,543
Other current liabilities	491,681		20,288		110,306			(13,316		)	608,959
Intercompany payables	—		712,768		70,970			(783,738		)	—
Total current liabilities	1,139,208		733,056		181,276			(1,075,054		)	978,486
Deferred income taxes	871,360		283,554		8,960			179			1,164,053
Noncurrent liabilities from risk management activities	—		—		—			—			—
Regulatory cost of removal obligation	359,299		—		—			—			359,299
Pension and postretirement liabilities	358,787		—		—			—			358,787
Deferred credits and other liabilities	35,684		134		1,745			—			37,563
	$	7,800,418	$	1,413,165	$	626,696		$	(1,906,011	)	$	7,934,268