Unaudited Financial Information

These consolidated interim-period financial statements have been prepared in accordance with accounting principles generally accepted in the United States on the same basis as those used for the Company’s audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. In the opinion of management, all material adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been made to the unaudited consolidated interim-period financial statements. These consolidated interim-period financial statements are condensed as permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of Atmos Energy Corporation included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. Because of seasonal and other factors, the results of operations for the three-month period ended December 31, 2014 are not indicative of our results of operations for the full 2015 fiscal year, which ends September 30, 2015.

No events have occurred subsequent to the balance sheet date that would require recognition or disclosure in the condensed consolidated financial statements.

Significant accounting policies

Our accounting policies are described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

Certain prior-year amounts have been reclassified to conform with the current year presentation.

In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede virtually all existing revenue recognition guidance under generally accepted accounting principles in the United States. Under the new standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. The new standard is currently scheduled to become effective for us beginning on October 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are currently evaluating the impact this standard may have on our financial position, results of operations and cash flows.

There were no other significant changes to our accounting policies during the three months ended December 31, 2014 that will become applicable to the Company in future periods.

Regulatory assets and liabilities

Accounting principles generally accepted in the United States require cost-based, rate-regulated entities that meet certain criteria to reflect the authorized recovery of costs due to regulatory decisions in their financial statements. As a result, certain costs are permitted to be capitalized rather than expensed because they can be recovered through rates. We record certain costs as regulatory assets when future recovery through customer rates is considered probable. Regulatory liabilities are recorded when it is probable that revenues will be reduced for amounts that will be credited to customers through the ratemaking process. Substantially all of our regulatory assets are recorded as a component of deferred charges and other assets and substantially all of our regulatory liabilities are recorded as a component of deferred credits and other liabilities. Deferred gas costs are recorded either in other current assets or liabilities and the regulatory cost of removal obligation is reported separately.

Significant regulatory assets and liabilities as of December 31, 2014 and September 30, 2014 included the following:



	December 31, 2014		September 30, 2014
	(In thousands)
Regulatory assets:
Pension and postretirement benefit costs⁽¹⁾	$	158,190	$	162,777
Merger and integration costs, net	4,595		4,730
Deferred gas costs	38,022		20,069
Rate case costs	2,427		3,757
Texas Rule 8.209⁽²⁾	36,100		26,948
APT annual adjustment mechanism	5,623		8,479
Recoverable loss on reacquired debt	18,238		18,877
Other	4,297		4,672
	$	267,492	$	250,309
Regulatory liabilities:
Deferred gas costs	$	61,530	$	35,063
Deferred franchise fees	7,367		5,268
Regulatory cost of removal obligation	489,210		490,448
Other	13,808		14,980
	$	571,915	$	545,759


⁽¹⁾	Includes $17.7 million and $18.8 million of pension and postretirement expense deferred pursuant to regulatory authorization.


⁽²⁾	Texas Rule 8.209 is a Railroad Commission rule that allows for the deferral of all expenses associated with capital expenditures incurred pursuant to this rule, including the recording of interest on the deferred expenses until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recovered through base rates.

Currently authorized rates do not include a return on certain of our merger and integration costs; however, we recover the amortization of these costs. Merger and integration costs, net, are generally amortized on a straight-line basis over estimated useful lives ranging up to 20 years.