Divestitures and Acquisitions

Divestiture of Atmos Energy Marketing (AEM)

On October 29, 2016, we entered into a Membership Interest Purchase Agreement (the Agreement) with CenterPoint Energy Services, Inc., a subsidiary of CenterPoint Energy, Inc. (CES) to sell all of the equity interests of AEM. The transaction closed on January 3, 2017, with an effective date of January 1, 2017. CES paid a cash purchase price of $38.3 million plus estimated working capital of $103.2 million for total cash consideration of $141.5 million. Of this amount, $7.0 million was placed into escrow and will be paid to the Company within 24 months, net of any indemnification claims agreed upon between the two companies. We expect to recognize a net gain of $0.03 per diluted share on the sale and complete the working capital true–up during the second quarter of fiscal 2017.

The operating results of our natural gas marketing reportable segment have been reported on the condensed consolidated statements of income as income from discontinued operations, net of income tax. Accordingly, expenses related to allocable general corporate overhead and interest expense are not included in these results. The decision to report this segment as a discontinued operation was predicated, in part, on the following qualitative and quantitative factors: 1) the disposal results in the company becoming a fully regulated entity; 2) the fact that an entire reportable segment will be disposed and 3) the fact the disposed segment represented in excess of 30 percent of consolidated revenues over the last five fiscal years.

The tables below set forth selected financial and operational information related to assets, liabilities and operating results related to discontinued operations. Additionally, assets and liabilities related to our natural gas marketing operations are classified as “held for sale” in other current assets and liabilities in our condensed consolidated balance sheets at December 31, 2016 and in other current assets, deferred charges and other assets, other current liabilities and deferred credits and other liabilities in our consolidated balance sheets at September 30, 2016. Prior period revenues and expenses associated with these assets have been reclassified into discontinued operations. This reclassification had no impact on previously reported consolidated net income.

The following table presents statement of income data related to discontinued operations.



	Three Months Ended December 31
	2016			2015
	(In thousands)

Operating revenues	$	303,474		$	259,258
Purchased gas cost	277,554			249,789
Gross profit	25,920			9,469
Operating expenses	7,874			5,993
Operating income	18,046			3,476
Other nonoperating expense	(211		)	(1,276		)
Income from discontinued operations before income taxes	17,835			2,200
Income tax expense	6,841			885
Net income from discontinued operations	$	10,994		$	1,315

The following table presents a reconciliation of the carrying amounts of major classes of assets and liabilities of our natural gas marketing's operations to total assets and liabilities classified as held for sale.



	December 31, 2016			September 30, 2016
	(In thousands)
Assets:
Net property, plant and equipment	$	11,599		$	11,905
Accounts receivable	139,741			93,551
Gas stored underground	77,559			54,246
Other current assets	9,447			14,711
Goodwill⁽²⁾	13,734			16,445
Deferred charges and other assets	1,870			435
Total assets of the disposal group classified as held for sale in the statement of financial position ⁽¹⁾	253,950			191,293
Cash	891			25,417
Other assets	(6,824		)	5
Total assets of disposal group in the statement of financial position	$	248,017		$	216,715

Liabilities:
Accounts payable and accrued liabilities	$	113,368		$	72,268
Other current liabilities	6,876			9,640
Deferred credits and other	322			316
Total liabilities of the disposal group classified as held for sale in the statement of financial position ⁽¹⁾	120,566			82,224
Intercompany note payable	—			35,000
Tax liabilities	19,469			15,471
Intercompany payables	4,108			14,139
Other liabilities	1,036			3,179
Total liabilities of disposal group in the statement of financial position	$	145,179		$	150,013


⁽¹⁾	Amounts in the comparative period are classified as current and long term in the statement of financial position.


⁽²⁾	The period-over-period change in natural gas marketing goodwill is the result of the reallocation of goodwill between the retained portion and held-for-sale portion of the former Atmos Energy Marketing reporting unit, based on relative fair value.

The following table presents statement of cash flow data related to discontinued operations.



	Three Months Ended December 31
	2016		2015
	(In thousands)
Depreciation and amortization	$	185	$	583
Capital expenditures	$	—	$	24
Noncash gain in commodity contract cash flow hedges	$	18,744	$	3,858

Acquisition of EnLink Pipeline

On December 20, 2016, we executed a purchase and sale agreement to acquire the general partnership and limited partnership interests in EnLink North Texas Pipeline, LP (EnLink Pipeline) from EnLink Energy GP, LLC and EnLink Midstream Operating, LP for an all–cash price of $85 million, plus estimated working capital. After considering estimated working capital, the total proceeds paid were $85.7 million. The final purchase is subject to adjustment after the estimated working capital is finalized during the second quarter of fiscal 2017.

EnLink Pipeline's primary asset is a 140–mile natural gas pipeline located on the north side of the Dallas–Fort Worth Metroplex. As of December 31, 2016, the $85 million purchase price was preliminarily allocated, based on fair value using observable market inputs, to the net book value of the acquired pipeline. The final purchase price allocation is subject to adjustment pending the completion of analysis of the fair value of certain contracts included in the acquisition. We expect to complete this evaluation during the second quarter of fiscal 2017.