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 working capital of $109.0 million for total cash consideration of $147.3 million. Of this amount, $7.0 million was placed into escrow and will be paid to the Company within 24 months of the closing date, net of any indemnification claims agreed upon between the two companies. We recognized a net gain of $0.03 per diluted share on the sale in the second quarter of fiscal 2017 and completed the working capital true–up during the third 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 resulted in the company becoming a fully regulated entity; 2) the fact that an entire reportable segment was disposed of 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. Operating expenses include operation and maintenance expense, provision for doubtful accounts, depreciation and amortization expense and taxes, other than income. Additionally, assets and liabilities related to our natural gas marketing operations are classified as “held for sale” on our consolidated balance sheet 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 tables present statement of income data related to discontinued operations:



	Three Months Ended June 30
	2017		2016
	(In thousands)

Operating revenues	$	—	$	200,213

Purchased gas cost	—		184,398
Operating expenses	—		7,047
Operating income	—		8,768
Other nonoperating expense	—		(304		)
Income from discontinued operations before income taxes	—		8,464
Income tax expense	—		3,414
Net income from discontinued operations	$	—	$	5,050



	Nine Months Ended June 30
	2017			2016
	(In thousands)

Operating revenues	$	303,474		$	728,989

Purchased gas cost	277,554			698,445
Operating expenses	7,874			19,940
Operating income	18,046			10,604
Other nonoperating expense	(211		)	(1,937		)
Income from discontinued operations before income taxes	17,835			8,667
Income tax expense	6,841			3,495
Income from discontinued operations	10,994			5,172
Gain on sale from discontinued operations, net of tax ($10,215 and $0)	2,716			—
Net income from discontinued operations	$	13,710		$	5,172

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:



	June 30, 2017		September 30, 2016
	(In thousands)
Assets:
Net property, plant and equipment	$	—	$	11,905
Accounts receivable	—		93,551
Gas stored underground	—		54,246
Other current assets	—		14,711
Goodwill	—		16,445
Deferred charges and other assets	—		435
Total assets of the disposal group classified as held for sale in the statement of financial position ⁽¹⁾	—		191,293
Cash	—		25,417
Other assets	—		5
Total assets of disposal group in the statement of financial position	$	—	$	216,715

Liabilities:
Accounts payable and accrued liabilities	$	—	$	72,268
Other current liabilities	—		9,640
Deferred credits and other	—		316
Total liabilities of the disposal group classified as held for sale in the statement of financial position ⁽¹⁾	—		82,224
Intercompany note payable	—		35,000
Tax liabilities	—		15,471
Intercompany payables	—		14,139
Other liabilities	—		3,284
Total liabilities of disposal group in the statement of financial position	$	—	$	150,118


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

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



	Nine Months Ended June 30
	2017		2016
	(In thousands)
Depreciation and amortization expense	$	185	$	1,743
Capital expenditures	$	—	$	179
Noncash gain (loss) in commodity contract cash flow hedges	$	18,744	$	(33,898	)

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 a cash purchase price of $85 million, plus working capital of $1.1 million.

EnLink Pipeline's primary asset was a 140–mile natural gas pipeline located on the north side of the Dallas–Fort Worth Metroplex. The $85 million purchase price has been allocated, based on fair value using observable market inputs, to the net book value of the acquired pipeline.