Unaudited Financial Information

9 Months Ended

Jun. 30, 2022

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, 2021. 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, 2021. Because of seasonal and other factors, the results of operations for the nine-month period ended June 30, 2022 are not indicative of our results of operations for the full 2022 fiscal year, which ends September 30, 2022.

No events have occurred subsequent to the balance sheet date that would require recognition or disclosure in the unaudited 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, 2021.

During the second quarter of fiscal 2022, we completed our annual goodwill impairment assessment using a qualitative assessment, as permitted under U.S. GAAP. We test for goodwill at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit. Based on the assessment performed, we determined that our goodwill was not impaired.

Recently issued accounting pronouncements

In November 2021, the Financial Accounting Standards Board (FASB) issued guidance which will require disclosure about government assistance in the notes to the financial statements. The amendment requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy, including information about the nature of the transactions and the related accounting policy used to account for the transactions, the line items on the balance sheet and income statement that are affected by the transactions and the significant terms and conditions of the transactions, including commitments and contingencies. The amendment is effective for us beginning October 1, 2022; however, we elected to adopt this amendment during the first quarter of fiscal 2022 as permitted by the guidance. As the guidance is related only to disclosures in the notes to the financial statements, there will be no impact on our financial position, results of operations or cash flows.

In March 2020, the FASB issued optional guidance which will ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the cessation of the London Interbank Offered Rate (LIBOR). The amendments can be elected immediately, as of March 12, 2020, through December 31, 2022. We are currently evaluating if we will apply the optional guidance as we assess the impact of the cessation of LIBOR on our current contracts and hedging relationships and the potential impact on our financial position, results of operations and cash flows.

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 other current assets and deferred charges and other assets and our regulatory liabilities are recorded as a component of other current liabilities and deferred credits and other liabilities. Deferred gas costs are recorded either in other current assets or liabilities.

Significant regulatory assets and liabilities as of June 30, 2022 and September 30, 2021 included the following:


	June 30, 2022		September 30, 2021
	(In thousands)
Regulatory assets:
Pension and postretirement benefit costs	$	34,482	$	45,922
Infrastructure mechanisms (1)	225,279		222,795
Winter Storm Uri incremental costs (2)	2,107,820		2,100,728
Deferred gas costs	42,818		66,395
Regulatory excess deferred taxes	48,746		45,370
Recoverable loss on reacquired debt	3,448		3,789
Deferred pipeline record collection costs	35,212		32,099


Other	15,552		4,343
	$	2,513,357	$	2,521,441
Regulatory liabilities:
Regulatory excess deferred taxes	$	586,149	$	705,084

Regulatory cost of removal obligation	558,542		541,511
Deferred gas costs	45,874		52,553
Asset retirement obligation	18,373		18,373
APT annual adjustment mechanism	26,689		31,110
Pension and postretirement benefit costs	51,954		56,201
Other	23,223		19,363
	$	1,310,804	$	1,424,195

(1)Infrastructure mechanisms in Texas, Louisiana and Tennessee allow for the deferral of all eligible expenses associated with capital expenditures incurred pursuant to these rules, including the recording of interest on deferred expenses until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recoverable through base rates.

(2)Includes extraordinary gas costs subject to securitization incurred during Winter Storm Uri and permissible carrying costs. See Note 8 to the unaudited condensed consolidated financial statements for further information. This amount is recorded within other current assets and deferred charges and other assets on the condensed consolidated balance sheet as of June 30, 2022.