Unaudited Financial Information

6 Months Ended

Mar. 31, 2023

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, 2022. 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, 2022. Because of seasonal and other factors, the results of operations for the six-month period ended March 31, 2023 are not indicative of our results of operations for the full 2023 fiscal year, which ends September 30, 2023.

Except as described in Note 6 and Note 12 to the unaudited condensed consolidated financial statements, 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, 2022.

During the second quarter of fiscal 2023, 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.

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 March 31, 2023 and September 30, 2022 included the following:


	March 31, 2023		September 30, 2022
	(In thousands)
Regulatory assets:
Pension and postretirement benefit costs	$	24,096	$	31,122
Infrastructure mechanisms (1)	203,010		235,972
Winter Storm Uri incremental costs (2)	121,493		2,109,454

Deferred gas costs	49,156		119,742
Regulatory excess deferred taxes (3)	47,656		47,311
Recoverable loss on reacquired debt	3,322		3,406
Deferred pipeline record collection costs	51,967		36,898


Other	13,231		21,467
	$	513,931	$	2,605,372
Regulatory liabilities:
Regulatory excess deferred taxes (3)	$	466,496	$	545,021

Regulatory cost of removal obligation	568,778		568,307
Deferred gas costs	97,407		28,834
Asset retirement obligation	5,737		5,737
APT annual adjustment mechanism	39,360		31,138
Pension and postretirement benefit costs	146,829		156,857
Other	30,703		23,013
	$	1,355,310	$	1,358,907

(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 incurred during Winter Storm Uri and certain related carrying costs. See Note 8 to the unaudited condensed consolidated financial statements for further information.

(3)Regulatory excess deferred taxes represent changes in our net deferred tax liability related to our cost of service ratemaking due to the enactment of Tax Cuts and Jobs Act of 2017 (the "TCJA") and a Kansas legislative change enacted in fiscal 2020. See Note 11 to the unaudited condensed consolidated financial statements for further information.