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, 2010. 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, 2010. Because of seasonal and other factors, the results of operations for the nine-month period ended June 30, 2011 are not indicative of our results of operations for the full 2011 fiscal year, which ends September 30, 2011.

Our earnings have been impacted by several one-time items in the current year, including the following pre-tax amounts:

We have evaluated subsequent events from the June 30, 2011 balance sheet date through the date these financial statements were filed with the Securities and Exchange Commission (SEC). No events have occurred subsequent to the balance sheet date that would require recognition or disclosure in the condensed consolidated financial statements.

Our accounting policies are described in Note 2 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2010.

As a result of discontinued operations, certain prior-year amounts have been reclassified to conform with the current year presentation.

During the second quarter of fiscal 2011, we completed our annual goodwill impairment assessment. Based on the assessment performed, we determined that our goodwill was not impaired.

During the nine months ended June 30, 2011, two new accounting standards became applicable to the Company pertaining to goodwill impairment testing for reporting units with zero or negative carrying amounts and disclosure of supplementary pro forma information for business combinations. The adoption of these standards had no impact on our financial position, results of operations or cash flows. There were no other significant changes to our accounting policies during the nine months ended June 30, 2011.

In May 2011, the Financial Accounting Standards Board (FASB) issued guidance that will provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. This guidance will change certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements and is effective prospectively for the Company for interim and annual periods beginning after December 15, 2011. We currently do not have any recurring Level 3 fair value measurements; accordingly, the adoption of this guidance will not impact our financial position, results of operations or cash flows.

In June 2011, the FASB issued guidance related to the presentation of other comprehensive income which will require that all nonowner changes in shareholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. This guidance is effective retrospectively for the Company for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this guidance will not impact our financial position, results of operations or cash flows.

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 June 30, 2011 and September 30, 2010 included the following:

			June 30,		September 30,
			2011		2010
			(In thousands)
Regulatory assets:
	Pension and postretirement benefit costs	$	200,393	$	209,564
	Merger and integration costs, net		6,360		6,714
	Deferred gas costs		22,083		22,701
	Regulatory cost of removal asset		32,691		31,014
	Environmental costs		434		805
	Rate case costs		5,321		4,505
	Deferred franchise fees		393		1,161
	Other		3,940		1,046
		$	271,615	$	277,510

Regulatory liabilities:
	Deferred gas costs	$	18,739	$	43,333
	Deferred franchise fees		629		-
	Regulatory cost of removal obligation		429,354		381,474
	Other		9,166		6,112
		$	457,888	$	430,919

The June 30, 2011 amounts above do not include regulatory assets and liabilities related to our Missouri, Illinois and Iowa service areas, which are classified as assets held for sale as discussed in Note 5.

Currently, our 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. Environmental costs have been deferred to be included in future rate filings in accordance with rulings received from various state regulatory commissions.

The following table presents the components of comprehensive income (loss), net of related tax, for the three-month and nine-month periods ended June 30, 2011 and 2010:

		Three Months Ended				Nine Months Ended
		June 30				June 30
		2011		2010		2011		2010
		(In thousands)

Net income (loss)		$	(566)	$	(3,154)	$	205,640	$	204,302
Unrealized holding gains (losses) on
	investments, net of tax expense (benefit)
	of $(56) and $(996) for the three months
	ended June 30, 2011 and 2010 and of
	$876 and $(198) for the nine months
	ended June 30, 2011 and 2010		(94)		(1,696)		1,492		(337)
Amortization, unrealized gain and unwinding
	of interest rate hedging transactions, net of
	tax expense (benefit) of $(4,629) and $247
	for the three months ended June 30, 2011
	and 2010 and $7,950 and $743 for the nine
	month ended June 30, 2011 and 2010		(7,884)		422		13,536		1,265
Net unrealized gains (losses) on commodity
	hedging transactions, net of tax expense
	(benefit) of $(182) and $5,066 for the three
	months ended June 30, 2011 and 2010 and
	$9,008 and $2,999 for the nine months
	ended June 30, 2011 and 2010		(285)		7,921		14,090		4,690
Comprehensive income (loss)		$	(8,829)	$	3,493	$	234,758	$	209,920

Accumulated other comprehensive income (loss), net of tax, as of June 30, 2011 and September 30, 2010 consisted of the following unrealized gains (losses):

		June 30,		September 30,
		2011		2010
		(In thousands)
Accumulated other comprehensive income (loss):
	Unrealized holding gains on investments	$	5,697	$	4,205
	Treasury lock agreements		8,068		(5,468)
	Cash flow hedges		(8,019)		(22,109)
		$	5,746	$	(23,372)