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, 2012. 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, 2012. Because of seasonal and other factors, the results of operations for the six-month period ended March 31, 2013 are not indicative of our results of operations for the full 2013 fiscal year, which ends September 30, 2013.

We have evaluated subsequent events from the March 31, 2013 balance sheet date through the date these financial statements were filed with the Securities and Exchange Commission (SEC). On April 1, 2013, we completed the sale of our Georgia natural gas distribution assets. Except as discussed in Note 6, 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 consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

During the second quarter of fiscal 2013, we completed our annual goodwill impairment assessment. Based on the assessment performed, we determined that our goodwill was not impaired.

Due to the April 1, 2013 sale of our Georgia distribution operations, at March 31, 2013, the financial results for this service area are shown in discontinued operations. Accordingly, certain prior-year amounts have been reclassified to conform with the current-year presentation.

During the six months ended March 31, 2013, two new accounting standards were announced that will become applicable to the Company in future periods. The first standard clarifies the enhanced disclosure of offsetting arrangements for financial instruments that will become effective for us for annual and interim periods beginning on October 1, 2013. The second standard, which became effective during our second fiscal quarter, requires the presentation of amounts reclassified out of accumulated other comprehensive income by component as well as significant amounts reclassified out of accumulated other comprehensive income by the respective line item in the statement of net income. We have presented the disclosures relating to reclassifications out of accumulated other comprehensive income in Note 4. The adoption of these standards should not have an impact on our financial position, results of operations or cash flows. There were no other significant changes to our accounting policies during the six months ended March 31, 2013.

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 March 31, 2013 and September 30, 2012 included the following:

			March 31,		September 30,
			2013		2012
			(In thousands)
Regulatory assets:
	Pension and postretirement benefit costs⁽¹⁾	$	289,003	$	296,160
	Merger and integration costs, net		5,502		5,754
	Deferred gas costs		525		31,359
	Regulatory cost of removal asset		10,183		10,500
	Rate case costs		6,256		4,661
	Deferred franchise fees		265		2,714
	Texas Rule 8.209⁽²⁾		14,912		5,370
	APT annual adjustment mechanism		4,965		4,539
	Other		5,716		7,262
		$	337,327	$	368,319

Regulatory liabilities:
	Deferred gas costs	$	43,112	$	23,072
	Deferred franchise fees		2,943		-
	Regulatory cost of removal obligation		433,617		459,688
	Other		5,429		5,637
		$	485,101	$	488,397

The amounts above do not include regulatory assets and liabilities related to our Georgia operations, which are classified as assets held for sale as discussed in Note 6.

Currently 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.