Segment Information

We manage and review our consolidated operations through the following reportable segments:


•	The distribution segment is primarily comprised of our regulated natural gas distribution and related sales operations in eight states.


•	The pipeline and storage segment is comprised primarily of the pipeline and storage operations of our Atmos Pipeline-Texas division and our natural gas transmission operations in Louisiana.


•	The natural gas marketing segment was comprised of our discontinued natural gas marketing business.

Our determination of reportable segments considers the strategic operating units under which we manage sales of various products and services to customers in differing regulatory environments. Although our distribution segment operations are geographically dispersed, they are aggregated and reported as a single segment as each natural gas distribution division has similar economic characteristics. In addition, because the pipeline and storage operations of our Atmos Pipeline-Texas division and our natural gas transmission operations in Louisiana have similar economic characteristics, they have been aggregated and reported as a single segment.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017. We evaluate performance based on net income or loss of the respective operating units. We allocate interest and pension expense to the pipeline and storage segment; however, there is no debt or pension liability recorded on the pipeline and storage segment balance sheet. All material intercompany transactions have been eliminated; however, we have not eliminated intercompany profits when such amounts are probable of recovery under the affiliates’ rate regulation process. Income taxes are allocated to each segment as if each segment’s taxes were calculated on a separate return basis.

Income statements and capital expenditures for the three and nine months ended June 30, 2018 and 2017 by segment are presented in the following tables:



	Three Months Ended June 30, 2018
	Distribution			Pipeline and Storage			Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	534,816		$	27,429		$	—		$	562,245
Intersegment revenues	672			100,204			(100,876		)	—
Total operating revenues	535,488			127,633			(100,876		)	562,245
Purchased gas cost	230,887			561			(100,562		)	130,886
Operation and maintenance expense	111,895			33,494			(314		)	145,075
Depreciation and amortization expense	66,504			24,167			—			90,671
Taxes, other than income	64,420			8,200			—			72,620
Operating income	61,782			61,211			—			122,993
Miscellaneous expense	(1,191		)	(812		)	—			(2,003		)
Interest charges	13,315			10,034			—			23,349
Income before income taxes	47,276			50,365			—			97,641
Income tax expense	11,932			14,516			—			26,448
Net income	$	35,344		$	35,849		$	—		$	71,193
Capital expenditures	$	284,209		$	110,285		$	—		$	394,494



	Three Months Ended June 30, 2017
	Distribution			Pipeline and Storage			Natural Gas Marketing		Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	493,738		$	32,763		$	—	$	—		$	526,501
Intersegment revenues	322			84,520			—		(84,842		)	—
Total operating revenues	494,060			117,283			—		(84,842		)	526,501
Purchased gas cost	197,767			1,251			—		(84,842		)	114,176
Operation and maintenance expense	99,631			29,059			—		—			128,690
Depreciation and amortization expense	62,760			17,263			—		—			80,023
Taxes, other than income	56,850			6,098			—		—			62,948
Operating income	77,052			63,612			—		—			140,664
Miscellaneous expense	(62		)	(227		)	—		—			(289		)
Interest charges	18,394			10,104			—		—			28,498
Income before income taxes	58,596			53,281			—		—			111,877
Income tax expense	22,082			18,987			—		—			41,069
Net income	$	36,514		$	34,294		$	—	$	—		$	70,808
Capital expenditures	$	205,780		$	46,983		$	—	$	—		$	252,763



	Nine Months Ended June 30, 2018
	Distribution			Pipeline and Storage			Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	2,593,578		$	77,268		$	—		$	2,670,846
Intersegment revenues	1,993			297,783			(299,776		)	—
Total operating revenues	2,595,571			375,051			(299,776		)	2,670,846
Purchased gas cost	1,421,698			1,906			(298,841		)	1,124,763
Operation and maintenance expense	347,623			89,027			(935		)	435,715
Depreciation and amortization expense	197,587			70,839			—			268,426
Taxes, other than income	184,219			24,181			—			208,400
Operating income	444,444			189,098			—			633,542
Miscellaneous expense	(2,198		)	(2,093		)	—			(4,291		)
Interest charges	51,581			30,581			—			82,162
Income before income taxes	390,665			156,424			—			547,089
Income tax (benefit) expense	(39,021		)	21,793			—			(17,228		)
Net income	$	429,686		$	134,631		$	—		$	564,317
Capital expenditures	$	749,693		$	338,779		$	—		$	1,088,472



	Nine Months Ended June 30, 2017
	Distribution		Pipeline and Storage			Natural Gas Marketing		Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	2,210,221	$	84,634		$	—	$	—		$	2,294,855
Intersegment revenues	1,036		254,573			—		(255,609		)	—
Total operating revenues	2,211,257		339,207			—		(255,609		)	2,294,855
Purchased gas cost	1,106,209		2,331			—		(255,565		)	852,975
Operation and maintenance expense	296,048		89,863			—		(44		)	385,867
Depreciation and amortization expense	185,219		49,429			—		—			234,648
Taxes, other than income	165,032		20,579			—		—			185,611
Operating income	458,749		177,005			—		—			635,754
Miscellaneous income (expense)	334		(784		)	—		—			(450		)
Interest charges	56,437		30,035			—		—			86,472
Income from continuing operations before income taxes	402,646		146,186			—		—			548,832
Income tax expense	149,623		52,351			—		—			201,974
Income from continuing operations	253,023		93,835			—		—			346,858
Income from discontinued operations, net of tax	—		—			10,994		—			10,994
Gain on sale of discontinued operations, net of tax	—		—			2,716		—			2,716
Net income	$	253,023	$	93,835		$	13,710	$	—		$	360,568
Capital expenditures	$	636,449	$	175,699		$	—	$	—		$	812,148

Balance sheet information at June 30, 2018 and September 30, 2017 by segment is presented in the following tables:



	June 30, 2018
	Distribution		Pipeline and Storage		Eliminations			Consolidated
	(In thousands)
Property, plant and equipment, net	$	7,427,486	$	2,644,374	$	—		$	10,071,860
Total assets	$	10,840,846	$	2,866,266	$	(2,199,488	)	$	11,507,624



	September 30, 2017
	Distribution		Pipeline and Storage		Eliminations			Consolidated
	(In thousands)
Property, plant and equipment, net	$	6,849,517	$	2,409,665	$	—		$	9,259,182
Total assets	$	10,050,164	$	2,621,601	$	(1,922,169	)	$	10,749,596