11. Segment Information

9 Months Ended

Jun. 30, 2011

Segment Reporting Disclosure Abstract

Through November 30, 2010, our operations were divided into four segments:

The natural gas distribution segment, which included our regulated natural gas distribution and related sales operations.
The regulated transmission and storage segment, which included the regulated pipeline and storage operations of our Atmos Pipeline – Texas Division.
The natural gas marketing segment, which included a variety of nonregulated natural gas management services.
The pipeline, storage and other segment, which included our nonregulated natural gas gathering transmission and storage services.

As a result of the appointment of a new CEO effective October 1, 2010, during the first quarter of fiscal 2011, we revised the information used by the chief operating decision maker to manage the Company. As a result of this change, effective December 1, 2010, we began dividing our operations into the following three segments:

The natural gas distribution segment, remains unchanged and includes our regulated natural gas distribution and related sales operations.
The regulated transmission and storage segment, remains unchanged and includes the regulated pipeline and storage operations of our Atmos Pipeline – Texas Division.
The nonregulated segment, is comprised of our nonregulated natural gas management, nonregulated natural gas transmission, storage and other services which were previously reported in the natural gas marketing and pipeline, storage and other segments.

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 natural gas distribution segment operations are geographically dispersed, they are reported as a single segment as each natural gas distribution division has similar economic characteristics. 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, 2010. We evaluate performance based on net income or loss of the respective operating units.

Income statements for the three and nine month periods ended June 30, 2011 and 2010 by segment are presented in the following tables. Prior-year amounts have been restated to reflect the new operating segments.

			Three Months Ended June 30, 2011
			Natural		Regulated
			Gas		Transmission
			Distribution		and Storage		Nonregulated		Eliminations		Consolidated
			(In thousands)

Operating revenues from
	external parties		$	406,817	$	19,772	$	417,026	$	-	$	843,615
Intersegment revenues				214		33,798		74,259		(108,271)		-
				407,031		53,570		491,285		(108,271)		843,615
Purchased gas cost				206,839		-		477,880		(107,909)		576,810
	Gross profit			200,192		53,570		13,405		(362)		266,805
Operating expenses
	Operation and maintenance			86,804		18,786		7,437		(362)		112,665
	Depreciation and amortization			49,099		6,790		1,043		-		56,932
	Taxes, other than income			47,534		3,729		879		-		52,142
	Asset impairments			-		-		10,988		-		10,988
Total operating expenses				183,437		29,305		20,347		(362)		232,727
Operating income (loss)				16,755		24,265		(6,942)		-		34,078
Miscellaneous income (expense)				(1,153)		(312)		168		(133)		(1,430)
Interest charges				28,042		7,653		283		(133)		35,845
Income (loss) from continuing
	operations before income taxes			(12,440)		16,300		(7,057)		-		(3,197)
Income tax expense (benefit)				(4,311)		5,748		(3,160)		-		(1,723)
Income (loss) from continuing
	operations			(8,129)		10,552		(3,897)		-		(1,474)
Income from discontinued
	operations, net of tax			908		-		-		-		908
		Net income (loss)	$	(7,221)	$	10,552	$	(3,897)	$	-	$	(566)

Capital expenditures			$	121,452	$	20,239	$	1,929	$	-	$	143,620

			Three Months Ended June 30, 2010
			Natural		Regulated
			Gas		Transmission
			Distribution		and Storage		Nonregulated		Eliminations		Consolidated
			(In thousands)

Operating revenues from
	external parties		$	396,097	$	22,796	$	342,412	$	-	$	761,305
Intersegment revenues				222		22,161		84,993		(107,376)		-
				396,319		44,957		427,405		(107,376)		761,305
Purchased gas cost				204,988		-		415,634		(106,983)		513,639
	Gross profit			191,331		44,957		11,771		(393)		247,666
Operating expenses
	Operation and maintenance			87,323		16,050		8,579		(393)		111,559
	Depreciation and amortization			45,633		5,171		1,136		-		51,940
	Taxes, other than income			47,946		3,010		952		-		51,908
Total operating expenses				180,902		24,231		10,667		(393)		215,407
Operating income				10,429		20,726		1,104		-		32,259
Miscellaneous income (expense)				(72)		94		511		(1,331)		(798)
Interest charges				29,019		7,667		1,912		(1,331)		37,267
Income (loss) from continuing
	operations before income taxes			(18,662)		13,153		(297)		-		(5,806)
Income tax expense (benefit)				(6,685)		4,688		420		-		(1,577)
Income (loss) from continuing
	operations			(11,977)		8,465		(717)		-		(4,229)
Income from discontinued
	operations, net of tax			1,075		-		-		-		1,075
		Net income (loss)	$	(10,902)	$	8,465	$	(717)	$	-	$	(3,154)

Capital expenditures			$	106,394	$	22,964	$	362	$	-	$	129,720

			Nine Months Ended June 30, 2011
			Natural		Regulated
			Gas		Transmission
			Distribution		and Storage		Nonregulated		Eliminations		Consolidated
			(In thousands)

Operating revenues from
	external parties		$	2,187,256	$	62,602	$	1,308,516	$	-	$	3,558,374
Intersegment revenues				651		94,951		241,940		(337,542)		-
				2,187,907		157,553		1,550,456		(337,542)		3,558,374
Purchased gas cost				1,317,775		-		1,491,815		(336,413)		2,473,177
	Gross profit			870,132		157,553		58,641		(1,129)		1,085,197
Operating expenses
	Operation and maintenance			268,299		49,591		24,556		(1,129)		341,317
	Depreciation and amortization			145,548		18,387		3,241		-		167,176
	Taxes, other than income			132,070		11,395		2,403		-		145,868
	Asset impairments			-		-		30,270		-		30,270
Total operating expenses				545,917		79,373		60,470		(1,129)		684,631
Operating income (loss)				324,215		78,180		(1,829)		-		400,566
Miscellaneous income				18,305		5,267		764		(290)		24,046
Interest charges				87,344		23,802		1,759		(290)		112,615
Income (loss) from continuing
	operations before income taxes			255,176		59,645		(2,824)		-		311,997
Income tax expense (benefit)				94,323		21,252		(1,364)		-		114,211
Income (loss) from continuing
	operations			160,853		38,393		(1,460)		-		197,786
Income from discontinued
	operations, net of tax			7,854		-		-		-		7,854
		Net income (loss)	$	168,707	$	38,393	$	(1,460)	$	-	$	205,640

Capital expenditures			$	340,713	$	44,796	$	4,774	$	-	$	390,283

			Nine Months Ended June 30, 2010
			Natural		Regulated
			Gas		Transmission
			Distribution		and Storage		Nonregulated		Eliminations		Consolidated
			(In thousands)
Operating revenues from
	external parties		$	2,511,350	$	64,281	$	1,365,623	$	-	$	3,941,254
Intersegment revenues				682		82,717		286,830		(370,229)		-
				2,512,032		146,998		1,652,453		(370,229)		3,941,254
Purchased gas cost				1,657,412		-		1,556,746		(369,017)		2,845,141
	Gross profit			854,620		146,998		95,707		(1,212)		1,096,113
Operating expenses
	Operation and maintenance			266,847		53,877		28,946		(1,212)		348,458
	Depreciation and amortization			137,580		15,395		3,226		-		156,201
	Taxes, other than income			140,234		9,226		3,380		-		152,840
Total operating expenses				544,661		78,498		35,552		(1,212)		657,499
Operating income				309,959		68,500		60,155		-		438,614
Miscellaneous income
	(expense)			1,474		117		1,524		(4,020)		(905)
Interest charges				87,877		23,589		8,035		(4,020)		115,481
Income from continuing
	operations before income taxes			223,556		45,028		53,644		-		322,228
Income tax expense				86,552		16,039		21,608		-		124,199
Income from continuing
	operations			137,004		28,989		32,036		-		198,029
Income from discontinued
	operations, net of tax			6,273		-		-		-		6,273
		Net income	$	143,277	$	28,989	$	32,036	$	-	$	204,302

Capital expenditures			$	302,621	$	56,786	$	2,942	$	-	$	362,349

Balance sheet information at June 30, 2011 and September 30, 2010 by segment is presented to reflect our business structure as of June 30, 2011 in the following tables. Prior-year amounts have been restated accordingly.

			June 30, 2011
			Natural		Regulated
			Gas		Transmission
			Distribution		and Storage		Nonregulated		Eliminations		Consolidated
			(In thousands)
ASSETS
Property, plant and
	equipment, net		$	4,085,081	$	771,777	$	59,193	$	-	$	4,916,051
Investment in subsidiaries				671,885		-		(2,096)		(669,789)		-
Current assets
	Cash and cash equivalents			39,446		-		77,983		-		117,429
	Assets from risk
		management activities		1,972		-		13,041		-		15,013
	Other current assets			565,265		15,822		469,576		(193,357)		857,306
	Intercompany receivables			505,709		-		-		(505,709)		-
		Total current assets		1,112,392		15,822		560,600		(699,066)		989,748
Intangible assets				-		-		363		-		363
Goodwill				572,262		132,341		34,711		-		739,314
Noncurrent assets from risk
	management activities			767		-		16		-		783
Deferred charges and other
	assets			319,019		16,137		12,055		-		347,211
			$	6,761,406	$	936,077	$	664,842	$	(1,368,855)	$	6,993,470

CAPITALIZATION AND
	LIABILITIES
Shareholders' equity			$	2,335,824	$	251,080	$	420,805	$	(671,885)	$	2,335,824
Long-term debt				2,205,910		-		196		-		2,206,106
		Total capitalization		4,541,734		251,080		421,001		(671,885)		4,541,930
Current liabilities
	Current maturities of
		long-term debt		2,303		-		131		-		2,434
	Short-term debt			173,845		-		-		(173,845)		-
	Liabilities from risk
		management activities		5,207		-		2,995		-		8,202
	Other current liabilities			419,848		8,862		226,352		(17,416)		637,646
	Intercompany payables			-		503,857		1,852		(505,709)		-
		Total current liabilities		601,203		512,719		231,330		(696,970)		648,282
Deferred income taxes				798,433		163,540		5,634		-		967,607
Noncurrent liabilities from
	risk management activities			56		-		6,089		-		6,145
Regulatory cost of removal
	obligation			396,201		-		-		-		396,201
Deferred credits and other
	liabilities			423,779		8,738		788		-		433,305
			$	6,761,406	$	936,077	$	664,842	$	(1,368,855)	$	6,993,470

			September 30, 2010
			Natural		Regulated
			Gas		Transmission
			Distribution		and Storage		Nonregulated		Eliminations		Consolidated
			(In thousands)
ASSETS
Property, plant and
	equipment, net		$	3,959,112	$	748,947	$	85,016	$	-	$	4,793,075
Investment in subsidiaries				620,863		-		(2,096)		(618,767)		-
Current assets
	Cash and cash equivalents			31,952		-		100,000		-		131,952
	Assets from risk
		management activities		2,219		-		18,356		-		20,575
	Other current assets			528,655		19,504		325,348		(150,842)		722,665
	Intercompany receivables			546,313		-		-		(546,313)		-
		Total current assets		1,109,139		19,504		443,704		(697,155)		875,192
Intangible assets				-		-		834		-		834
Goodwill				572,262		132,341		34,711		-		739,314
Noncurrent assets from risk
	management activities			47		-		890		-		937
Deferred charges and other
	assets			324,707		13,037		16,695		-		354,439
			$	6,586,130	$	913,829	$	579,754	$	(1,315,922)	$	6,763,791

CAPITALIZATION AND
	LIABILITIES
Shareholders' equity			$	2,178,348	$	212,687	$	408,176	$	(620,863)	$	2,178,348
Long-term debt				1,809,289		-		262		-		1,809,551
		Total capitalization		3,987,637		212,687		408,438		(620,863)		3,987,899
Current liabilities
	Current maturities of
		long-term debt		360,000		-		131		-		360,131
	Short-term debt			258,488		-		-		(132,388)		126,100
	Liabilities from risk
		management activities		48,942		-		731		-		49,673
	Other current liabilities			473,076		10,949		162,508		(16,358)		630,175
	Intercompany payables			-		543,007		3,306		(546,313)		-
		Total current liabilities		1,140,506		553,956		166,676		(695,059)		1,166,079
Deferred income taxes				691,126		142,337		(4,335)		-		829,128
Noncurrent liabilities from
	risk management activities			2,924		-		6,000		-		8,924
Regulatory cost of removal
	obligation			350,521		-		-		-		350,521
Deferred credits and other
	liabilities			413,416		4,849		2,975		-		421,240
			$	6,586,130	$	913,829	$	579,754	$	(1,315,922)	$	6,763,791