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, 2011. 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, 2011. Because of seasonal and other factors, the results of operations for the nine-month period ended June 30, 2012 are not indicative of our results of operations for the full 2012 fiscal year, which ends September 30, 2012.

We have evaluated subsequent events from the June 30, 2012 balance sheet date through the date these financial statements were filed with the Securities and Exchange Commission (SEC). On July 27, 2012, we issued a notice of redemption of our Unsecured 5.125% Senior Notes on August 28, 2012. The redemption is discussed further in Note 6. On August 1, 2012, we completed the sale of our Missouri, Illinois and Iowa natural gas distribution assets. The sale is discussed in Note 5. On August 8, 2012 we announced that we had entered into a definitive agreement to sell our natural gas distribution operations in Georgia, which is discussed in Note 5.

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, 2011.

During the second quarter of fiscal 2012, 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, 2012, two new accounting standards were announced that will become applicable to the Company in future periods. The first standard requires enhanced disclosure of offsetting arrangements for financial instruments and will become effective for annual periods beginning after January 1, 2013 and for interim periods within those annual periods. The second standard indefinitely defers the effective date for new presentation requirements related to reclassifications of items from accumulated other comprehensive income, which were scheduled to be effective for interim and annual periods beginning after December 15, 2011. 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 nine months ended June 30, 2012.

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, 2012 and September 30, 2011 included the following:

			June 30,		September 30,
			2012		2011
			(In thousands)
Regulatory assets:
	Pension and postretirement benefit costs	$	240,312	$	254,666
	Merger and integration costs, net		5,876		6,242
	Deferred gas costs		14,495		33,976
	Regulatory cost of removal asset		10,430		8,852
	Environmental costs		52		385
	Rate case costs		4,454		4,862
	Deferred franchise fees		2,129		379
	Other		13,236		3,534
		$	290,984	$	312,896

Regulatory liabilities:
	Deferred gas costs	$	34,044	$	8,130
	Regulatory cost of removal obligation		449,778		464,025
	Other		6,465		14,025
		$	490,287	$	486,180

The amounts above do not include regulatory assets and liabilities related to our divested Missouri, Illinois and Iowa service areas, which are classified as assets held for sale as of June 30, 2012 as discussed in Note 5.

During the prior fiscal year, the Railroad Commission of Texas' Division of Public Safety issued a new rule requiring natural gas distribution companies to develop and implement a risk-based program for the renewal or replacement of distribution facilities, including steel service lines. The rule allows for the deferral of all expenses associated with capital expenditures incurred pursuant to this rule, including the recording of interest on the deferred expenses until the next rate proceeding (rate case or annual rate filing) at which time investment and costs would be recovered through base rates. As of June 30, 2012, we had deferred $2.1 million associated with the requirements of this rule which are recorded in “Other” in the regulatory assets table above.

Effective January 1, 2012, the Texas Legislature amended its Gas Utility Regulatory Act (GURA) to permit natural gas utilities to defer into a regulatory asset or liability the difference between a gas utility's actual pension and postretirement expense and the level of such expense recoverable in its existing rates. The deferred amount will become eligible for inclusion in the utility's rates in its next rate proceeding. We elected to utilize this provision of GURA, effective January 1, 2012, and established a regulatory asset totaling $5.1 million, which is recorded in “Other” in the regulatory assets table above. Of this amount, $2.9 million represented a reduction to operation and maintenance expense during the second and third quarters of fiscal 2012.

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, 2012 and 2011:

		Three Months Ended				Nine Months Ended
		June 30				June 30
		2012		2011		2012		2011
		(In thousands)

Net income (loss)		$	31,132	$	(566)	$	208,750	$	205,640
Unrealized holding gains (losses) on
	investments, net of tax expense (benefit)
	of $(523) and $(56) for the three months
	ended June 30, 2012 and 2011 and of
	$1,194 and $876 for the nine months
	ended June 30, 2012 and 2011		(888)		(94)		2,059		1,492
Amortization, unrealized gain (loss) and
	unwinding of treasury lock agreements, net
	of tax expense (benefit) of $(18,399) and
	$(4,629) for the three months ended June 30,
	2012 and 2011 and $(9,995) and $7,950 for the
	nine months ended June 30, 2012 and 2011		(31,328)		(7,884)		(17,019)		13,536
Net unrealized gains (losses) on cash flow
	hedging transactions, net of tax expense
	(benefit) of $11,401 and $(182) for the three
	months ended June 30, 2012 and 2011 and
	$(2,595) and $9,008 for the nine months
	ended June 30, 2012 and 2011		17,830		(285)		(4,060)		14,090
Comprehensive income (loss)		$	16,746	$	(8,829)	$	189,730	$	234,758

Accumulated other comprehensive income (loss), net of tax, as of June 30, 2012 and September 30, 2011 consisted of the following unrealized gains (losses):

		June 30,		September 30,
		2012		2011
		(In thousands)
Accumulated other comprehensive income (loss):
	Unrealized holding gains on investments	$	4,617	$	2,558
	Treasury lock agreements		(51,176)		(34,157)
	Cash flow hedges		(20,921)		(16,861)
		$	(67,480)	$	(48,460)