Segment Information | 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 |